Document:

exv10w1

Exhibit 10.1

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

THIRD
AMENDED AND RESTATED GAS PROCESSING CONTRACT

BETWEEN

KINDER
MORGAN TEXAS PIPELINE LLC AND

COPANO
PROCESSING, L.P.

June 1, 2010

 

 

THIRD AMENDED AND RESTATED GAS PROCESSING CONTRACT

BETWEEN

KINDER MORGAN TEXAS PIPELINE LLC

AND

COPANO PROCESSING, L.P.

TABLE OF CONTENTS

	 	 	 	 	 

	ARTICLE 1. — DEFINITIONS
	 	 	2	 
	1.1. Words and Terms
	 	 	2	 
	ARTICLE 2. — CERTAIN OBLIGATIONS OF THE PARTIES
	 	 	5	 
	2.1. Commitments of the Parties
	 	 	5	 
	2.2. Bypass; Suspension of Processing
	 	 	6	 
	2.3. Hydrocarbon Dew Point Control
	 	 	6	 
	2.4. KMTP Conditioning and Blending Fees
	 	 	6	 
	2.5. Entitlement to Products; Replacement of PTR
	 	 	7	 
	2.6. Copano Contract Gas
	 	 	7	 
	ARTICLE 3. — ALLOCATION OF INLET GAS
	 	 	7	 
	3.1. KMTP Information
	 	 	7	 
	3.2. KMTP Gas Calculations
	 	 	7	 
	ARTICLE 4. — ALLOCATION OF PLANT PRODUCTS AND DETERMINATION
OF THE PROCESSING MARGIN
	 	 	8	 
	4.1 Allocation of Plant Products
	 	 	8	 
	ARTICLE 5. — PAYMENTS
	 	 	9	 
	5.1. Payments by Copano
	 	 	9	 
	5.2. Payments by KMTP
	 	 	9	 
	5.3. Processing Payment — PCL Gas
	 	 	9	 
	ARTICLE 6. — PRESSURES
	 	 	10	 
	6.1. Delivery Pressure
	 	 	10	 
	6.2. Pressure Drop
	 	 	11	 
	ARTICLE 7. — CONTENT TESTS
	 	 	11	 
	7.1. Sampling
	 	 	11	 
	7.2. Notices of Tests
	 	 	11	 
	7.3. Btu Content
	 	 	11	 
	ARTICLE 8. — RESIDUE GAS REDELIVERY
	 	 	11	 
	8.1. Transfer of Custody and Responsibility for Residue Gas
	 	 	11	 
	8.2. Residue Gas Volumes
	 	 	12	 
	ARTICLE 9. — MAKE-UP OF PTR
	 	 	12	 
	9.1. Obligation
	 	 	12	 
	9.2. PTR Make-up Gas Balancing
	 	 	12	 
	9.3. Notice of Volumes
	 	 	12	 
	ARTICLE 10. — MEASUREMENT
	 	 	13	 
	10.1. Assumed Atmospheric Pressure
	 	 	13	 

 

 

	 	 	 	 	 

	10.2. Unit of Volume
	 	 	13	 
	10.3. Adjustment for Supercompressibility
	 	 	13	 
	10.4. Determination of Heating Value
	 	 	14	 
	10.5. Determination of Flowing Temperature
	 	 	14	 
	10.6. Determination of Specific Gravity
	 	 	14	 
	ARTICLE 11. — MEASURING EQUIPMENT AND TESTING
	 	 	15	 
	11.1. Equipment
	 	 	15	 
	11.2. Calibration and Tests of Meters
	 	 	15	 
	11.3. Access to Meters and Records
	 	 	16	 
	11.4. Correction of Metering Errors
	 	 	16	 
	11.5. Failure of Meters
	 	 	16	 
	11.6. Check Measuring Equipment
	 	 	17	 
	11.7. New Measurement Techniques
	 	 	17	 
	11.8. Liquid Measurement
	 	 	17	 
	ARTICLE 12. — QUALITY
	 	 	18	 
	12.1. Gas Quality Specifications
	 	 	18	 
	12.2. Testing
	 	 	19	 
	12.3. Failure to Meet Quality Specifications
	 	 	19	 
	ARTICLE 13. — ACCOUNTING
	 	 	19	 
	13.1. Statements
	 	 	19	 
	13.2. Payments
	 	 	19	 
	13.3. Auditing
	 	 	20	 
	13.4. Failure to Pay
	 	 	20	 
	ARTICLE 14. — FORCE MAJEURE
	 	 	21	 
	14.1. Definition
	 	 	21	 
	14.2. Strikes and Lockouts
	 	 	21	 
	14.3. Plant Loss
	 	 	22	 
	ARTICLE 15. — TAXES
	 	 	22	 
	15.1. Taxes
	 	 	22	 
	ARTICLE 16. — LIABILITY; TITLE AND WARRANTIES
	 	 	22	 
	16.1. Transfer of Custody of and Responsibility For Gas
	 	 	22	 
	16.2. Title to Products
	 	 	22	 
	16.3. Title to PTR
	 	 	22	 
	16.4. Liability
	 	 	22	 
	16.5. Warranties
	 	 	23	 
	ARTICLE 17. — SUCCESSORS AND ASSIGNS
	 	 	23	 
	17.1. Binding of Terms
	 	 	23	 
	17.2. Conditions
	 	 	23	 
	17.3. Pledged Rights
	 	 	23	 
	ARTICLE 18. — NOTICES
	 	 	24	 
	18.1. Addresses
	 	 	24	 
	ARTICLE 19. — TERM
	 	 	25	 
	19.1. Term
	 	 	25	 

ii

 

	 	 	 	 	 

	ARTICLE 20. — MISCELLANEOUS
	 	 	26	 
	20.1. Upstream Processing
	 	 	26	 
	20.2. Indemnity
	 	 	26	 
	20.3. Waiver
	 	 	26	 
	20.4. Performance
	 	 	27	 
	20.5. Drafting
	 	 	27	 
	20.6. Headings
	 	 	27	 
	20.7. Third Party Beneficiaries
	 	 	27	 
	20.8. Prior Contract
	 	 	27	 
	20.9. Replacement Indices
	 	 	27	 

iii

 

THIRD AMENDED AND RESTATED GAS PROCESSING CONTRACT

BETWEEN

KINDER MORGAN TEXAS PIPEINE LLC

AND

COPANO PROCESSING, L.P.

THIS THIRD AMENDED AND RESTATED GAS PROCESSING CONTRACT (this “Contract”) is made and entered into
as of June 1, 2010 (the “Effective Date”), by and between KINDER MORGAN TEXAS PIPELINE LLC (“KMTP”)
and COPANO PROCESSING, L.P. (“COPANO”). KMTP and COPANO may be referred to in this Contract
individually as a “Party” and collectively as the “Parties”.

W I T N E S S E T H:

     WHEREAS, COPANO and KMTP are parties to that certain Amended and Restated Gas Processing
Contract entered into as of January 1, 2004 which provides for the Processing of Gas by COPANO at a
natural gas processing plant known as the Houston Central Plant located in the O.K. Winn and
Francis Mayhar Surveys, Colorado County, Texas (the “Plant”) (the “2004 Restated Agreement”); and

     WHEREAS, the 2004 Restated Agreement was amended and restated in its entirety by that certain
Amended and Restated Gas Processing Contract dated February 1, 2006, between KMTP and COPANO (the
“2006 Restated Agreement”);

     WHEREAS, KMTP owns and operates a 30-inch pipeline system extending from the vicinity of
Laredo, Texas, to the Plant (said pipeline system and any extensions and loops thereof shall be
referred to herein as the “KMTP Line”); and

     WHEREAS, COPANO and/or its Affiliates (defined below) own natural gas pipeline facilities that
deliver Gas into the KMTP Line (the “Copano Pipeline Facilities”) which Gas is delivered to the
Plant for Processing (all such Gas so delivered from the Copano Pipeline Facilities shall be
referred to herein as “Copano Pipeline Gas”); and

     WHEREAS, COPANO and/or its Affiliates (as defined below) may enter into Gas Processing or Gas
conditioning arrangements with producers or other third parties delivering Gas to the KMTP Line
pursuant to which COPANO shall have the right to Process or condition Gas produced, delivered or
supplied by such third parties (such Gas may be referred to herein as “Copano Contract Gas”, and
together with the Copano Pipeline Gas, shall be referred to herein as “Copano Gas”); and

 

 

     WHEREAS, KMTP transports certain quantities of Gas other than Copano Gas (“KMTP Gas”) in the
KMTP Line that is delivered to the Plant and desires that such Gas be Processed in the Plant, and

     WHEREAS, COPANO desires to Process the KMTP Gas for KMTP, and

     WHEREAS, COPANO and KMTP desire to amend and restate the the 2006 Restated Agreement as
provided herein,

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

ARTICLE 1. — DEFINITIONS

     1.1. Words and Terms

     Unless the context indicates a different meaning, the following words and terms shall have the
meanings set out below:

     “2004 Restated Agreement” has the meaning set forth in the recitals above.

     “2006 Restated Agreement” has the meaning set forth in the recitals above.

     “Adjustment Factor” means, (i) for the first five contract years, the number one (1), and (ii)
for each contract year thereafter, a fraction, the numerator of which is the CPI-U for the April
immediately preceding the applicable June 1, and the denominator of which is the CPI-U for the
prior April of the year immediately prior to the year for which the Adjustment Factor is to be
determined; provided, however, that the Adjustment Factor shall never be less than one (1).

     “Affiliate” means, as to any Person, any other Person that directly or indirectly, through one
or more intermediaries, controls or is controlled by, or is under common control with, such Person.
The term control means the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.

     “Agreement” has the meaning set forth in the preamble.

     “Alternate Redelivery Point” means the flange or weld on the downstream side of the emergency
shut—down valve installed downstream of the Plant at the point of connection to any pipeline
connected to the Plant as of the Effective Date other than the KMTP pipeline.

2

 

     “Btu” means British thermal unit.

     “Business Day” means a day other than a 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.

     “COPANO” has the meaning set forth in the preamble.

     “Copano Contract Gas” has the meaning set forth in the recitals above. For the avoidance of
doubt, and not withstanding anything in this Contract to the contrary, Gas that is Processed in the
Plant pursuant to a processing agreement between COPANO and Eagle Ford Gathering, LLC is Copano
Contract Gas but is governed by the terms and conditions of the processing agreement between COPANO
and Eagle Ford Gathering, LLC.

     “Copano Gas” has the meaning set forth in the recitals above.

     “Copano Pipeline Facilities” has the meaning set forth in the recitals above.

     “Copano Pipeline Gas” has the meaning set forth in the recitals above.

     “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.

     “Creditor Party” has the meaning set forth in Section 13.2.

     “Day” means a period beginning at 9:00 a.m. (local time) on a calendar day and ending at 9:00
a.m. (local time) on the next succeeding calendar day. The date of a Day shall be that of its
beginning.

     “Debtor Party” has the meaning set forth in Section 13.2.

     “Delivery Point” means the flange or weld on the upstream side of the emergency shut—down
valve installed upstream of the Plant.

     “Effective Date” has the meaning set forth in the preamble above.

     “Gas”, as used herein, means natural gas, as produced in its natural state from oil wells or
from natural gas wells or gas condensate wells.

3

 

     “GPM” means the amount of gallons of ethane and/or heavier Products per Mcf.

     “Hydrocarbon Shrinkage” means the amount, in MMBtu, by which the Inlet Gas is reduced as a
result of extracting the Plant Products as determined in EXHIBIT “C”, attached hereto.

     “Inlet Gas” means all Gas delivered into the Plant from the KMTP Line, being the Copano Gas
and the KMTP Gas.

     “KMTP” has the meaning set forth in the preamble.

     “KMTP Gas” has the meaning set forth in the recitals above.

     “KMTP Line” has the meaning set forth in the recitals above.

     “Mcf” means one thousand (1,000) cubic feet, and “MMcf” means one million (1,000,000) cubic
feet.

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

     “Month” or “month” means a period beginning at 9:00 a.m. (local time) on the first day of a
calendar month and ending at 9:00 a.m. (local time) on the first day of the next succeeding
calendar month.

     “New KMTP Gas” has the meaning set forth in Section 5.3(b).

     “Payment Date” has the meaning set forth in Section 13.2.

     “PCL” or “Processing Confirmation Letter” has the meaning set forth in Section 5.3(a).

     “PCL Gas” means that portion of the KMTP Gas that is Processed under a PCL.

     “Person” means any individual, corporation, business trust, association, company, partnership,
joint venture, governmental authority, or other entity.

     “Plant” has the meaning set forth in the recitals above.

     “Plant Fuel, Flare and Losses” means the fuel consumed in the processing of Gas including the
loss of Gas due to the flaring and other activities incidental in the operation of the Plant.

     “Process,” “Processed,” or “Processing” means the processing of Gas for the recovery of
liquefiable hydrocarbons and/or the control of hydrocarbon dew point.

4

 

     “Processing Margin” has the meaning set forth in Article 4.

     “Production Month” has the meaning set forth in Section 3.1.

     “Products” means commercial products fractionated either in the Plant or elsewhere, including,
but not limited to, condensate, natural gasoline, butane, isobutane, propane and ethane.

     “Psia” means pounds per square inch absolute.

     “Psig” means pounds per square inch gauge.

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

     “PTR Make-up Gas” has the meaning set forth in Section 9.1.

     “Residue Gas” means the Gas remaining at the outlet of the Plant after the reduction of Inlet
Gas by PTR.

     “Residue Gas Redelivery Point” means the flange or weld on the downstream side of the
emergency shut—down valve installed downstream of the Plant and connecting to KMTP’s pipeline.

     “Ship Channel Index” means the Index published in Inside F.E.R.C.’s Gas Market Report for the
first of each month under the heading “Market Center Spot-Gas Prices,” subheading “East Texas,
Houston Ship Channel” or if Inside F.E.R.C.’s Gas Market Report ceases to be published or fails to
publish said index price, an alternative index price that is comparable selected by the Parties.

     “Unfractionated NGLs” means product mixes that require further fractionation to become
Products.

ARTICLE 2. — CERTAIN OBLIGATIONS OF THE PARTIES

     2.1. Commitments of the Parties

     Subject to the terms and conditions herein, KMTP agrees to deliver or cause to be delivered to
COPANO at the Delivery Point all of the Gas in the KMTP Line available for delivery at the Delivery
Point. COPANO shall have the exclusive right and option to Process all such Gas in the Plant.

     Notwithstanding the foregoing, KMTP shall have the right to require COPANO to bypass the Plant
with all or part of the Inlet Gas during any period in which the threat of hurricanes or freezing
weather in the U. S. Gulf Coast area is imminent, present or recent, if, in KMTP’s sole opinion,
such Inlet Gas is needed to fulfill KMTP’s contract obligations. During such period, to the extent
of such bypass, the payment obligations of

5

 

the Parties under Article 5, and COPANO’s performance obligations under Section 2.3 shall be
deemed suspended and waived by both KMTP and COPANO.

     2.2. Bypass; Suspension of Processing.

     Subject to the provisions of the immediately succeeding sentence, COPANO shall have the right
to: (i) bypass the Plant with all or a portion of the KMTP Gas, (ii) suspend Processing, or (iii)
suspend or curtail the operation of the Plant at any time and from time to time during the term of
this Contract. However, notwithstanding such bypass, suspension or curtailment, unless such
bypass, suspension or curtailment is the result of force majeure or KMTP’s request to bypass the
KMTP Gas: (i) each of the Parties shall continue to pay the amounts it is required to pay under
Article 5 hereof; and (ii) COPANO shall condition Gas hereunder as required by Section 2.3.

     2.3. Hydrocarbon Dew Point Control.

     COPANO shall condition Gas delivered to the Plant such that all Gas in the KMTP Line
immediately downstream of the Plant shall have a cricondentherm hydrocarbon dew point no greater
than ** degrees (**o) Fahrenheit. COPANO shall provide such Gas conditioning service by any means
it determines, including but not limited to the Processing of a partial quantity of Inlet Gas
sufficient to enable it to meet the specifications set out above. Notwithstanding the foregoing,
COPANO shall not be obligated to Process more than a total of 550,000 MMBtu of Gas per day. If the
volume of Gas delivered by KMTP to the Plant exceeds 550,000 MMBtu per day, COPANO may, but shall
not be obligated to Process volumes in excess of 550,000 MMBtu per day. In such case, the
hydrocarbon dew point of Gas in the KMTP Line immediately downstream of the Plant may exceed the
specifications set forth in this Section 2.3 to the extent resulting from the delivery by KMTP of
Inlet Gas in excess of 550,000 MMBtu per day.

     2.4. KMTP Conditioning and Blending Fees.

     Notwithstanding any prior agreement or agreements between the Parties or any of their
Affiliates to the contrary, COPANO and its Affiliates shall not be obligated to bear or pay, and
KMTP and its Affiliates shall not charge COPANO or any of its Affiliates, or deduct from any
payments made to COPANO or any of its Affiliates, any fees to condition or blend COPANO Gas to meet
KMTP’s hydrocarbon dew point specifications. Notwithstanding any prior agreement or agreements
between KMTP and any of its Affiliates and any third party to the contrary, no third party shall be
obligated to bear or pay, and KMTP and its Affiliates shall not charge any third party, or deduct
from payments made to any third party, any fees to condition or blend COPANO Gas to meet KMTP’s
hydrocarbon dew point specifications unless COPANO and KMTP agree in writing that such charges or
deductions may be made by KMTP or its Affiliates.

6

 

     2.5. Entitlement to Products; Replacement of PTR.

     COPANO shall retain one hundred percent (100%) of the Products obtained by the Processing of
KMTP Gas in the Plant, and shall replace one hundred percent (100%) of the PTR attributable to such
Processing of the KMTP Gas.

     2.6. Copano Contract Gas

     If COPANO enters into any agreement to Process or condition Gas produced, delivered or
supplied by a third party after the Effective Date, COPANO will give KMTP prompt written notice of
such agreement. Gas Processed or conditioned under any such agreement will be Copano Contract Gas.

ARTICLE 3. — ALLOCATION OF INLET GAS

     3.1. KMTP Information

     KMTP shall provide COPANO with the volume, average Btu per Mcf, average GPM, and any other
information necessary for the processing allocation of the KMTP Gas and the Copano Gas by the fifth
Business Day of each Month following the Month such KMTP Gas and/or Copano Gas is delivered to the
Plant (the “Production Month”). Such information shall be provided separately for (i) PCL Gas,
(ii) Inlet Gas; (iii) Copano Contract Gas; (iv) Copano Pipeline Gas; and (v) New KMTP Gas.

     3.2. KMTP Gas Calculations.

	 	 	KMTP shall calculate and report to COPANO by the fifth Business Day of each Month following
the Production Month the Mcf, MMBtu, Btu factor, and average GPM by component of the KMTP Gas as
follows:

	 	 	KMTP Gas Btu factor =Heating Value of KMTP Gas (expressed in MMBtu)/Volume of KMTP Gas
(expressed in Mcf)

	 	 	KMTP Gas MMBtu =Heating Value of Inlet Gas (expressed in MMBtu) minus the Heating Value of
Copano Gas (expressed in MMBtu)

	 	 	KMTP Gas Mcf =Volume of Inlet Gas (expressed in Mcf) minus the Volume of Copano Gas
(expressed in Mcf)

	 	 	KMTP Gas GPM by component = (Inlet Gas theoretical gallons by component minus the Copano Gas
theoretical gallons by component)/Volume of KMTP Gas Mcf(expressed in Mcf)

	 	 	Sum of each Copano Gas theoretical gallons by component = the sum of each Copano Gas GPM by
component times the applicable Copano Gas Mcf

	 	 	Inlet Gas theoretical gallons by component = Inlet Gas GPM by component times the Inlet Gas
(expressed in Mcf)

7

 

An example of the foregoing procedure for the calculation of Mcf, MMBtu, Btu factor, and average
GPM by component for the KMTP Gas is set forth in Exhibit A attached hereto.

ARTICLE 4. — ALLOCATION OF PLANT PRODUCTS AND DETERMINATION OF THE PROCESSING MARGIN

     4.1 Allocation of Plant Products

     KMTP and COPANO shall allocate the total quantity of each Plant Product contained in the Gas
that is processed, recovered and saved at the Plant during each Month as set forth in EXHIBIT C.
Determination of Plant Products, PTR and Residue Gas shall be determined as set forth in EXHIBIT C
attached hereto.

     4.2 Processing Margin

     KMTP and COPANO shall calculate the processing margin for each Production Month (the
“Processing Margin”) in accordance with the formulae set forth in Part 1 of Exhibit D attached
hereto and the provisions of this Article 4. Part 2 of Exhibit D hereto is an example of the
Processing Margin calculation for a Production Month in which: (i) GPM values are assumed to be
those set forth in cells C13 through C19, (ii) the actual Product recovery factors are those set
forth in cells D13 through D19, (iii) the Ship Channel Index is assumed to be $** per MMBtu (cell
H7), (iv) Product prices less any deductions referred to below in clauses (iv) and (v) of this
Article 4 are assumed to be those set forth in cells L13 through L19; (v) the Heating Value of KMTP
Gas is assumed to be ** MMBtu/Mcf (cell D23), vi) the actual Plant Fuel, Flare and Losses is
assumed to be **% of the Delivered MMBtu (cell D31). In calculating the Processing Margin, the
Parties shall use the following inputs: (i) the actual GPM values for the Production Month for each
Product attributable to the KMTP Gas (as reported the following month by KMTP pursuant to Article
3), (ii) the actual KMTP Gas Btu factor for the full Production Month (as reported the following
month by KMTP pursuant to Article 3), (iii) the Ship Channel Index (cell H7) for the Production
Month, (iv) the actual prices received by COPANO for the Production Month for each Product, less
COPANO’S transportation and fractionation fee equal to the greater of:

     (A) $** per Gallon,

     or

     (B) $** per Gallon + ($** per Gallon X (Ship Channel Index/$3.50 per MMBtu))

8

 

(v) the actual prices received by COPANO for Unfractionated NGLs, less $** per Gallon, and (vi) the
actual plant recovery factors for each Plant Product, and (vii) the actual Fuel, Flare, and Losses.

     4.3 Replacement of Lean Oil Plant

     In the event that COPANO replaces substantially all of its lean oil plant with a cryogenic
plant 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 plant is placed in service the ethane recovery
factor in Cell D13 would be fixed at **%. The ethane recovery factor would be fixed for ** years
from the year the new cryogenic plant is placed in service. After such time, the recovery factor in
Cell D13 would be based on the actual Plant recovery factor for ethane.

ARTICLE 5. — PAYMENTS

     5.1. Payments by Copano

     For any Production Month for which the Processing Margin is greater than the product of ** per
gallon times the Adjustment Factor, COPANO shall pay KMTP an amount calculated as follows:

	 	 	KMTP Gas Mcf X (Processing Margin — ($** per Gallon X Adjustment Factor) X
Recovered GPM of KMTP Gas X **%

The “Recovered GPM of KMTP Gas” as used in this Section 5.1 and in Section 5.2 shall be determined
as set forth in cell E21 of Exhibit D part 2.

     5.2. Payments by KMTP

     For any Production Month for which the Processing Margin is less than the product of ** per
gallon times the Adjustment Factor, KMTP shall pay COPANO the lesser of:

(A) KMTP Gas Mcf X ($** per Gallon X Adjustment Factor) — Processing Margin) X
Recovered GPM of KMTP Gas;

or

(B) ($** per Mcf X Adjustment Factor) X KMTP Gas Mcf.

     5.3. Processing Payment — PCL Gas

9

 

     (a) Mutually Agreed Alternate Processing Arrangements. The Parties acknowledge that
it may be necessary to structure alternate Processing arrangements to attract rich Gas supplies to
the KMTP Line and the Plant. A Processing Confirmation Letter (“PCL”) in substantially the form of
Exhibit B-1 hereto shall set forth the terms for Processing such Gas, referred to herein as PCL
Gas, as mutually agreed upon by COPANO and KMTP. The PCL shall set forth the procedure for
determining the Products and PTR attributable to the PCL Gas. In the absence of entry by the
Parties into a PCL, the terms contained in the body of this Contract shall control in regard to all
Processing carried out pursuant this Section 5.3(a) and any PCL hereunder.

     (b) Alternate Processing Arrangements for New KMTP Gas. Subject to the availability
of Processing capacity in the Plant at the time KMTP requests Processing under this Section 5.3(b),
KMTP shall have the right to have COPANO Process or condition KMTP Gas in the Plant that is
produced, delivered or supplied by third parties (such Gas may be referred to herein as “New KMTP
Gas”) under the alternate arrangements set forth in a PCL substantially in the form of Exhibit B-2
hereto. The alternate arrangements set forth in Exhibit B-2 shall apply only to the extent
requested by KMTP for quantities of New KMTP Gas specified by KMTP in a written request to COPANO.
Except as otherwise stated in Exhibit B-2, the terms contained in the body of this Agreement shall
control in regard to all Processing of KMTP Gas carried out pursuant to this Section 5.3(b) and any
PCL hereunder. The processing of New KMTP Gas shall be firm and have an MDQ of ** MMBtu per day.

     5.4 For purposes of the calculations contained in this Article 5, “KMTP Gas” shall be deemed
to include only that KMTP Gas actually Processed at the Plant.

ARTICLE 6. — PRESSURES

     6.1. Delivery Pressure

     Inlet Gas shall be delivered to COPANO at the Delivery Point at the pressure that exists in
the KMTP Line. Although the pressure in the KMTP Line may vary, KMTP will make reasonable efforts
to effect deliveries of Gas at the Delivery Point at a pressure of not less than 750 psig and not
more than 1000 psig. COPANO will accept Gas at the Delivery Point at the KMTP Line pressures;
provided, however, that if KMTP effects deliveries that are outside of the range of pressures
listed above, then COPANO may refuse to accept such deliveries of KMTP Gas for Processing,
bypassing all or a part of said Gas as COPANO deems necessary for safe and efficient operation of
the Plant.

10

 

     6.2. Pressure Drop

     COPANO shall deliver and KMTP shall receive Residue Gas at the Residue Gas Redelivery Point or
the Alternate Redelivery Point at a pressure that is not more than 50 psig less than the pressure
at which KMTP Gas was delivered at the Delivery Point, unless KMTP will accept a lesser pressure at
the Residue Gas Redelivery Point or the Alternate Redelivery Point.

ARTICLE 7. — CONTENT TESTS

     7.1. Sampling

     The inlet and outlet Gas metering and sampling facilities at or near the Delivery Point and
the Residue Gas Redelivery Point shall be owned and operated by KMTP. Such facilities shall be
equipped with chromatographs to provide a continuous chromatographic analysis of KMTP Gas and
Residue Gas returned to KMTP on a daily basis. KMTP shall be responsible for determining the
contents of the Copano Gas by taking and analyzing samples with a chromatograph or by use of a
continuous chromatographic analysis.

     7.2. Notices of Tests

     KMTP shall give COPANO sufficient notice in advance of each test of the Gas chromatographs in
order to permit COPANO to have a representative present to witness such tests, and KMTP shall
furnish COPANO in writing the results of each such test of the Gas chromatographs.

     7.3. Btu Content

     Heating value determination shall be done according to methods prescribed in Article 10.
Daily MMBtu shall be calculated and accumulated using continuous data from a chromatograph when
available. The average monthly Btu per cubic foot shall be calculated by dividing the sum of the
daily total MMBtu for the Production Month by the sum of the daily total Mcf for the month.

ARTICLE 8. — RESIDUE GAS REDELIVERY

     8.1. Transfer of Custody and Responsibility for Residue Gas

     COPANO agrees to deliver Residue Gas attributable to KMTP Gas to KMTP or its designee at the
Residue Gas Redelivery Point or the Alternate Redelivery Point as directed by KMTP from time to
time. Custody of and responsibility for Residue Gas attributable to KMTP shall pass from COPANO to
KMTP at such points.

11

 

     8.2. Residue Gas Volumes

     COPANO shall use reasonable commercial efforts each day to deliver Residue Gas attributable to
KMTP Gas in the same day as such Gas was delivered to the Plant. Any imbalances in deliveries of
Residue Gas shall be cashed out each month in the same manner specified for PTR Make-Up Gas in
Section 9.2 below.

ARTICLE 9. — MAKE-UP OF PTR

     9.1. Obligation

     COPANO agrees to deliver or cause to be delivered to KMTP, or its designee, a volume of Gas
with an MMBtu content equal to one hundred percent (100%) of the difference between the number of
MMBtu contained in KMTP Gas and the number of MMBtu contained in Residue Gas attributable to KMTP
Gas. Gas so delivered is herein called “PTR Make-up Gas”. COPANO also agrees to deliver or cause
to be delivered to KMTP, or its designee, COPANO’s share of the PTR Make-up Gas attributable to the
PCL Gas in accordance with the terms of the particular PCL.

     9.2. PTR Make-up Gas Balancing

     COPANO shall use reasonable commercial efforts each month to deliver PTR Make-up Gas due KMTP
in the same month as such Gas was delivered to the Plant. The number of MMBtu delivered by COPANO
as PTR Make-up Gas may not equal the amount due from time to time, and COPANO shall maintain an
account of the over- and under-deliveries of PTR Make-up Gas. Any imbalance in deliveries of PTR
Make-up Gas shall be cashed out each month in accordance with the following:

(a) Over-delivery of PTR Make-up Gas shall be sold to KMTP at a price equal to **
percent (**%) of the average of the Ship Channel Index for: (i) the month in which
the Gas was Processed which gave rise to the PTR Make-up Gas obligation, and (ii)
the following month.

(b) Under-delivery of PTR Make-up Gas shall be purchased from KMTP by COPANO at a
price equal to ** of the Ship Channel Index for: (i) the month in which the Gas was
Processed which gave rise to the PTR Make-up Gas obligation, and (ii) the following
month.

     9.3. Notice of Volumes

     On or before the third work day preceding the end of each month, KMTP will provide COPANO with
KMTP’s reasonable estimate of Gas volume anticipated to be delivered to the Plant from the KMTP
Line during the next succeeding month, and shall make reasonable efforts to give COPANO advance
notice of expected material changes in this volume. Following each month, COPANO

12

 

will provide KMTP by the eighth (8th) workday with a complete listing of PTR Make-up Gas and
Residue Gas deliveries.

ARTICLE 10. — 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), irrespective of actual elevation or location of the delivery point(s) above
sea level or variations in such atmospheric pressure from time to time, unless specified otherwise.

     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 as may be mutually acceptable to
KMTP and COPANO, unless otherwise specified herein. Measurement by turbine meter, unless specified
otherwise, shall be in accordance with A.G.A. Report No. 7, with any revisions, amendments or
supplements as maybe mutually agreeable to the Parties. When positive displacement or turbine
meters are used for the measurement of Gas, the flowing temperature of the Gas shall be assumed to
be sixty degrees Fahrenheit (6O° F.) and no correction shall be made for any variation therefrom;
provided, however, KMTP shall have the option of installing or causing to be installed a recording
thermometer, should chart measurement be used, and if KMTP exercises such option and installs or
causes to be installed such thermometer, correction shall be made for each degree variation in the
average flowing temperature for each meter recording. Where measurement is by other than orifice,
turbine or positive meter, standards commonly acceptable in the natural Gas industry shall be used
in the determination of all factors involved in the computation of Gas volumes.

     10.3. Adjustment for Supercompressibility

     Adjustment to measured Gas volumes for the effects of supercompressibility shall be made
according to accepted AGA standards. The measuring Party shall obtain representative relative
density, Gas composition, carbon dioxide and nitrogen mole fraction values, from the Gas samples
obtained for the Gas delivered or received as may be required to compute such adjustments according
to standard testing procedures. Equations

13

 

for the calculation of supercompressibility will be taken from the latest revision of AGA
Report No. 8, Compressibility for Natural Gas and Other Hydrocarbon Gases. Each month, the
supercompressibility will be calculated using the latest Gas analysis and the monthly average of
the flowing temperature and pressure.

     10.4. Determination of Heating Value.

     At the mutual agreement of KMTP and COPANO, the heating value of the Gas may be determined by
recording calorimeter or by the use of a chromatograph, a continuous Gas sampler or by taking spot
Gas samples. 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. If spot or continuous samples are taken, the samples shall be
analyzed on the measuring Party’s calorimeter or chromatograph. The result of a sample shall be
applied to Gas deliveries on the first day of the month the sample is removed and for all
succeeding months until a new sample is taken. All heating value determinations made with a
chromatograph shall use physical Gas constants for Gas compounds as outlined in the latest revision
of GPA 2172 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 meter or meters should chart measurement be used. 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 may be determined by the
use of a recording gravitometer or 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. At the mutual agreement of KMTP
and COPANO, the specific gravity of the Gas flowing through the meter or meters may be determined
by means of a portable gravitometer or chromatograph, by taking Gas samples or by the use of a
continuous Gas sampler in lieu of a recording gravitometer. In the event Gas samples are taken or a
continuous Gas sampler is installed, the samples shall be run on the measuring Party’s gravitometer
or chromatograph at another location. If spot or continuous samples are taken, to determine
specific gravity of the Gas, the result of such sample shall be applied to Gas deliveries on the
first day of the month the

14

 

sample is removed and for all succeeding months until a new sample is taken. All specific
gravity determinations made with a chromatograph shall use physical constants for Gas compounds as
outlined in the latest revision of GPA 2172 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 11. — MEASURING EQUIPMENT AND TESTING

     11.1. Equipment

     At or near each point at which either KMTP Gas or COPANO Gas is measured, KMTP, or its
designee, shall, at its expense, operate and maintain in accurate working order, the meters,
instruments and equipment of standard type necessary to measure the Gas to be delivered hereunder.
KMTP shall likewise furnish, install, operate and maintain, or cause the same to be done, such
instruments and equipment as may be necessary at points other than such point(s) of delivery and
other than any Alternate Redelivery Point to obtain the information to measure the Gas to be
delivered hereunder. The metering and other equipment installed, together with any buildings
erected for such equipment, shall be and remain the property of KMTP.

     As specified by KMTP, all measuring stations provided hereunder shall be equipped with orifice
meter runs, orifice meter gauges, 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. At KMTP’s and COPANO’S mutual agreement, a computer, transducers and other
associated sensing devices may be installed to accurately measure the Gas delivered hereunder in
accordance with A.G.A. Report Nos. 3,5,6 and 7, as appropriate, in lieu of mechanical devices with
charts. If a computer and associated devices are installed, the values for gross heating value and
specific gravity may be entered either manually (but not more frequently than once per month) or as
real time data if such data is available. Values for carbon dioxide and nitrogen used in
supercompressibility correction determinations shall be entered as real time data if such data is
available or shall be entered manually at intervals mutually agreed upon, but at least once every
six (6) months.

     11.2. Calibration and Tests of Meters

     The measuring Party shall calibrate chromatographs, if used, 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 by KMTP but not less frequently than
once each month. COPANO may, at its option, be present for such calibration and adjustment. KMTP
shall give COPANO notice of the time of all

15

 

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 (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 records for a period of three (3) years for mutual use of KMTP and COPANO.
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 two percent (2%) (one percent [1%] if electronic flow
measurement equipment is utilized), 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 KMTP and COPANO
upon the basis of the best available data, using the first of the following methods which is
feasible:

16

 

(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.

     COPANO may install, maintain and operate at its own expense, at or near the Delivery Point
hereof, 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. KMTP 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 COPANO.

     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 11 when the Party employing such new method or technique receives consent from the other
Party.

     11.8. Liquid Measurement

     COPANO shall measure Products and condensate 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 COPANO, 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. KMTP shall have access to
the measuring equipment at all reasonable times, but readings, calibrations and adjustments thereof
shall be done by employees or agents of COPANO. COPANO shall notify KMTP in advance of the
performance of tests and calibrations so that KMTP may have its representative present as a
witness.

17

 

ARTICLE 12. — QUALITY

     12.1. Gas Quality Specifications

     All KMTP Gas delivered to the Plant, and PTR Make-up Gas and Residue Gas returned to KMTP
hereunder shall meet the following specifications:

(a) The Gas shall be free of water and other objectionable liquids at the
temperature and pressure at which the Gas is delivered and the Gas shall not contain
any hydrocarbons which might condense to free liquids in the pipeline under normal
pipeline conditions 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 one-quarter (1/4) grain of hydrogen sulphide
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.

(c) The Gas shall not contain more than two (2) grains of total sulphur 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.

(d) The Gas shall not contain more than one-quarter (1/4) grain of mercaptan 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.

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

(1) ** percent (**%) by volume of carbon dioxide (C02)

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

(3) Three percent (3%) by volume of nitrogen (N2),

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

18

 

(f) The Gas shall contain no carbon monoxide, halogens or 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 (120o F) nor less than forty degrees Fahrenheit (40o F).

(h) The Gas shall contain a daily average heating content of not less than nine
hundred seventy five (975) Btu per cubic foot.

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

     12.2. Testing

     Tests to determine the quality of Gas shall be conducted by either Party at its sole expense
and shall be made as often as mutually agreed upon and as reasonably required by approved standard
methods in general use by the natural gas industry. The testing Party shall promptly furnish the
other Party with copies of all test results. The testing Party shall give the other Party
reasonable notice of all such tests in order that the other Party may have its representatives
present if it so desires.

     12.3. Failure to Meet Quality Specifications

     If any Gas subject hereto fails to meet an applicable quality specification, the receiving
Party shall have the right to waive such failure and to continue to receive such Gas. If the
receiving Party refuses to receive such Gas and if the delivering Party does not elect to treat the
Gas so as to cause the same to meet such quality specification, then such delivering Party shall
stop the delivery of Gas that fails to meet such quality specification.

ARTICLE 13. — ACCOUNTING

     13.1. Statements

     COPANO shall provide KMTP by the twentieth (20th) day of each calendar month a statement for
the previous month setting forth the payments due to KMTP or to COPANO pursuant to Article 5 and
any amounts owed to or by KMTP for Residue Gas pursuant to Section 8.2 and for PTR Make—up Gas
pursuant to Section 9.2.

     13.2. Payments

     The Party that is owed the greater amount as reflected in a statement referred to in Section
13.1 (the “Creditor Party”)

19

 

shall net its obligation against the obligation of the other Party (the “Debtor Party”).
Specifically, the Debtor Party shall make payment of the difference between amounts owed by the
Creditor Party hereunder and amounts owed by the Debtor Party hereunder. Payment of such
difference shall be made not later than the twenty-fifth (25th) day of the month
following the month of delivery (the “Payment Date”). If the amounts owed by each Party to the
other are equal, neither Party shall make payment. If the Payment Date falls on a Saturday, or a
bank holiday other than Monday, payment shall be made on the preceding banking day. If the Payment
Date falls on a Sunday or a Monday bank holiday, payment shall be made on the succeeding banking
day.

     13.3. Auditing

     Each Party shall have the right at reasonable hours to examine the books, records, and charts
of the other Party to the extent necessary to verify the accuracy of any statement, payment,
calculation, or determination made pursuant to the provisions of this Contract. If any such
examination shall reveal, or if either Party shall discover, any error or inaccuracy in its own or
the other Party’s statement, payment, calculation, or determination, then proper adjustment and
correction thereof shall be made as promptly as practicable thereafter, provided that all
statements, payments, calculations and determinations shall be final unless questioned within three
(3) years of the date thereof.

     13.4. Failure to Pay

     If either Party fails to pay any amount payable to the other hereunder when due, interest
thereon shall accrue and be payable from the date on which payment was due until the date payment
is made. The rate of such interest shall be the prime rate of interest quoted by Fleet National
Bank; provided, that the interest rate provided herein shall never exceed the highest rate of
interest permitted by applicable law. If any such failure to pay continues for thirty (30) days
after protest in writing, the aggrieved Party may suspend deliveries or acceptance of deliveries of
Gas hereunder and, in addition, may terminate this Contract upon written notice to the non—paying
Party as applicable. The exercise of any such right by either Party shall be in addition to any and
all other remedies available to such Party.

20

 

ARTICLE 14. — FORCE MAJEURE

     14.1. Definition.

If either Party is rendered unable, wholly or in part, by force majeure to carry out its
obligations (except financial obligations) under this Contract, it is agreed that, on such Party’s
giving notice and reasonably full particulars of such force majeure 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. The term “force majeure” means any cause not
reasonably within the control of the Party claiming same, which shall include, but not be limited
to acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy,
terrorism, wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, storm warnings, hurricanes, floods, high water, washouts, arrests and restraints of
government and people, civil disturbances, explosions, breakage or accident to machinery or lines
of pipe, freezing of wells or lines of pipe, partial or entire failure of wells, the necessity for
making repairs or alterations to machinery or lines of pipe, 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 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, federal or
state, civil or military, 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.

     14.2. 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.

21

 

     14.3. Plant Loss

     In the event of loss of or damage to all or a substantial part of the Plant or the KMTP Line
for any cause, COPANO and KMTP shall have no obligation to repair, rebuild, or replace same unless
each Party determines, in its sole discretion, to do so, and the above requirement that any force
majeure shall be remedied with all reasonable dispatch shall not apply in such event.

ARTICLE 15. — TAXES

     15.1. Taxes

     As between the Parties, KMTP shall be responsible for all taxes and assessments levied on
facilities owned by KMTP and activities prior to the delivery of COPANO Gas and KMTP Gas at the
Delivery Point and after the redelivery at the Residue Gas Redelivery Point or Alternate Redelivery
Point. COPANO shall be responsible for all taxes and assessments levied on facilities owned by
COPANO and activities from the time Copano Gas and/or KMTP Gas is so delivered to Copano until the
redelivery of Gas to KMTP at the Residue Gas Redelivery Point or the Alternate Delivery Point.

ARTICLE 16. — LIABILITY; TITLE AND WARRANTIES

     16.1. Transfer of Custody of and Responsibility For Gas

     As between KMTP and COPANO, KMTP shall be in control and possession of the Gas until such Gas
has been delivered to COPANO at the Delivery Point and after it has been redelivered to KMTP at the
Residue Gas Redelivery Point or Alternate Redelivery Point. As between COPANO and KMTP, COPANO
shall be in control and possession of the Gas after it has been delivered to COPANO at the Delivery
Point and until it is redelivered to KMTP at the Residue Gas Redelivery Point or Alternate
Redelivery Point. Nothing in this Section 16.1 shall affect title to the Gas, which will remain
with the owner thereof.

     16.2. Title to Products

     Title to Products attributable to KMTP Gas shall be transferred to COPANO at the Delivery
Point.

     16.3. Title to PTR

     Title to PTR Make-up Gas shall be transferred to KMTP at the point at which said PTR Make-Up
Gas is delivered to KMTP.

     16.4. Liability

     Neither Party shall be liable for punitive or exemplary damages or for consequential, indirect
or special damages, of any kind arising out of or in any way relating to its performance or failure
to perform under this Contract.

22

 

     16.5. Warranties

     KMTP hereby warrants that it has the right to have Processed all KMTP Gas delivered from the
KMTP Line and agrees, if notified by COPANO, to indemnify COPANO against all suits, actions, debts,
accounts, damages, costs (including attorneys’ fees), losses and expenses arising from or out of
any adverse legal claims of any and all persons with respect to such Processing rights. COPANO
hereby warrants that it has the right to Process COPANO Gas and warrants title to PTR Make—up Gas
and agrees, if notified by KMTP, to indemnify KMTP against all suits, actions, debts, accounts,
damages, costs (including attorneys’ fees), losses and expenses arising from or out of any adverse
legal claims of any and all persons with respect to such right to Process and/or title.

ARTICLE 17. — SUCCESSORS AND ASSIGNS

     17.1. Binding of Terms

     All the terms and conditions of this Contract shall extend to and be binding upon the
respective successors and assigns of the Parties.

     17.2. Conditions

     No assignment of an interest in this Contract shall be made by either Party without the prior
written consent of the other Party; which consent shall not be unreasonably withheld, provided,
that prior written consent shall not be required: (i) for an assignment to an Affiliate of a Party
in connection with a corporate consolidation, amalgamation, merger or reorganization or (ii) for an
assignment by either Party to a purchaser in connection with a sale of the KMTP Line by KMTP or the
Plant by COPANO.

     17.3. Pledged Rights

     Notwithstanding any provision hereof to the contrary, either Party shall have the right to
pledge, mortgage or grant a security interest in its rights hereunder to secure the indebtedness of
such Party and the consent of the other Party shall not be required in connection with the
foreclosure of any liens, security interests created by any such pledge, mortgage or security
agreement.

23

 

ARTICLE 18. — NOTICES

     18.1. Addresses

All notices provided for herein shall be in writing and delivered to 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 given upon delivery as evidenced by the
receipt of delivery. Notices sent by facsimile shall be deemed to have been given 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 4 p.m. on a business day,
then such facsimile shall be deemed to have been delivered on the next following business day:

To KMTP:

Address for Notices:

KINDER MORGAN TEXAS PIPELINE LLC

One Allen Center

500 Dallas Street, Suite 1000

Houston, Texas 77002

ATTN: Accounting Dept. (For Accounting Matters)

Telephone: (713)369-9000

Facsimile: (713)369-9385

KINDER MORGAN TEXAS PIPELINE LLC

One Allen Center

500 Dallas Street, Suite 1000

Houston, Texas 77002

ATTN: Vice President, Gas Supply & Processing (For all other matters)

Telephone: (713)369-8860

Facsimile: (713)369-9395

Address for Payments:

KINDER MORGAN TEXAS PIPELINE LLC

Wells Fargo Bank, NA

ABA #**

A/C# **

For Credit to Kinder Morgan Texas Pipeline LLC

24

 

	 	 	 	 	 

	 	 	To COPANO:
	 
	 	 	 	 
	 	 	Address for Notices:
	 
	 	 	 	 
	 	 	Copano Processing, L.P.
	 

	 	ATTN:
	 	Contract Services (For Contract Matters)
	 	 	2727 Allen Parkway, Suite 1200
	 	 	Houston, Texas 77019-2154
	 

	 	Telephone:
	 	713-621-9547
	 

	 	Facsimile:
	 	713-737-9047
	 
	 	 	 	 
	 	 	Copano Processing, L.P.
	 	 	ATTN: Plant Accounting (For Accounting Matters)
	 	 	2727 Allen Parkway, Suite 1200
	 	 	Houston, Texas 77019-2154
	 

	 	Telephone:
	 	713-621-9547
	 

	 	Facsimile:
	 	713-737-9502
	 
	 	 	 	 
	 	 	Copano Processing, L.P.
	 	 	ATTN: Vice President Gas Processing (For all other matters)
	 	 	2727 Allen Parkway, Suite 1200
	 	 	Houston, Texas 77019-2154
	 

	 	Telephone:
	 	713-621-9547
	 

	 	Facsimile:
	 	713-737-9047
	 
	 	 	 	 
	 	 	Address for Payments:
	 
	 	 	 	 
	 	 	Copano Processing, L.P.
	 	 	Comerica Bank — Texas
	 

	 	ABA No.
	 	**
	 

	 	Acct No.
	 	**

Either Party may change its address for purposes of this paragraph by giving notice of such change
of address to the other Party in the manner herein provided for giving notice.

ARTICLE 19. — TERM

     19.1. Term

     This Contract shall be effective as of the Effective Date and shall continue in full force and
effect for a primary term ending on December 31, 2024, and year to year thereafter, unless canceled
by either Party giving advance written notice to the other at least 180 days before the date of
termination of the primary term or any subsequent anniversary date thereof.

25

 

ARTICLE 20. — MISCELLANEOUS

     20.1. Upstream Processing

     KMTP shall not Process or arrange for Processing of any of the Gas in the KMTP Line upstream
of the Plant or prior to delivery of such Gas into the KMTP Line with a third party processor
except that KMTP shall have the sole option to: (i) Process or arrange for Processing of any Gas
upstream of the Plant from any pipeline or plant that KMTP or any Affiliate of KMTP acquires after
the Effective Date if such Gas was subject to a processing agreement on the effective date of the
acquisition of such pipeline or plant by KMTP or its Affiliate; and (ii) Process or arrange for
Processing of Gas located upstream from KMTP’s Freer Compressor Station for the purpose of
conditioning the Gas to meet the hydrocarbon dew point specification at KMTP’s delivery points.
Arrangements for Processing by a third party seller or transporter of Gas delivered into the KMTP
Line shall not, for purposes hereof, be deemed arrangements by KMTP.

     20.2. Indemnity

     KMTP and COPANO each hereby releases, relinquishes and discharges and, at the sole cost and
expense of each, shall indemnify, protect, save harmless and defend the other of and from any and
all claims, demands, causes of actions, damages, liabilities and costs, (including reasonable
attorneys’ fees,) of any and every nature whatsoever arising out of the performance of this
Contract which are asserted against the indemnitee by any person, whether they be third persons or
employees of either of the Parties, for personal injury, death, or loss of or damage to property
where such personal injury, death, or loss of or damage to property is due to the sole negligence
or sole willful misconduct of the indemnitor, its employees, agents, contractors or subcontractors.
Where personal injury, death, or loss of or damage to property is the result of joint negligence
or willful misconduct of KMTP and COPANO, their employees, agents, contractors or subcontractors,
the indemnitor’s duty of indemnification shall be in the same proportion that the indemnitor’s
negligent acts or omissions contributed thereto. If KMTP or COPANO is held strictly liable under
law, 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, death, or losses of or damage to
property for which the indemnitee is held strictly liable.

     20.3. Waiver

     No waiver by KMTP or COPANO of any default of the other Party under this Contract shall
operate as a waiver of any subsequent default, whether of a like or a different character.

26

 

     20.4. Performance

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

     20.5. Drafting

     As between the Parties, it shall be conclusively presumed that each and every provision of
this Contract was drafted jointly by KMTP and COPANO.

     20.6. Headings

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

     20.7. Third Party Beneficiaries

     It is the specific intention of the Parties that the provisions of this Contract shall not
impart rights enforceable by any person, firm, or organization not a Party or not a successor or
assignee of a Party to this Contract and, therefore, that there be no third party beneficiary to
this Agreement.

     20.8. Prior Contract

     This Contract supersedes and replaces the 2006 Restated Agreement as of the Effective Date.
This Contract shall not alter or affect any rights or obligations of the Parties under the 2006
Restated Agreement that accrued prior to the Effective Date.

     20.9. Replacement Indices

     Should any index utilized by the Parties be unavailable or cease to be published, the Parties
shall promptly meet and in good faith determine an alternative index or payment methodology that
will place each in a comparable economic position to that they would have been in had the original
index have been available and utilized. Should the Parties be unable to so reach agreement, either
may submit the matter for arbitration pursuant to the expedited rules of the American Arbitration
Association.

	 	 	20.10 Governing Law

     This Contract shall be interpreted, construed and governed by the laws of the State of Texas
without reference to those that might refer to the law of another jurisdiction. The Parties
stipulate that venue for any action brought to enforce any right under this Contract shall be
proper in Harris County, Texas.

27

 

     IN WITNESS WHEREOF, this Contract is executed in multiple originals as of the dates signified
below, effective as of the date first above written.

	 	 	 	 	 	 	 

	 	 	COPANO PROCESSING, L.P.	 	 
	 	 	by Copano Processing GP, L.L.C.	 	 
	 	 	its Managing General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

Senior Vice President
	 	 
	 

	 	Date:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	KINDER MORGAN TEXAS PIPELINE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

VICE PRESIDENT
	 	 
	 

	 	Date:	 	 	 	 

28

 

Exhibit A

To the Third Amended and Restated Gas Processing Agreement

Between Kinder Morgan Texas Pipeline LLC and Copano Processing, L.P.

Dated June 1, 2010

 

 

			
	 	 	 
	KINDER MORGAN TEXAS PIPELINE COMPANY
	 	05-May-10
	HOUSTON CENTRAL PLANT	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	1

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF @**
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.0376	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.3791	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.0952	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1020	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0500	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0331	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.1213	 	 	**
	 

	 	 	 	Total
	 	 	 	 	1.8184	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.4942	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1363	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	2

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.2075	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.4659	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1147	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1277	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0610	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0406	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.1393	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.1567	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.5584	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1497	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	3

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS

2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	 

	 	 	 	 	 	ETHANE
	 	 	1.9098	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.7103	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1807	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1933	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.1221	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0759	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.3126	 	 	**
	 

	 	 	 	Total
	 	 	 	 	3.5045	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	1.6118	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1059	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	4

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.1040	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.3871	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.0874	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1069	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0574	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0416	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.2040	 	 	**
	 

	 	 	 	Total
	 	 	 	 	1.9884	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	1.6689	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.0731	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	5

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	PROPANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	C6
	 	#DIV/0!
	 	**
	 

	 	 	 	Total
	 	 	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	CO2
	 	 	1.1523	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1900	 	 	 

3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	6

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	2.0566	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.8328	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.2250	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.2178	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.1033	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0697	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.2043	 	 	**
	 

	 	 	 	Total
	 	 	 	 	3.7094	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	3.7374	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1012	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	7

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.7781	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.7617	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1670	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.2008	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0930	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0637	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.2197	 	 	**
	 

	 	 	 	Total
	 	 	 	 	3.2840	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	3.6452	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1044	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	8

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.3799	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.6901	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1656	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.2026	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0904	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0638	 	 	**

4

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	 

	 	 	 	 	 	C6
	 	 	0.2294	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.8218	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.7104	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1766	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	9

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.4057	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.6418	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1476	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1880	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0821	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0612	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.1862	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.7127	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	1.4136	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1696	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	10

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.2991	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.5699	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1159	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1627	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0622	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0529	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.1897	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.4524	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	3.0061	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.0576	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	11

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS

5

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	 

	 	 	 	 	 	ETHANE
	 	 	1.5090	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.4898	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1345	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1360	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0673	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0453	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.2458	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.6276	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.6221	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1680	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	12

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	PROPANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	C6
	 	#DIV/0!
	 	**
	 

	 	 	 	Total
	 	 	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	CO2
	 	 	3.2503	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1990	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	13

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.1367	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.4034	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1246	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1144	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0613	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0450	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.1472	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.0325	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.9611	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.2384	 	 	 

6

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	14

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.8063	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.9423	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.2196	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.2687	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.1135	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0813	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.1983	 	 	**
	 

	 	 	 	Total
	 	 	 	 	3.6299	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	3.2136	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.2823	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	15

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	PROPANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	C6
	 	#DIV/0!
	 	**
	 

	 	 	 	Total
	 	 	 	#DIV/0!
	 	**
	 

	 	 	 	 	 	CO2
	 	 	3.6340	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.0800	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	16

	 	**	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	PIN **	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	1.2702	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.5435	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.1443	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.1676	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0728	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0516	 	 	**

7

 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Nov-09	 	 	 
	 

	 	 	 	 	 	C6
	 	 	0.1270	 	 	**
	 

	 	 	 	Total
	 	 	 	 	2.3771	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.5286	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1899	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	MP279

	 	MIDCON	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	NET	 	 	 	 	 	 	 	 
	 

	 	 	 	Inlet MCF
	 	 	 	 	**	 	 	 
	 

	 	 	 	BTU Factor
	 	 	 	 	**	 	 	 
	 

	 	 	 	Inlet MMBTU
	 	 	 	 	**	 	 	 
	 

	 	 	 	GPM:
	 	 	 	 	 	 	 	THEORETICAL GALLONS
	 

	 	 	 	 	 	ETHANE
	 	 	0.7446	 	 	**
	 

	 	 	 	 	 	PROPANE
	 	 	0.1967	 	 	**
	 

	 	 	 	 	 	I-BUTANE
	 	 	0.0523	 	 	**
	 

	 	 	 	 	 	N-BUTANE
	 	 	0.0453	 	 	**
	 

	 	 	 	 	 	I-PENTANE
	 	 	0.0279	 	 	**
	 

	 	 	 	 	 	N-PENTANE
	 	 	0.0154	 	 	**
	 

	 	 	 	 	 	C6
	 	 	0.0843	 	 	**
	 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Total
	 	 	 	 	1.1665	 	 	**
	 

	 	 	 	 	 	CO2
	 	 	2.4988	 	 	 
	 

	 	 	 	 	 	N2
	 	 	0.1109	 	 	 
	 

	 	 	 	 	 	 	 	KM net gallons
	 	**

8

 

EXHIBIT B-1

This Exhibit B-1 is attached to and made a part of that certain Amended and Restated Gas
Processing Contract dated as of June_1, 2010 between KINDER MORGAN TEXAS PIPELINE LLC (“KMTP”) AND
COPANO PROCESSING, L.P. (“COPANO”)(the “Contract”). Capitalized terms used but not defined in this
Exhibit B-1 shall have the meanings given them in the Contract.

PROCESSING CONFIRMATION LETTER (PCL)

KMTP METER STATION NO.                     

Name of Producer:

Field(s):

County:

Quantity:

Quality:

Effective Date:

Term of PCL:

KMTP share of:

     Products:

     PTR:

Allocation Procedure: As set forth in Exhibit C to the Contract.

Other Fees Paid:

Other Provisions:

This Processing Confirmation Letter is accepted by and agreed to by:

	 	 	 	 	 	 	 

	Kinder Morgan Texas Pipeline LLC	 	COPANO PROCESSING, L.P.
	 
	 	 	 	 	 	 
	This ___ day of                     , 20_	 	This ___ day of                     , 20_
	 
	 	 	 	 	 	 
	By:

	 	 
	 	By:
	 	 
	 

	 	 
	 	 	 	 

9

 

EXHIBIT B-2

This Exhibit B-2 is attached to and made a part of that certain Amended and Restated Gas
Processing Contract dated as of June 1, 2010 between KINDER MORGAN TEXAS PIPELINE LLC (“KMTP”) AND
COPANO PROCESSING, L.P. (“COPANO”)(the “Contract”). Capitalized terms used but not defined in this
Exhibit B-2 shall have the meanings given them in the Contract.

PROCESSING CONFIRMATION LETTER (PCL)

KMTP METER STATION NO.                    

Name of Producer:

Field(s):

County:

Quantity:

Quality:

Effective Date:

Term of PCL:

     Fees Paid: KMTP will pay a Processing Fee of $** per MMBtu of Gas delivered at the inlet of
the Plant and Processed under this PCL. Such Gas shall be processed on a firm basis subject to an
MDQ of ** MMBtu per day.

     Other Provisions: COPANO will purchase and pay KMTP for 100% of the Products actually
recovered by Processing under this PCL. The price paid by COPANO for such Products shall be the
OPIS Mont Belvieu Index (Non-TET) price less a transportation and fractionation fee determined by
the following formula:

1. For gas delivered at the proposed ** interconnect at or near KMTP’s Kenedy Compressor
Station in Bee County, Texas , the transportation and fractionation fee shall be as follows and
shall not be adjusted for inflation:

$** per Gallon + ($** per Gallon x(Ship Channel Index/$3.50))

2. For all other gas the transportation and fractionation fee shall be as follows:

$** + ($** x Adjustment Factor) + ($** x(HSC/$3.50))

COPANO will purchase and pay KMTP for 100% of the Unfractionated NGLs recovered by Processing under
this PCL. The price paid by COPANO for Unfractionated NGLs shall be the actual prices

 

 

received by COPANO for such Unfractionated NGLs, less $** per Gallon.

COPANO will not be required to compensate KMTP for or make up PTR attributable to Gas Processed
under this PCL. PTR and quantities of Products and Unfractionated NGLs recovered will be
determined for Gas Processed under this PCL in accordance with the procedures set forth in Exhibit
C to the Contract.

	 	 	 	 	 	 	 

	Accepted by and agreed to by:	 	 	 	 
	Kinder Morgan Texas Pipeline LLC	 	COPANO PROCESSING, L.P.
	 
	 	 	 	 	 	 
	This ___ day of                     , ____	 	This ___ day of                     , ____
	 
	 	 	 	 	 	 
	By:

	 	 
	 	By:
	 	 
	 

	 	 
	 	 	 	 

2

 

EXHIBIT C

This Exhibit C is attached to and made a part of that certain Amended and Restated Gas
Processing Contract dated as of June 1, 2010 between KINDER MORGAN TEXAS PIPELINE LLC (“KMTP”) AND
COPANO PROCESSING, L.P. (“COPANO”)(the “Contract”). Capitalized terms used but not defined in this
Exhibit C shall have the meanings given them in the Contract.

DETERMINATION OF PLANT PRODUCTS, PTR AND RESIDUE GAS

A. Determination of Plant Products

     The quantity of Products attributable to Gas delivered to COPANO hereunder shall be determined
by multiplying the total quantity of each Product contained as a component in the Gas by the
recovery factor for each Product. The recovery factor shall equal a fraction, the numerator of
which is the quantity of each such Plant Product recovered and saved in the Plant, and the
denominator of which is the total quantity of each such Plant Product contained as a component of
Gas from all sources delivered to the Plant for Processing.

B. Determination of PTR

     The PTR shall be the sum of the Plant Fuel, Flare and Losses and the Hydrocarbon Shrinkage as
determined below:

	 	(i)	 	The quantity of Gas, stated in MMBtu’s, that is consumed as
Plant fuel, flare and vent in the Processing of the Gas during a given Month
shall be determined by multiplying the total quantity of MMBtu’s consumed as
Plant Fuel, Flare and Losses in the Plant operations during such Month by a
fraction, the numerator of which is the MMBtu allocated to Gas and the
denominator of which is the total MMBtu from all sources of supply delivered
to the Plant for Processing; and
	 
	 	(ii)	 	Hydrocarbon Shrinkage shall be calculated each Month by
multiplying the number of gallons of each component recovered and allocated to
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
as adjusted to sixty degrees Fahrenheit (60°) and 14.73 psia pressure base;
the aggregate Btu’s of all such components shall constitute the Hydrocarbon
Shrinkage hereunder.

C. Determination of Residue Gas

3

 

	 	 	The quantity of Residue Gas shall be determined by subtracting the quantity of PTR in MMBtu
attributable to Gas from the quantity of Gas in MMBtu delivered for Processing at the
Plant.
	 
	D.	 	Changes in Procedures Described in this Exhibit C
	 
	 	 	COPANO may change the procedures described in this Exhibit C upon prior written consent of
KMTP, which consent shall not be unreasonably withheld.

4

 

EXHIBIT D – Part 1

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	A	 	B	 	C	 	D	 	E	 	F	 	G	 	H	 	I	 	J	 	K	 	L
	 	 	 	 	 	 	 	 	 	 	EXHIBIT D PART 1 FORMULAE	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Processing Margin Calculation	 	 	 	 	 	 	 	 	 	 	 	 
	2	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	4	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	5	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	6	 	 	 	 	 	 	 	 	 	Ship Channel Index	 	**	 	 	 	 	 	 	 	 	 	 
	7	 	PRODUCER PLANT	 	KMTP	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	HOUSTON CENTRAL	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	8	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	9	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	ACTUAL PROD.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	PRICES
	10	 	 	 	 	 	 	 	ACTUAL PLANT	 	 	 	 	 	 	 	COMPOSITE	 	 	 	 	 	 	 	LESS
	 	 	 	 	 	 	 	 	RECOVERY	 	RECOVERED	 	LIQUID VOLUME	 	LIQUID PRICE	 	PRICE	 	COMPONENT	 	COMPOSITE	 	 	 	DEDUCTIONS
	11	 	COMPONENT	 	 	 	GPM	 	%	 	GPM	 	%	 	$/GAL	 	$/GAL	 	Btu/GAL	 	Btu/GAL	 	 	 	$/GAL
	12	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	13	 	Ethane
	 	 	 	**	 	**	 	=(C13*D13)/100	 	=E13/E$21	 	=L13	 	=F13*G13	 	66340	 	=F13*I13	 	 	 	**
	14	 	Propane
	 	 	 	**	 	**	 	=(C14*D14)/100	 	=E14/E$21	 	=L14	 	=F14*G14	 	91563	 	=F14*I14	 	 	 	**
	15	 	I-Butane
	 	 	 	**	 	**	 	=(C15*D15)/100	 	=E15/E$21	 	=L15	 	=F15*G15	 	99630	 	=F15*I15	 	 	 	**
	16	 	n-Butane
	 	 	 	**	 	**	 	=(C16*D16)/100	 	=E16/E$21	 	=L16	 	=F16*G16	 	103740	 	=F16*I16	 	 	 	**
	17	 	I-Pentane
	 	 	 	**	 	**	 	=(C17*D17)/100	 	=E17/E$21	 	=L17	 	=F17*G17	 	109680	 	=F17*I17	 	 	 	**
	18	 	n-Pentane
	 	 	 	**	 	**	 	=(C18*D18)/100	 	=E18/E$21	 	=L18	 	=F18*G18	 	110870	 	=F18*I18	 	 	 	**
	19	 	Hexanes+
	 	 	 	**	 	**	 	=(C19*D19)/100	 	=E19/E$21	 	=L19	 	=F19*G19	 	123000	 	=F19*I19	 	 	 	**
	20	 	 
	 	 	 	**	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	21	 	TOTALS
	 	 	 	=SUM(C13:C20)	 	 	 	=SUM(E13:E20)	 	=SUM(F13:F20)	 	 	 	=SUM(H13:H20)	 	 	 	=SUM(J13:J20)	 	 	 	 
	22	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	23	 	KMTP GAS (Btu/cf)
	 	 	 	 	 	**	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	24	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	25	 	GAS SALES VALUE($/MMBtu)
	 	 	 	 	 	=H7-**	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	26	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	27	 	SHRINKAGE VALUE($/Gal)
	 	 	 	 	 	=(J21/1000000)*D25	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	28	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	29	 	FRAC MARGIN($/Gal)
	 	 	 	 	 	=H21-D27	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	30	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	31	 	FUEL CONSUMPTION(MMBtu/Gal)
	 	 	 	 	 	=(***D23/1000)/E21	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	32	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	33	 	FUEL COST($/Gal)
	 	 	 	 	 	=D31*D25	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	34	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	35	 	PROCESSING MARGIN($/Gal)
	 	 	 	 	 	=D29-D33	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

5

 

     

EXHIBIT D – Part 2

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	A	 	B	 	C	 	D	 	E	 	F	 	G	 	H	 	I	 	J	 	K	 	L
	EXHIBIT D PART 2 EXEMPLAR WITH REPRESENTATIVE VALUES

	Processing Margin Calculation

	2	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	3	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	4	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	5	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Ship Channel Index	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	7	 	PRODUCER PLANT	 	KMTP	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	HOUSTON CENTRAL	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	8	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	9	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	ACTUAL PROD.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	PRICES
	10	 	 	 	 	 	 	 	 	 	 	 	ACTUAL PLANT	 	 	 	 	 	 	 	 	 	 	 	 	 	COMPOSITE	 	 	 	 	 	 	 	 	 	 	 	 	 	LESS
	 	 	 	 	 	 	 	 	 	 	 	 	RECOVERY	 	RECOVERED	 	LIQUID VOLUME	 	LIQUID PRICE	 	PRICE	 	COMPONENT	 	COMPOSITE	 	 	 	 	 	DEDUCTIONS
	11	 	COMPONENT	 	 	 	 	 	GPM	 	%	 	GPM	 	%	 	$/GAL	 	$/GAL	 	Btu/GAL	 	Btu/GAL	 	 	 	 	 	$/GAL
	12	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	13	 	Ethane
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.47278	 	 	 	*	*	 	 	0.34513	 	 	 	66,340	 	 	 	31,364	 	 	 	 	 	 	 	*	*
	14	 	Propane
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.24354	 	 	 	*	*	 	 	0.26790	 	 	 	91,563	 	 	 	22,300	 	 	 	 	 	 	 	*	*
	15	 	I-Butane
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.07195	 	 	 	*	*	 	 	0.11368	 	 	 	99,630	 	 	 	7,169	 	 	 	 	 	 	 	*	*
	16	 	n-Butane
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.06036	 	 	 	*	*	 	 	0.08933	 	 	 	103,740	 	 	 	6,262	 	 	 	 	 	 	 	*	*
	17	 	I-Pentane
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.03436	 	 	 	*	*	 	 	0.05875	 	 	 	109,680	 	 	 	3,768	 	 	 	 	 	 	 	*	*
	18	 	n-Pentane
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.01910	 	 	 	*	*	 	 	0.03266	 	 	 	110,870	 	 	 	2,118	 	 	 	 	 	 	 	*	*
	19	 	Hexanes+
	 	 	 	 	 	 	*	*	 	 	*	*	 	 	*	*	 	 	0.09791	 	 	 	*	*	 	 	0.16743	 	 	 	123,000	 	 	 	12,043	 	 	 	 	 	 	 	*	*
	20	 	 
	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	21	 	TOTALS
	 	 	 	 	 	 	*	*	 	 	 	 	 	 	*	*	 	 	1.0	 	 	 	 	 	 	 	1.07488	 	 	 	 	 	 	 	85,023	 	 	 	 	 	 	 	 	 
	22	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	23	 	KMTP GAS (Btu/cf)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	24	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	25	 	GAS SALES VALUE($/MMBtu)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	26	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	27	 	SHRINKAGE VALUE($/Gal)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	28	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	29	 	FRAC MARGIN($/Gal)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	30	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	31	 	FUEL CONSUMPTION(MMBtu/Gal)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	32	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	33	 	FUEL COST($/Gal)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	34	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	35	 	PROCESSING MARGIN($/Gal)
	 	 	 	 	 	 	 	 	 	 	*	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

6exv10w1

Form 10-Q

Page 40

Exhibit 10.1

THE TIMBERLAND COMPANY

2007 INCENTIVE PLAN

(as amended)

1.       DEFINED TERMS

          Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets
forth certain operational rules related to those terms.

2.       PURPOSE

          The Plan has been established to advance the interests of the Company by providing for the
grant to Participants of Stock-based and other incentive Awards.

3.       ADMINISTRATION

          The Administrator has discretionary authority, subject only to the express provisions of the
Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive
the terms and conditions of any Award; prescribe forms, rules and procedures; and otherwise do all
things necessary to carry out the purposes of the Plan. In the case of any Award intended to be
eligible for the performance-based compensation exception under Section 162(m), the Administrator
will exercise its discretion consistent with qualifying the Award for that exception.
Determinations of the Administrator made under the Plan will be conclusive and will bind all
parties.

4.       LIMITS ON AWARDS UNDER THE PLAN

        (a) Number of Shares. Subject to Section 7(b), a maximum of 8,000,000 shares of Stock
may be delivered in satisfaction of Awards under the Plan. The number of shares of Stock delivered
in satisfaction of Awards shall, for purposes of the preceding sentence, be determined net of: (1)
shares of Stock withheld by the Company in payment of the exercise price of the Award, (2) shares
of Stock withheld in satisfaction of tax withholding requirements with respect to the Award, (3)
shares of Restricted Stock that are forfeited to the Company, (4) shares of Stock subject to an
Award, where cash is delivered to a Participant in lieu of such shares, and (5) shares of Stock
remaining under an Award that terminates without having been exercised in full (in the case of an
Award required exercise by a Participant for delivery of shares of Stock). To the extent
consistent with the requirements of Section 422 and with other applicable legal requirements
(including applicable stock exchange requirements), Stock issued under awards of an acquired
company that are converted, replaced, or adjusted in connection with the acquisition shall not
reduce the number of shares available for Awards under the Plan. 

        (b) Type of Shares. Stock delivered by the Company under the Plan may be authorized
but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of
Stock will be delivered under the Plan.

        (c) Section 162(m) Limits. The maximum number of shares of Stock for which Stock
Options may be granted to any person in any calendar year and the maximum number of shares of Stock
subject to SARs granted to any person in any calendar year will each be 1,000,000. The maximum
number of shares subject to other Awards granted to any person in any calendar year will be
1,000,000. The maximum amount payable to any person in any year under Cash Awards will be
$6,000,000. The foregoing provisions will be construed in a manner consistent with Section
162(m). 

5.       ELIGIBILITY AND PARTICIPATION

          The Administrator will select Participants from among those key Employees and directors of,
and consultants and advisors to, the Company or its Affiliates who, in the opinion of the
Administrator, are in a position to make a significant contribution to the success of the Company
and its Affiliates; provided, that, subject to such express exceptions, if any, as the
Administrator may establish, eligibility shall be further limited to those persons as to whom the
use of a Form S-8 registration Statement is permissible. Eligibility for ISOs is limited to
employees of the Company or of a “parent corporation” or “subsidiary corporation” of the Company as
those terms are defined in Section 424 of the Code.

 

 

Form 10-Q

Page 41

6.     RULES APPLICABLE TO AWARDS

      (a) All Awards

          (1) Award Provisions. The Administrator will determine the terms of all Awards,
subject to the limitations provided herein. By accepting (or, under such rules as the
Administrator may prescribe, being deemed to have accepted) an Award, the Participant agrees
to the terms of the Award and the Plan. Notwithstanding any provision of this Plan to the
contrary, awards of an acquired company that are converted, replaced or adjusted in
connection with the acquisition may contain terms and conditions that are inconsistent with
the terms and conditions specified herein, as determined by the Administrator.

          (2) Term of Plan. No Awards may be made after February 27, 2017, but previously
granted Awards may continue beyond that date in accordance with their terms.

          (3) Transferability. Neither ISOs nor, except as the Administrator otherwise
expressly provides in accordance with the second sentence of this Section 6(a)(3), other
Awards may be transferred other than by will or by the laws of descent and distribution, and
during a Participant’s lifetime ISOs (and, except as the Administrator otherwise expressly
provides in accordance with the second sentence of this Section 6(a)(3), other
non-transferable Awards requiring exercise) may be exercised only by the Participant. To the
extent provided in the immediately preceding sentence, the Administrator may permit Awards
other than ISOs to be transferred by gift, subject to such limitations as the Administrator
may impose.

          (4) Vesting, Etc. The Administrator may determine the time or times at which an
Award will vest or become exercisable and the terms on which an Award requiring exercise will
remain exercisable. Unless the Administrator expressly provides otherwise, an Award
requiring exercise will cease to be exercisable, and all other Awards to the extent not
already fully vested will be forfeited, immediately upon the cessation (for any reason,
including but not limited to death) of the Participant’s employment or other service
relationship with the Company and its Affiliates. Without limiting the foregoing, the
Administrator may at any time accelerate the vesting or exercisability of an Award,
regardless of any adverse or potentially adverse tax consequences resulting from such
acceleration.

          (5) Taxes.  The Administrator will make such provision for the withholding of
taxes as it deems necessary. The Administrator may, but need not, hold back shares of Stock
from an Award or permit a Participant to tender previously owned shares of Stock in
satisfaction of tax withholding requirements (but not in excess of the minimum withholding
required by law).

          (6) Dividend Equivalents, Etc. The Administrator may provide for the payment of
amounts in lieu of cash dividends or other cash distributions with respect to Stock subject
to an Award. Any entitlement to dividend equivalents or similar entitlements shall be
established and administered consistent either with exemption from, or compliance with, the
requirements of Section 409A to the extent applicable.

          (7) Rights Limited. Nothing in the Plan will be construed as giving any person
the right to continued employment or service with the Company or its Affiliates, or any
rights as a stockholder except as to shares of Stock actually issued under the Plan. The
loss of existing or potential profit in Awards will not constitute an element of damages in
the event of termination of Employment for any reason, even if the termination is in
violation of an obligation of the Company or any Affiliate to the Participant.

          (8) Section 162(m). This Section 6(a)(8) applies to any Performance Award
intended to qualify as performance-based for the purposes of Section 162(m), other than a
Stock Option or SAR. In the case of any Performance Award to which this Section 6(a)(8)
applies, the Plan and such Award will be construed to the maximum extent permitted by law in
a manner consistent with qualifying the Award for such exception. With respect to such
Performance Awards, the Administrator will preestablish, in writing, one or more specific
Performance Criteria no later than 90 days after the commencement of the period of service to
which the performance relates (or at such earlier time as is required to qualify the Award as
performance-based under Section 162(m)). Prior to grant, vesting or payment of the
Performance Award, as the case may be, the Administrator will certify whether the applicable
Performance Criteria have been attained and such determination will be final and conclusive.
No Performance Award to which this Section 6(a)(8) applies may be granted after the first
meeting of the stockholders of the Company held in 2012 until the listed performance measures
set forth in the definition of “Performance Criteria”

 

 

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(as originally approved or as
subsequently amended) have been resubmitted to and reapproved by the stockholders of the
Company in accordance with the requirements of Section 162(m), unless such grant is made
contingent upon such approval.

          (9) Coordination with Other Plans. Awards under the Plan may be granted in
tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards
made under other compensatory plans or programs of the Company or its Affiliates. For
example, but without limiting the generality of the foregoing, awards under other
compensatory plans or programs of the Company or its Affiliates may be settled in Stock
(including, without limitation, Unrestricted Stock) if the Administrator so determines, in
which case the delivery of such Stock shall be treated as awarded under the Plan (and shall
reduce the number of shares thereafter available under the Plan in accordance with the rules
set forth in Section 4). In any case where an award is made under another plan or
program of the Company or its Affiliates and such award is intended to qualify for the
performance-based compensation exception under Section 162(m), and such award is settled by
the delivery of Stock or another Award under the Plan, the applicable Section 162(m)
limitations under both the other plan or program and under the Plan shall be applied to the
Plan as necessary (as determined by the Administrator) to preserve the availability of the
Section 162(m) performance-based compensation exception with respect thereto.

          (10) Section 409A. Each Award shall contain such terms as the Administrator
determines, and shall be construed and administered, such that the Award either (i) qualifies
for an exemption from the requirements of Section 409A, or (ii) satisfies such requirements.

          (11) Certain Requirements of Corporate Law.  Awards shall be granted and
administered consistent with the requirements of applicable Delaware law relating to the
issuance of stock and the consideration to be received therefore, and with the applicable
requirements of the stock exchanges or other trading systems on which the Stock is listed or
entered for trading, in each case as determined by the Administrator.

      (b) Awards Requiring Exercise

          (1) Time And Manner Of Exercise. Unless the Administrator provides otherwise,
an Award requiring exercise by the holder will not be deemed to have been exercised until the
Administrator receives a notice of exercise (in form acceptable to the Administrator) signed
by the appropriate person and accompanied by any payment required under the Award. If the
Award is exercised by any person other than the Participant, the Administrator may require
satisfactory evidence that the person exercising the Award has the right to do so.

          (2) Exercise Price. The exercise price (or the base value from which
appreciation is to be measured) of each Award requiring exercise shall be 100% (in the case
of an ISO granted to a ten-percent shareholder within the meaning of subsection (b)(6) of
Section 422, 110%) of the fair market value of the Stock subject to the Award, determined as
of the date of grant, or such higher amount as the Administrator may determine in connection
with the grant. No such Award, once granted, may be repriced other than in accordance with
the applicable stockholder approval requirements of the New York Stock Exchange. Fair market
value shall be determined by the Administrator consistent with the applicable requirements of
Section 422 and Section 409A.

          (3) Payment Of Exercise Price. Where the exercise of an Award is to be
accompanied by payment, payment of the exercise price shall be by cash or check acceptable to
the Administrator, or, if so permitted by the Administrator and if legally permissible, (i)
through the delivery of shares of Stock that have been outstanding for at least six months
(unless the Administrator approves a shorter period) and that have a fair market value equal
to the exercise price, (ii) through a broker-assisted exercise program acceptable to the
Administrator, (iii) by other means acceptable to the Administrator, or (iv) by any
combination of the foregoing permissible forms of payment. The delivery of shares in payment
of the exercise price under clause (i) above may be accomplished either by actual delivery or
by constructive delivery through attestation of ownership, subject to such rules as the
Administrator may prescribe.

          (4) Maximum Term. Awards requiring exercise will have a maximum term not to
exceed ten (10) years from the date of grant.

 

 

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	7.	 	EFFECT OF CERTAIN TRANSACTIONS

       (a) Mergers, etc. Except as otherwise provided in an Award, the following provisions
shall apply in the event of a Covered Transaction:

          (1) Assumption or Substitution. If the Covered Transaction is one in which
there is an acquiring or surviving entity, the Administrator may provide for the assumption
of some or all outstanding Awards or for the grant of new awards in substitution therefore by
the acquirer or survivor or an affiliate of the acquirer or survivor.

          (2) Cash-Out of Awards. If the Covered Transaction is one in which holders of
Stock will receive upon consummation a payment (whether cash, non-cash or a combination of
the foregoing), the Administrator may provide for payment (a “cash-out”), with respect to
some or all Awards or any portion thereof, equal in the case of each affected Award or
portion thereof to the excess, if any, of (A) the fair market value of one share of Stock (as
determined by the Administrator in its reasonable discretion) times the number of shares of
Stock subject to the Award or such portion, over (B) the aggregate exercise or purchase
price, if any, under the Award or such portion (in the case of an SAR, the aggregate base
price above which appreciation is measured), in each case on such payment terms (which need
not be the same as the terms of payment to holders of Stock) and other terms, and subject to
such conditions, as the Administrator determines; provided, that the Administrator shall not
exercise its discretion under this Section 7(a)(2) with respect to an Award or portion
thereof providing for “nonqualified deferred
compensation” subject to Section 409A in a manner that would constitute an extension or
acceleration of, or other change in, payment terms if such change would be inconsistent with
the requirements of Section 409A.  

          (3) Acceleration of Certain Awards. If the Covered Transaction (whether or not
there is an acquiring or surviving entity) is one in which there is no assumption,
substitution or cash-out, each Award requiring exercise will become fully exercisable, and
the delivery of any shares of Stock remaining deliverable under each outstanding Award of
Stock Units (including Restricted Stock Units and Performance Awards to the extent consisting
of Stock Units) will be accelerated and such shares will be delivered, prior to the Covered
Transaction, in each case on a basis that gives the holder of the Award a reasonable
opportunity, as determined by the Administrator, following exercise of the Award or the
delivery of the shares, as the case may be, to participate as a stockholder in the Covered
Transaction; provided, that to the extent acceleration pursuant to this Section 7(a)(3) of an
Award subject to Section 409A would cause the Award to fail to satisfy the requirements of
Section 409A, the Award shall not be accelerated and the Administrator in lieu thereof shall
take such steps as are necessary to ensure that payment of the Award is made in a medium
other than Stock and on terms that as nearly as possible, but taking into account adjustments
required or permitted by this Section 7, mirror the prior terms of the Award.

          (4) Termination of Awards Upon Consummation of Covered Transaction. Each Award
will terminate upon consummation of the Covered Transaction, other than the following: (i)
Awards assumed pursuant to Section 7(a)(1) above; (ii) Awards converted pursuant to the
proviso in Section 7(a)(3) above into an ongoing right to receive payment other than Stock;
and (iii) outstanding shares of Restricted Stock (which shall be treated in the same manner
as other shares of Stock, subject to Section 7(a)(5) below).

          (5) Additional Limitations.  Any share of Stock and any cash or other property
delivered pursuant to Section 7(a)(2) or Section 7(a)(3) above with respect to an Award may,
in the discretion of the Administrator, contain such restrictions, if any, as the
Administrator deems appropriate to reflect any performance or other vesting conditions to
which the Award was subject and that did not lapse (and were not satisfied) in connection
with the Covered Transaction. In the case of Restricted Stock that does not vest in
connection with the Covered Transaction, the Administrator may require that any amounts
delivered, exchanged or otherwise paid in respect of such Stock in connection with the
Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the
Administrator deems appropriate to carry out the intent of the Plan.

       (b) Change in and Distributions With Respect to Stock

                    (1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or
combination of shares (including a reverse stock split), recapitalization or other change in the
Company’s capital structure, the Administrator shall make appropriate adjustments to the maximum
number of shares specified in Section 4(a) that may be delivered under the Plan and to the maximum
share limits described in Section 4(c), and shall also make appropriate adjustments to the number
and kind of shares of stock or securities subject to Awards then outstanding or subsequently
granted, any exercise prices relating to Awards and any other provision of Awards affected by such
change.

 

 

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Page 44

                    (2) Certain Other Adjustments. The Administrator may also make adjustments of the
type described in Section 7(b)(1) above to take into account distributions to stockholders other
than those provided for in Section 7(a) and 7(b)(1), or any other event, if the Administrator
determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to
preserve the value of Awards made hereunder, having due regard for the qualification of ISOs under
Section 422, the requirements of Section 409A, and for the performance-based compensation rules of
Section 162(m), where applicable.

                    (3) Continuing Application of Plan Terms.  References in the Plan to shares of Stock
will be construed to include any stock or securities resulting from an adjustment pursuant to this
Section 7.

	8.	 	  LEGAL CONDITIONS ON DELIVERY OF STOCK

          The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to
remove any restriction from shares of Stock previously delivered under the Plan until: (i) the
Company is satisfied that all legal matters in connection with the issuance and delivery of such
shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery
listed on any stock exchange or national market system, the shares to be delivered have been listed
or authorized to be listed on such exchange or system upon official notice of issuance; and (iii)
all conditions of the Award have been satisfied or waived. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act. The Company may require that certificates evidencing
Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer
applicable to such Stock, and the Company may hold the certificates pending lapse of the applicable
restrictions.

	9.	 	  AMENDMENT AND TERMINATION

          The Administrator may at any time or times amend the Plan or any outstanding Award for any
purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any
future grants of Awards; provided, that except as otherwise expressly provided in the Plan the
Administrator may not, without the Participant’s consent, alter the terms of an Award so as to
affect materially and adversely the Participant’s rights under the Award, unless the Administrator
expressly reserved the right to do so at the time of the Award. Any amendments to the Plan shall
be conditioned upon stockholder approval only to the extent, if any, such approval is required by
law (including the Code and applicable stock exchange requirements), as determined by the
Administrator.

	10.	 	  OTHER COMPENSATION ARRANGEMENTS

          The existence of the Plan or the grant of any Award will not in any way affect the Company’s
right to Award a person bonuses or other compensation in addition to Awards under the Plan.

	11.	 	  MISCELLANEOUS

          (a)      Waiver of Jury Trial. By accepting an Award under the Plan, each Participant
waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights
under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or
other agreement delivered or which in the future may be delivered in connection therewith, and
agrees that any such action, proceedings or counterclaim shall be tried before a court and not
before a jury. By accepting an Award under the Plan, each Participant certifies that no officer,
representative, or attorney of the Company has represented, expressly or otherwise, that the
Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the
foregoing waivers.

          (b)      Limitation of Liability. Notwithstanding anything to the contrary in the Plan,
neither the Company, any Affiliate, nor the Administrator, nor any person acting on behalf of the
Company, any Affiliate, or the Administrator, shall be liable to any Participant or to the estate
or beneficiary of any Participant or to any other holder of an Award by reason of any acceleration
of income, or any additional tax, asserted by reason of the failure of an Award to satisfy the
requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code; provided,
that nothing in this Section 11(b) shall limit the ability of the Administrator or the Company to
provide by separate express written agreement with a Participant for a gross-up payment or other
payment in connection with any such tax or additional tax.

 

 

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Page 45

EXHIBIT A

Definition of Terms

          The following terms, when used in the Plan, will have the meanings and be subject to the
provisions set forth below:

          “Administrator”: The Compensation Committee, except that the Compensation Committee may
delegate (i) to one or more of its members such of its duties, powers and responsibilities as it
may determine; (ii) to one or more officers of the Company the power to grant rights or options to
the extent permitted by Section 157(c) of the Delaware General Corporation Law; and (iii) to such
Employees or other persons as it determines such ministerial tasks as it deems appropriate. In the
event of any delegation described in the preceding sentence, the term “Administrator” shall include
the person or persons so delegated to the extent of such delegation.

          “Affiliate”: Any corporation or other entity that stands in a relationship to the Company
that would result in the Company and such corporation or other entity being treated as one employer
under Section 414(b) and Section 414(c) of the Code, except that in determining eligibility for the
grant of a Stock Option or SAR by reason of service for an Affiliate, Sections 414(b) and 414(c) of
the Code shall be applied by substituting “at least 50%” for “at least 80%” under Section
1563(a)(1), (2) and (3) of the Code and Treas. Regs. § 1.414(c)-2; provided, that to the extent
permitted under Section 409A, “at least 20%” shall be used in lieu of “at least 50%”; and further
provided, that the lower ownership threshold described in this definition (50% or 20% as the case
may be) shall apply only if the same definition of affiliation is used consistently with respect to
all compensatory stock options or stock awards (whether under the Plan or another plan). The
Company may at any time by amendment provide that different ownership thresholds (consistent with
Section 409A) apply but any such change shall not be effective for twelve (12) months.

          “Award”: Any or a combination of the following:

               (i) Stock Options.

               (ii) SARs.

               (iii) Restricted Stock.

               (iv) Unrestricted Stock.

               (v) Stock Units, including Restricted Stock Units.

               (vi) Performance Awards.

               (vii) Cash Awards.

               (viii) Awards (other than Awards described in (i) through (vii) above) that are
convertible into or otherwise based on Stock.

          “Board”: The Board of Directors of the Company.

          “Cash Award”: An Award denominated in cash.

          “Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or
any successor statute as from time to time in effect.

          “Compensation Committee”: The Management Development and Compensation Committee of the Board.

          “Company”: The Timberland Company.

          “Covered Transaction”: Any of (i) a consolidation, merger, or similar transaction or series
of related transactions, including a sale or other disposition of stock, in which the Company is
not the surviving corporation or which results in the

 

 

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Page 46

acquisition of all or substantially all of
the Company’s then outstanding common stock by a single person or entity or by a group of persons
and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the
Company’s assets, or (iii) a dissolution or liquidation of the Company. Where a Covered
Transaction involves a tender offer that is reasonably expected to be followed by a merger
described in clause (i) (as determined by the Administrator), the Covered Transaction shall be
deemed to have occurred upon consummation of the tender offer.

          “Employee”: Any person who is employed by the Company or an Affiliate.

          “Employment”: A Participant’s employment or other service relationship with the Company and
its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides
otherwise, so long as the Participant is employed by, or otherwise is providing services in a
capacity described in Section 5 to the Company or its Affiliates. If a Participant’s employment or
other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the
Participant’s Employment will be deemed to have terminated when the entity ceases to be an
Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates.

          “ISO”: A Stock Option intended to be an “incentive stock option” within the meaning of
Section 422. Each option granted pursuant to the Plan will be treated as providing by its terms
that it is to be a non-incentive stock option unless, as of the date of grant, it is expressly
designated as an ISO.

          “Participant”: A person who is granted an Award under the Plan.

          “Performance Award”: An Award subject to Performance Criteria. The Committee in its
discretion may grant Performance Awards that are intended to qualify for the performance-based
compensation exception under Section 162(m) and Performance Awards that are not intended so to
qualify.

          “Performance Criteria”: Specified criteria, other than the mere continuation of Employment or
the mere passage of time, the satisfaction of which is a condition for the grant, exercisability,
vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance Criterion will mean an
objectively determinable measure of performance relating to any or any combination of the following
(measured either absolutely or by reference to an index or indices and determined either on a
consolidated basis or, as the context permits, on a divisional, subsidiary, line of business,
project or geographical basis or in combinations thereof): (i) sales; revenues; assets; expenses;
earnings before or after deduction for all or any portion of interest, taxes, depreciation, or
amortization, whether or not on a continuing operations or an aggregate or per share basis; return
on equity, investment, capital or assets; gross margin; inventory levels or turns; one or more
operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital
expenditures; cash flow; stock price; stockholder return; sales of particular products or services;
customer acquisition or retention; or other objective operating contributions; or (ii) acquisitions
and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs,
split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance
of debt or equity) or refinancings; or other transactions that involve a change in the equity
ownership of the Company. A Performance Criterion and any targets with respect thereto determined
by the Administrator need not be based upon an increase, a positive or improved result or avoidance
of loss. To the extent consistent with the requirements for satisfying the performance-based
compensation exception under Section 162(m), the Administrator may provide in the case of any Award
intended to qualify for such exception that one or more of the Performance Criteria applicable to
such Award will be adjusted in an objectively determinable manner to reflect events (for example,
but without limitation, acquisitions or dispositions) occurring during the performance period that
affect the applicable Performance Criterion or Criteria.

          “Plan”: The Timberland Company 2007 Incentive Plan as from time to time amended and in
effect.

          “Restricted Stock”: Stock subject to restrictions requiring that it be redelivered or offered
for sale to the Company if specified conditions are not satisfied.

          “Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of Stock or cash
in lieu of Stock is, subject to the satisfaction of specified performance or other vesting
conditions.

          “Section 409A”: Section 409A of the Code.

          “Section 422”: Section 422 of the Code.

 

 

Form 10-Q

Page 47

          “Section 162(m)”: Section 162(m) of the Code.

          “SAR”: A right entitling the holder upon exercise to receive an amount (payable in shares of
Stock of equivalent value) equal to the excess of the fair market value of the shares of Stock
subject to the right over the fair market value of such shares at the date of grant.

          “Stock”: Common Stock of the Company, par value $.01 per share.

          “Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the
exercise price.

          “Stock Unit”: An unfunded and unsecured promise, denominated in shares of Stock, to deliver
Stock or cash measured by the value of Stock in the future.

          “Unrestricted Stock”: Stock not subject to any restrictions under the terms of the Award.

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