Document:

Exhibit 10.1

 

GAS
PURCHASE CONTRACT

 

BETWEEN

 

 

CONTINENTAL
RESOURCES, INC.

 

Seller

 

 

and

 

 

HILAND
PARTNERS, LP

 

Buyer

 

 

Dated November 8, 2005

 

 

GAS
PURCHASE CONTRACT

INDEX

 

ARTICLE

 

	
  I

  	
  DEFINITIONS

  	
   

  
	
  II

  	
  COMMITMENT

  	
   

  
	
  III

  	
  FACILITIES AND RIGHT-OF-WAY

  	
   

  
	
  IV

  	
  DELIVERY POINT(S) AND PRESSURE

  	
   

  
	
  V

  	
  SELLER’S RESERVATIONS

  	
   

  
	
  VI

  	
  QUANTITY OF GAS

  	
   

  
	
  VII

  	
  QUALITY OF GAS

  	
   

  
	
  VIII

  	
  MEASUREMENT AND TESTS

  	
   

  
	
  IX

  	
  ALLOCATION PROCEDURES

  	
   

  
	
  X

  	
  PRICE

  	
   

  
	
  XI

  	
  TAXES

  	
   

  
	
  XII

  	
  PAYMENT AND ROYALTY

  	
   

  
	
  XIII

  	
  TERM

  	
   

  
	
  XIV

  	
  UNPROFITABLE GAS

  	
   

  
	
  XV

  	
  OPERATION OF RETURN RESIDUE LINE &
  TEST METER FACILITIES

  	
   

  
	
  XVI

  	
  TITLE, OWNERSHIP AND RESPONSIBILITY FOR
  INJURY OR DAMAGE

  	
   

  
	
  XVII

  	
  CARBON DIOXIDE & NITROGEN GAS

  	
   

  
	
  XVIII

  	
  FORCE MAJEURE

  	
   

  
	
  XIX

  	
  LAWS AND REGULATIONS

  	
   

  
	
  XX

  	
  ADDRESSES AND NOTICES

  	
   

  
	
  XXI

  	
  RIGHT-OF-WAY

  	
   

  
	
  XXII

  	
  ASSIGNMENT

  	
   

  
	
  XXIII

  	
  COUNTERPART

  	
   

  
	
  XXIV

  	
  RATIFICATION

  	
   

  
	
  XXV

  	
  DEFAULT
  AND NON-WAIVER

  	
   

  

 

2

 

GAS
PURCHASE CONTRACT

 

THIS CONTRACT dated this 8th day of November, 2005, is between
Continental Resources, Inc. (hereinafter referred to as “Seller”), and
Hiland Partners, LP (hereinafter referred to as “Buyer”).

 

For and in consideration of the premises and
the mutual covenants contained herein, the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                               Except
where the context indicates a different meaning or intent, the following terms
as used herein shall be construed to have meanings as follows:

 

1.2                               The
term “day” shall mean a period of twenty four (24) consecutive hours beginning
and ending at seven o’clock a.m. Central Time (including Daylight
Savings).

 

1.3                               The
term “month” shall mean a period beginning at seven o’clock a.m. on the
first day of a calendar month and ending at seven o’clock a.m. on the
first day of the next succeeding calendar month.

 

1.4                               The
term “year” shall mean a period of twelve (12) months beginning the day on
which the delivery of gas to Buyer commenced hereunder.

 

1.5                               “Cubic
foot of gas” shall mean the volume of gas contained in one cubic foot of space
at a standard pressure base and at a standard temperature base.  The standard pressure base shall be fourteen
and seventy-three one hundredths pounds per square inch absolute (14.73 Psia)
and the standard temperature base shall be 60 degrees (60o) Fahrenheit.  “Mcf” shall mean one thousand (1,000) cubic
feet of gas.  “BCF” shall mean one billion
(1,000,000,000) cubic feet of gas.

 

1.6                               The
term “Btu” (British Thermal Unit) shall mean the quantity of heat required to
raise the temperature of one (1) pound of pure water one degree of
Fahrenheit temperature scale (58.5o to 59.5o Fahrenheit).  “MMBtu” shall mean one million British
Thermal Units.

 

1.7                               The
term “psia” shall mean pounds per square inch absolute.  The term “psig” shall mean pounds per square
inch gauge.

 

1.8                               The
term “Plant(s)” shall mean any processing plant(s) owned and/or operated by
Buyer for the extraction of natural liquids from gas located in Bowman County
and Slope County, North Dakota, and Fallon County, Montana.

 

3

 

1.9                               The
term “Plant Products” or “Products” shall mean those natural gas liquids,
including ethane, propane, butane, and natural gasoline, and mixtures thereof,
which are removed from the gas stream in the liquid extraction process at the
Plant(s) and delivered as natural gas liquids from the Plant(s).  “Plant Products” shall include Drip Liquids.

 

1.10                        The
term “Residue Gas” shall mean that portion of the gas remaining after the
extraction of Plant Products, the use of gas for fuel in the Plant(s) and
related facilities, field compression fuel, flare and incidental losses.

 

1.11                        The
term “Drip Liquids” shall mean any liquid hydrocarbons accumulating in drips,
separators and/or pipelines downstream of Delivery Point(s) which are collected
by Buyer from the gathering system(s); including, without limitation, dirty
oil, line drip, scrubber oil, compression and separator liquids, distillates
and condensates; and such term includes all such liquids regardless of whether
they are deleterious or marketable.

 

1.13                        The term “Effective Date” shall
mean the date that the Nitech Nitrogen Rejection Unit is installed and
commences operation.

 

1.14                        The term “Cedar Hills Volumes”
shall mean those volumes that are gathered by Buyer at a pressure of less than
75 psig.

 

1.15                        The term “MPHU Volumes” shall
mean those volumes that are gathered and delivered by Seller to Buyer from the
Medicine Pole Hills Unit, Medicine Pole Hills West Unit, and Medicine Pole
Hills South Unit.

 

1.16                        The term “CTB” shall mean
Seller’s central tank battery(s) serving all wells located on properties
described in Exhibit ”A”.

 

ARTICLE II

COMMITMENT

 

2.1                               Seller
agrees to sell and Buyer agrees to purchase from Seller gas produced from wells
now or hereafter located on oil and gas leasehold interests now owned or
controlled or hereafter owned or controlled by Seller on the lands described on
Exhibit ”A” attached hereto (“Dedicated Leases”).

 

ARTICLE III

FACILITIES AND RIGHT-OF-WAY

 

3.1                               Each
of the parties hereto shall proceed with due diligence and in good faith to
obtain such governmental authorizations, right-of-way, and material as may be
required to perform this Contract.  Upon
receipt and acceptance by both parties of such governmental authorizations or
within sixty (60) days of the execution of this Contract if

 

4

 

no such governmental authorizations are required, Buyer and Seller
shall commence and prosecute with due diligence the construction of such
facilities as are necessary to enable it to receive or deliver at the Delivery
Point(s) the specified quantities of gas contemplated by this Contract.  The delivery and receipt of gas shall begin
promptly after completion of the construction and installation of connecting
facilities.  In the event that either
party has not commenced the construction of its facilities within sixty (60)
days of the date herein required, or in the event either party commences
construction but thereafter fails to prosecute construction with due diligence
until completion thereof, the other party shall have the right to cancel this
Contract at any time thereafter by serving ten (10) days written notice on
the dilatory party unless such dilatory party within said ten (10) days,
remedies the cause of such cancellation.

 

3.2                               Seller,
at its sole cost and expense, shall construct, install, maintain, and operate
any and all facilities and equipment necessary for the proper, safe and
efficient operation of Seller’s wells and to enable it to make delivery of gas
hereunder to Buyer at the Delivery Point(s). 
Such equipment shall include the valves and fittings necessary to permit
Buyer to make its connection at the Delivery Point(s).

 

3.3                               Buyer,
at its sole cost and expense, shall construct, install, maintain and operate
any and all facilities and equipment necessary to accept Seller’s gas at each
Delivery Point.

 

3.4                               Insofar
as Seller’s lease permits, Buyer or Buyer’s designee is granted the right to
lay and maintain lines and install any equipment on the dedicated lease(s)
necessary for the receipt of Seller’s gas, and Buyer or Buyer’s designee shall
have the right of free entry thereon during the term of this Contract.  Should Buyer be delayed in securing any
additional right-of-way not covered hereby, then such delay shall suspend
performance under this Contract until such right-of-way may be obtained.  In the event any right-of-way necessary for
the receipt of Seller’s gas at any given Delivery Point cannot be obtained on
terms and conditions acceptable to Buyer, then Buyer shall not be obligated to
connect said Delivery Point.

 

ARTICLE IV

DELIVERY POINT(S) AND PRESSURE

 

4.1                               The
Delivery Point(s) hereunder shall be the upstream flange of Buyer’s metering
facility serving Seller’s Central Tank Battery(s) and/or well(s) (“Delivery
Point”).  Upon delivery, title to the gas
and all components thereof shall pass to and vest in Buyer.

 

4.2                               The
gas to be delivered hereunder shall be delivered by Seller at the Delivery
Point(s) specified in Article 4.1 hereof at a pressure sufficient to
enable it to enter Buyer’s facilities against the working pressure therein at reasonable
uniform rates of delivery.  Buyer will
endeavor to maintain a suction pressure at Buyer’s CTB compression facilities
of no greater than forty (40) psig. 
Provided, however, with respect to the Coyote Creek CTB, Sunny Slope
CTB, Walter CTB, Eagon CTB and/or

 

5

 

other CTB producing less than 1 MMCFD, Seller acknowledges that the
line pressures will exceed forty (40) psig, but be less than sixty (60) psig,
until such time as sufficient volumes are produced by these delivery points to
justify the installation of CTB compression by Buyer at these locations, at its
sole discretion.  However, in the event
Buyer’s line pressure prevents Seller’s gas from being delivered into Buyer’s
facilities, Seller shall have the right to flare or otherwise dispose of its
gas without penalty or liability to Buyer. 
Nothing in this agreement shall be interpreted to require or impose an
obligation on Seller to curtail or limit its crude oil production from the
Dedicated Leases.

 

4.3                               The
parties hereto acknowledge that at least eighty percent (80%) of the plant and
field compression to be utilized by Seller will be operated on electric power.

 

4.4                               If
Seller’s wells become incapable of delivering into facilities owned and/or operated
by Buyer, Seller shall so advise Buyer in writing.  Neither party shall be obligated to compress
such gas but either party shall have the option to do so.  If either party provides compression
facilities, then such party agrees to provide sufficient pulsation dampening
equipment so that measurement at the Delivery Point(s) will not be affected by
pulsation.

 

ARTICLE V

SELLER’S RESERVATIONS

 

5.1                               Seller
hereby expressly reserves unto itself, its successors and assigns, the
following rights with respect to its interests in the oil and gas properties
committed by Seller to Buyer hereunder together with sufficient gas produced
therefrom to satisfy such rights:

 

a.                                       To operate
Seller’s oil and gas properties free from any control by Buyer in such manner
as Seller, in Seller’s sole discretion, may deem advisable, including, without
limitation the right, but never the obligation, to drill new wells, to repair
and rework old wells, renew or extend, in whole or in part, any oil and gas
lease covering, in whole or in part, the oil and gas properties and to abandon
any well or surrender any such oil and gas lease, in whole or in part, when no
longer deemed by Seller to be capable of producing gas in paying quantities
under normal methods of operation.

 

b.                                      To use gas produced
from the oil and gas properties for developing and operating Seller’s oil and
gas properties committed hereto in the field in which the gas is produced, for
the operation of Seller’s pipelines, water stations, camps and other
miscellaneous uses incident to the operation of such leases, and to fulfill
obligations to Seller’s Lessors therein.

 

6

 

c.                                       To pool,
combine and unitize any of Seller’s oil and gas properties with other
properties of Seller and of others in the same field, and to alter such
pooling, combination or units, in which event this Contract will cover Seller’s
allocated interest in unitized production insofar as such interest is
attributable to the oil and gas properties committed hereunder.  Seller shall give notice in writing to Buyer
of any change contemplated by this Article as is deemed material to this
Contract, and the description of property covered hereby shall be considered as
having been amended accordingly.

 

ARTICLE VI

QUANTITY OF GAS

 

6.1                             Seller
commits all gas produced from the Dedicated Lease(s) to Buyer under this
Contract that Seller owns, controls, or has the rights to commit.

 

6.2                             Buyer will
purchase and take Seller’s gas, subject to the demands of Buyer’s resale
purchaser(s) and the operating conditions and capacity of the facilities owned
and/or operated by Buyer.  It is
understood that Buyer cannot guarantee the purchase of any particular quantity
of Seller’s gas which is available for sale.

 

6.3                             Seller shall
have the right to dispose of any gas not taken by Buyer, subject to Buyer’s
right to resume purchases at any subsequent time.  Buyer shall not have the right to resume
purchases of gas if the fees for the taking of said gas as described within
this Agreement by Buyer exceeds the revenue received by Seller for same as
described within this Agreement.

 

6.4                             Seller shall
have agents or employees available at all reasonable times to receive from
Buyer’s dispatchers advice and requests for changes in the rates of delivery of
gas hereunder as required by Buyer from time to time.

 

6.5                             In the event
the gas delivered hereunder at any point or points of delivery becomes
insufficient in volume, quantity, quality or pressure, in the sole judgment of
Buyer, Buyer shall have the right to refuse or cease taking such gas so long as
such condition exists, or may terminate this contract as to any such gas upon
thirty (30) days notice in writing to Seller. 
Seller also has the right to dispose of any gas if the fees for the
taking of said gas as described within this Agreement by Buyer exceeds the
revenue received by Seller for same as described within this Agreement.

 

6.6                             The
parties hereto recognize the desirability of maintaining the uniform rate of
flow of gas to the Plant(s) over each twenty-four (24) hour period in each day
throughout each month, and Seller agrees to use its best efforts to regulate
its producing schedule so that Seller’s gas shall be made available to the
Plant(s) at as uniform a rate of flow as is practicable.

 

7

 

ARTICLE VII

QUALITY OF GAS

 

7.1                               The
gas delivered hereunder shall be commercially free of dust, gum, gum forming
constituents, treating chemicals and solid matter that might adversely affect
the gathering thereof and shall conform to the following specifications:

 

	
  a.

  	
  Oxygen

  	
  Not more than 0.4% by volume

  
	
   

  	
   

  	
   

  
	
  b.

  	
  Carbon Dioxide

  	
  Not more then 15.0% by volume

  
	
   

  	
   

  	
   

  
	
  c.

  	
  Hydrogen Sulfide

  	
  Not more than 4.7 grains per 100 Cubic Feet

  
	
   

  	
   

  	
   

  
	
  d.

  	
  Mercaptan Sulfur

  	
  Not more than 4.7 grains per 100 Cubic Feet

  
	
   

  	
   

  	
   

  
	
  e.

  	
  Free Water

  	
  None

  
	
   

  	
   

  	
   

  
	
  f.

  	
  Temperature

  	
  Not more than 120 degrees Fahrenheit

  
	
   

  	
   

  	
   

  
	
  g.

  	
  Total Sulfur

  	
  Not more than 4.7 grains per 100 Cubic Foot

  

 

7.2                             The
acceptance of gas which does not meet the specifications of this Article 7
shall not be deemed a waiver of the right to require future deliveries to
conform to said specifications.

 

ARTICLE VIII

MEASUREMENT AND TESTS

 

8.1                               Buyer
shall operate at or near the point(s) of delivery, an orifice meter, or
meter(s).  Seller, insofar as Seller’s
leasehold and other mineral rights enable it to do so, will furnish Buyer sites
for its metering facilities.  Except as
otherwise specifically provided to the contrary in this Article, orifice meters
or other measurement devices shall be installed and volumes computed in
accordance with accepted industry practice. 
Seller shall have access to such metering equipment at reasonable hours,
but the reading, calibrating, adjusting, operation and maintenance thereof may
be done only by Buyer.

 

8.2                               The
unit of volume shall be one (1) cubic foot of gas at a base temperature of
sixty degrees (60°) Fahrenheit and at a pressure base of fourteen and
seventy-three hundredths pounds per square inch absolute (14.73 Psia).  Computation of volumes shall be made in
accordance with industry accepted practice.

 

8.3                               In
the absence of recording the actual atmospheric pressure, Buyer may assume the
atmospheric pressure to be thirteen and two-tenths pounds per square inch
absolute (13.2 Psia).  At Buyer’s option
the absolute atmospheric pressure may be assumed or may be measured by use of
electronic recording devices such as Totalflow

 

8

 

(Registered Trademark) or the like. 
At Buyer’s option the temperature of the gas passing the meters shall be
determined by use of a recording thermometer so installed that it may properly
record the temperature of the gas flowing through the meter; otherwise, the
temperature shall be assumed to be sixty degrees (60°) Fahrenheit.  The specific gravity shall be determined
semi-annually or more often as Buyer deems advisable.

 

8.4                               Seller
may install, maintain and operate, at its own expense, such pressure regulators
and check measuring equipment as it shall desire, provided that such equipment
shall be installed so as not to interfere with the operation of Buyer’s
measuring equipment.  Buyer shall have
access to such check measuring equipment at reasonable hours, but the reading,
calibrating, adjusting, operation and maintenance thereof shall be done only by
Seller.

 

8.5                               Each
party shall have the right to be present at the time of any calibrating done in
connection with the other’s metering equipment used in metering deliveries
hereunder.  The party proposing a
calibration of a meter shall provide written notice to the other party no less
than five (5) days prior to the date of the calibration.

 

8.6                               At
time to time as may be necessary Buyer shall verify the accuracy of the
measuring equipment and Seller shall verify the accuracy of its check measuring
equipment, if any.  If either party shall
notify the other that it desires a special test of any measuring equipment, the
parties shall cooperate to secure a prompt verification of the accuracy of such
equipment.  If either party at any time
observes a variation between the delivery meter and the check meter, it will
promptly notify the other party thereof and both parties will then cooperate to
secure an immediate verification of the accuracy of such equipment.  Each party shall give to the other notice of
the time of all tests of meters reasonably in advance of the holding of such
tests in order that the other party may conveniently have its representatives
present.

 

8.7                               If
at any time any of the measuring or testing equipment is found to be out of service
or registering inaccurately in any percentage, it shall be adjusted at once to
read accurately within the limits prescribed by the manufacturer.  If any measuring equipment shall be found to
be inaccurate or out of service by an amount exceeding two percent (2%) at a
recording corresponding to the average hourly rate of flow for the period since
the last preceding test, then any previous recordings of such equipment shall
be corrected to zero error for any period which is known definitely or agreed upon.  The volume of gas delivered during such
period shall be estimated by (i) using the data recorded by and check
measuring equipment if registering accurately; (ii) by correcting the
error if the percentage of error is ascertainable by calibration, test or
mathematical calculation, or if neither such method is feasible; (iii) by
estimating the quantity or quality delivered based upon deliveries under
similar conditions during a period when the equipment was registering
accurately.  No adjustment shall be made
for recorded inaccuracies of two percent (2%) or less.

 

9

 

8.8                               Buyer
shall preserve for a period of at least two (2) years all test data,
charts and other similar records.

 

8.9                               Semi-annually,
or more often as Buyer deems advisable, Buyer shall obtain a representative
sample of Seller’s gas delivered at each point of delivery and by means of
chromatography or other accepted method in the industry determine the
composition and gross heating value of Seller’s gas in British Thermal Units
(Btu) per cubic foot on a water saturated basis.  The first such determination shall be made
within a reasonable time after delivery of gas begins and shall apply until the
first day of the month following the next determination.  The period for determination shall be
selected by Buyer.  If conditions exist
such that Seller desires a Btu determination, Seller will notify Buyer of
aforementioned condition and request that a Btu determination be
performed.  Buyer shall make such Btu
determination within thirty (30) days of receipt of notice from Seller.  If no change is determined from this Btu
determination made upon the request of Seller, Seller shall reimburse Buyer for
all reasonable costs associated with this Btu determination.

 

8.10                        The
determinations as to conformity of the gas with the above specifications shall
be made by Buyer in accordance with generally accepted procedures of the gas
industry.  Such determinations shall be
made as often as Buyer deems necessary and Seller may witness such
determinations or make joint determinations with its own appliances.  If in Seller’s judgment the result of any
such test or determination is inaccurate, Buyer, at Seller’s request, will
again conduct the questioned test or determination, and the costs of such
additional test or determination shall be borne by Seller unless same shows the
original test or determination to be materially inaccurate.

 

8.11                        If any of
the gas delivered by Seller hereunder shall fail to meet the quality specifications
stated in this Article, Buyer may at its option accept delivery of and pay for
such gas or discontinue or curtail Seller’s delivery of gas hereunder whenever
the quality of the gas does not conform to the quality specifications.  Buyer shall notify Seller of such failure and
Seller shall make diligent effort to deliver gas conforming to the
specifications.  If Seller concludes in
its sole opinion that it cannot economically deliver gas conforming to the specifications,
Seller shall so advise Buyer in writing within thirty (30) days of receipt of
deficiency notice from Buyer.  Within
thirty (30) days of receipt of such notice from Seller, Buyer shall give notice
to Seller in writing of its elections to accept or reject delivery of such
gas.  If Buyer rejects delivery of such
gas, then said notice will terminate this Contract with respect to such
gas.  If Buyer accepts delivery of such
gas, Buyer may deduct from the proceeds otherwise payable a fee to cover the
reasonable costs incurred by Buyer to monitor the gas quality or to bring the
gas within the quality specifications. 
Buyer is obligated to notify and receive approval from Seller for any
fee(s) to cover reasonable costs incurred by Buyer to monitor the gas quality
and/or to bring gas within quality specifications as stated within this
section.

 

10

 

ARTICLE IX

ALLOCATION PROCEDURES

 

9.1                               For
each Delivery Point, Buyer shall determine from test data available the
theoretical gallons of each Product produced from the Delivery Point.  Buyer will allocate Plant Products actually
recovered, saved and sold to each Delivery Point based on the theoretical
gallons attributable to the Delivery Point in relation to the total theoretical
gallons from all Delivery Points into Buyer’s gathering system.

 

9.2                               Buyer
will allocate field fuel, flare, Plant flare, Plant fuel and Residue Gas used
for field compression to each Delivery Point based on the ratio of the wellhead
volume for such Delivery Point to the total wellhead volumes from all Delivery
Points into Buyer’s gathering system. 
However, notwithstanding the above, Buyer retains the right to allocate
fuel and flare associated with treating the gas for removal of CO2
based on the volume of CO2 in delivery points so treated.

 

9.3                               Residue
Gas returned to the field shall be allocated to each of the Central Tank
Batteries and/or wells based upon the actual metered volumes returned to each
of the Delivery Points.

 

9.4                               Residue
Gas available for sale at the tailgate of the Plant(s) shall be allocated
ratably to each Delivery Point based on the theoretical residue attributable to
the Delivery Point in relation to the total theoretical residues from all
Delivery Points into Buyer’s gathering system. 
Theoretical residue shall be calculated for any Delivery Point by
deducting Btu’s of allocated product, fuel and flare from Delivery Point Btu’s.  In addition, Residue Gas available for sale
shall also be calculated by deducting any residue gas BTU’s returned to the
Central Tank Batteries and/or wells for use by Seller.

 

ARTICLE X

PRICE

 

10.1                        As
full consideration for the gas and all the components thereof delivered to
Buyer hereunder during each month, Buyer shall pay Seller an amount determined
by the computations hereunder.  The sale
of all Product and Residue Gas by Buyer shall be at a price not less than what
Buyer could have received in an arms length third-party transaction.

 

10.2                        It is
understood that the gas delivered hereunder will be gathered in gathering
system(s) owned and/or operated by Buyer and may be redelivered to a processing
plant or plants for the removal of liquefiable hydrocarbons together with gas
produced from other properties.

 

10.3                        For gas
delivered to each Delivery Point hereunder, Buyer shall pay Seller an amount
equal to Seller’s allocated gallons of Plant Products (determined as provided
in Article 9 above) times fifty percent (50%) times the price actually
received by Buyer for the sale of the Product. 
In the event Buyer fractionates the Plant Products prior to

 

11

 

their sale, buyer shall pay Seller an amount equal to Seller’s
allocated gallons of Plant Products (determined as provided in Article 9
above) times fifty percent (50%) of the price actually received by Buyer for
the sale of the Product, less a deduction for delivery, transportation,
fractionation and sale of four and one-half cents (4.5¢) per gallon.  This fee shall be escalated at the rate of
one percent (1%) per year from the Effective Date of this Contract on an annual
basis and year-to-year thereafter.

 

10.4                        Residue
Gas available for sale shall be computed in accordance with Section 9.4 of
this Contract.  Buyer shall market all
the Residue Gas received hereunder and remit to Seller fifty percent (50%) of
the proceeds attributable to Seller’s gas.

 

10.5                        The
following fees shall be deducted from the proceeds otherwise due Seller under
Sections 10.3 and 10.4 of this Contract:

 

a.                                   Gathering
Fee:              On the first thirty
six (36) BCF of Cedar Hills Volumes that are delivered by Seller to Buyer,
Buyer shall be entitled to and shall deduct from Seller’s proceeds a fee of
sixty cents ($.60) per MCF.   The
applicable fee shall be escalated at the rate of one percent (1%) per year from
the Effective Date of this Contract on an annual basis and year-to-year
thereafter.  Once thirty-six BCF of Cedar
Hills Volumes have been delivered, Buyer is not entitled to collect a fee for
this service.

 

b.                                  CO2 Fee:                                               When
the average composite volume of CO2
from the Cedar Hills Volumes and the MPHU Volumes is less than ten percent
(10%) by volume, Buyer shall be entitled to and shall deduct a fee of ten cents
($.10) per MCF.   When the average
composite volume of CO2
from the Cedar Hills Volumes and the MPHU Volumes is equal to or greater than
ten percent (10%) but less than or equal to fifteen percent (15%) by volume,
Buyer shall be entitled to and shall deduct a fee of twenty cents ($.20) per
MCF.  Under no circumstances shall the
average composite volume of CO2
from the Cedar Hills Volumes and the MPHU Volumes exceed fifteen percent (15%)
by volume. The applicable fee shall be escalated at the rate of one percent
(1%) per year from the Effective Date of this Contract on an annual basis and
year-to-year thereafter.

 

c.                                   Fuel Fee:                                              If Seller takes more than 50% of the Residue
Gas available for sale in any month, Seller agrees to pay Buyer an
amount determined by multiplying i) the difference between the amount taken and
50% of the

 

12

 

Residue Gas
available for sale by ii) the price received for Residue Gas sold
for such month.

 

d.                                  Electrical Fee: 
Seller agrees to pay fifty percent (50%) of the electrical costs
attributable to Seller’s gas for all compression, plant and field needs, as
well as other plant or facility electrical charges, based on the volume of gas
measured on a monthly basis from all points of delivery from Seller.

 

10.6                      Any time after the fifth
anniversary of the Effective Date of this agreement, Seller shall have the one
time option to convert the proceeds percentages in Sections 10.3 and 10.4
hereof from fifty percent (50%) of Plant Products and Residue Gas to ten
percent (10%) of Plant Products and Residue Gas.  In the event that Seller elects to exercise
this one time option, the gathering fee and CO2 fee in Section 10.5 hereof
shall be eliminated in their entirety. 
In addition, the fuel fee and electrical fee in Section 10.5 hereof
shall be reduced to ten percent (10%).  
The election shall be made in writing by Seller to Buyer and shall
become effective the first day of the month following said notice, provided the
notice is delivered at least ten (10) days prior to the end of the month.

 

10.7                        Notwithstanding
the foregoing provisions of this Article 10, PRICE, if at any time, and
from time to time, Buyer in its sole judgment determines that, at any point or
points of delivery, operating conditions relating to Buyer’s facilities or
market conditions relating to Buyer’s purchase of gas or resale of the gas and
natural gas liquids indicate that a downward price revision is necessary or
appropriate, then Buyer may elect to notify Seller of Buyer’s intent to
renegotiate Seller’s price and pricing basis or to terminate this
Contract.  Any notice of renegotiation of
price or termination shall be given in writing by Buyer to Seller not less than
thirty (30) days prior to the date upon which such notice is to become
effective.    Seller has thirty (30) days
after receipt of notice of price renegotiation to accept such renegotiation or
cancel the contract.  Such, if any price
reduction, shall be in effect only as long as the condition that caused the
reduction exists.  Any price reduction
shall only remain in place so long as the condition that caused the reduction
exists.

 

ARTICLE XI

TAXES

 

11.1                        Seller
shall bear all taxes imposed upon Seller with respect to the gas delivered
hereunder and Buyer shall bear all taxes imposed upon Buyer with respect to
such gas after delivery thereof to Buyer. 
Taxes of whatever nature, that are payable on a monthly basis and are
based upon the value or volume of the gas produced and sold, will be computed
and paid by Seller.

 

13

 

ARTICLE XII

PAYMENT AND ROYALTY

 

12.1                        Buyer
shall render to Seller on or before the twenty-fifth (25th) day of each month a
statement showing the volume of gas delivered by Seller, or for which payment
is due hereunder, during the preceding month. 
Buyer shall make payment to Seller on or before the last day of each
calendar month for all gas delivered or for which payment is due hereunder for
the preceding month.

 

12.2                        One
hundred percent (100%) of the monthly payment for gas due hereunder, shall be
remitted by Buyer to Seller for Seller’s disbursement to all owners of the gas
production delivered to Buyer by Seller.

 

12.3                        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, charge or computation made pursuant to the provisions of this
Contract.  If any such examination
reveals any inaccuracy in any billing theretofore made, the necessary
adjustment in such billing and payment shall be promptly made, provided that no
adjustment for any billing or payment shall be made and payments shall be
considered final after the lapse of two (2) years from the rendition
thereof except to the extent that either party has noted a specific exception
to the other party in writing during that period.

 

12.4                        Seller is
responsible for all payments to the owners of all royalties, overriding
royalties, bonus payments, production payments and the like.  Seller agrees to defend, indemnify and hold
Buyer harmless from any and all liabilities to the owners of royalties,
overriding royalties, bonus payments, production payments and the like.

 

ARTICLE XIII

TERM

 

13.1                        This
Contract shall remain in effect from the Effective Date for a period of fifteen
(15) years.

 

ARTICLE XIV

UNPROFITABLE GAS

 

14.1                        In the
event that the purchase of gas from a Delivery Point(s) under this Contract
becomes unprofitable for Buyer, in Buyer’s sole judgment, Buyer may cease
taking the gas therefrom so long as such condition exists.  In the event that Buyer invokes this
provision by refusing to purchase gas from any Delivery Point, Seller may
request cancellation of this Contract as to any such Delivery Point by
providing thirty (30) days written notice. 
Unless Buyer commences purchasing gas hereunder within said thirty (30)
day period, this Contract shall terminate as to such Delivery Point.

 

14

 

14.2                        If at any
time the gas volumes or products content of the gas available to Buyer, or any
other cause, shall render the operation of the Plant(s) unprofitable, Buyer may
by thirty (30) days notice in writing to Seller cancel this Contract.  If Buyer provides said notice to Seller,
Seller shall have a thirty (30) day option to purchase Buyer’s facilities  at the then prevailing fair market price.

 

ARTICLE XV

OPERATION OF RETURN RESIDUE LINE &
TEST METER FACILITIES

 

15.1                        Seller
grants Buyer the right to operate the residue return system which allows for
the delivery of Residue Gas from Buyer’s Plant to the Delivery Point(s) so long
as Buyer purchases gas from any of the wells contained within the Dedicated
Leases.  In the event that the residue
return system should ever need to be replaced or repaired by Buyer, and
mutually agreed upon by the Seller that replacement(s) and/or repair(s) are
required, Seller agrees to bear the complete cost of replacing or repairing
said system.

 

15.2                        Buyer
agrees to maintain and calibrate the residue return meters and the test meters
located at each of the Delivery Point(s). 
Buyer shall retrieve production data from these meters on a monthly
basis and provide said data to Seller. 
Seller agrees to remit payment to Buyer in the amount of Fifty Dollars
($50.00) per month for each test meter and residue return meter maintained by
Buyer.  Buyer shall only bill for those
meters requested and necessary for the operations of said residue return system
as agreed to in writing from the Seller.

 

ARTICLE XVI

TITLE, OWNERSHIP AND RESPONSIBILITY FOR INJURY OR
DAMAGE

 

16.1                        Seller
warrants for itself, its heirs, successors and assigns that is has good title
to the gas delivered hereunder free and clear of any and all liens,
encumbrances and claims whatsoever, or that Seller has good right and lawful
authority to sell the same.  Seller
agrees to defend, indemnify and save Buyer harmless from any and all suits,
claims, liens, and encumbrances of whatsoever nature relating to such gas or
the title thereto.

 

16.2                        As between
the parties hereto, Seller shall be in control and possession of the gas
deliverable hereunder and responsible for any injury or damage caused thereby
until the same shall have been delivered to Buyer, after which delivery Buyer
shall be deemed to be in exclusive control and possession thereof and
responsible for any injury or damage caused thereby; provided that neither
party shall be required to indemnify the other party for the other party’s own
negligence.

 

16.3                        Neither
party shall be responsible to the other for exemplary damages or for any
consequential or indirect losses suffered by the other party or its customers
relating to performance or nonperformance of this Contract, including but not
limited to loss of profit, loss of product or loss of production, howsoever
caused, notwithstanding

 

15

 

that such loss may have been foreseeable, and notwithstanding any
negligence or other breach.

 

ARTICLE XVII

CARBON DIOXIDE & NITROGEN GAS

 

17.1                        The
parties hereto acknowledge that local, state, national or other governmental
authorities may at some time in the future regulate the carbon dioxide and nitrogen
gas emitted from Buyer’s plant.  Seller
agrees that it shall indemnify Buyer from and that it shall bear the sole cost
and expense associated with properly disposing of the carbon dioxide and
nitrogen gas and/or hydrocarbons associated with the carbon dioxide or nitrogen
attributable to Seller’s gas from Buyer’s facility.  Buyer shall immediately notify Seller of any
action or notice as received by Buyer for any regulations, fines, fees, notices
of violations, and the like for emitting carbon dioxide and/or nitrogen.

 

17.2                        The parties hereto agree and
recognize that the carbon dioxide gas available at the tailgate of Buyer’s
plant may have substantial value at some time in the future.  The Seller has the right to take the CO2
free of cost for use in Seller’s operations. 
Buyer and Seller agree that in the event that Buyer is able to market or
otherwise find a beneficial use for the carbon dioxide gas, Buyer shall market
the carbon dioxide gas and shall remit to Seller fifty percent (50%) of the
proceeds attributable to Seller’s gas.

 

ARTICLE XVIII

FORCE MAJEURE

 

18.1                        In the
event that either party hereto is rendered unable, wholly or in part, by force
majeure to carryout its obligations under this Contract, other than make
payments due hereunder, the obligations of such party, so far as they are
affected by such force majeure, shall be suspended during the continuance of
any inability to cause but for no longer period.

 

18.2                        The term “force
majeure” as employed herein shall mean acts of God, strikes, lockouts or other
industrial disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, storms,
floods, washouts, arrests and restraints of governments and people, civil
disturbances, fires, explosions, breakage or accidents to machinery or lines of
pipe, freezing of wells or lines of pipe, partial or entire failure of wells or
sources of supply of gas, refusal or inability for any reason, except price, of
Buyer’s resale purchaser(s) to take deliveries, and other causes, whether of
the kind herein enumerated or otherwise, not within the control of the party
claiming suspension and which by the exercise of the diligence such party is
unable to prevent or overcome; such term shall likewise include (a) in
those instances where either party hereto is required to obtain servitudes,
right of way grants, permits or licenses, and (b) in those instances where
either party is required to furnish materials or supplies for the purposes of
constructing or maintaining facilities or is

 

16

 

required to secure permits or permissions from any governmental agency
to enable such party to fulfill its obligations 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 materials
or supplies, permits or permissions.

 

18.3                        It is
understood and agreed that the settlement of strikes or lockouts shall be entirely
within the discretion of the party having the difficulty, and that the above
requirements that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts or other labor
disturbances when such course is inadvisable in the discretion of the party
having the difficulty.

 

ARTICLE XIX

LAWS AND REGULATIONS

 

19.1                        This
Contract is subject to all valid statutes and rules and regulations of any
duly constituted federal or state authority or regulatory body having
jurisdiction.

 

19.2                        The
following provisions shall apply to the extent that price controls under the
Natural Gas Act of 1938, Natural Gas Policy Act of 1978 or other federal or
state legislation or regulation apply to the sale of gas hereunder or to Buyer’s
resale.  Any changes in pricing due to
changes in the category of the gas delivered hereunder shall be effective the
first day of the month following thirty (30) days after the date Buyer receives
written notification of such category change from Seller.

 

a.                                   If commonly
metered gas consisting of more than one pricing category is sold pursuant to
this Contract, Seller shall provide Buyer for each month the percentages of the
total metered volume to be allocated to each such pricing category.  In all cases where gas is sold in more than
one pricing category, the price payable for gas in each category shall be
separately calculated by Buyer based on the volume delivered in each category.

 

b.                                  For gas production
attributable to wells for which well category determination applications are
pending, Buyer will make payments based on the price received by Buyer
applicable to the category sought when Seller establishes interim collection
authority under applicable FERC regulations. 
It shall be the sole obligation of Seller to file and diligently pursue
any well category determination applications required by the NGPA or subsequent
legislation or regulations.  Seller shall
timely provide Buyer with proper documentation of applicable well category
determination applications and interim collection authority filing established
in compliance with applicable regulations.

 

17

 

Seller shall notify Buyer when each well
category determination application becomes final.

 

c.                                   Should Buyer make
payment to Seller based on the price for any category of gas subject to any
governmental agency’s determination of price category, or subject to any
governmental agency or judicial review of such determination, and if it is
subsequently determined that the gas was not eligible for the price upon which
payment was based; or if for any other reason (including without limitation
renegotiations of the resale contracts or other contracts referenced above)
Buyer or its subsidiaries do not receive or retain such prices in resale or
other proceeds, then the price thereafter to be paid shall be accordingly
reduced, and Seller will refund to Buyer or Buyer may at its option recoup any
previous excess payment against subsequent payments due.  Any refund or recoupment will bear interest
at the lesser of the rate prescribed in 18 C.F.R. § 154.102 or subsequent
regulation, or the maximum applicable legal rate of interest.

 

19.3                        If at any
time during the term of this Contract, any governmental authority shall take or
threaten to take any action directly or indirectly whereby the sale, delivery,
transportation or redelivery of gas as contemplated hereunder shall be
proscribed or possibly subjected to terms, conditions, restraints or
regulations, including without limitation by enumerations, certificate, rate or
price controls or ceilings that, in the sole judgment of Buyer, would be
adverse or unduly burdensome, then Buyer may, upon written notice, cancel and
terminate this Contract.

 

ARTICLE XX

ADDRESSES AND NOTICES

 

20.1                        Until
Buyer is otherwise notified in writing by Seller, the address of Seller is and
shall remain as follows:

 

Continental Resources, Inc.

302 N. Independence St.

P.O. Box 1032

Enid, Oklahoma  73702-1032

 

and unless Seller is otherwise notified in writing by Buyer, the
address of Buyer is and shall remain:

 

Hiland Partners, LP

205 W. Maple, Suite 1100

P.O. Box 5103

Enid, Oklahoma  73702-5103

 

18

 

20.2                        All
notices required to be given in writing hereunder shall be given to the
respective parties at such address or such other addresses as the parties
respectively shall designate by written notice and such notice, required to be
given in writing, shall not be deemed effective until actual receipt thereof by
Buyer or Seller at the address herein provided.

 

ARTICLE XXI

RIGHT-OF-WAY

 

21.1                        Insofar as
Seller’s lease or leases permits and insofar as Seller may have any rights
however derived (whether pursuant to governmental agency, order, regulation,
statute or otherwise), Seller grants to Buyer and Buyer’s natural gas gathering
and/or field contractor, if any, and their assignees the right to lay and
maintain pipelines and install field equipment, including compression equipment
associated with gathering Seller’s Gas, on the lands or leases subject to this
Contract as reasonably necessary in connection with the purchase of Seller’s
gas, and further grants to Buyer and Buyer’s gas gathering and/or field
contractor the right of free entry on said lands and leases during the term of
this Contract.  All pipelines and other
equipment placed by Buyer or Buyer’s contractor on said lands and leases shall
remain the property of the owner and may be removed by the owner at any
time.  Buyer releases and indemnifies
Seller of and from all claims, damages, liabilities, expenses, and costs
arising from Buyers accessing or use of any such ROW or operation of equipment
or pipelines constructed or placed thereon.

 

ARTICLE XXII

ASSIGNMENT

 

22.1                        This
Contract may be assigned by either party with the consent of the other party
which shall not be unreasonably withheld. 
This Contract shall be binding upon and inure to the benefit of the
successors, assigns, heirs, personal representatives and representatives in
bankruptcy of the parties hereto and shall constitute a real right and covenant
running with the lands and oil and gas properties covered hereby and shall be
binding upon any purchaser of Buyer’s facilities and upon any purchaser of the
properties of Seller which are subject to the Contract; provided, however, that
nothing contained in this Article shall in any way prevent either party
hereto from mortgaging its rights hereunder for security for its indebtedness,
such security to be subordinate to the rights and obligations under this
Contract.

 

19

 

ARTICLE XXIII

COUNTERPART

 

23.1                        This
Contract may be executed in any number of counterparts, all of which shall be
considered together as one instrument, and this Contract shall be binding upon
all parties executing the same, whether or not executed by all parties owning
an interest in the oil and gas properties.

 

ARTICLE XXIV

RATIFICATION

 

24.1                        This
Contract may be ratified and adopted by any owner of an interest in any oil and
gas properties subject hereto or any lands or leases with which any oil and gas
properties subject hereto may be pooled or unitized, by execution and delivery
to Buyer of a special instrument in writing, ratifying and adopting this
Contract insofar as said owner’s interest in any such land, lease or oil and
gas properties is concerned, whereupon such owner shall become a party Seller
to this Contract with like force and effect and to the same extent as though
such owner had executed this Contract at the time of its execution and
delivery, and all of the terms and provisions of this Contract shall thereupon
become binding upon Buyer and any such other owner.

 

ARTICLE XXV

DEFAULT AND NON-WAIVER

 

25.1                        The
failure of Seller or Buyer at any time to require performance by the other
party of any provision hereof shall in no way affect the right of either party
to require any performance which may be due thereafter pursuant to such
provision, nor shall the waiver by Buyer or Seller of any breach of any
provision hereof be taken or held to be a waiver of any subsequent breach of
such provision.

 

IN WITNESS WHEREOF, the parties have hereto
set their hands in person or by their duly authorized officials as of the date
set forth above.

 

	
   

  	
  SELLER:

  	
  CONTINENTAL RESOURCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
      /s/ Mark Monroe

  	
   

  
	
   

  	
   

  	
  Mark Monroe

  
	
   

  	
   

  	
  President &
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BUYER:

  	
  HILAND PARTNERS, LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
      /s/ Randy Moeder 

  	
   

  
	
   

  	
   

  	
  Randy Moeder

  
	
   

  	
   

  	
  President &
  CEO

  
	
   

  	
   

  	
  Hiland
  Partners GP, LLC

  

 

20Exhibit 10.1

 

PSB
HOLDINGS, INC.

2005 STOCK-BASED INCENTIVE PLAN

 

FORM OF

 

STOCK
OPTION AGREEMENT

(OUTSIDE DIRECTORS)

 

A.                                   STOCK
OPTIONS for a total of       shares of Common Stock,
par value $.10 per share, of PSB Holdings, Inc. (the “Company”) are hereby
granted to                        
(the “Participant”).  Reload Options and
Stock Appreciation Rights with respect to a total of              
shares are also granted to the Participant and relate to the Options granted
hereunder.  The grant and terms of the
Options, Reload Options and Stock Appreciation Rights shall be subject in all
respects to the PSB Holdings, Inc. 2005 Stock-Based Incentive Plan (the “Plan”).  The terms of this Stock Option Agreement are
subject to the terms and conditions of the Plan.

 

B.                                     The
Option exercise price of Common Stock is $10.60 per share, the Fair Market
Value (as defined in the Plan) of the Common Stock on November 7, 2005,
the date of grant.

 

C.                                     The
Options granted hereunder shall vest in five (5) equal annual installments,
with the first installment becoming exercisable on the first anniversary of the
date of grant, or November 7, 2006, and succeeding installments on each
anniversary thereafter through November 7, 2010.  The Options granted hereunder may be
exercised for up to ten (10) years from the date of grant, subject to
sub-paragraph D below.

 

D.                                    If
Participant ceases to maintain service with the Company or its affiliates,
including Putnam Savings Bank (the “Bank”) for any reason other than Disability
(as defined in the Plan), death, Retirement 
(as defined in the Plan) or following a Change in Control (as defined in
the Plan), Options will be exercisable only as to those Options which have
vested at the time of such cessation of service and will be exercisable for a period
of up to one (1) year following such cessation of service.  If Participant ceases to maintain service
with the Bank or the Company due to death, Disability, Retirement or following
a Change in Control, Options granted hereunder, whether or not exercisable at
such time, will become exercisable by the Participant (or his/her legal
representative or beneficiary) for one (1) year following the date of
termination of service.  In no event will
the period of exercise extend beyond the expiration of the Option term.

 

E.                                      Reload
Options are hereby granted with respect to all Options granted hereunder and
apply if the Participant exchanges shares of Common Stock in satisfaction of
all or a portion of the exercise price of an original Option grant.  The Reload Option represents an additional
option to acquire the same number of shares of Common Stock as is exchanged by
the Participant to pay for the original Option. 
Reload Options may also be provided to the extent that a Participant
exchanges shares in satisfaction of any tax withholding obligation.  A Reload Option is subject to all the same
terms and conditions as the original Option except that (i) the exercise
price of the shares of Common Stock subject to the Reload Option will be
determined at the time the original Option is exercised and (ii) such
Reload Option will conform to all provisions of the Plan at the time that the
original Option is exercised and (iii) a Reload Option issued on the
exercise of an Incentive Stock Option may be an Incentive Stock Option or a
Non-statutory Stock Option.

 

 

F.                                      Stock
Appreciation Rights (“SARs”) are hereby granted with respect to all Options
granted hereunder.  SARs are granted in
tandem with the Options granted hereunder and the exercise of one will cause
the cancellation of the other.  If the
Participant exercises SARs, the Participant will not be required to pay the
exercise price of the related Option and will be entitled to receive Common
Stock of the Company equal in value to the difference between the Fair Market
Value of the Common Stock on the date of exercise and the exercise price of the
related Options (which will be cancelled).

 

Example:  Participant receives 1,000 Options and
related SARs.  The Options have an
exercise price of $12.  When the Company
Stock is trading at $18, the Participant exercises 300 SARs.  Because the Participant has exercised SARs,
the Participant does not have to pay the exercise price.  The Participant receives 100 shares of the
Company stock.

 

	
   

  	
  $18

  	
   

  	
   

  	
  Common Stock

  
	
   

  	
  - $12

  	
   

  	
   

  	
  exercise price

  
	
   

  	
  $6

  	
   

  	
   

  	
  SAR value

  
	
   

  	
  x 300

  	
   

  	
   

  	
  SARs exercised

  
	
   

  	
  $1,800

  	
  /18

  	
   

  	
  Common Stock =
  100 shares

  

 

G.                                     Options
may not be exercised if the issuance of shares of Common Stock of the Company
upon such exercise would constitute a violation of any applicable federal or
state securities or other law or regulation. 
The Participant, as a condition to exercise of the Options, shall
represent to the Company that the shares of Common Stock of the Company that he
acquires pursuant to such exercise are being acquired by such Participant for
investment and not with a present view to distribution or resale, unless
counsel for the Company is then of the opinion that such a representation is
not required under the Securities Act of 1933 or any other applicable law,
regulation, or rule of any governmental agency.

 

H.                                    In
the discretion of the Board of Directors, vested Options may be transferred,
subject to any limitations on transferability imposed by the Board of
Directors.

 

I.                                         A
copy of the Plan is enclosed and your attention is invited to all the
provisions of the Plan.  You will observe
that you are not required to exercise the Options as to any particular number
or shares at one time, but the Options must be exercised, if at all and to the extent
exercised, by no later than ten years and one day from the date of grant.  The Options may be exercised during such term
only in accordance with the terms of the Plan. 
In the event of any inconsistency between this Stock Option Agreement
and the Plan, the terms of the Plan will control.

 

J.                                        All
exercises of the Options must be made by executing and returning the Notice of
Exercise of Stock Options attached hereto as Exhibit A, and upon receipt
of any shares of Common Stock upon the exercise of any Options, the recipient
shall complete and return to the Company the Acknowledgment of Receipt of Stock
Option Shares attached hereto as Exhibit B.

 

2

 

K.                                    The
Participant acknowledges receipt of a copy of the PSB Holdings, Inc. 2005
Stock-Based Incentive Plan and represents that he is familiar with the terms
and provisions thereof.  The Participant
hereby accepts the Options subject to all the terms and provisions of such
Plan.  The Participant hereby agrees to
accept as binding, conclusive, and final all decisions and interpretations of
the Committee established to administer such Plan upon any questions arising
under such plan.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  PSB
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  PARTICIPANT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

This Stock Option Agreement must be
executed in duplicate originals, with one original retained by

the Company and one original retained by the Participant

 

3

 

EXHIBIT A

 

NOTICE
OF EXERCISE OF STOCK OPTIONS

(BY OUTSIDE DIRECTORS)

 

I
hereby exercise the stock option (the “Option”) granted to me by PSB Holdings, Inc.
(the “Company”) or its affiliate, subject to all the terms and provisions set forth in the Stock Option
Agreement (the “Agreement”) and the PSB Holdings, Inc. 2005 Stock-Based
Incentive Plan (the “Plan”) referred to therein, and notify you of my desire to
purchase                   
shares of common stock of the Company (“Common Stock”) for a purchase price of
$          per share.

 

Enclosed
please find (check one):

 

o                                    My check in the sum of $       , or electronic
funds transfer (EFT) in the sum of $          
in full payment of the purchase price.

 

o                                    Stock of the Company with a fair market value
of $       in full payment of the purchase price.*

 

o                                    My check in the sum of $       
and stock of the Company with a fair market value of $      ,
in full payment of the purchase price.*

 

o                                    Please
sell        Shares from my Option Shares through a broker in full/partial payment of
the purchase price.

 

I
understand that after this exercise,             
shares of Common Stock remain subject to the Option, subject to all terms and provisions set forth in the Agreement
and the Plan.

 

I
hereby represent that it
is my intention to acquire these shares for the following purpose:

 

o                                    investment

 

o                                    resale or distribution

 

Please
note: if your intention is to resell (or distribute within the meaning of Section 2(11)
of the Securities Act of 1933) the shares you acquire through this Option
exercise, the Company or transfer agent may require an opinion of counsel that such resale or distribution
would not violate the Securities Act of 1933 prior to your exercise of such
Option.

 

	
  Dated: 

  	
   

  	
  ,

  	
   

  	
  .

  	
   

  	
   

  
	
   

  	
  Participant’s signature

  

 

*                                         If
I elect to exercise by exchanging shares I already own, I will constructively
return shares that I already own to purchase the new option shares.  If my shares are in certificate form, I must
attach a separate statement indicating the certificate number of the shares I
am treating as having exchanged.  If the
shares are held in “street name” by a registered broker, I must provide the
Company with a notarized statement attesting to the number of shares owned that
will be treated as having been exchanged. 
I will keep the shares that I already own and treat them as if they are
shares acquired by the option exercise. 
In addition, I will receive additional shares equal to the difference
between the shares I constructively exchange and the total new option shares
that I acquire.

 

 

EXHIBIT B

 

ACKNOWLEDGMENT
OF RECEIPT OF STOCK OPTION SHARES

 

I hereby acknowledge the delivery to me by PSB Holdings, Inc. (the
“Company”) or its affiliate on                                   ,
of stock certificates for                     shares
of common stock of the Company purchased by me pursuant to the terms and
conditions of the Stock Option Agreement and the PSB Holdings, Inc. 2005
Stock-Based Incentive Plan, as applicable, which shares were transferred to me
on the Company’s stock record books on                     .

 

	
  Dated:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Participant’s signature

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}]]