Document:

Exhibit 10.4

 

EXECUTION COPY

 

SALE AND ASSIGNMENT

 

THIS SALE AND ASSIGNMENT, dated as of October 29,
2010 (this “Agreement”), is entered into between FCC Investment Trust I
(the “Seller”) and 50-by-50 LLC (the “Buyer”).

 

WHEREAS, the Buyer desires to purchase from the Seller and
the Seller desires to sell to the Buyer a portfolio of receivables with, among
other things, certain related security and rights of payment thereunder.

 

NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:

 

1.             Purchase and Sale of the Sale
Assets.  Upon the terms and subject
to the conditions of this Agreement, the Seller shall sell, transfer and
deliver to the Buyer, and the Buyer shall purchase from the Seller, the Sale
Assets (as defined below) for the Purchase Price (as defined below) in cash, on
the date hereof.

 

2.             Purchase Price.  With respect to the purchase of the Sale
Assets, the Buyer shall pay a purchase price on the date hereof equal to the
sum of $176,964.29 (the “Purchase Price”).  The Seller hereby acknowledges and agrees
that the Purchase Price represents a fair market purchase price for the Sale
Assets it is selling to the Buyer.  The
Seller hereby directs the Buyer to pay the Purchase Price to Fortress Credit
Co. LLC., as administrative agent under the Credit Agreement (as defined below)
for application on the date hereof to the Seller’s outstanding obligations
thereunder.  In addition, the Seller
hereby agrees that all collections of principal, interest or any other proceeds
received in respect of the Sale Assets after the date hereof shall be
transferred to the Buyer’s account no. 135291000 at U.S. Bank National
Association within two business days of receipt by the Seller.

 

3.             Designation of Receivables.  The Seller delivers herewith a computer file
containing a true and complete list of the receivables sold and assigned
hereunder, identified by (i) obligor name, (ii) original principal balance
(or “amount financed”) of the receivable, (iii) the principal balance of
the receivable as of October 29, 2010, (iv) contract number or other
identifying number, (v) the applicable contractor name, and
(vi) whether such receivable is related to a mortgage contract or a
non-mortgage contract.  Such computer
file shall be as of the date of this Agreement, incorporated into and made part
of this Agreement and is marked as Schedule I hereto.

 

4.             Receivables.  The Seller does hereby sell, transfer, assign,
set over and otherwise convey to the Buyer, and the Buyer hereby purchases and
takes from the Seller, all right, title and interest of the Seller in the
property identified in clauses (i) - (iii) below
whether constituting accounts, cash and currency, chattel paper, tangible
chattel paper, electronic chattel paper, copyrights, copyright licenses,
equipment, fixtures, contract rights, general intangibles, instruments,
certificates of deposit, certificated securities, uncertificated securities,
financial assets, securities entitlements, commercial tort claims, deposit
accounts, inventory, investment property, letter-of-credit rights, software,
supporting obligations, accessions, and other property 

 

 

and
whether consisting of, arising out of, or related to any of the following,
property, whether now owned or existing or hereafter created, arising or
acquired and wherever located (collectively, the “Sale Assets”):

 

(i)            the receivables
identified by the Seller as of the date hereof which are listed on Schedule
I (the “Receivables”), together with all monies due or to become due
in payment under such Receivables on and after such date, including, but not
limited to, all collections thereon;

 

(ii)           all related
security with respect to the Receivables referred to in clause (i) above;
and

 

(iii)          all income and
proceeds of the foregoing.

 

5.             Notification of Account Debtors.  The Buyer shall bear the responsibility and
expense of notifying all account debtors of the Sale Assets of the sale hereof
from the Seller to the Buyer and any new payment instructions related thereto; provided that, if requested by the Buyer, the Seller agrees
to provide commercially reasonable cooperation with such efforts at the Buyer’s
expense.

 

6.             Representation and Warranties.  This Agreement is made without recourse but
on the terms and subject to the conditions set forth herein.  The Seller and the Buyer acknowledge and
agree that the Seller makes no representations, warranties and covenants with
respect to the Sale Assets and, upon payment of the Purchase Price by the
Buyer, the Seller shall have no further rights or obligations with respect to
the Sale Assets; provided that the Seller
represents and warrants that upon completion of the transactions to be effected
on the date hereof, the Buyer will acquire such title to the Sale Assets as the
Borrower had at the time that Drawbridge Special Opportunities Fund LP sold all
the equity interests in the Borrower to CLST Asset I, LLC, free and clear of
any liens created by the Borrower.

 

7.             Release
of Lien.  Fortress Credit Co. LLC, in
its capacity as administrative agent under that certain Credit Agreement, dated
as of November 10, 2008 (as amended, the “Credit Agreement”), by
and among the Seller, Fortress Credit Co. LLC, as the administrative agent (the
“Administrative Agent”), the lenders from time to time party thereto,
Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) and
U.S. Bank National Association, on behalf of the lenders and other secured
parties thereto, hereby relinquishes any and all right, title and interest it
may have in the Sale Assets set forth on Schedule I hereto and shall
execute such instruments of release in favor of the Seller with respect to the
Sale Assets being released from the lien of the Administrative Agent and
otherwise take such actions as are necessary or appropriate (including the
filing of UCC termination statements) to release the lien of the Administrative
Agent on the Sale Assets; provided that,
if such UCC termination statements have not been filed within five business
days from the date hereof, the Seller (and its agents and representatives) is
hereby authorized, without further act or deed, to file appropriate termination
statements with respect to the interests released hereby.

 

2

 

8.             Entire
Agreement.  This Agreement contains
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.

 

9.             GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

10.           Limitation of Liability.  It is expressly understood and agreed by the
parties hereto that (i) this Agreement is executed and delivered by U.S.
Bank Trust National Association, not individually or personally but solely as
trustee of the Seller, in the exercise of the powers and authority conferred
and vested in it, (ii) each of the representations, undertakings and
agreements herein made on the part of the Seller is made and intended not as a
personal representation, undertaking or agreement by U.S. Bank Trust National
Association but is made and intended for the purpose of binding only the
Seller, (iii) nothing herein contained shall be construed as creating any
liability on U.S. Bank Trust National Association, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (iv) under no
circumstances shall U.S. Bank Trust National Association be personally liable
for the payment of any indebtedness or expenses of the Seller or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Seller under this Agreement or any other related
documents; provided, however, that U.S. Bank Trust National Association shall
remain personally liable for the breach or failure of the representations and
warranties made in its personal capacity in the applicable trust agreement for
the Seller.

 

[Remainder of Page Intentionally Left Blank]

 

3

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their respective duly authorized
officer as of the date first above written.

 

	
   

  	
  FCC
  INVESTMENT TRUST I,

  
	
   

  	
  as
  the Seller

  
	
   

  	
   

  
	
   

  	
  By:

  	
  U.S.
  Bank Trust National Association, not in its individual capacity but solely as
  statutory trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael D. Bengston

  
	
   

  	
  Name:

  	
  Michael
  D. Bengston

  
	
   

  	
  Title:

  	
  Assistant
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  50-BY-50
  LLC,

  
	
   

  	
  as
  the Buyer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Constantine M. Dakolias

  
	
   

  	
  Name:

  	
  Constantine
  M. Dakolias

  
	
   

  	
  Title:

  	
  President

  

 

 

	
  Acknowledged
  and Agreed:

  	
   

  
	
   

  	
   

  
	
  FORTRESS
  CREDIT CO. LLC, as

  	
   

  
	
  Administrative
  Agent under the Credit Agreement

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Constantine M. Dakolias

  	
   

  
	
  Name:

  	
  Constantine
  M. Dakolias

  	
   

  
	
  Title:

  	
  President

  	
   

  

 

 

Schedule I

 

See Attached

 

Note:
Redacted portions have been marked with *****. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

 

 

	
  Loan ID

  	
   

  	
  8/31 Curbal

  	
   

  	
  Obligor Name

  	
   

  	
  Original

  Balance

  	
   

  	
  Mortgage or Non-

  Mortgage Contract

  
	
  35021

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  25405

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  27460

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  27701

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  22886

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  41031

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  38879

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  42609

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  34719

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  40087

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  29477

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  13483

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  34577

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  42176

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  25054

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  43442

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  38683

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  42605

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  38890

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  35521

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  31367

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  34178

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  39817

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  42831

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  46876

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  20645

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  12848

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  44369

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  12677

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  39248

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  34716

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  33466

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  29279

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  
	
  44731

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  39237

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  12201

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  SECURED

  
	
  37988

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  *****

  	
   

  	
  UNSECURED

  

 

Note:
Redacted portions have been marked with *****. The redacted portions are subject
to a request for confidential treatment that has been filed with the Securities
and Exchange Commission.Exhibit 10.3

 

CERTAIN
PORTIONS OF THIS EXHIBIT HAVE BEEN REDACTED AND ARE THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934.  REDACTED PORTIONS
ARE MARKED WITH [*****] AND HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

EXECUTION

 

 

GAS SERVICES AGREEMENT

 

BETWEEN

 

SM ENERGY COMPANY (“Customer”)

 

AND

 

EAGLE FORD GATHERING LLC (“Eagle Ford”)

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE

  	
   

  	
  DESCRIPTION

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  II.

  	
   

  	
  Quantities

  	
   

  	
  3

  
	
  III.

  	
   

  	
  Points of Delivery

  	
   

  	
  4

  
	
  IV.

  	
   

  	
  Nominations and Imbalances

  	
   

  	
  4

  
	
  V.

  	
   

  	
  Fees

  	
   

  	
  5

  
	
  VI.

  	
   

  	
  Processing Settlement

  	
   

  	
  6

  
	
  VII.

  	
   

  	
  Taxes and Compliance Costs

  	
   

  	
  8

  
	
  VIII.

  	
   

  	
  Custody Transfer and
  Responsibility

  	
   

  	
  8

  
	
  IX.

  	
   

  	
  Liquefiable Hydrocarbon
  Content Tests

  	
   

  	
  9

  
	
  X.

  	
   

  	
  Measurement

  	
   

  	
  9

  
	
  XI.

  	
   

  	
  Measuring Equipment and
  Testing

  	
   

  	
  10

  
	
  XII.

  	
   

  	
  Allocations

  	
   

  	
  12

  
	
  XIII.

  	
   

  	
  Gas Quality

  	
   

  	
  12

  
	
  XIV.

  	
   

  	
  Pressures

  	
   

  	
  13

  
	
  XV.

  	
   

  	
  Accounting

  	
   

  	
  14

  
	
  XVI.

  	
   

  	
  Force Majeure

  	
   

  	
  14

  
	
  XVII.

  	
   

  	
  Notices

  	
   

  	
  15

  
	
  XVIII.

  	
   

  	
  Warranty and
  Indemnification

  	
   

  	
  16

  
	
  XIX.

  	
   

  	
  Successors and Assigns

  	
   

  	
  18

  
	
  XX.

  	
   

  	
  Term

  	
   

  	
  18

  
	
  XXI.

  	
   

  	
  Miscellaneous

  	
   

  	
  18

  
	
  XXII.

  	
   

  	
  Signatures

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Exhibit “A”

  	
  Points of Delivery and
  Redelivery

  	
   

  	
   

  
	
   

  	
   

  	
  Exhibit “B”

  	
  Joint Venture Line

  	
   

  	
   

  
	
   

  	
   

  	
  Exhibit “C1”

  	
  Bolt Ranch Point of
  Delivery

  	
   

  	
   

  
	
   

  	
   

  	
  Exhibit “C2”

  	
  La Salle Area Point of
  Delivery

  	
   

  	
   

  
	
   

  	
   

  	
  Exhibit “D”

  	
  Nomination Form

  	
   

  	
   

  

 

 

GAS SERVICES AGREEMENT

 

THIS GAS SERVICES AGREEMENT (the “Agreement”) is made
and entered into effective as of July 1, 2010, by and between SM ENERGY COMPANY (“Customer”) and EAGLE FORD GATHERING LLC, a Delaware
limited liability company (“Eagle Ford”). 
Customer and Eagle Ford are sometimes referred to collectively as “Parties”
or singularly as a “Party.”

 

W I T N E S
S E T H:

 

WHEREAS,
Customer owns and/or controls Gas to be produced from wells located in Webb,
Dimmit, and La Salle Counties, Texas, and desires Eagle Ford, on a firm
non-interruptible basis, subject to the terms and conditions hereof, to gather,
transport, and process such Gas, and to purchase the liquefiable hydrocarbons
as calculated herein, and to redeliver Customer’s Residue Gas all as provided
herein; and

 

WHEREAS,
Eagle Ford has firm transportation capacity on the Laredo-to-Katy pipeline
system of Kinder Morgan Texas Pipeline LLC (“KMTP”) and firm processing
capacity at the Houston Central Plant (“Plant”) owned and operated by Copano
Processing, L.P. (“Copano Processing”) in Colorado County, Texas, and is
willing to provide for the services desired by Customer under the terms and
conditions hereof; and

 

WHEREAS,
Eagle Ford will construct a new gathering pipeline (as generally depicted on Exhibit “B”,
labeled “Joint Venture Line”), at its sole cost and expense, from the KMTP
Laredo-to-Katy pipeline to the Points of Delivery, which is sufficient to
gather Customer’s Gas as provided herein.

 

NOW,
THEREFORE, for and in consideration of the premises and the mutual benefits and
covenants herein contained, the Parties hereby agree as follows:

 

ARTICLE I – DEFINITIONS

 

1.1          Defined Words
and Terms. Except where the context otherwise indicates
another or different meaning or intent, the following words and terms as used
herein shall be construed to have the meaning indicated:

 

(a)               “Btu” shall
mean British thermal unit, which is the quantity of heat required to raise the
temperature of one pound avoirdupois of pure water from 58.5 degrees Fahrenheit
(“°F”) to 59.5°F.  MMBtu shall mean
1,000,000 Btu.

 

(b)               “Conventional
Lease Separation” shall mean the separation of equilibrium liquids from the
effluent produced by wells delivering Gas to the Points of Delivery hereunder
without using adsorption, absorption, external refrigeration, or other cooling
processes.

 

(c)                “Cubic Foot of Gas” shall
mean the volume of Gas contained in one cubic foot of space at a standard
pressure base and at a standard temperature base.  The standard pressure base shall be 14.73
psia, and the standard temperature base shall be 60°F. The terms “Mcf” and “MMcf”
shall mean, respectively, 1,000 cubic feet and 1,000,000 cubic feet.

 

1

 

(d)               “CPI-U” means the “All Items
Consumer Price Index for All Urban Consumers, U.S. City Average,” as compiled
monthly by the U.S. Department of Labor, Bureau of Labor Statistics utilizing a
standard reference base period of 1982-84 equals 100, unadjusted for seasonal
variation.

 

(e)                “Day” or “Daily” shall mean
a 24-hour period beginning at 9:00 a.m. (central time) on a calendar day
and ending at 9:00 a.m. (central time) on the next succeeding calendar
day.  Any Day other than Saturday,
Sunday, or legal holiday for commercial banks under either the laws applicable
to national banking associations or those applicable to Texas state chartered
banks, shall mean “Business Day.” The date of a day shall be that of its
beginning.

 

(f)                 “Gas” shall mean natural Gas
produced in its original state from Gas and/or oil wells, but shall not include
such iso-butane and heavier hydrocarbons as are removed, prior to the delivery
hereunder, by Conventional Lease Separation. 
The classification by the Railroad Commission of Texas shall control
hereunder as to whether a well is a Gas well or an oil well.

 

(g)                “Gathering System” shall
mean the Joint Venture Line and other facilities owned and operated by Eagle
Ford and utilized to gather Customer’s Gas.

 

(h)               “GPM” shall mean gallons per
Mcf as determined at the Points of Delivery. 
This term refers to the content of components in natural Gas that are
recoverable or recovered as liquid products.

 

(i)                   “Gross Heating Value” shall
mean the gross number of Btu that would be contained in a volume of one (1) cubic
foot of Gas at a temperature of sixty (60) degrees Fahrenheit, and under a
pressure of fourteen and seventy-three hundredths (14.73) psia and adjusted to
reflect the actual water vapor content of the Gas delivered.  If the Gas contains less than seven (7) pounds
of water vapor per million cubic feet then the Gas shall be deemed dry.

 

(j)                  “Gas Daily Index” shall mean
the midpoint average price published in the Platts Gas Daily Price Guide for the
Month in which an Imbalance occurs under the heading Midpoint Averages,
subheading “East-Houston-Katy,” Houston Ship Channel.

 

(k)               “HSC Index” shall mean the
price published by Platts, a Division of the McGraw-Hill Companies, in the
first issue of Inside F.E.R.C.’s Gas Market Report in the Month of production
under the heading Market Center Spot-Gas
Prices, subheading East Texas, Houston Ship Channel Index.

 

(l)   “Hydrocarbon Shrinkage” shall mean the
amount, in MMBtu, by which Customer’s Gas delivered at the Points of Delivery
is reduced as a result of calculating the Plant Products as set forth in Section 6.2
below.

 

(m)           “Imbalance” shall mean the
positive or negative difference each Month between Customer’s Residue Gas
delivered by Eagle Ford at the Points of Redelivery and Customer’s nominations
to its downstream pipeline(s) at the Points of Redelivery during such
Month.

 

2

 

(n)               “Month” shall mean a period
beginning 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.

 

(o)                 “Plant Fuel,
Flare and Losses” shall be fixed based at the amount set forth in Section 6.2
below and applied to Customer’s Gas delivered at the Points of Delivery.

 

(p)               “Plant Products” shall mean
the liquefiable hydrocarbon calculated using the fixed recoveries of each
component (as set forth in Section 6.2 below) and applied to Customer’s
Gas delivered at the Points of Delivery.

 

(q)               “Plant Thermal Reduction” (“PTR”)
shall mean the sum of the Hydrocarbon Shrinkage and Plant Fuel, Flare and
Losses.

 

(r)                  “Points of Delivery” shall
mean the meter facilities described on Exhibit “A”.

 

(s)                 “Points of
Redelivery” shall mean the inlet flange of the meters at the tailgate of the Plant
that measure the Residue Gas delivered into the pipelines or pooling points
named on Exhibit “A.”

 

(t)                  “Psia” or “psia” shall mean
pounds per square inch absolute.

 

(u)               “Psig” or “psig” shall mean
pounds per square inch gauge.

 

(v)               “Residue Gas” shall mean the
total quantity of Customer’s Gas received at the Points of Delivery each Month,
less Customer’s PTR calculated hereunder.

 

ARTICLE II – QUANTITIES

 

2.1        Commitment. Subject to all
of the terms, conditions, and limitations herein set forth, Customer hereby
commits to the performance of this Agreement and agrees to deliver or cause to
be delivered to Eagle Ford, and Eagle Ford agrees to receive from Customer, and
transport, and process, as provided herein, during the term hereof at the
Points of Delivery, Gas owned and/or controlled by Customer (excluding any Gas
originating from third parties during the first two Contract Periods described
below in this Section 2.1, however this exclusion does not apply to
royalty owners’ Gas or overriding royalty owners’ Gas or other working interest
owners’ Gas produced from a well in which Customer owns a working interest)
which is received at the  Points of
Delivery described in Exhibit “A,” up to a Maximum Daily Quantity (the “Firm
MDQ”) for each such Delivery Period as follows:

 

	
  Delivery Period

  	
   

  	
  Firm MDQ MMBtu/Day

  
	
  1.)
  In-Service Date of the Gathering System through 12/31/2011*

  	
   

  	
  [*****]

  
	
  2.)
  1/1/2012 -12/31/2012

  	
   

  	
  [*****]

  
	
  3.)
  1/1/2013 -12/31/2014

  	
   

  	
  200,000

  
	
  4.)
  1/1/2015 -12/31/2021

  	
   

  	
  [*****]

  

 

*In
the event that during this Delivery Period, Eagle Ford notifies Customer in
writing that Copano Processing has completed the necessary expansion of its
fractionation capacity at the Plant, the Firm MDQ for the remainder of this
Delivery Period shall be [*****]MMBtu/Day.

 

3

 

Eagle
Ford shall redeliver to Customer at the Points of Redelivery, on a firm basis
subject to all the provisions of this Agreement, the Residue Gas attributable
to the Firm MDQ.  The “In-Service Date”
shall be the date that the Gathering System is operational and ready to receive
and gather Customer’s Gas, as determined by Eagle Ford and specified in a
written notice to Customer.

 

2.2          Interruptible
Quantities. Customer may deliver and Eagle Ford may receive at
the Points of Delivery mutually agreeable quantities of Gas each Day in excess
of the Firm MDQ, on an interruptible basis, under the same terms and conditions
provided for in this Agreement, up to a quantity of Gas that Eagle Ford agrees
to receive from time to time.  Eagle Ford
shall redeliver to Customer at the Points of Redelivery, on an interruptible
basis, the Residue Gas attributable to the Gas in excess of the Firm MDQ.  For the purpose of clarity, it is understood
and agreed by the Parties that all Gas delivered at the Points of Delivery in
excess of the Firm MDQ on an interruptible basis will be counted towards the
Customer’s Period Quantity Commitment as described in Section 5.3 herein.

 

ARTICLE III – POINTS OF DELIVERY

 

3.1          Points of  Delivery.  Shall mean the Eagle Ford owned meter
facilities described on Exhibit “A.”

 

ARTICLE IV – NOMINATIONS AND IMBALANCES

 

4.1          Daily
Nominations.  Customer
shall nominate by 10:30 a.m. on a Business Day prior to the Day of flow,
in accordance with Eagle Ford’s nomination procedures, the quantity of Gas per
Day (“Daily Nominated Quantity”) that Customer will deliver to Eagle Ford at
each Point of Delivery and receive at each Point of Redelivery.  Intra-day nominations will be made in
accordance with Eagle Ford’s nomination procedures.  The quantities to be transported shall be as
agreed to by the Parties (the “Confirmed Nominations”) and described in a
Nomination Form, substantially in the form of the attached Exhibit “D.”  Customer shall make all necessary arrangements
to receive Customer’s Residue Gas at the Points of Redelivery.  Eagle Ford shall have no obligation to gather
Customer’s Gas on any Day for which Customer does not have a Confirmed
Nomination.

 

4.2          Right to
Balance.  The Parties agree that during
the term hereof Eagle Ford shall have the right to operate its Gathering System
and to accept and deliver Gas hereunder in such a manner as to maintain balance
between receipts and deliveries of Gas subject to this Agreement as closely as
possible.  Eagle Ford will have the right
and option (i) to refuse to accept Customer’s Gas in excess of its
Confirmed Nominations at the Points of Delivery, and (ii) to refuse to
accept Residue Gas delivery nominations at the Points of Redelivery if such
nominations exceed the quantity of Customer’s Residue Gas available at the
Points of Redelivery.

 

4.3          Cash-Out. Each Month
Eagle Ford shall value Customer’s Imbalance, if any, at the Gas Daily
Index.  Over-deliveries of Residue Gas by
Customer at the Points of Redelivery will be sold to Eagle Ford at the Gas
Daily Index.  Under-deliveries of Residue
Gas by Customer at the Points of Redelivery will be purchased by Customer from
Eagle Ford at the Gas Daily Index.

 

4

 

ARTICLE V – FEES

 

5.1          Service Fee.  For each MMBtu of Customer’s Gas delivered to
the Points of Delivery with a GPM content equal to or greater than [*****] (the GPM for this purpose will be calculated Daily
based upon the weighted average GPM at the Points of Delivery, provided that
the GPM at any Points of Delivery shall not be less than [*****]),
Customer will pay Eagle Ford a Service Fee equal to the sum of $[*****] plus
[*****]% of the HSC Index (“Service Fee”). The Service Fee applicable to
Customer’s Gas containing less than [*****] GPM
(the GPM for this purpose will be calculated Daily based upon the weighted
average GPM at the Points of Delivery) will be subject to the negotiation of
mutually agreeable terms. The Service Fee will be reduced by $[*****] per MMBtu
at the time the Total Quantity Commitment is met by delivery of Gas, including
the quantity for which payment of a Deficiency Fee is made pursuant to Section 5.3,
prior to the expiration of the Primary Term.

 

5.2          Inflation
Adjustment. Commencing on January 1, 2017, and continuing
for the Term of this Agreement, Customer and Eagle Ford agree that the Service
Fee and the $[*****] portion of the T&F Fee shall be adjusted annually
(effective on each January 1) by the percentage increase or decrease in
the CPI-U for the preceding twelve-Month period determined by comparing the
CPI-U for the November immediately preceding the applicable January 1
to the CPI-U for the prior November (“Inflation Adjustment”). The Parties
agree that the adjusted Service Fee shall never decrease as a result of the
Inflation Adjustment below the original amount set forth in Sections 5.1 and
6.3. In the event the CPI-U is no longer published, the Parties shall mutually
agree to a replacement inflationary index.

 

5.3          Quantity
Commitment. Commencing on the effective date of this Agreement,
as determined under ARTICLE XX - TERM, Customer hereby commits to
deliver a minimum quantity of Gas during each Contract Period specified below
in this Section 5.3 (“Period Quantity Commitment”) as set forth below. If
Customer fails to deliver the Period Quantity Commitment at the end of each
Contract Period, then Customer shall pay Eagle Ford, at the conclusion of each
Contract Period, an amount equal to $[*****] per MMBtu (“Deficiency Fee”) times
the deficient quantity in MMBtu. Gas delivered in excess of the Period Quantity
Commitment in a Contract Period will be credited to the Period Quantity
Commitment for subsequent Contract Periods.

 

	
  Contract Periods

  	
   

  	
  Period Quantity

  Commitment MMBtu

  
	
  1.
  In-Service Date of the Gathering System through 6/30/2012

  	
   

  	
  Equals
  the number of days between the In-Service Date through 6/30/2012 times [*****]

  
	
  2.
  7/1/2012 -12/31/2012

  	
   

  	
  [*****]

  
	
  3.
  1/1/2013 -12/31/2013

  	
   

  	
  [*****]

  
	
  4.
  1/1/2014 -12/31/2014

  	
   

  	
  [*****]

  
	
  5.
  1/1/2015 -12/31/2015

  	
   

  	
  [*****]

  
	
  6.
  1/1/2016 -12/31/2016

  	
   

  	
  [*****]

  
	
  7.
  1/1/2017 -12/31/2017

  	
   

  	
  [*****]

  
	
  8.
  1/1/2018 -12/31/2018

  	
   

  	
  [*****]

  
	
  9.
  1/1/2019 -12/31/2019

  	
   

  	
  [*****]

  
	
  10.
  1/1/2020 -12/31/2020

  	
   

  	
  [*****]

  
	
  11.
  1/1/2021 -12/31/2021

  	
   

  	
  [*****]

  
	
  TOTAL
  QUANTITY COMMITMENT

  	
   

  	
  Equals
  the summation of all Period Quantity Commitments

  

 

5

 

5.4          MDQ Change. If Customer
delivers the Total Quantity Commitment through December 31, 2021, and
Customer’s average Daily deliveries are less than [*****]%
of Customer’s then-existing Daily Firm MDQ for a period of four consecutive
months, then Eagle Ford shall have the right to reduce the then-existing Firm
MDQ. Any such reduction shall not result in a Firm MDQ that is less than [*****]% of the total average quantity of Gas delivered by
Customer over the above 4-Month period. Following a reduction as contemplated
in the foregoing, Customer shall have the right, subject to available firm
capacity as determined in Eagle Ford’s sole discretion, reasonably exercised,
to an increase of the then-existing Firm MDQ; provided, however, that Customer’s
new Firm MDQ following any such increase shall not exceed the Firm MDQ
specified in Section 2.1 for the applicable Contract Period.

 

5.5          Quantity
Commitment Reduction. Beginning on January 1, 2017, and for each
calendar year thereafter, Customer shall have the right to reduce its Period
Quantity Commitment (as defined in Section 5.3 above) by [*****]%. The Firm MDQ shall be adjusted to reflect any
reduction in Period Quantity Commitment. For example: If Customer elects to
reduce the Period Quantity Commitment on January 1, 2017, then the Firm
MDQ for such Calendar year shall become [*****]
MMBtu/Day, or [*****]MMBtu annually. If Customer
elects to reduce its Period Quantity Commitment, the Deficiency Fee (as defined
in Section 5.3 above) for Customer’s remaining Period Quantity Commitment
shall increase to $[*****] per MMBtu.

 

5.6          Failure To
Receive Gas.  If, at any
time during the term of this Agreement, Eagle Ford is unable to take all of
Customer’s available Gas up to the Firm MDQ on any Day for any reason,
including Force Majeure, then Customer shall receive credit against the Period
Quantity Commitment for delivering the greater of the previous Month’s average
Daily deliveries in aggregate or the Daily equivalent Period Quantity
Commitment for such Day(s). In the event Eagle Ford is unable to take Customer’s
Gas delivered under the terms and conditions hereof up to the Firm MDQ for a
total of 45 Days in any one calendar year, but not to exceed 60 Days in any two
consecutive calendar years, excluding periods of Force Majeure (“Reduced Flow
Period”), then Customer shall have the right to terminate this Agreement by
providing 30 Days prior written notice to Eagle Ford within 15 Days following
the Reduced Flow Period. The right of termination provided for in the preceding
sentence shall also apply in the event a period of Force Majeure exceeds 270
consecutive days wherein Eagle Ford cannot take the Firm MDQ in effect at such
time. Upon such termination there will be no further obligation on the part of
either Party (except obligations incurred before the effective date of
termination, including to pay for Gas delivered and not yet paid for) and any
accumulated obligation related to the Period Quantity Commitment, if any, will
be waived.

 

ARTICLE VI – PROCESSING
SETTLEMENT

 

6.1          Plant Products.  Customer
agrees to sell to Eagle Ford, and Eagle Ford agrees to purchase from Customer,
under the provisions hereof, all Plant Products attributable to Customer’s Gas.  As consideration for the purchase of the
Plant Products by Eagle Ford from Customer hereunder, Eagle Ford shall pay
Customer the value of the Plant Products as determined in Section 6.3
below. Eagle Ford shall take title to the Plant Products at the Points of
Delivery.

 

6

 

6.2          Plant
Recoveries. The Plant recoveries and FF&L will be fixed as
shown below:

 

	
  Product

  	
   

  	
  Initial Recoveries

  
	
  Ethane

  	
   

  	
  [*****]

  
	
  Propane

  	
   

  	
  [*****]

  
	
  Butanes

  	
   

  	
  [*****]

  
	
  Pentanes+

  	
   

  	
  [*****]

  
	
  Plant FF&L

  	
   

  	
  [*****]

  

 

	
  Product

  	
   

  	
  Recoveries after 200

  MMcf/d Proposed

  Expansion

  
	
  Ethane

  	
   

  	
  [*****]

  
	
  Propane

  	
   

  	
  [*****]

  
	
  Butanes

  	
   

  	
  [*****]

  
	
  Pentanes+

  	
   

  	
  [*****]

  
	
  Plant FF&L

  	
   

  	
  [*****]

  

 

	
  Product

  	
   

  	
  Recoveries after Full

  Replacement of Lean

  Oil Plant

  
	
  Ethane

  	
   

  	
  [*****]

  
	
  Propane

  	
   

  	
  [*****]

  
	
  Butanes

  	
   

  	
  [*****]

  
	
  Pentanes+

  	
   

  	
  [*****]

  
	
  Plant FF&L

  	
   

  	
  [*****]

  

 

Recoveries after the full
replacement of the lean oil plant are further described in Section 6.5
below.

 

6.3          Value. The value for
the Plant Products shall be (i) one hundred percent (100%) of the OPIS
Mont Belvieu Index monthly average of the daily average of the high and of the
low prices for purity ethane, and (ii) one hundred percent (100%) of the
OPIS Mont Belvieu Index Non-TET monthly average of the daily average of the
high and of the low prices for propane, isobutane, normal butane, and natural
gasoline, both less the transportation and fractionation fee (the “T &
F” Fee) defined below. The T & F Fee shall mean the greater of (i) $[*****] per gallon, or (ii) the fee calculated and
determined in cents per gallon on a Monthly basis using the following formula:

 

T &
F = [*****] + [*****]
+ ([*****] x (HSC Index/3.50)) cents per
gallon

 

6.4          Residue Gas.  Eagle Ford shall deliver Customer’s Residue
Gas to Customer, or its designee, at the Points of Redelivery.  Subject to availability, Customer shall have
access to the pipeline interconnections shown on Exhibit “A.”  Eagle Ford shall deliver Customer’s Residue
Gas to Customer, or its designee, in condition and at pressures sufficient to
allow the Gas to enter the Points of Redelivery up to the MAOP of the
respective Points of Redelivery.

 

7

 

6.5          Replacement of
Lean Oil Plant. In the event substantially all of the lean oil
processing equipment at the Plant is replaced with cryogenic equipment having a
capacity of approximately 450,000 MMBtu per Day, then commencing on the first
day of the Month following the Month the new cryogenic equipment is placed in
service, the ethane recovery factor shall be fixed at [*****]%
and shall remain fixed for [*****] ([*****]) calendar years. After such time, the ethane
recovery factor shall be [*****]%.  Eagle Ford shall notify Customer in writing
that Copano Processing has replaced the lean oil plant at the Plant.

 

6.6          Ethane
Rejection. Customer will have the right to reject ethane each
Month by providing Eagle Ford with five (5) Business Days’ notice prior to the
first Day of such month. Customer’s ethane recovery for any Month during which
Customer has elected to reject ethane will be fixed at [*****]%
of the theoretical gallons of ethane contained in Customer’s Gas.  All other fixed recoveries as set forth in Section 6.2
will remain the same during ethane rejection.

 

ARTICLE VII - TAXES AND COMPLIANCE COSTS

 

7.1          General. Subject to
the provisions of Section 7.2 below, Eagle Ford shall pay or cause to be
paid all taxes and assessments imposed on Eagle Ford, and Customer shall pay or
cause to be paid all taxes and assessments imposed upon Customer.  In the event any new or additional taxes are
imposed on Customer’s Gas or Residue Gas during the term of this Agreement,
Customer shall be responsible for and pay such taxes, or shall reimburse Eagle
Ford therefore if Eagle Ford has paid or reimbursed others for such taxes.

 

7.2           Reimbursement.  Notwithstanding anything contained in this
Agreement to the contrary, if there is a change in any applicable law or
regulation after the effective date of this Agreement which results in a
governmental authority imposing, in Eagle Ford’s sole determination, reasonably
exercised, an additional direct or indirect, actual or pro rata cost or expense
on Eagle Ford in connection with or related to the quality of Customer’s Gas,
including but not limited to: (i) any tax, assessment or emission credit,
allowance or offset expense, (ii) any requirements to modify facilities or
operations, (iii) any requirement to prevent, reduce, control, or monitor
emissions, or (iv) other cost or expense based upon or related to
greenhouse gas content or emissions (collectively, “Compliance Costs”),
Customer will be fully responsible for its share of the Compliance Costs.
Customer’s share of the Compliance Costs will be based on the ratio of the mole
percent of carbon dioxide per Mcf in Customer’s Gas at the Points of Delivery
times the total Mcf delivered by Customer at such points bears to the mole
percent of carbon dioxide per Mcf in all Gas delivered at the inlet of the
Plant times the total Mcf delivered at the Plant, or other mutually agreeable
method. If Eagle Ford recovers a portion of the Compliance Costs paid by
Customer at a future date from third parties, Eagle Ford shall reimburse
Customer for its proportionate share of such recovery.  Eagle Ford shall have the right to deduct all
Compliance Costs for which Customer has a reimbursement obligation from the
amounts otherwise owed by Eagle Ford to Customer hereunder.

 

ARTICLE VIII - CUSTODY TRANSFER AND
RESPONSIBILITY

 

8.1          Custody and
Risk of Loss. Custody and risk of loss of Customer’s Gas
(including all components of the Gas stream) delivered hereunder shall pass
from Customer to Eagle Ford at the Points of Delivery. Custody and risk of loss
of Customer’s Residue Gas shall pass from Eagle Ford to Customer at the Points
of Redelivery.

 

8.2          Responsibility. Customer
shall be in control and possession of Gas and liquid 

 

8

 

hydrocarbons and responsible
for any injuries, claims,
liabilities, or damages caused thereby until the same shall have been delivered
to Eagle Ford at the Points of Delivery. After such delivery, as between Eagle
Ford and Customer, Eagle Ford shall be in possession and control thereof and
responsible for any injuries, claims, liabilities, or damages caused thereby
until redelivery of Residue Gas to Customer or its designee at the Points of
Redelivery.

 

ARTICLE IX – LIQUEFIABLE
HYDROCARBON CONTENT TESTS

 

9.1          Frequency. Eagle Ford or
Eagle Ford’s designee shall use an online gas chromatograph at each Point of
Delivery described on Exhibit “A” to determine liquefiable hydrocarbon
content, and other pertinent properties of Customer’s Gas at the Points of
Delivery by standard test methods then in use in the industry and approved by
the Parties hereto.

 

ARTICLE X – MEASUREMENT

 

10.1        Assumed
Atmospheric Pressure. The average atmospheric pressure shall be
assumed to be fourteen and seven tenths pounds per square inch (14.7 psi) at
the Points of Delivery.

 

10.2        Unit of Volume. The unit of
volume for measurement of Gas for all purposes shall be one (1) cubic foot
of Gas at a base temperature of sixty degrees Fahrenheit (60o F.)  and at a base pressure of fourteen and
seventy-three hundredths pounds per square inch absolute (14.73 psia).  Where measurement is by orifice meter, all
fundamental constants, observations, records and procedures involved in the
determination and/or verification of the quantity and other characteristics of
Gas delivered hereunder shall be made according to the latest revision of
ANSI/API 2530-92 Chapter 14.3, Part 1-4 (AGA Report No. 3), with any
revisions, amendments or supplements, unless otherwise specified herein.

 

10.3        Adjustment for
Supercompressibility. Adjustment to measured Gas volumes for the
effects of supercompressibility shall be made according to the latest revision
of AGA report No. 8 “Compressibility and Super Compressibility for natural
gas and Other Hydrocarbon gases,” as amended from time to time.  The measuring Party shall use an onsite gas
chromatograph at each delivery point described Exhibit “A” to obtain
representative relative density, gas composition, and heating values of the Gas
delivered or received as may be required to compute such adjustments.    The supercompressibility will be calculated
using the latest Gas analysis, flowing temperature and pressure. When
electronic flow measurement is used, the Daily flow data will be calculated
using the method set forth in AGA Report No. 8 Detailed Method.

 

10.4        Determination
of Heating Value. The heating value of the Gas may be determined by
the use of a chromatograph. The arithmetical average of the hourly heating
value recorded by a recording instrument during periods of flow each day shall
be considered as the heating value of the Gas delivered hereunder during such
day. The samples shall be analyzed on the measuring Party’s chromatograph. The
result of a sample shall be applied to Gas deliveries during the month. All
heating value determinations made with a chromatograph shall use physical Gas
constants for Gas compounds as outlined in the latest revision of GPA 2145 or
revisions to related reports to which the Parties may mutually agree. Heating
value shall be determined to the nearest whole Btu.

 

10.5        Determination
of Flowing Temperature. The temperature of the Gas flowing through
the meter or meters shall be determined by the continuous use of a recording
thermometer installed so that it will properly record the temperature of the
Gas flowing through the 

 

9

 

meter. The average of the
temperature recorded each day shall be used in computing the volumes of Gas for
that Day. Temperature shall be determined to the nearest whole degree in
Fahrenheit.

 

10.6        Determination
of Specific Gravity. The specific gravity of the Gas flowing through the
meter or meters shall be determined by the use of a chromatograph so that it
will properly record the specific gravity of the Gas flowing through the meter
or meters. The average of specific gravity recorded each Day shall be used in
computing the volume of Gas for that Day. 
All specific gravity determinations made with a chromatograph shall use
physical constants for Gas compounds as outlined in the latest revision of GPA
2145 or revisions to related Reports to which the Parties may mutually agree.
Specific gravity shall be determined to the nearest one thousandth (0.001).

 

ARTICLE XI – MEASURING EQUIPMENT AND TESTING

 

11.1        Equipment. At or near
each Point of Delivery and Point of Redelivery, Eagle Ford, or its designee,
shall, at its expense, install, operate and maintain in accurate working order,
the meters, electronic flow measurement computers, instruments and equipment of
standard type necessary to measure the Gas to be delivered and redelivered
hereunder.  The Gas meters shall conform
to the latest edition of the applicable AGA/API standards.  The metering and other equipment installed,
together with any buildings erected for such equipment, shall be and remain the
property of Eagle Ford or its designee.

 

As specified by Eagle Ford,
all measuring stations provided hereunder shall be equipped with orifice meter
runs, electronic flow computer, recording gauges or other types of meter or
meters of standard make and design commonly accepted in the natural gas
industry in order to accurately measure the Gas delivered hereunder. A
computer, transducers and other associated sensing devices will be installed to
accurately measure the Gas delivered hereunder in accordance with A.G.A. Report
Nos. 3, 5, 6, and 7, as appropriate.  The
values for gross heating value, specific gravity and Gas composition shall be
real time data from an onsite gas chromatograph.

 

11.2        Calibration and
Tests of Meters. The measuring Party shall calibrate chromatographs
at least once each month against a standard Gas sample. All other measuring
equipment shall be calibrated and adjusted as necessary by the measuring Party
or as frequently as deemed necessary, but not less frequently than once each
month. Customer  may, at its
option, be present for such calibration and adjustment. Eagle Ford shall give
Customer notice of the time of all tests sufficiently in advance of conducting
same so that the Parties may conveniently have their representatives present. Following
any test, any measuring equipment found to be inaccurate to any degree shall be
adjusted immediately to measure accurately. 
Each Party shall have the right, at any time, to challenge the accuracy
of any measuring equipment used hereunder and may request additional tests. If,
upon testing, the challenged equipment is found to be in error, then it shall
be repaired and calibrated. The cost of any such special testing, repair and
calibration shall be borne by the Party requiring the special test if the
percentage of inaccuracy is found to be two percent (2%) or less, or one
percent (1%) if electronic flow measurement equipment is utilized.  Otherwise, the cost shall be borne by the
Party operating the challenged measuring equipment.

 

11.3        Access to Meters
and Records. The other Party shall have access at all
reasonable times to the measuring equipment and all other instruments used by
the measuring Party in determining the measurement and quality of the Gas
delivered hereunder, but the reading, calibrating, and adjusting thereof shall
be done only by employees, agents or representatives of the measuring
Party.  The measuring Party shall keep on
file copies of original 

 

10

 

records for a period of
three (3) years for mutual use of Eagle Ford and Customer. Upon request,
the measuring Party shall submit to the other Party copies of original records
from such equipment, subject to return by the Party within sixty (60) Days
after receipt thereof.

 

11.4        Correction of
Metering Errors. If, upon any test, the measuring equipment, in the
aggregate for any measurement facility, is found to be inaccurate by more than
one percent (1%),  registration
thereof and any payments based upon such registration shall be corrected at the
rate of such inaccuracy for any period of inaccuracy which is definitely known
or agreed upon; provided, however, if such period is not definitely known or
agreed upon, then such registration and payment shall be corrected for a period
extending back one-half (1/2) of the time elapsed since the last Day of
calibration.

 

11.5        Failure of
Meters. If, for any reason, the measuring equipment is out of service or out
of repair so that the quantity of Gas delivered hereunder through such
measuring equipment cannot be ascertained or computed from the readings
thereof, the quantity of Gas so delivered during the period such equipment is
out of service or out of repair shall be estimated and agreed upon by Eagle
Ford and Customer upon the basis of the best available data, using the first of
the following methods which is feasible:

 

(a)           By using the
registration of any duplicate measuring equipment installed by the measuring
Party, if installed and registering correctly;

 

(b)           By using the
registration of any check measuring equipment of the other Party, if installed
and registered accurately;

 

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

 

(d)           By estimating
the quantity of deliveries by using the volumes delivered under similar
conditions during preceding periods when the measuring equipment was
registering accurately.

 

11.6        Check Measuring
Equipment. Customer may install, maintain and operate at its
own expense, at or near the Points of Delivery, such check measuring equipment
as desired; provided, however, that such equipment shall be installed so as not
to interfere with the operation of any other measuring equipment. Eagle Ford
shall have access to such check measuring equipment at all reasonable times,
but the reading, calibration and adjusting thereof and the changing of charts
shall be done only by Customer.  Customer
will have access to a separate set of taps for check measurement purposes.

 

11.7        New Measurement
Techniques. If, at any time during the term hereof, a new
method or technique is developed with respect to Gas measurement or liquids
measurement or to the determination of the factors used in such measurements,
such new method or technique may be substituted for the method set forth in
this Article XI when the Party employing such new method or technique
receives consent from the other Party.

 

11.8        Liquid
Measurement. Eagle Ford, or its designee, shall measure Plant
Products by utilizing meters operated and maintained in accordance with
recognized industry standards. Measurement procedures and calculations will be
in accordance with the API Manual of Petroleum Measurement. Meter tests and
calibration will be conducted as determined by Eagle Ford, but at least once
each Month. Procedures used in testing and calibration will be in accordance
with the aforementioned API Manual of Petroleum Measurement to ensure
measurement accuracy to within one-half of one percent. Consecutive meter
factors differing by more than 50/10,000 will result in an adjustment to
recorded volumes. The readings, calibrations 

 

11

 

and adjustments of the
measuring equipment shall be done by employees or agents of Eagle Ford. Eagle
Ford shall notify Customer in advance of the performance of tests and
calibrations so that Customer may have its representative present as a witness
at the Points of Delivery.

 

ARTICLE XII – ALLOCATIONS

 

12.1        Allocation of
Plant Products.  From the
results of the liquefiable hydrocarbon content tests and the quantity of Gas
delivered to the Points of Delivery for each Month, there shall be determined
the total theoretical gallons of each Plant Product contained in Customer’s
Gas.  The total amount of each Plant
Product assumed to be recovered and saved in the Plant during each Month shall
be fixed at recoveries as set forth in Section 6.2 (subject to Sections
6.5 and 6.6) and multiplied by Customer’s total theoretical gallons of each
Plant Product.

 

12.2        Allocation of
Plant Fuel, Flare and Losses.  The quantity of the Gas that is assumed to be
consumed as Plant Fuel, Flare and Losses stated in MMBtu, shall be deemed to be
the percentage of the quantity of Gas in MMBtu delivered at the Points of
Delivery as set forth in Section 6.2.

 

12.3        Hydrocarbon
Shrinkage. Hydrocarbon Shrinkage shall be calculated by Eagle
Ford each Month by multiplying the number of gallons of each component of Plant
Products attributable to Customer’s Gas by the Btu equivalent of each such
component as set forth in the GPA Technical
Standards Publication No. 2145-09, as revised from time to time
and so adjusted to 60°F and 14.73 psia pressure base.  The aggregate Btu of all such components
shall constitute the Hydrocarbon Shrinkage hereunder.

 

ARTICLE XIII – GAS QUALITY

 

13.1        Specifications.  Customer shall deliver at the Points of
Delivery merchantable pipeline quality Gas that conforms to the following
quality specifications:

 

(a)         The Gas shall be free of
water and other objectionable liquids at the temperature and pressure at which
the Gas is delivered to Eagle Ford and shall in no event contain water vapor in
excess of seven (7) pounds per one million (1,000,000) cubic feet,
measured at fourteen and seventy-three hundredths pounds per square inch
absolute (14.73 psia) at a standard temperature of sixty degrees Fahrenheit
(60° F.).

 

(b)         The Gas shall not contain
more than twenty-five hundredths (.25) of one grain of hydrogen sulfide per one
hundred (100) cubic feet as determined by quantitative methods in general use within
the natural gas industry and as mutually acceptable to the Parties hereto.

 

(c)          The Gas shall not contain
more than one half (.50) of one grain of total sulfur per one hundred (100)
cubic feet as determined by quantitative methods in general use within the
natural gas industry and as mutually acceptable to the Parties hereto.

 

(d)         The Gas shall not contain
more than three tenths (.3) of one grain of mercaptans per one hundred (100)
cubic feet as determined by quantitative methods in general use within the
natural gas industry and as mutually acceptable to the Parties hereto.

 

12

 

(e)          The Gas shall not contain in
excess of:

 

i.                                          [*****] percent ([*****]%) by volume of carbon dioxide (CO2);

 

ii.                                       Ten parts per
million (10 ppm) by volume of oxygen (O2);

 

iii.                                    Three percent
(3%) by volume of nitrogen (N2);

 

iv.                                   In the
aggregate, four percent (4%) by volume of non-hydrocarbons.

 

(f)           The Gas shall contain no
carbon monoxide, halogens, unsaturated hydrocarbons, and not more than four
hundred parts per million (400 ppm) of hydrogen.

 

(g) The
Gas shall have a temperature of not more than one hundred and twenty degrees
Fahrenheit (120° F.) and not less than forty degrees Fahrenheit (40° F).

 

(h) The
Gas shall be commercially free from gum, gum-forming constituents, or other
objectionable liquid or solid matter which might become separated from the Gas
in the course of transmission through pipelines.

 

(i)             Subject to the provisions of
this Section 13.1 and the constituents allowed herein, the Gas shall be
free of any and all corrosive materials that may, in Eagle Ford’s
determination, be harmful to any of its or its designees’ facilities.

 

(j)            The Gas shall have a minimum
weighted average GPM of [*****] at the
Points of Delivery; however the minimum GPM at any Point of Delivery is [*****].

 

13.2        Failure to Meet
Specifications. If any Gas subject hereto fails to meet an
applicable quality specification, Eagle Ford shall have the right to waive such
failure and to continue to receive such Gas. If Eagle Ford refuses to receive
such Gas and if Customer does not elect to treat the Gas so as to cause the
same to meet such quality specification, then Customer shall stop the delivery
of the Gas that fails to meet such quality specification. Customer’s failure to
conform to such gas qualities (and Eagle’s refusal to take out of spec Gas)
does not relieve Customer of any obligations hereunder.

 

ARTICLE XIV
– PRESSURES

 

14.1        Customer’s
Delivery Pressure.  Customer
shall deliver Gas to Eagle Ford at the Points of Delivery at pressures
sufficient to allow the Gas to enter the Gathering System, but not at pressures
in excess of 1200 psig or the maximum allowable operating pressure of the
Gathering System (“MAOP”) whichever is lower, as it may exist from time to
time, at the Points of Delivery. Eagle Ford is under no obligation to modify
its line pressures to permit the entry of Customer’s Gas into the Gathering
System.  Customer may install compression at its own cost and
expense.  Customer shall equip its compression and production equipment,
if any, (i) with overpressure relief or shut-off devices to prevent
delivery to Eagle Ford in excess of the MAOP, (ii) with Gas cooling
equipment to prevent discharge temperatures above 120° F. into the Gathering
System, and (iii) with pulsation dampening equipment acceptable to Eagle
Ford to minimize pulsation induced measurement errors.

 

13

 

ARTICLE XV
– ACCOUNTING

 

15.1        Payment.  On or
before the 25th Day of each Month, Eagle Ford shall pay
Customer by wire transfer and provide a net settlement statement setting forth
the amount due to Customer for Gas received hereunder during the prior
Month.  Eagle Ford shall make payment to Customer for the value of the
Plant Products less all fees and other charges applicable hereunder. Such
payment and net settlement statement  shall include, by each Point of
Delivery, the calculation of Hydrocarbon Shrinkage, Imbalance, Plant
Products, PTR, Residue Gas, and any applicable cash-out as provided in Section 4.3
hereof. In addition, the net settlement statement shall include a calculation
of the cumulative amount of Gas delivered (subject to volume credited in
accordance with Section 5.6, if any) during the applicable Contract
Period. Any cash-out amounts due Customer shall be included in Eagle Ford’s
payment to Customer and any cash-out amounts due Eagle Ford shall be deducted
from Eagle Ford’s payment to Customer.

 

If any amount is due Eagle Ford at the end of each
Contract Period under Section 5.3, then Eagle Ford shall, within
forty-five (45) Days after the end of such Contract Period, furnish Customer a
detailed accounting of and invoice for such payment due Eagle Ford, based on
the calculations provided in Section 5.3.  Customer shall make
payment to Eagle Ford by wire transfer within fifteen (15) Days from receipt of
such invoice.

 

15.2        Information.  Upon receipt of a written request by
Eagle Ford, Customer will furnish to Eagle Ford copies of any and all forms
filed by Customer and/or its operators with any state or federal regulatory
agency covering Gas subject to this Agreement.  Additionally, Eagle Ford
and Customer shall each preserve all records applicable to this Agreement,
including all test and measurement data and charts, for a period of at least 24
Months following the end of each calendar year, or such longer periods as shall
be required under law or regulation.  Notwithstanding anything in this
Agreement to the contrary, the Parties’ respective rights and obligations under
this Section 15.2 shall survive termination of this Agreement.

 

15.3       Audits.  Either Party, upon notice in writing
to the other Party and upon execution of a mutually acceptable confidentiality
agreement which is typical of this type of audit, shall have the right at
reasonable hours to audit the accounts and records relating to any invoice
under this Agreement within the 24 Month period following the end of the
calendar year in which an invoice was rendered; provided, however, that the auditing
Party must make a claim in writing upon the other Party for all discrepancies
disclosed by said audit within said 24 Months.  Any audit shall be
conducted by the auditing Party or its representative at the auditing Party’s
expense. Any invoices shall be final as to all Parties unless questioned within
said 24 Months.  Notwithstanding anything
in this Agreement to the contrary, the Parties’ respective rights and
obligations under this Section 15.3 shall survive termination of this
Agreement.

 

ARTICLE XVI – FORCE MAJEURE

 

16.1       Definition.  Subject to the other
provisions of this Agreement, if either Party is rendered unable, wholly or in
part, by Force Majeure to carry out its obligations under this Agreement, other
than to make payments when due hereunder, it is agreed that, on such Party’s
giving notice and reasonably full particulars of such Force Majeure in writing
or by facsimile to the other Party within a reasonable time after the
occurrence of the cause relied on, the obligations of the Party giving such
notice, so far as they are affected by Force Majeure, shall be suspended during
the continuance of any inability so caused, but for no longer period, and such
cause shall so far as possible be remedied with all reasonable dispatch, if
economically justifiable. The term 

 

14

 

“Force
Majeure,” as employed herein, shall mean acts of God, strikes, lockouts or
other industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
storms, hurricanes, floods, high water washouts, arrests and restraints of
government and people, civil disturbances, explosions, breakage or accident to
machinery or lines of pipe, unscheduled maintenance to machinery and equipment,
freezing of wells or lines of pipe, partial or entire failure of wells, the
failure of third parties to transport, process, deliver, and receive Gas
subject hereto as a documented consequence of an event of Force Majeure, and
any other causes, whether of the kind herein enumerated or otherwise, not
reasonably within the control of the Party claiming suspension.

 

Such term shall likewise include (a) in those
instances where either Party is required to obtain servitudes, rights-of-way
grants, permits or licenses to enable such Party to perform hereunder, the
inability of such Party to acquire, or the delays on the part of such Party in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
such servitudes, rights-of-way grants, permits or licenses, and (b) in
those instances where either Party hereto is required to furnish materials and
supplies for the purpose of constructing or maintaining facilities or is
required to secure permits or permissions from any governmental agency to
enable such Party to perform hereunder, the inability of such Party to acquire,
or the delays on the part of such Party in acquiring, at reasonable costs and
after the exercise of reasonable diligence, such materials and supplies, permits
and permissions.

 

16.2        Strikes and
Lockouts. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty, and that the above requirement that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing Party when such
course is inadvisable in the discretion of the Party having the difficulty.

 

16.3       Facilities Loss. In the event
of loss of or damage to all or a substantial part of the Gathering System, the
KMTP pipeline, or the Plant for any cause, then neither Eagle Ford nor KMTP nor
Copano Processing shall have any obligation to repair, rebuild, or replace
same. The requirement in Section 16.1 above that any Force Majeure shall
be remedied with all reasonable dispatch shall not apply in such event. 
If such event occurs and it is determined that such facilities will not be
repaired, rebuilt, or replaced, then this Agreement shall terminate with no
further obligation on the part of either Party (with the exception of
obligations incurred before the effective date of termination, including
amounts due for Gas delivered at the Points of Delivery prior to such event) and
any accumulated obligation related to the Period Quantity Commitment, if any,
will be waived.

 

ARTICLE XVII – NOTICES

 

17.1        Addresses.             All notices
provided for herein shall be in writing at the addresses listed below or to
such other address either Party shall designate by written notice.  Such notices shall be sent by certified U.S.
mail, return receipt requested, postage prepaid, by facsimile, or by
courier.  Notices sent by certified mail
or courier shall be deemed provided upon delivery as evidenced by the receipt
of delivery.  Notices sent by facsimile
shall be deemed to have been provided upon the sending Party’s receipt of its
facsimile machine’s confirmation of successful transmission; however, if the
Day on which such facsimile is received is not a Business Day or is after five p.m.
on a Business Day, then such facsimile shall be deemed to have been provided on

 

15

 

the next following Business
Day.

 

To
Customer:

 

Gas
Scheduling

Attn: Gas Control

Street Address or P.O. Box 1775 Sherman Street, Suite 1200

City, State Zip Denver, CO  80203

Telephone:            303-861-8140

Facsimile:              303-830-2216

E-mail:                   gascontrol@sm-energy.com

 

Contractual Matters

Attn:  Contract Administration

1775 Sherman Street, Suite 1200

Denver, CO 80203

 

Wiring
Instructions:

 

SM Energy Company

Wells Fargo Bank West, NA

1740 Broadway, Denver,
CO  80274

Acct:  [*****]

ABA for ACH: [*****]

ABA for Wire Transfer: [*****]

 

To
Eagle Ford:

 

Attn:  Contract Services

2727 Allen Parkway, Suite 1200

Houston, Texas 77019

Telephone:            (713) 621-9547

Facsimile:              (713) 737-9047

E-mail:                   cseawright@copanoenergy.com

 

Wiring
Instructions:

 

Bank:     Comerica Bank

ABA:      [*****]

Account Name:  [*****]

Account:  [*****]

 

17.2       Dispatching
Notices. Eagle Ford may notify Customer in writing, by facsimile, by
electronic means, or orally by telephone followed within a reasonable time with
a written confirmation of changes in Eagle Ford’s Gas dispatching requirements.

 

ARTICLE XVIII – WARRANTY AND INDEMNIFICATION

 

18.1       WARRANTY OF
TITLE. CUSTOMER HEREBY WARRANTS TO EAGLE
FORD THAT IT OR THE OWNER FOR WHOM IT IS ACTING HAS GOOD, MERCHANTIBLE TITLE TO
THE GAS DELIVERED HEREUNDER AND THE PLANT PRODUCTS CONTAINED THEREIN, THE RIGHT
TO DELIVER AND SELL SAME, AND THAT SUCH GAS AND PLANT PRODUCTS ARE FREE FROM
ALL LIENS AND ADVERSE CLAIMS, AND CUSTOMER AGREES TO INDEMNIFY EAGLE FORD AND
ITS MEMBERS FROM AND AGAINST ANY AND ALL LIABILITIES, SUITS, ACTIONS, DEBTS,
ACCOUNTS, DAMAGES, COSTS (INCLUDING REASONABLE ATTORNEYS’ FEES), LOSSES AND EXPENSES
ARISING 

 

16

 

FROM OR OUT
OF ANY ADVERSE CLAIMS OF ANY AND ALL PERSONS MADE AGAINST EAGLE FORD OR ITS
MEMBERS REGARDING TITLE TO OR OWNERSHIP OF THE GAS AND PLANT PRODUCTS.

 

18.2        ADVERSE CLAIMS. IN THE
EVENT ANY ADVERSE CLAIM IS ASSERTED WITH RESPECT TO ANY OF CUSTOMER’S GAS OR
PLANT PRODUCTS, EAGLE FORD MAY WITHHOLD ANY PAYMENT DUE CUSTOMER HEREUNDER
THAT RELATES TO THE SPECIFIC VOLUME OF CUSTOMER’S GAS OR PLANT PRODUCTS AGAINST
WHICH THE CLAIM IS MADE WITHOUT INTEREST UNTIL SUCH CLAIM HAS BEEN FINALLY
DETERMINED OR UNTIL CUSTOMER FURNISHES EAGLE FORD A BOND, IN FORM AND
WITH SURETIES REASONABLY ACCEPTABLE TO EAGLE FORD, CONDITIONED TO HOLD EAGLE
FORD AND ITS MEMBERS HARMLESS FROM ANY SUCH CLAIMS.

 

18.3        OWNERSHIP PAYMENTS. CUSTOMER
AGREES TO PAY OR CAUSE TO BE PAID TO THE PARTIES ENTITLED THERETO ALL WORKING
INTEREST, ROYALTIES, OVERRIDING ROYALTIES, PAYMENTS OUT OF PRODUCTION, AND
OTHER LIKE CHARGES APPLICABLE TO THE GAS AND PLANT PRODUCTS.

 

18.4        COMPLIANCE WITH REGULATIONS. CUSTOMER WARRANTS THAT ANY
GAS TRANSPORTED UNDER THIS AGREEMENT THAT IS SUBSEQUENTLY DELIVERED INTO
INTERSTATE COMMERCE SHALL BE TRANSPORTED (i) BY THE RECEIVING INTERSTATE
PIPELINE ON BEHALF OF AN INTRASTATE PIPELINE OR A LOCAL DISTRIBUTION COMPANY
PURSUANT TO THE PROVISIONS OF SECTION 311(A)(1) OF THE NATURAL
GAS POLICY ACT OF 1978 AND SUBPART B OF SECTION 284 OF THE
REGULATIONS OF THE FEDERAL ENERGY REGULATORY COMMISSION (THE “TRANSPORTATION
REGULATIONS”) OR ANY SUCCESSOR AUTHORITY AND (ii) IN COMPLIANCE WITH THE
TRANSPORTATION REGULATIONS.  CUSTOMER
AGREES TO INDEMNIFY EAGLE FORD AND ITS MEMBERS FROM AND AGAINST ANY AND ALL
LIABILITIES, SUITS, ACTIONS, DEBTS, ACCOUNTS, DAMAGES, COSTS (INCLUDING REASONABLE ATTORNEYS’ FEES), LOSSES, EXPENSES, FINES AND PENALTIES
ARISING FROM OR OUT OF CUSTOMER’S BREACH OF THIS WARRANTY.

 

18.5        INDEMNIFICATION. SUBJECT
TO THE OTHER PROVISIONS HEREOF,  EACH OF
EAGLE FORD AND CUSTOMER SHALL INDEMNIFY, DEFEND, AND HOLD THE OTHER AND THEIR
RESPECTIVE MEMBERS, OFFICERS, DIRECTORS, AND EMPLOYEES HARMLESS FROM CLAIMS,
DEMANDS, AND CAUSES OF ACTION OF EVERY TYPE AND CHARACTER ARISING OUT OF ITS
PERFORMANCE OR NON-PERFORMANCE UNDER THIS AGREEMENT (INCLUDING EXPENSES AND
REASONABLE ATTORNEY’S FEES RELATED THERETO) WHICH ARE ASSERTED AGAINST THE
INDEMNITEE BY ANY PERSON (INCLUDING, WITHOUT LIMITATION, CUSTOMER’S AND EAGLE
FORD’S EMPLOYEES) FOR PERSONAL INJURY, DEATH, OR LOSS OF OR DAMAGE TO PROPERTY
WHICH IS THE RESULT OF THE SOLE NEGLIGENCE OR THE SOLE WILLFUL MISCONDUCT OF
THE INDEMNITOR. WHERE PERSONAL INJURY, DEATH, OR LOSS OF OR DAMAGE TO PROPERTY
IS THE RESULT OF JOINT NEGLIGENCE OR JOINT WILLFUL MISCONDUCT OF CUSTOMER AND
EAGLE FORD, OR EITHER OF THESE TWO PARTIES, OR EITHER OF THEM AND ONE OR MORE
THIRD PARTIES, THE INDEMNITOR’S DUTY OF INDEMNIFICATION SHALL BE IN THE SAME
PROPORTION THAT THE INDEMNITOR’S NEGLIGENT ACTS OR OMISSIONS CONTRIBUTED
THERETO. IF CUSTOMER OR EAGLE FORD IS STRICTLY LIABLE UNDER LAW  OR STATUTE, THE INDEMNITOR’S DUTY OF INDEMNIFICATION
SHALL BE IN THE SAME PROPORTION THAT THE INDEMNITOR’S NEGLIGENT ACTS OR
OMISSIONS CONTRIBUTED TO THE PERSONAL INJURY, ILLNESS, DEATH OR LOSS OF OR
DAMAGE TO PROPERTY FOR WHICH THE INDEMNITEE IS 

 

17

 

STRICTLY
LIABLE.

 

18.6        LIMITATION OF CLAIMS; SURVIVAL. EACH PARTY WAIVES ALL RIGHTS, EXCEPT SUCH RIGHTS AS ARE OTHERWISE
EXPLICITLY RETAINED HEREIN, TO CLAIM INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE
DAMAGES WHICH IN ANY WAY RELATE TO A CLAIM UNDER OR A BREACH OF THIS
AGREEMENT.  NOTWITHSTANDING
ANYTHING IN THIS AGREEMENT TO THE CONTRARY, THE PARTIES’ RESPECTIVE RIGHTS AND
OBLIGATIONS UNDER THIS ARTICLE XVIII SHALL SURVIVE TERMINATION OF THIS
AGREEMENT FOR THE APPLICABLE PERIODS OF LIMITATIONS.

 

ARTICLE XIX – SUCCESSORS AND ASSIGNS

 

19.1        Binding of
Terms. All the terms and conditions of this Agreement shall extend to and be
binding upon the respective successors and assigns of the Parties hereto.

 

19.2        Assignments. The Parties
have entered into this Agreement in anticipation of continued performance
hereunder, and, accordingly, the rights and obligations of either Party
hereunder shall not be assigned without the prior written consent of the other
Party, which shall not be unreasonably withheld or delayed. Assignments of this
Agreement may be made in whole or in part. 
Without the consent of the other Party hereto, either Party hereto may
assign its rights hereunder to an affiliate which directly or indirectly owns
or is owned by or is under common control of another affiliate or affiliates of
the Party making the assignment.

 

19.3        Pledged Rights. Nothing
contained in this Article shall in any way prevent either Party from
pledging or mortgaging its rights hereunder for security of indebtedness.

 

ARTICLE XX – TERM

 

20.1        Term. This
Agreement shall become binding on each Party as of July 1, 2010, when
executed by such Party, but shall become operative and effective on the
In-Service Date and shall continue and remain in full force and effect until January 1,
2022 (“Primary Term”) and year to year thereafter, unless terminated by either
Party upon at least ninety (90) Days’ written notice given to the other Party
prior to the end of the Primary Term or any annual extensions thereafter.  However, such termination shall not discharge
any obligations incurred before the effective date of termination by the
Parties hereunder, including payment for services rendered.

 

20.2        Early
Termination. If the In-Service Date does
not occur by December 31, 2011, for any reason including Force Majeure
events, Customer may terminate this Agreement by written notice to Eagle Ford
by 3:00 p.m. CST January 12, 2012.

 

ARTICLE XXI – MISCELLANEOUS

 

21.1        Waiver. No waiver by
Eagle Ford or Customer of any default of the other Party under this Agreement shall
operate as a waiver of any subsequent default, whether of a like or a different
character.

 

21.2        Performance. Any provision
herein, which requires action by either Party where a performance date is not
specified, shall require performance of such action within a reasonable time.

 

18

 

21.3         Confidentiality. The terms of
this Agreement, including but not limited to quantity and price, shall not be
disclosed to any third party (excluding the affiliates and/or working interest
and royalty interest owners of the Parties) without the prior written consent
of the other Party, which consent shall not be unreasonably withheld, except to
the extent disclosure is required by laws, rules, regulations, or orders of
governmental authority or the rules and regulations of any applicable
stock exchange.  Notwithstanding
anything in this Agreement to the contrary, the Parties’ respective rights and
obligations under this Section 21.3 shall survive termination of this
Agreement.  A CONFIDENTIALITY PROVISION CAN NOT BE UNILATERALLY REQUIRED IN A GAS
SALE, TRANSPORTATION OR GATHERING AGREEMENT TO WHICH A CUSTOMER IS A PARTY AND
THIS SECTION 21.3 WILL NOT BECOME A PART OF THIS AGREEMENT UNLESS
CUSTOMER’S AUTHORIZED REPRESENTATIVE HAS INITIALED THE LINE MARKED “YES, SECTION 21.3,
CONFIDENTIALITY, IS INCLUDED IN THIS AGREEMENT,” PROVIDED UNDER CUSTOMER’S
SIGNATURE BLOCK.

 

21.4        Drafting. As between the Parties
hereto, it shall be conclusively presumed that each and every provision of this
Agreement was drafted jointly by Customer and Eagle Ford.

 

21.5        Headings. The headings contained
in this Agreement are used solely for convenience and do not constitute part of
the agreement between the Parties, and they should not be used to aid in any
manner in construing this Agreement.

 

21.6       APPLICABLE LAW. THE INTERPRETATION AND PERFORMANCE OF
THIS AGREEMENT SHALL BE IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
EXCEPT AS TO ANY PROVISION OF SUCH LAWS THAT MAY REFER THE INTERPRETATION
OF THIS AGREEMENT TO ANOTHER JURISDICTION. Notwithstanding anything in
this Agreement to the contrary, this Section 21.6 shall survive
termination of this Agreement.

 

21.7         Governmental Prohibition. If any
governmental authority prohibits or otherwise conditions performance of an
obligation in a manner that is unacceptable in the sole judgment of the Party
affected thereby, then the Party so affected or prohibited may terminate this
Agreement by giving written notice to the other Party with the effective date
of the termination occurring on the first Day of the Month immediately
following the Month in which the notice of termination is given, provided that
any governmental prohibition or condition which renders this Agreement or any
part hereof illegal shall result in the immediate termination of this Agreement
without regard to notice (with the exception of obligations incurred before the
effective date of termination, including to pay for Gas delivered and not yet
paid for; any accumulated obligation related to the then-current Period
Quantity Commitment will not be waived).

 

21.8         Creditworthiness. If either
Party has reasonable grounds for insecurity regarding the performance of any
obligation under this Agreement, whether or not then due, (including, without
limitation, the occurrence of a material change in either Parties’
creditworthiness), either Party may demand Adequate Assurance of
Performance.  “Adequate Assurance of
Performance” shall mean sufficient security in the form, amount, and for the
term reasonably acceptable to the requesting Party, including, but not limited
to, a standby irrevocable letter of credit, a prepayment, or a guaranty.  In the event such assurance is not provided
or mutually agreed upon (both Parties acting reasonably), then the requesting
Party shall have the right, as applicable, to suspend services or suspend delivery
of Gas, or to terminate this Agreement, without prior notice, in addition to
any and all other remedies available to it. 
If Eagle Ford elects to suspend services or Customer elects to suspend
delivery of Gas in accordance with this Section 21.8, the obligation
imposed by Section 5.3 shall be tolled during such suspension.  Upon termination in accordance with this Section 21.8,
(a) there will be no further obligation on the part of either Party
(except 

 

19

 

obligations incurred before
the effective date of termination, including to pay for Gas delivered and not
yet paid for and (b) any accumulated obligation related to the Period
Quantity Commitment, to the extent not tolled, will not be waived if termination
is by Eagle Ford, but will be waived if termination is by Customer.

 

ARTICLE XXII – SIGNATURES

 

IN WITNESS WHEREOF, this Agreement is executed
in multiple originals as of the date first written above.

 

 

	
  SM ENERGY
  COMPANY

  	
   

  	
  EAGLE
  FORD GATHERING LLC

  
	
   

  	
   

  	
   

  
	
  /s/
  David J. Whitcomb

  	
   

  	
  /s/
  Brian D. Eckhart

  
	
  David J. Whitcomb

  	
   

  	
  Brian D. Eckhart

  
	
  Vice President – Marketing

  	
   

  	
  Senior Vice President, Transportation
  and Supply

  

 

 

IF CUSTOMER
AGREES THAT SECTION 21.3, CONFIDENTIALITY SHALL BE INCLUDED IN THIS
AGREEMENT FOR THE PRIMARY TERM AND ANY EXTENSION THEREOF, PLEASE INITIAL IN THE
SPACE PROVIDED BELOW MARKED “YES”, OTHERWISE INITIAL THE SPACE MARKED “NO”.

 

x           YES, SECTION 21.3,
CONFIDENTIALITY, IS INCLUDED IN THIS AGREEMENT

 

o         NO, SECTION 21.3 IS
NOT INCLUDED IN THIS AGREEMENT

 

[SIGNATURE PAGE TO GAS SERVICES AGREEMENT DATED EFFECTIVE JULY 1, 2010,
BETWEEN EAGLE FORD GATHERING LLC AND SM ENERGY COMPANY]

 

20

 

THIS EXHIBIT HAS
BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.  REDACTED MATERIAL IS MARKED WITH [*****] AND
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXHIBIT “A”

to Gas Services Agreement dated effective July 1, 2010,
between

Eagle Ford Gathering LLC and SM Energy Company

(the “Agreement”)

 

POINTS OF DELIVERY

 

Eagle Ford, at its own cost
and expense, shall install two (2) separate mutually agreeable Points of
Delivery as follows:

 

Bolt Ranch Point of Delivery, Webb County, TX as
reflected in Exhibits “C1”

 

La Salle Area Point of Delivery, La Salle County, TX as
reflected in Exhibit “C2”.

 

Any additional points of
delivery that Customer requests during the term of this Agreement shall be
installed only with Eagle Ford’s consent and at Customer’s sole cost and
expense.

 

Customer will be provided
internet accounts and access to their volumes and other available data
associated with the Points of Delivery.

 

POINTS OF REDELIVERY

 

	
  1. Kinder Morgan Texas
  Pipeline

  	
   

  	
  Meter #HC5-20996

  
	
  2. Houston Pipe Line
  Company

  	
   

  	
  Meter #HC5-20903

  
	
  3. Tennessee Gas Pipeline
  Company

  	
   

  	
  Meter #HC5-20904 or Zone 0
  Pool

  
	
  4. Texas Eastern
  Transmission Company

  	
   

  	
  TETCO So TX Pool 79501

  

 

The above referenced Points of Redelivery are inclusive of any
header delivery fees as part of the Service Fee.  Should additional Redelivery Points be added
in the future, Customer shall have the right to add such points at a fee to be
negotiated on a case by case basis.

 

 

EXHIBIT “B”

To Gas Services Agreement dated effective July 1, 2010,
between

Eagle Ford Gathering LLC and SM Energy Company

(the “Agreement”)

 

 

 

EXHIBIT “C1”

To Gas Services Agreement dated effective July 1, 2010,
between

Eagle Ford Gathering LLC and SM Energy Company

(the “Agreement”)

 

 

 

EXHIBIT “C2”

To Gas Services Agreement dated effective July 1, 2010,
between

Eagle Ford Gathering LLC and SM Energy Company

(the “Agreement”)

 

 

 

EXHIBIT “D”

Nomination Form

 

	
  Eagle Ford Gathering LLC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1. First of the Month
          

  	
   

  	
  Please send Nomination
  Request to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2. Nomination Change
          

  	
   

  	
  Copano Processing, L.P. 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  3. Same Day Change
          

  	
   

  	
  david.velen@copanoenergy.com

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  glenn.cook@copanoenergy.com

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attn:   Energy Services

  	
   

  	
  nominations@copanoenergy.com

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Transportation Nomination Request

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eagle
  Ford Contract # 

  	
   

  	
   

  	
   

  	
  Start Date:                       1,
  2011

  	
   

  	
   

  	
   

  	
  Stop
  Date EOM

  	
   

  	
   

  	
   

  	
  Page  1 of 1

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Telecopy

  
	
  Shipper:

  	
   

  	
   

  	
   

  	
  On Behalf of/Agent For

  	
   

  	
  Nominator

  	
   

  	
   

  	
   

  	
  Telephone
  Number

  	
   

  	
  Number

  
	
  SM Energy Company

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Please indicate:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Meter

  	
   

  	
  Meter

  	
   

  	
  Volume

  	
   

  	
  Upstream/Downstream
  Confirmation

  	
   

  	
   

  
	
  RP-Redelivery
  Pt, MP-Measure

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Number

  	
   

  	
  Name

  	
   

  	
  MMBTU/D

  	
   

  	
   

  	
   

  	
   

  
	
  Pt, IM-Imbalance Makeup

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (DRY)

  	
   

  	
  Contact
  Name/Number

  	
   

  	
  Contract
  Number

  	
   

  	
  MMBTU

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MP

  	
   

  	
  RP

  	
   

  	
  IM

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
   

  	
   

  	
  KMTP
  I#44666

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
   

  	
   

  	
  PTR

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
   

  	
   

  	
  Total
  Residue

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
  o

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  x

  	
   

  	
  o

  	
   

  	
  HC5-20996

  	
   

  	
  KMTP
  @ HCP Tailgate

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  x

  	
   

  	
  o

  	
   

  	
  HC5-20904

  	
   

  	
  Tenn
  @ HCP Tailgate

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  x

  	
   

  	
  o

  	
   

  	
  HC5-20900

  	
   

  	
  TETCO
  @ HCP Tailgate

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
   

  	
  x

  	
   

  	
  o

  	
   

  	
  HC5—20903

  	
   

  	
  HPL
  @ HCP Tailgate

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total
  Receipts

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total
  Deliveries

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}]]