Document:

Exhibit 10.67

 

CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED BY RESACA EXPLOITATION, INC. FOR CERTAIN PORTIONS OF THIS
DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS AGREEMENT WITH
“*****”.

 

 

GAS PURCHASE CONTRACT

 

 

BETWEEN

 

 

SDG RESOURCES, L. P.

 

 

as “SELLER”

 

 

and

 

 

VERSADO GAS PROCESSORS,
L.L.C.

 

 

as “BUYER’’

 

 

GAS PURCHASE CONTRACT INDEX

 

	
  ARTICLE

  	
   

  	
  SUBJECT

  	
   

  	
  PAGE NO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  SETTLEMENTS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III.

  	
   

  	
  ALLOCATION

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IV.

  	
   

  	
  TERM

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  V.

  	
   

  	
  DELIVERY
  POINT

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VI.

  	
   

  	
  DELIVERY
  PRESSURE

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VII.

  	
   

  	
  QUALITY
  OF GAS

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VIII.

  	
   

  	
  SETTLEMENT
  TESTS

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IX.

  	
   

  	
  MEASUREMENT

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  X.

  	
   

  	
  ROYALTY

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XI.

  	
   

  	
  WARRANTY
  OF TITLE

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XII.

  	
   

  	
  INDEMNITY

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XIII.

  	
   

  	
  FLUSH
  GAS/RATABLE TAKES

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XIV.

  	
   

  	
  FORCE
  MAJEURE

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XV.

  	
   

  	
  UNPROFITABLE
  GAS

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XVI.

  	
   

  	
  RIGHT
  OF WAY

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XVII.

  	
   

  	
  PRIORITY
  RIGHTS OF SELLER

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XVIII.

  	
   

  	
  SCOPE

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XIX.

  	
   

  	
  TAXES

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XX.

  	
   

  	
  LAWS
  AND REGULATIONS

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXI.

  	
   

  	
  PAYMENT

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXII.

  	
   

  	
  ASSIGNMENT

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXIII.

  	
   

  	
  PRODUCTION
  IN CONFORMANCE WITH FLOW SCHEDULE

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXIV.

  	
   

  	
  COUNTERPART SIGNATURES

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXV.

  	
   

  	
  CANCELLATION
  OF PRIOR CONTRACTS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXVI.

  	
   

  	
  NOTICES

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XXVII.

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  14

  

 

1

 

GAS PURCHASE CONTRACT

 

THIS CONTRACT, made and entered into this 1st
day of January, 2002, by and between VERSADO GAS PROCESSORS, L.L.C., a Delaware
Limited Liability Company acting by and through its Member/Operator, Dynegy
Midstream Services, Limited Partnership, hereinafter referred to as “Buyer”,
and SDG Resources, L. P., a Texas limited partnership, hereinafter referred to
as “Seller”;

 

WITNESSETH:

 

WHEREAS, Seller owns or controls an interest
in one or more valid and subsisting oil and Gas leases covering certain lands
situated and being within the County of Lea, State of New Mexico, as more fully
described in Exhibit “A” attached hereto and made  a part hereof
(which leases, interests, and lands shall hereinafter be referred to as the
“Committed Area”); and,

 

WHEREAS, certain wells on said lands are
productive of either casinghead Gas, or Gas well Gas, and Seller desires to
sell the Gas which may hereafter be produced from wells located on said
premises; and,

 

WHEREAS, Buyer desires to purchase said Gas;

 

NOW, THEREFORE, in consideration of the
mutual covenants and agreements to be kept and performed by the parties, Seller
hereby grants, bargains, sells, and agrees to deliver to Buyer and Buyer agrees
to purchase and take from Seller, subject to the stipulations and conditions
hereinafter specified, Seller’s interest in Gas now or hereafter produced from
wells on the lands hereinabove described.

 

ARTICLE I - DEFINITIONS

 

1.1

 

For the purposes of this Contract, except in
those certain instances where the context expressly states another meaning, the
following terms and expressions shall have the following meanings:

 

(a)           “Gas” shall mean the gaseous hydrocarbons produced
from oil or Gas wells including all of the constituents thereof.

 

(b)           “Residue Gas” is defined as and shall be any Gas
which is discharged in the form of Gas from the Plant before or after
processing or sold as fuel from Buyer’s Gathering System.

 

(c)           “Plant” shall mean Gas processing facilities in
which Seller’s Gas is processed.

 

(d)           “Products” shall mean liquid hydrocarbons including,
but not limited to, methane, ethane, propane, iso-butane, normal butane,
iso-pentane, normal pentane, hexane and heavier hydrocarbons, and/or any
mixture thereof which has been extracted through Plant processing excluding
Drip Liquids.

 

(e)           “Process” shall mean the removal of liquid
hydrocarbons and/or impurities from Seller’s Gas.

 

(f)            “MCF” shall mean one thousand (1,000) cubic feet of
Gas at a pressure of 14.65 psia and a temperature of 60°F.

 

(g)           “MMBTU” shall mean one million British Thermal
Units.

 

(h)           “GPM” shall mean gallons per MCF.

 

(i)            “Fuel” shall mean the monthly volume of Gas, in MCF
or MMBTU, utilized for Plant and/or gathering system operations.

 

2

 

(j)            “Month” shall mean a period beginning at seven
o’clock a.m. Mountain Standard Time on the first day of the calendar month
and ending at seven o’clock a.m. on the first day of the next succeeding
calendar month, except that the period from the date of first deliveries to the
first day of the following calendar month shall be deemed to be a month, and
the period between the termination date and the first day of the calendar month
in which termination occurs shall be deemed to be a month.

 

(k)           “Gathering System” shall mean the lines and
equipment necessary to gather Gas from the delivery point(s) and deliver
to Buyer’s Plant.

 

(l)            “Drip Liquids” means any liquid hydrocarbons
accumulating in drips, separators and/or pipelines after Producer’s Gas is
delivered into the Gathering System at the Delivery Point(s) but upstream
of the second (2nd) stage of
compression, including, without limitation, dirty oil, line drip, scrubber oil,
compression and separator liquids, distillates and condensates.

 

(m)          “Interest” means any oil and gas leasehold, or
mineral fee interest owned or controlled by Producer within the Committed Area,
including any rights Producer may have to process Gas owned by third parties,
but only to the extent and for the period authorized in the instrument creating
such rights.

 

ARTICLE II - SETTLEMENTS

 

Buyer shall pay to Seller for the Gas
delivered hereunder the sum of the values computed in accordance with Sections
2.1 and 2.2 of this Article.

 

2.1           Products
Settlements

 

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***** ***** ***** ***** ***** ***** *****

 

***** ***** ***** *****
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***** ***** ***** ***** ***** ***** ***** ***** *****

 

*****
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***** ***** ***** *****

 

*****
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***** ***** ***** *****

 

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***** ***** ***** ***** ***** ***** ***** ***** *****

 

***** ***** ***** *****
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***** ***** ***** ***** ***** ***** ***** ***** *****

 

***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** *****

 

***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** *****

 

***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** *****(1)

 

(1) CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY RESACA EXPLOITATION,
INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH “*****”.

 

3

 

2.2           Residue Gas
Settlements

 

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***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** *****

 

***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** *****

 

*****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** *****

 

*****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ****(2)

 

2.3           Renegotiation
of Settlement Terms. Either party shall have the right to require a
renegotiation of the settlement terms set forth in this Article 2, to be
effective ten (10) years after July 1,1998, and on any subsequent ten
(10) year anniversary of such date. Such renegotiation shall be requested
in writing by the party desiring renegotiation at least 180 days before the end
of the most recent ten year period, to be effective on the first day of the month
of the ensuing ten year period. In any such renegotiation, the parties will
seek to arrive at settlement terms which are similar, as of the date of the
renegotiation, to the terms that each party could expect to obtain in a freely
negotiated purchase agreement providing for a commitment of a similar volume
and quantity for a term of at least ten years. If the parties are unable to
reach agreement on such terms, the matter will be resolved in accordance with
the dispute resolution procedures set forth in Exhibit “B” attached hereto

 

ARTICLE III - ALLOCATION

 

3.1           Available Gas
and Gallons

 

(a)           For each
monthly period, Seller’s “available Gas” at each delivery point shall be
determined on a component basis by multiplying the monthly delivered volume in
MCF at such delivery point by the mole fraction of each component contained
therein, as determined from the Gas sample analysis set forth in Article 8,
SETTLEMENT TESTS, then deducting the component volume in MCF of unprocessed Gas
used for fuel which is attributable to Seller’s available Gas, as determined in
Article 3.4.

 

(b)           For each
monthly period, Seller’s “available gallons” of Product for each delivery point
shall be determined on a component basis by dividing the available Gas for each
component at each delivery point, as determined in Article 3.1(a) by
the applicable Cubic Foot per Gallon physical constant as published in GPA
publication 2145-94 or the most current revision. The physical constant for
Normal Hexane shall be used for the Hexanes Plus Component.

 

3.2           Allocation of
Products

 

(a)           For each
monthly period, the “actual net Plant production” of each Product in gallons
shall be the total deliveries of that Product delivered from Buyer’s Plant.

 

(b)           Seller’s
allotment of the actual net Plant production of each Product shall be
determined by multiplying Seller’s available gallons of such Product from all
delivery points by a fraction, the numerator of which is the actual net Plant
production of that Product and the denominator of which is the available
gallons of such Product from all delivery points.

 

3.3           Allocation of
Residue Gas

 

(a)           For each
monthly period, Seller’s allotment of the total Residue Gas sold from Buyer’s
Plant, hereinafter referred to as Seller’s “allocated Residue”, shall be determined
by multiplying each component of Seller’s available Gas as determined in Article
3.1(a) by a fraction, the numerator of which is the sum of each applicable
component

 

(2) CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY RESACA EXPLOITATION,
INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OMITTED PORTIONS
ARE INDICATED IN THIS AGREEMENT WITH “*****”.

 

4

 

volume in MCF for Residue Gas sold, for Residue Gas used for fuel, and
for Residue Gas returned to lease(s) from Buyer’s Plant and the
denominator of which is each applicable component volume in MCF of the
available Gas from all delivery points.

 

(b)           Seller’s
“allocated Residue Gas available for sale” shall be the sum of the following;
each component of Seller’s allocated Residue as determined in Article 3.3(a) multiplied
by the applicable Btu per Cubic Foot physical constant as published in GPA
publication 2145-94 or the most current update, less Seller’s allocated fuel in
MMBtu’s as determined in Article 3.4.

 

3.4           Allocation of
Fuel

 

Buyer at its sole discretion shall have the right to utilize either
processed or unprocessed Gas as fuel.

 

(a)           The volume of
processed Gas used as fuel, converted to MMBtu’s using the same conversion
factors as in Paragraph 3.3(b), allocated to Seller’s available Gas shall be
determined by multiplying the fuel volume in MMBtu by a fraction, the numerator
of which is Seller’s available Gas utilizing the facilities utilizing processed
Gas as fuel, the denominator of which is the available Gas from all delivery
points utilizing the facilities utilizing processed Gas as fuel.

 

(b)           The volume of
unprocessed Gas used as fuel shall be determined by multiplying the component
volume in MCF of the unprocessed Gas utilized as fuel by such facilities, by a
fraction, the numerator of which is Seller’s available Gas or monthly delivered
volume in MCF whichever is applicable, the denominator of which is the
available Gas or monthly delivered volume in MCF from all delivery points
utilizing the facilities utilizing unprocessed Gas as fuel.

 

(c)           If Buyer
utilizes Residue Gas or Gas furnished by a third party for fuel, such Gas value
or volume shall be allocated as in Article 3.4(a) herein.

 

3.5           Allocation of
Electrical Power

 

In the event Buyer elects to utilize electrical power in the operation
of compressors at the processing Plant or located in the field, such electrical
power costs will be allocated to Seller’s Gas by multiplying the total
electrical power cost times a factor, the numerator of which is the volume of
Gas delivered hereunder utilizing such compressors and the denominator of which
is the total volume of Gas utilizing such compressors. Seller’s allocated
electrical cost will then be subtracted from the net proceeds from the sale of
Residue Gas attributable to the Gas delivered by Seller before dividing the
Residue income between Buyer and Seller as provided in Article 2.2.

 

3.6           Allocation
Change

 

Buyer, at its sole discretion may at any time and from time to time
change the existing allocation procedure set forth herein, to accommodate
changes in industry practices or standards.

 

ARTICLE IV - TERM

 

4.1           Effective Date

 

This Contract will become effective on the date first set forth above
and will remain in full force and effect for the life of the Interests (or any
extension or renewal thereto) described in Exhibit “A” hereto.

 

4.2           Termination

 

Upon termination of this Contract, this Contract will cease to have any
force or effect, except as to unsatisfied obligations or liabilities of either
party attributable to the period prior to 12:00 midnight on the date of
termination, or arising thereafter as a result of such termination.

 

4.3           Interest Expiration

 

In the event an Interest covering the land described in Exhibit “A”
should terminate before the expiration of this Contract, then this Contract
shall be canceled contemporaneously with such termination, but only as to the
lands and wells which were subject to said interest.

 

5

 

ARTICLE V - DELIVERY POINT

 

5.1           Location

 

The delivery point(s) shall be at the inlet flange of Buyer’s
measurement facilities which shall be located downstream of Seller’s mechanical
separator.

 

ARTICLE VI
- DELIVERY PRESSURE

 

6.1           Seller

 

Seller shall deliver its Gas to Buyer at a pressure sufficient to
enable the Gas to enter Buyer’s Gathering System against the pressure
maintained therein from time to time.

 

6.2           Buyer

 

(a)           Buyer will
endeavor to maintain a working pressure at the point(s) of delivery no
greater than twenty-five (25) psig. However, Buyer is not obligated to maintain
such working pressure and shall have no liability to Seller for failing to do
so.

 

(b)           Should the average
daily pressure at a point of delivery covered by this Contract exceed said
working pressure described in Article 6.2(a) for more than thirty (30)
consecutive days in any one hundred twenty (120) day period, upon Buyer’s
receipt of written notification from Seller, Buyer shall have one hundred
eighty (180) days in which to meet said pressure requirements. In the event
Buyer fails to reduce the line pressure within said one hundred eighty (180)
day period, then Buyer shall release upon Seller’s request by thirty (30) days’
written notice to Buyer, Gas from the delivery point not meeting the pressure
requirements hereunder. Seller shall grant Buyer an extension of one hundred
eighty (180) days, if Buyer has initiated construction to remedy said failure.

 

ARTICLE VII
- QUALITY OF
GAS

 

7.1           Processing
Prior to Delivery

 

The Gas covered by this Contract is sold to Buyer for the purpose of
extracting therefrom Products. Seller agrees that prior to delivery to Buyer
the Gas shall not be processed other than in a conventional separator or
separators operating with no internal piping for heat interchange, and which
operate without any prior chilling or refrigeration of the full well stream
other than the cooling which takes place upon expansion of the full well stream
as it is produced across a choke and into said separator or separators. Except
for liquids removed by the aforesaid separation facilities and except for the
removal of impurities under this Article, Seller agrees that no components of
the Gas shall be removed prior to delivery to Buyer.

 

7.2           Specifications

 

The Gas delivered at each delivery point hereunder shall be
merchantable Gas, at all times complying with the following quality
requirements:

 

(a)           Shall be free of water in the liquid phase, impurities
and other objectionable substances. At a minimum, conventional mechanical
separators shall be installed by Seller upstream from the delivery point(s).

 

(b)           Shall not contain more than one (1) grain of
mercaptan per one hundred (100) cubic feet of Gas.

 

(c)           Shall not contain in excess
of three mote percent (3.0%) of carbon dioxide.

 

(d)           Shall not contain in excess of three mole percent (3.0%)
of nitrogen.

 

(e)           Shall not contain in excess of ten parts per million
(10 ppm) by volume of oxygen.

 

(f)            Shall not contain more than six mole percent (6.0%)
of combined carbon dioxide, nitrogen and oxygen.

 

6

 

(g)           Shall not exceed one hundred
and twenty degrees Fahrenheit (120o F) in temperature at the point of delivery.

 

(h)           Shall have a total heating value of not less than
one thousand fifty (1,050) BTUs per cubic foot.  In the event that the total heating value of
any Gas tendered for delivery hereunder falls below one thousand fifty (1,050)
BTUs per cubic foot, Buyer shall have the right to refuse to accept such Gas as
long as said heating value remains below one thousand fifty (1,050) BTUs per
cubic foot.

 

(i)            Shall not contain more than one mole percent (1.0%)
of hydrogen sulfide.

 

7.3           Testing

 

The determination 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, including chromatograph analysis. 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.

 

7.4           Failure to Meet
Specifications

 

(a)           Should any of
the Gas delivered by Seller hereunder at a given delivery point fail to meet
the quality specifications herein, Buyer may at its option accept, or
immediately discontinue or curtail receipt of Seller’s delivery of Gas at such
delivery point.

 

(b)           Should Seller’s
operations or any of the Gas delivered by Seller hereunder create a condition
which in the exclusive judgment of Buyer tend to endanger the Plant or property
of Buyer or the lives or property of Buyer’s employees or any third party,
Buyer may discontinue receipt of Seller’s Gas.

 

(c)           Buyer shall
notify Seller of such failure and Seller shall make diligent effort to deliver
such 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 Buyer’s notice. Within thirty (30) days of receipt of Seller’s
notice, Buyer shall give notice to Seller in writing of its election to accept
or reject delivery of the Gas from such delivery point. If Buyer rejects
delivery of such Gas, then this Contract shall terminate with respect to the
producing formation of the well delivering the Gas to the delivery point and
the acreage attributable thereto upon receipt of said notice by Seller.

 

7.5           Fee

 

If Buyer accepts delivery of such non-conforming Gas from such delivery
point, Buyer may charge a treating fee, to be mutually agreed upon by Buyer and
Seller, to cover the reasonable costs incurred by Buyer to monitor the Gas
quality or to bring the Gas within the quality specifications.

 

ARTICLE
VIII -  SETTLEMENT
TESTS

 

8.1           Determination
of Gas Composition

 

(a)           Buyer shall
obtain a representative sample of Seller’s Gas at each delivery point and
determine the composition in mole percent, theoretical Product content in GPM,
gross heating value in BTU per cubic foot on a water saturated basis, and
specific gravity, all by means of chromatography or other accepted method in
the industry. 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.

 

(b)           The test for
hydrogen sulfide shall be GPA standard 2377-94 entitled “Test for Hydrogen
Sulfide and Carbon Dioxide in Natural Gas Using Length of Stain Tubes” or any
revision thereof. This method may be replaced, at Buyer’s sole discretion, by
any acceptable method commonly used in the industry.

 

(c)           The tests
provided for in Article 8.1(a) shall be computed to a standard
pressure base of 14.65 pounds per square inch absolute and at a standard base
temperature of sixty degrees Fahrenheit (60oF).

 

7

 

8.2           Testing Period

 

(a)           The
chromatograph analysis and other tests shall be made by Buyer semiannually,
except when, in the opinion of either party, a change in the method of
operation of the lease(s) or well(s) connected to Seller’s Gathering
System will affect materially the Gas composition, specific gravity and/or
hydrogen sulfide content of the Gas, in which event the tests shall be made at
the demand of either party upon five (5) days’ notice to the other party.

 

(b)           Buyer shall
notify Seller in writing ten (10) days prior to the semiannual tests in
order that it may have a representative present to witness said tests and/or
make joint tests with its own appliances.

 

ARTICLE IX
- MEASUREMENT

 

9.1           Type

 

The Gas delivered hereunder shall be measured by a suitable orifice
meter, or meters, of standard make to be furnished, installed, and kept in
repair by Buyer at the point(s) of delivery of such Gas.

 

9.2           Standards

 

(a)           All Gas volumes
measured hereunder shall be computed to a standard pressure base of fourteen
and sixty-five one-hundredths (14.65) pounds per square inch absolute at a
standard base temperature of sixty degrees Fahrenheit (60oF). For purposes of
measurement computations the average atmospheric pressure shall be assumed to
be thirteen and two-tenths (13.2) pounds per square inch and the average
flowing temperature shall be assumed to be sixty degrees Fahrenheit (60oF). All
orifice coefficient computations shall be made in accordance with published
procedures adopted as American National Standard, “Orifice Metering of Natural
Gas, “published as ANSI/API 2530 as amended or revised from time to time,
except that the Reynolds Number, Expansion, and Manometer Factors shall each be
considered as unity, and only those Gas volumes measured at pressures of 100  pounds
per square inch gauge or greater shall be corrected for deviation from Boyle’s
Law.

 

(b)           Notwithstanding
the foregoing, at Buyer’s option the flowing temperature of the Gas may be
determined by means of a recording thermometer installed by and at the expense
of Buyer. In the event Buyer elects to exercise such option, the average
recorded temperature of the Gas delivered during each month shall be deemed to
be the temperature of such Gas so delivered during such month or if Buyer
elects to use the capabilities of an electronic flow recorder then the flowing
temperature shall be deemed to be the temperature of such Gas so delivered
during such month.

 

9.3           Frequency of
Calibration

 

Buyer shall test the meter installed at each delivery point
semiannually

 

9.4           Accuracy

 

(a)           Said meter, or
meters, shall be open to inspection during Buyer’s normal working hours by
Seller in the presence of Buyer. In case any question arises as to the accuracy
of the meter measurement, said meter, or meters, shall be tested upon the
demand of either party. The expense of such tests shall be borne by the party
demanding same if the meter is found to be correct and by Buyer if found
incorrect. A registration within 2% of correct shall be considered correct.

 

(b)           Seller at its
own expense may install, maintain and operate check measuring equipment
provided that such equipment shall not interfere with the operation of Buyer’s
equipment.

 

(c)           If at any time
Buyer’s measuring or testing equipment is found to be out of service, or
registering inaccurately in any percentage, it shall be adjusted at once to
read accurately, within the limits prescribed by the manufacturer. If such
equipment is out of service, or inaccurate by an amount exceeding two percent
(2%) at a reading corresponding to the average rate of flow for the period
since the last preceding test, the previous readings of such equipment shall be
disregarded for any period definitely known or agreed upon, or if not so known
or agreed upon, for a period of sixteen (16) days or one-half (1/2) of the elapsed time since the last test, whichever
is shorter. The volume of Gas delivered during such period shall be estimated
by:

 

(i)            Using the data recorded by
any check-measuring equipment if installed and accurately registering, or if
not installed or registering accurately;

 

8

 

(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.

 

If requested, Buyer shall send charts or flow computer unit data
printouts to Seller for review. Seller shall return all said charts and
printouts to Buyer within thirty (30) days following receipt by Seller.

 

ARTICLE X - ROYALTY

 

10.1         Payment

 

(a)           Seller agrees
to account and pay to the persons entitled thereto all royalties, overriding
royalties, bonus payments and production payments due with respect to the Gas
delivered hereunder.

 

(b)           Seller further
agrees to defend, indemnify and hold Buyer harmless from all claims, demands
and cause of action of any kind, together with all losses, damages,
liabilities, costs and expenses (including court costs and reasonable attorney’s
fees), arising out of or in any way relating to the payments provided for in Article 10.1(a) or
Seller’s failure to make said payments.

 

ARTICLE XI - WARRANTY OF TITLE

 

11.1         Conveyance

 

(a)           Seller warrants
title to the Gas and that Seller has the right to sign this Contract on behalf
of 51.51136% of the working interest owners in the well(s) under the lease(s) covered
by this Contract as shown on Exhibit “A” as it may be amended from time to
time.

 

(b)           Title to the
Gas conveyed hereunder shall pass from Seller to Buyer at the point(s) of
delivery. Seller hereby warrants title to all Gas delivered to Buyer hereunder
and that Seller has the right to sell such Gas. Further, Seller warrants that
all such Gas is owned by Seller free and clear of all liens, encumbrances and
adverse claims, and that it has the right to sell and transfer the same to
Buyer free of all liens, encumbrances and claims of every kind, and Seller
hereby agrees to indemnify and save Buyer harmless against all claims, demands
and causes of action of any kind, together with all loss, damages, costs and
expenses (including court costs and reasonable attorney fees) arising out of or
in any way resulting from adverse claims to such Gas or the Products, Residue
Gas or sulfur (if any) produced therefrom.

 

(c)           Seller hereby
conveys to Buyer free of cost to Buyer, title to the Gas consumed as fuel in
the operation of the Plant and Gathering System, and all Gas which is flared,
leaked or otherwise lost in the operation of the Plant and Gathering System,
and any Drip Liquids; such conveyance to be effective at the time such Gas or
Drip Liquids are so used, lost, or collected.

 

11.2         Evidence of Rights

 

Seller also agrees that upon demand by Buyer it will submit any
Contracts or Agreements covering the leases and/or wells connected to Buyer’s
Gathering System or such other documents as may be necessary to satisfy Buyer
that Seller has good and clear title to the Gas being conveyed hereunder. If
Seller’s title is questioned, or involved in litigation, Buyer shall have the
right to withhold payment without interest during the pendency of such claim or
litigation until said title is freed from such question, but Buyer may so
withhold payment under such circumstances only until Seller furnishes Buyer
with a bond or surety acceptable to Buyer that will indemnify Buyer and hold
Buyer harmless from any losses that may arise from Buyer having made and
continuing to make payment to Seller.

 

9

 

ARTICLE XII - INDEMNITY

 

12.1

 

Buyer shall indemnify and
save Seller harmless against any claims for damages and losses arising from
injuries to persons or property attributable to the Gas delivered hereunder
after delivery thereof has been made to Buyer; conversely, Seller shall
indemnify and hold Buyer harmless against any claims for damages and losses
arising from injuries to persons or property attributable to the Gas prior to
delivery to Buyer and after the Gas remaining after processing is delivered to
the purchaser of the Gas. In addition, each of the parties (Buyer and Seller)
hereto shall indemnify and hold the other harmless from any losses and damages
arising out of the operations conducted hereunder by such indemnifying party to
the extent resulting from the negligent acts of such indemnifying party, its
agents or its employees.

 

ARTICLE XIII - FLUSH GAS/RATABLE TAKES

 

13.1                           Residue Gas

 

During flush Gas
production or during periods of curtailment by the residue gas purchaser(s),
Buyer shall only be obligated to take Seller’s Gas that is produced from oil
wells and ratably as to quantity with all other Gas produced from oil wells
connected to its Gathering System and/or Plant. Buyer shall require Seller to
shut-in Gas produced from Gas wells during this period.

 

13.2                           Products

 

During flush Gas
production or during periods of curtailment by the liquid Products
Purchaser(s), Buyer shall only be obligated to take Seller’s Gas that is
produced from oil wells ratably as to quantity with all other Gas produced from
oil wells connected to its Gathering System and/or Plant. Buyer shall require
Seller to shut-in Gas produced from Gas wells during this period.

 

13.3                           Flush Gas

 

A flush Gas condition is
hereby defined to exist whenever Buyer’s Gathering System or Plant is of
insufficient capacity to gather and/or process all of the Gas connected
thereto. Unless Buyer within six (6) months from the commencement of such
condition arranges to take or pay for any part or all of the excess Gas, Seller
shall have the right to dispose of the excess Gas not taken or paid for by
Buyer until such condition no longer exists.

 

ARTICLE XIV - FORCE MAJEURE

 

14.1                           Suspension

 

In the event of either
party hereto being rendered unable, wholly or in part, by force majeure to
carry out its obligations under this Contract, other than to make payments due
hereunder, the obligations of the party suffering force majeure shall be
suspended to the extent affected by and for the period of such force majeure
condition. Such party suffering force majeure shall give notice and full
particulars of such force majeure in writing or by facsimile to the other party
as soon as possible after the occurrence of the cause. Such cause shall as far
as possible be remedied with all reasonable dispatch.

 

14.2                           Definition

 

The term “force majeure”
as employed herein shall mean acts of God, strikes, lockouts or other
industrial disputes or disturbances, acts of the public enemy, wars, blockades,
Insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
storms, floods, washouts, arrests and restraints of governments and people,
civil disturbances, explosions, breakage or accidents to machinery or lines of
pipe, the making of repairs or alterations to lines of pipe or plants,
inability to secure labor or materials, freezing of wells or lines of pipe,
partial or entire failure of wells or Gas supply, necessity for compliance with
any court order, or any law, statute, ordinance, regulation or order
promulgated by a governmental authority having jurisdiction, inclement weather
that necessitates extraordinary measures and expense to construct facilities
and/or maintain operations and any other causes, whether of the kind enumerated
herein or otherwise, not within the control of the party claiming suspension
and which by the exercise of due diligence such party is unable to prevent or
overcome. Such term shall likewise include

 

(i)                                    in those instances where either party
hereto is required to obtain servitudes, rights-of-way, grants, permits or
licenses to enable such party to fulfill its obligations hereunder, the
inability of such party

 

10

 

to acquire, or
delays on the part of such party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such servitudes, right-of-way grants, permits
or licenses, and

 

(ii)                                 in those instances where either party
hereto is required to furnish materials and supplies for the purpose of
constructing or maintaining facilities or is required to secure permits or
permissions from any governmental agency to enable such party to fulfill its
obligations hereunder, the inability of such party to acquire, or delays on the
part of such party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, such materials, supplies, permits and permissions.

 

14.3                           Labor Disputes

 

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 or lockouts by acceding to the demands of the
opposing party when such course is inadvisable in the discretion of the party
having difficulty.

 

14.4                           Maintenance

 

Either party may briefly
interrupt its performance hereunder for the purpose of making necessary or
desirable inspections, alterations and repairs; and the party requiring such
relief shall give to the other party reasonable notice of its intention to
suspend its performance hereunder, except in cases of emergency where such
notice is impracticable or in cases where the operations of the other party
will not be affected. The party requiring such relief shall endeavor to arrange
such interruptions so as to inconvenience the other party as little as
possible. Service interruptions on the part of either party which are
sanctioned by this provision are expressly included within the definition of “force
majeure” for the purposes of this contract.

 

14.5                           Contract Extension

 

In the event that during
the term of this Contract, Seller claims a suspension of its obligation to
deliver Gas to Buyer for a total of thirty (30) or more days (whether
consecutive or non consecutive) for the reason of one or more events of force
majeure, then the term of this Contract shall be extended for the number of
days during which such force majeure condition is claimed.

 

ARTICLE XV - UNPROFITABLE GAS

15.1                           Delivery Point

 

If, in Buyer’s sole
judgment, the Gas available at any delivery point provided for hereunder is or
becomes insufficient in volume or Product content, or for any other cause is or
becomes unprofitable for processing, Buyer shall not be required to take such
Gas so long as such condition exists.

 

(a)                                  If Buyer fails to accept or take Gas from
Seller’s well(s) due to delivery point unprofitability for a period of thirty
(30) consecutive days, then Seller shall have the right to have said well(s) released
from this contract at any time thereafter upon at least fifteen (15) days
written notice, in which event said well(s) shall be released from this
contract at the end of said fifteen (15) day period unless on or before the
last day thereof Buyer resumes taking or accepting Gas from Seller’s well(s).

 

15.2                           Plant Unprofitability

 

If at any time the volume
and/or Product content of all Gas available for processing in Buyer’s Plant or
any other cause beyond Buyer’s control, shall render the operation of Buyer’s
Plant or Gathering System unprofitable in Buyer’s sole judgment, Buyer shall
not be required to take such Gas so long as such condition exists or Buyer may
by thirty (30) days written notice to Seller cancel this Contract.

 

ARTICLE XVI - RIGHT OF WAY

 

16.1                           Easement

 

To the full extern that
Seller is able to convey such rights, Seller hereby assigns and grants to Buyer
an easement across the premises covered hereby to lay and maintain lines and to
install, maintain and operate any equipment necessary to its operations
hereunder and Buyer shall have the right of free entry for any purpose
connected

 

11

 

therewith.
All lines and equipment placed by Buyer on said lands shall remain the property
of Buyer and may be removed by Buyer before or within a reasonable time after
the expiration of this Contract.

 

ARTICLE XVII - PRIORITY RIGHTS OF
SELLER

 

17.1                           Lease Operations

 

Seller
may use the Gas required to be delivered hereunder for the purpose of
developing and operating its lease or well(s), excluding the use of Gas for gas
lifting or for pressure maintenance and/or cycling operations. Seller may, at
any time, without liability to Buyer clean out, deepen, or abandon any well or
wells on the above-described lands or may use any efficient, modern, or
improved method for the production of oil. Before any well or wells are taken
out of service for any reason whatsoever, Seller agrees to first shut off the same
from communication with Buyer’s Gathering System.

 

ARTICLE XVIII -
SCOPE

 

18.1

 

In
the event this Contract covers more than one lease or well, this Contract shall
be construed as a separate contract as to each lease or well.

 

ARTICLE XIX -
TAXES

 

19.1                           Responsibility

 

Seller
shall bear all taxes imposed upon Seller with respect to the Gas delivered
hereunder prior to delivery to Buyer and any processing taxes imposed upon the
processing of Seller’s Gas and Buyer shall bear all taxes imposed upon Buyer
with respect to such Gas after delivery thereof to Buyer (except processing
taxes).  If required by law or requested
by Seller, Buyer shall remit Seller’s taxes to the proper authority and deduct
the amount so paid from Buyer’s payment to Seller.

 

ARTICLE XX - LAWS AND REGULATIONS

 

20.1

 

This
Contract and all provisions herein shall be subject to and performed in accordance
with all present and future, applicable and valid orders, laws, rules and
regulations of any duly constituted federal, state or local governmental
authority now or hereafter having jurisdiction over the parties, their
facilities, the Gas delivered hereunder or this Contract. This Contract shall
be governed by and interpreted in accordance with the laws of the State of
Texas, notwithstanding any conflict of laws or rules which may require or
permit the application of the laws of another jurisdiction.

 

ARTICLE XXI - PAYMENT

 

21.1                           Time and
Examination

 

Payment
shall be mailed by Buyer not later than the last day of each month for all Gas
purchased hereunder during the preceding month, and a statement showing full
details of the account shall be transmitted to Seller. Examination by Seller of
the accounting records kept by Buyer respecting said Gas account shall be
permitted by Buyer at any and all reasonable business hours and to the extent
necessary to verify the accuracy of any statement, charge, computation, or
demand made under or pursuant to this Contract.

 

21.2                               Claim Period

 

All
statements and/or invoices rendered to Seller under the terms of this Contract
during any calendar year shall be conclusively presumed to be true and correct
after twenty-four (24) months following the end of any such calendar year
unless Seller within such twenty-four month period makes a written claim on
Buyer for adjustment. Failure to make a claim for adjustment within such period
shall presumptively establish the correctness of such statements

 

12

 

and/or
invoices and shall preclude the making of claims for adjustment thereon in any
manner whatsoever, whether by filing an action in a court of law or otherwise.
The making of a written claim for adjustment against Buyer by any method other
than the initiation of the Alternative Dispute Resolution Procedures set forth
in Exhibit “B” shall not operate to suspend the running of the applicable
statute of limitations for such claim. This paragraph shall only operate to bar
claims for adjustment made by Seller (or any agent of Seller) against Buyer; it
shall not operate to bar claims for adjustment made by Buyer (or any agent of
Buyer) against Seller.

 

21.3                           Receiver of
Statements

 

If
the lease or well(s) described herein are owned by two or more parties,
the Gas purchase statement will be sent to the Operator thereof and payment of
any sums due Seller hereunder shall be made to the party designated as Operator
of such lease or well(s) who shall make proper distribution to Seller, or
at the written request of any working interest owner and subject to Article 11.2,
Buyer may make payment of any sums due such working interest owner directly to
such owner.

 

ARTICLE XXII - ASSIGNMENT

 

22.1                           Conveyance

 

The
provisions of this Contract shall be binding upon and inure to the benefit of
the parties hereto, their heirs, successors and assigns. If Seller assigns or
conveys all or any part of the leases or other properties covered hereby,
Seller shall provide in any instrument of assignment or conveyance that the
leases or other properties are assigned or conveyed subject to the terms and
conditions of this Contract and that the party or parties to whom such
assignment or conveyance is made shall be bound by the terms of this Contract.

 

22.2                           Notification

 

Seller
shall make a concerted effort to notify Buyer of any assignment of all or any
portion of the leases or properties covered hereby. No transfer of or
succession to the interest of Seller hereunder, wholly or partially, shall affect
or bind Buyer until Buyer shall have been furnished with written notice and the
original instrument or a certified copy or an acceptable photocopy of the
instrument or instruments effecting such changes of ownership.

 

ARTICLE XXIII - PRODUCTION IN
CONFORMANCE WITH FLOW SCHEDULE

 

23.1                           Schedule

 

In
order to maintain maximum Plant efficiency on a 24-hour operating schedule,
Buyer desires to maintain a reasonably uniform rate of flow of Gas to its Plant
over each 24-hour period. Seller agrees to either (1) regulate its
producing schedule so that the Gas shall be supplied from Seller’s lease to
Buyer’s Gathering System at a reasonably uniform rate of flow; or (2) accept
and follow a producing schedule to be established by Buyer for all wells
connected to Buyer’s Plant or Gathering System, provided that Buyer shall
consider the wishes of Seller in establishing the producing schedule for Seller’s
well or wells.  Nothing else in this
Contract to the contrary, Seller agrees that in the event it fails to comply
with this paragraph, Buyer shall have the right, at its option, to refuse to
accept delivery of Seller’s Gas during any period of such non-compliance.

 

ARTICLE XXIV - COUNTERPART SIGNATURES

 

24.1

 

This
Contract may be executed in any number of counterparts, each of which, when
executed by Buyer and Seller, shall be deemed to be an original, binding
agreement between Buyer and Seller, as of the effective date hereof.

 

ARTICLE XXV - CANCELLATION OF
PRIOR CONTRACTS

 

25.1

 

Upon
commencement of deliveries of Gas hereunder, this Contract shall supersede any
prior Gas contracts and any amendments thereto effective between the parties
hereto insofar as such contracts cover the leases or properties described in Exhibit “A”
herein.

 

13

 

ARTICLE XXVI - NOTICES

 

26.1

 

All
notices, statements and other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been effectively
given when mailed by United States mail addressed to.

 

	
  SELLER

  	
   

  	
  BUYER

  
	
   

  	
   

  	
   

  
	
  SDG
  Resources, L. P.

  Attention: Douglas H. Kiesewetter

  1604 ACR 2110

  Elkhart,
  TX 75839

  Telefax: 903-764-5553

  	
   

  	
  Versado
  Gas Processors, L.L.C. 

  Attention: DMS Contract Administration

  1000 Louisiana St, Ste 5800

  Houston, TX 77002-5050

  Telefax: 713-507-6982

  

 

as
the case may be, or to such other address as either party shall respectively
hereafter designate in writing. Notices of change of address of any of the
parties shall be given in writing to the other in the manner aforesaid and
shall be observed in the giving of all future notices, statements, or other
communications required or permitted to be given hereunder.

 

ARTICLE XXVII - MISCELLANEOUS

 

27.1

 

The
title headings are for identification and reference only, and shall not be used
in interpreting any part of this Contract.

 

27.2

 

This
Contract shall be considered for all purposes as prepared through the joint
efforts of the parties, and shall not be construed against one party or the
other as a result of the preparation, submittal or other event of negotiation,
drafting or execution thereof.

 

27.3                           Alternative
Dispute Resolution Schedule.

 

Any
claim controversy or dispute arising out of, relating to, or in connection with
this Agreement, including the interpretation, validity, termination or breach
thereof, shall be resolved solely in accordance with the Alternative Dispute
Resolution Schedule set forth in Exhibit “B”  attached hereto.
Producer and Processor’s agreement to resolve any claim, controversy or dispute
in accordance with the provisions of Exhibit “B” shall survive the
expiration or termination of this Agreement.

 

27.4                           Covenant Not To
Sue.

 

The
parties hereto covenant that they shall not resort to court remedies except as
provided for in Exhibit “B,” or for preliminary relief in aid of
arbitration. A Party that fails to comply with the terms and conditions set
forth in Exhibit “B” or Section 24.1 or violates the covenants in
this Section 24.2 shall pay all the legal costs incurred by the other
party in connection with the enforcement thereof.   The parties expressly agree that suits,
actions or proceedings in connection with the foregoing must be instituted
exclusively in a state of federal court having jurisdiction.

 

14

 

THIS CONTRACT shall be considered valid and binding only after it has
been executed by an officer or duly appointed agent of each of the parties
hereto.

 

IN WITNESS WHEREOF the parties have hereunto subscribed their names.

 

 

	
  BUYER:

  
	
   

  
	
  VERSADO GAS PROCESSOR, L.L.C.

  
	
   

  
	
  By: Dynegy Midstream Services, Limited Partnership, its
  Member/Operator

  
	
  By: Dynegy Midstream G.P., Inc., its General Partner

  

 

	
   

  	
  By

  	
  /s/ [ILLEGIBLE]

  
	
   

  	
   

  	
         Vice-President

  

 

 

	
  SELLER:

  
	
   

  
	
  SDG RESOURCES, L. P.

  

 

 

ATTEST:

 

	
  /s/ [ILLEGIBLE]

  	
   

  	
  By:

  	
  /s/ Douglas H.
  Kiesewetter

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ [ILLEGIBLE]

  	
   

  	
  Title:

  	
  President,
  SDG Resources I, LLC

  

 

15

 

EXHIBIT “A”

 

This
Exhibit “A” is attached hereto and made a part of the Gas Purchase
Contract dated effective as of January 1, 2002, by and between VERSADO GAS
PROCESSORS, L.L.C., referred to as “Buyer” and SDG RESOURCES, L. P., referred
to as “Seller”:

 

	
  County

  	
  Lea

  
	
  State

  	
  NM

  
	
  Legal Description:

  	
  S/2
  Section 13, SE/4 SE/4 Section 14, S/2 SE/4 Section 23, All of Section 24,
  N/2 Section 25, and E/2 NE/4 Section 26, T24S, R36E and All of Section 18,
  W/2 Section 19, and NW/4 Section 30, T24S, R37E*

  
	
  Existing Wells:

  	
  Cooper Jal Unit Area

  
	
  Supplier’s
  Gross Working Interest

  	
  51.51136%

  

 

*                 INSOFAR AND ONLY INSOFAR as to the Tansill,
Yates, Seven Rivers and Queen Formations; said interval being the Unitized
Formation of the Cooper Jal Unit and being the stratigraphic equivalent of the
continuous interval occurring in the Amerada Petroleum Corporation’s A. G.
Falby No. 1 well (located 1,650’ FSL and 990” FWL of Section 19, T24S,
R37E. Lea County, New Mexico) at an indicated depth of 2,890’ to 3,745’, as recorded
on the Schlumberger Electrical Log taken on December 4, 1948.

 

 

(End of Exhibit)

 

16

 

EXHIBIT “B”

 

This
Exhibit “B” is attached hereto and made a part of the Gas Purchase
Contract dated effective as of January 1, 2002, by and between VERSADO GAS
PROCESSORS, L.L.C., referred to as “Buyer” and SDG RESOURCES, L.P., referred to
as “Seller”:

 

ALTERNATIVE
DISPUTE RESOLUTION PROCEDURES

 

1.             Initiation of Procedures.   Either
party desiring to initiate the dispute resolution procedures set forth herein
with respect to a Dispute not resolved in the ordinary course of business (the “initiating
Party”) must give written notice of the Dispute (the “Dispute Notice”) to the
other party (the “Non-initiating Party”). The Dispute Notice shall include (i) a
statement of that party’s position and a summary of arguments supporting that
position, and (ii) the name and title of the executive who will represent
that party, and of any other person who will accompany the executive, in the negotiations
under Article 2 below.

 

2.             Negotiation Between
Executives.   If one party
has given a Dispute Notice under Article l above, the Parties shall
attempt in good faith to resolve the Dispute within forty-five (45) days
following receipt of the Dispute Notice by the Non-Initiating Party by
negotiation between executives who have authority to settle the Dispute and who
are at a higher level of management than the persons with direct responsibility
for administration of this Agreement or the matter In Dispute.  Within fifteen (15) days after receipt of the
Dispute Notice, the Non-Initiating Party shall submit to the other a written
response. The response will include (i) a statement of that party’s
position and a summary of arguments supporting that position, and (ii) the
name and title of the executive who will represent that party and of any other
person who will accompany the executive. Within forty-five (45) days following
receipt of the Dispute Notice by the Non-Initiating Party, the executives of both
Parties will meet at a mutually acceptable time and place, and thereafter, as
often as they reasonably deem necessary, to attempt to resolve the Dispute.

 

3.             Mediation.
  If the Dispute has not been
resolved by negotiation under the Article 2 above within forty-five (45)
days following receipt of the Dispute Notice by the Non-Initiating Party or If
the Non-Initiating Party fails to respond within the required fifteen (15) day
period, either party may initiate the mediation procedure of this Article 3
by giving written notice to the other party (“Mediation Notice”). The Parties
will endeavor to settle the Dispute by mediation within sixty (60) days of the
Mediation Notice under the then current Center for Public Resources (“CPR”)
Model Mediation Procedure for Business Disputes. If the Parties have not agreed
upon a mediator within seven (7) days
after the Mediation Notice, either party may request CPR assistance in the
selection of a mediator under its guidelines. Unless otherwise agreed to by the
Parties, no discovery shall be allowed during the sixty (60) day mediation
period. The cost of the mediator will be shared equally between the Parties,
unless otherwise agreed to in writing by the Parties.

 

4.             Arbitration.   If the Dispute has not been resolved by
mediation under the Article 3 above within the required sixty (60) day
period or if either party fails and/or refuses to participate in such mediation
procedures, either party may request that the matter be resolved through
arbitration by submitting a written notice (the “Arbitration Notice”) to the
other. Any arbitration that is conducted hereunder shall be governed by the
Federal Arbitration Act, 9 U.S.C § 1 et seq.,  as amended, and
will not be governed by the arbitration acts, statutes, or rules of any other
jurisdiction.

 

5.             Arbitration Procedure.  The Arbitration Notice shall name the
noticing party’s arbitrator and shall contain a statement of the issue(s) presented
for arbitration. Within fifteen (15) Days of receipt of an Arbitration Notice,
the other party shall name its arbitrator by written notice to the other and
may designate any additional issue(s) for arbitration. The two named
arbitrators shall select the third arbitrator within fifteen (15) Days after
the date on which the second arbitrator was named. Should the two arbitrators
fail to agree on the selection of the third arbitrator, either party shall be
entitled to request the Senior Judge of the United States District Court for
the Southern District of Texas to select the third arbitrator.  Should either party fail and/or refuse to name
its arbitrator within the required fifteen (15) day period, the other party
shall be entitled to request the Senior Judge of the United States District
Court for the Southern District of Texas to select the arbitrator for such
party. All arbitrators shall be qualified by education or experience within the
natural gas liquids portion of the energy industry to decide the issues
presented for arbitration. No arbitrator shall be: a current or former
director, officer, or employee of either party or its Affiliates; an attorney
(or member of a law firm) who has rendered legal services to either party or
its Affiliates within the preceding three Years; or an owner of significant
shares (more than 2%) of the common stock of either party, or its Affiliates.

 

17

 

6.             Arbitration Hearing. The three
arbitrators shall commence the arbitration proceedings within twenty-five (25)
Days following the appointment of the third arbitrator. The arbitration
proceedings shall be held at a mutually acceptable site and if the Parties are
unable to agree on a site, the arbitrators shall select the site. The
arbitrators shall have the authority to establish rules and procedures
governing the arbitration proceedings, including, without limitation, rules concerning
discovery. Each party shall have the opportunity to present its evidence at the
hearing. The arbitrators may call for the submission of pre-hearing statements
of position and legal authority, but no post-hearing briefs shall be submitted.
The arbitration panel shall not have the authority to award incidental,
consequential, special, punitive or exemplary damages. In addition, if an issue
under consideration is limited to a determination of an amount of money owed by
one party to the other, each party shall submit to the arbitration panel a
final offer of its proposed resolution of the Dispute. The arbitration panel
shall be charged to select from the two proposals the one which the panel finds
to be the most reasonable and consistent with the terms and conditions of this
Agreement, and the arbitration panel shall not average the Parties’ proposals
or otherwise craft its own remedy. All evidence submitted in an arbitration
proceeding, transcripts of such proceedings, and all documents submitted by the
Parties in an arbitration proceeding shall be kept confidential and shall not
be disclosed to any third party by either party hereto.

 

7.             Arbitration Decision and Costs.  The decision of the arbitrators or a majority
of them, shall be in writing and shall be final and binding upon the Parties as
to the issue(s) submitted. The cost of the hearing shall be shared equally
by the Parties, and each party shall be responsible for its own expenses and those
of its counsel or other representatives. Each party hereby irrevocably waives,
to the fullest extent permitted by law, any objection it may have to the
arbitrability of any such Disputes and further agrees that a final
determination in any such arbitration proceeding shall be conclusive and
binding upon each party.

 

8.             Enforcement of Award. Judgment upon
any award rendered by the arbitrators may be entered in any court having jurisdiction.
 The prevailing party shall be entitled
to reasonable attorneys’ fees in any contested court proceeding brought to
enforce or collect any award of judgment rendered by the arbitrators.

 

9.             Tolling and Performance. Except as
otherwise provided in these procedures, all applicable statutes of limitation
and defenses based upon the passage of time and all contractual limitation
periods specified in this Agreement, if any, will be tolled while the
procedures specified herein are pending. The Parties will take all actions
necessary to effectuate the tolling of any applicable statute of limitation or
contractual limitation periods. All deadlines specified herein may be extended
by mutual written agreement of the Parties. Each party is required to continue
to perform its obligations under this Agreement pending final resolution of any
Dispute, unless to do so would be impossible or impracticable under the
circumstances. Notwithstanding the foregoing, the statute of limitations of the
State of Texas applicable to the commencement of a lawsuit will apply to the
commencement of an arbitration under this Agreement, except that no defenses
will be available based upon the passage of time during any negotiation or
mediation called for by these procedures.

 

18

 

 

September 23,
2008

 

DCP
Midstream

10
Desta Drive, Suite 400W

Midland,
TX 79705

 

Attention:
Rupert Salinas, Bob Brown, Contract Administration

 

Enclosed
you will find the Certificate of Conversion evidencing the change from Resaca
Exploitation, LP to Resaca Exploitation, Inc. Please ensure that the contract
records are changed to reflect our new entity name.

 

Thank
you,

 

 

	
  /s/
  Mary Frances Deibert

  	
   

  
	
  Mary
  Frances Deibert

  
	
  Marketing
  Manager

  

 

	
  Resaca Contract Number

  	
   

  	
  DCP Contract ID

  
	
  RES-0001S

  	
   

  	
  GLD082000R

  
	
  RES-0004S

  	
   

  	
  GLD094200

  
	
  RES-0005S

  	
   

  	
  TUN024800R

  
	
  RES-0006S

  	
   

  	
  GLD103000

  
	
  RES-0007S

  	
   

  	
  CRA026100

  

 

1331 LAMAR, SUITE
#1450 HOUSTON, TEXAS 77010-3039

MAIN: 713.650.1246
FAX: 713.655.1711

WWW.RESACAEXPLOITATION.COM

 

 

 

	
  

  	
  Targa Midstream Services

  
	
  Limited Partnership

  
	
  1000 Louisiana

  
	
  Suite 4300

  
	
  Houston, Texas 77002

  
	
  www.targaresources.com

  

 

September 30, 2008

 

Via CERTIFIED MAIL/RRR

 

RESACA
EXPLOITATION INC. (“COMPANY”)

1331
LAMAR STE 1450

HOUSTON,
TX 77010

Attn:
Contract Administration

 

	
  RE:

  	
  GAS DELIVERED AND SOLD BY
  COMPANY TO VERSADO GAS

  PROCESSORS, L.L.C.
  (“VERSADO”) AT VERSADO’S EUNICE PLANT

  (“PLANT”) LOCATED IN LEA
  COUNTY, NEW MEXICO.

  

 

Gentlemen:

 

Versado
is currently gathering and processing gas (“Gas”) from Company pursuant to
purchase and/or processing contract(s) and/or agreement(s) (collectively,
and as amended, the “Contract(s)”). The Gas is processed under the terms of the
Contract(s) at the Plant. The residue gas remaining after processing
(“Residue”) is delivered to El Paso Natural Gas Company (“EPNG”).

 

EPNG
has notified Versado that it currently contemplates that effective November 1,
2008 and extending through December 31, 2008 (“Curtailment Period”) EPNG
will severely curtail its receipt of Residue from the Plant and will only
accept 30MMscf/d of Residue (“Base Residue”) from the Plant. This curtailment
is being done in order to facilitate modifications to be made by EPNG to EPNG’s
system. Notwithstanding the foregoing, for purposes of this letter agreement
the Curtailment Period will be deemed to commence on November 1, 2008 and
continue through the later of the date that EPNG ceases the referenced
curtailment, or December 31, 2008.

 

Versado
is evaluating a project to install pipeline and appurtenant facilities and set
rental compression (collectively, the “Project”) at or near the Plant which
will, in our judgment, allow Versado to deliver into EPNG some or all of any
Residue exceeding the Base Residue and available at the tailgate of the Plant
“(Excess Residue”). The Project will

 

 

require
a substantial investment in compression, pipelines and necessary appurtenances
for the Plant. Versado believes it is in the best interest of all the
producers, including Company, delivering Gas into Versado’s systems that feed
Gas into the Plant (collectively, “Producers”), to participate in the Project,
rather than curtailing their Gas deliveries to Versado in order to meet EPNG’s
directives. The actual cost of the Project’s installation and construction is
estimated to be $290,000 and the Project’s actual rental costs for the
compression equipment are estimated to be $407,400 for the two months.

 

Versado,
subject to the provisions hereof, is prepared to move forward with the
installation, construction and subsequent operation of the Project. Versado
would propose that, in return therefore, it receive from Company a fee (“Excess
Residue Handling Fee”), computed and paid, or deducted from any proceeds
otherwise due Company from the Contract(s), on a monthly basis relevant to Gas
delivered during the Curtailment Period, equal to the following:

 

1.               Company’s pro-rata share [“Pro-Rata Share”]
(determined by the percentage Company’s wellhead thousand standard cubic feet
per month (“WH mscf/m”) gas delivered to Versado’s Plant bears to all wellhead
WH mscf/m gas delivered to Versado’s Plant times eighty-five percent) of
installation and constructions costs relevant to the Project, and

2.               Company’s Pro-Rata Share of compression rental
costs.

 

The
Excess Residue Handling Fee would be chargeable on all Gas delivered during the
Curtailment Period.

 

Versado’s
obligation to proceed with the Project shall be subject to Versado’s
determination, in the exercise of reasonable commercial judgment, that
Producers (together controlling a quantity of Gas adequate to make the Project
financially justifiable) have entered in agreements with Versado similar in
substance to this letter agreement.

 

This
letter agreement shall constitute an amendment to each of the Contract(s). In
the event of any conflict between the terms contained in this letter agreement
and those contained in any of the Contract(s) as previously written, the
terms contained in this letter agreement shall control.

 

If
the foregoing is acceptable to Company, please execute both originals hereof in
the space provided. Please return one fully executed original to Targa by no
later than October 15, 2008 and retain one for your records.

 

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Clark White

  
	
   

  	
  Clark
  White

  
	
   

  	
  V.
  P. and Region Manager

  
	
   

  	
  Targa
  Midstream Services Limited Partnership

  
	
   

  	
  As
  Operator for Versado Gas Processors, L.L.C.

  

 

 

Agreed
to and accepted:

 

RESACA
EXPLOITATION INC.

 

 

	
  By:

  	
  /s/
  Randy Ziebarth

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Randy
  Ziebarth

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  10/9/08

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  cc:

  	
  DEIBERM@TEAI.COMExhibit 10.9

 

Execution Copy

 

FIRST AMENDMENT TO

 

INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

 

This
First Amendment to Intercreditor and Collateral Agency Agreement (this “Amendment”), dated as of June 26, 2009, is among
RESACA EXPLOITATION, Inc. (fka Resaca Exploitation, LP) (the “Borrower”), Resaca Operating Company (the “Guarantor”); BP CORPORATION NORTH AMERICA INC. (the “Approved Hedge Counterparty”), CIT CAPITAL USA, INC., as
Administrative Agent, and in its capacity as collateral agent hereunder (“Collateral Agent”) for the benefit of
Creditors (as defined below).

 

Recitals

 

A.                                   The Borrower,
NGP Capital Resources Company (the “Prior
Administrative Agent”) and other financial institutions named and
defined therein as lenders (the “Original
Lenders”) and agents entered into that certain Credit
Agreement dated May 1, 2006„ as amended by Limited
Consent and Waiver and Amendment dated May 7, 2006, a First Amendment to
Credit Agreement dated May 31, 2007, a Second Amendment to Credit
Agreement dated August 1, 2007, a Third Amendment to Credit Agreement
dated October 12, 2007, a Limited Consent and Waiver and Amendment dated January 15,
2008, and a Fourth Amendment to Credit Agreement dated June 11, 2008 (as
amended, the “Original Credit Agreement”).

 

B.                                     The Borrower,
NGP Capital Resources Company as collateral agent for the Prior Administrative
Agent, Original Lenders and the Approved Hedge Counterparty (collectively, the “Creditors”) entered into that certain Intercreditor and
Collateral Agency Agreement dated May 1, 2006 (as
amended from time to time, the “Intercreditor
Agreement”);

 

C.                                     On July 10,
2008, the Borrower converted from “Resaca Exploitation, LP, as Delaware limited
partnership” into “Resaca Exploitation, Inc., a Texas corporation”.

 

D.                                    The Borrower,
the Prior Administrative Agent and other financial institutions named and
defined therein as lenders and agents amended and restated the Original Credit
Agreement by entering into an Amended and Restated Credit Agreement dated July 11,
2008 pursuant to which such lenders provided certain loans to the Borrower (as
heretofore amended, modified or supplemented, the “Existing
Credit Agreement”).

 

E.                                      The Prior
Administrative Agent resigned as Administrative Agent under the Existing Credit
Agreement and the other Loan Documents (as defined in the Existing Credit
Agreement) and pursuant to that certain Resignation and Appointment of
Administrative Agent Agreement, as of even date herewith, the parties to the
Existing Credit Agreement mutually agreed to ratify the appointment of CIT
Capital USA Inc. as successor Administrative Agent (in such capacity, the “Successor Agent”) under the Existing Credit
Agreement and the other Loan Documents (as defined in the Existing Credit
Agreement) and CIT Capital USA Inc. accepted such appointment

 

F.                                           The Borrower
has requested the Lenders, and the Lenders have agreed, to amend and restate
the Existing Credit Agreement, subject to the terms and conditions of that
certain Second Amended and Restated Credit Agreement dated as of June 26,
2009 (as the same may be further

 

1

 

amended,
the “Credit Agreement”), of even date herewith by and among the Borrower,
the Successor Agent and the Lenders parties thereto.

 

G.                                     In addition,
the Intercreditor Agreement provides that Borrower is required to cause the Guarantor
to become bound by all of the terms of the Intercreditor Agreement on the terms
and conditions set forth therein.

 

H.                                    The Borrower,
the Approved Hedge Counterparty, the Collateral Agent and the Administrative
Agent, for and on behalf of Lenders, have agreed to amend the Intercreditor
Agreement to reflect the events described in Recitals C through G above as set
forth herein.

 

NOW
THEREFORE, in consideration of the foregoing and the mutual covenants herein
contained and other good and valuable consideration, the existence and
sufficiency of which are expressly recognized by all of the parties hereto, the
parties agree as follows:

 

Section 1.                                            Defined Terms. Each
capitalized term used herein but not otherwise defined herein has the meaning
given such term in the Intercreditor Agreement, as amended by this Amendment.
Unless otherwise indicated, all section references in this Amendment refer to
sections of the Intercreditor Agreement.

 

Section 2.                                                          Amendments to
Intercreditor Agreement.

 

2.1                           Defined Terms and References.

 

(a)                                  All references
to “NGP Capital Resources Company” are hereby deleted and replaced with “CIT
Capital USA Inc.”

 

(b)                                 All references
to “Resaca Exploitation, LP” shall be deemed to mean and refer to “Resaca
Exploitation, Inc.”

 

(c)                                  All references
to “this Agreement” shall be deemed to mean and refer to the Intercreditor
Agreement as hereby amended and ratified by this Amendment.

 

(d)                                 All references
to the “Senior Credit Agreement” or “Credit Agreement” shall be deemed to mean
and refer to that certain Second Amended and Restated Credit Agreement dated June 26,
2009 (as from time to time amended, supplemented or restated).

 

(e)                                  The definition
of “Approved Hedge Counterparties” in Section 1.02 is herby amended
to delete the phrase “Section 4.1(t), Section 6.21, and
Section 7.3” and replace such deleted phrase with “Section 6.1(o), Section 8.21,
and Section 9.3”.

 

2.2                           Amendment to
Annex I. Annex I of the Intercreditor Agreement is hereby amended to delete
such Annex in its entirety and replaced such Annex by Annex I attached
hereto.

 

2.3                           Amendment to Section 6.04. Section 6.04
(Notices, etc.) is hereby amended to delete
the name and address under “To Collateral Agent or Administrative Agent” and to
replace such name and address with the following name and address:

 

2

 

CIT
Capital USA Inc.

505
Fifth Avenue, 10th Floor

New
York, NY 10017

Attn:
Marc Theisinger

Telecopy
No.: (212) 771-9675

 

with
a copy to:

 

CIT
Capital USA Inc.

700
Louisiana Street, Suite 5200

Houston,
TX 77002

Attn:
David Bornstein

Telecopy
No. (713) 237-8156

 

Section 3.                                                          Guarantor as
Additional Party to the Intercreditor Agreement.

 

3.1                           Agreement to be
Bound. The Guarantor shall be bound by all of the terms and provisions of the
Intercreditor Agreement.

 

3.2                           Intercreditor
Agreement Controls. The Guarantor acknowledges and agrees that the
terms of the Intercreditor Agreement shall control over the terms of the
Security Documents to the extent of any conflict relating to the relative
rights of Creditors.

 

3.3                           INDEMNITY. THE INDEMNITY
AND REIMBURSEMENT PROVISIONS CONTAINED IN SECTION 6.05 SHALL APPLY TO ALL
MATTERS UNDER THE INTERCREDITOR AGREEMENT AND THE GUARANTOR AGREES TO INDEMNIFY
AND REIMBURSE THE INDEMNITEES IN ACCORDANCE WITH THE TERMS THEREOF.

 

3.4                           Benefit of
Agreement. Except as stated in Section 6.02 of the
Intercreditor Agreement, the terms and provisions of the Intercreditor
Agreement, other than those which by their terms specifically apply to Borrower
or any Subsidiary Guarantor, shall inure solely to the benefit of each Creditor
and its respective successors and assigns and the terms and provisions of the
Agreement shall not inure to the benefit of nor be enforceable by the Guarantor
or its successors or assigns. The parties hereto agree that the Guarantor shall
not be bound by any amendment to the Intercreditor Agreement which would have
the effect of increasing its Obligations and indemnities hereunder or materially
affecting their rights or duties under the Security Documents unless it shall
have consented to such amendment.

 

3.5                           Further
Assurances. The Guarantor at its expense will execute,
acknowledge and deliver all such agreements and instruments and take all such
action as the Collateral Agent or any Creditor from time to time may reasonably
request in order to further effectuate the purposes of this Supplemental
Agreement and the Intercreditor Agreement and to carry out the terms hereof and
thereof.

 

3

 

3.6                           Address for
Notices. All notices and other communications given to the Guarantor under the
Intercreditor Agreement may be given at its address or telecopier number as
follows:

 

Resaca
Operating Company

1331
Lamar, Suite 1450

Houston,
Texas 77010

Attention:
Mr. Dennis Hammond

Telecopier
No.: (713) 655-1711

 

Section 4.                                                          Miscellaneous.

 

4.1                           Ratification; Confirmation. Except as
expressly amended hereby, the Agreement is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof shall remain in
full force and effect. This Agreement shall form a part of the Intercreditor
Agreement for all purposes, and every Creditor heretofore or hereafter
authenticated and delivered shall be bound hereby.

 

4.2                           Counterparts. This Amendment
may be executed by one or more of the parties hereto in any number of separate
counterparts, and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. Delivery of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.

 

4.3                           Successors and
Assigns. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.

 

4.4                           No Oral
Agreement. The Intercreditor Agreement as amended by
this Amendment represents the final agreement between the parties and may not
be contradicted by evidence of prior, contemporaneous, or unwritten oral
agreements of the parties. There are no subsequent oral agreements between the
parties.

 

4.5                           GOVERNING LAW. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF TEXAS BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

4.6                           Collateral
Agent Makes No Representation. Collateral Agent makes no representation
as to the validity or sufficiency of this Agreement, or the Intercreditor
Agreement as amended hereby.

 

4.7                           Effect of
Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.

 

[SIGNATURE PAGE BEGINS NEXT PAGE]

 

4

 

IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
first written above.

 

 

	
   

  	
  RESACA
  EXPLOITATION, INC., as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Chris Work

  
	
   

  	
   

  	
  Chris
  Work, as Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RESACA
  OPERATING COMPANY, as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dennis Hammond

  
	
   

  	
   

  	
  Dennis
  Hammond, as Director and President

  

 

SIGNATURE PAGE TO

FIRST AMENDMENT TO INTERCREDITOR AGREEMENT

 

S-1

 

	
   

  	
  CIT CAPITAL USA INC.,

  
	
   

  	
  as
  the Administrative Agent and Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David M. Bornstein

  
	
   

  	
   

  	
  David
  M. Bornstein, as Vice President

  

 

SIGNATURE PAGE TO

FIRST AMENDMENT TO INTERCREDITOR AGREEMENT

 

S-2

 

	
   

  	
  BP CORPORATION NORTH AMERICA INC.,

  
	
   

  	
  as
  an Approved Hedge Counterparty

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steve Provenzano

  
	
   

  	
  Name:

  	
  Steve
  Provenzano

  
	
   

  	
  Title:

  	
  CCO
  Financial Products

  

 

SIGNATURE PAGE TO

FIRST AMENDMENT TO INTERCREDITOR AGREEMENT

 

S-3

 

ANNEX I

 

Security Documents

 

1.                                       Deed of Trust,
Line of Credit Mortgage, Assignment, Security Agreement and Financing Statement
dated May 1, 2006 executed by the Borrower in favor of NGP Capital
Resources Company, as collateral agent for the benefit of the Creditors, pledging
Oil and Gas Properties located in Texas and New Mexico, amended by First
Amendment to Deed of Trust, Line of Credit Mortgage, Assignment, Security
Agreement and Financing Statement dated July 11, 2008 executed by the
Borrower in favor of NGP Capital Resources Company, as collateral agent for the
benefit of the Creditors, and as further amended by Second Amendment to Deed of
Trust, Line of Credit Mortgage, Assignment, Security Agreement and Financing
Statement of even date herewith executed by the Borrower in favor of the CIT
Capital USA Inc., as collateral agent for the benefit of the Creditors, each
recorded in the following jurisdictions:

 

Crane
County, Texas

Ector
County, Texas

Howard
County, Texas

Mitchell
County, Texas

Pecos
County, Texas

Winkler
County, Texas

Lea
County, New Mexico

Eddy
County, New Mexico

 

2.                                       UCC-1 Financing
Statement naming the Borrower as debtor and NGP Capital Resources Company as
secured party, covering all assets of the Borrower and filed with the Secretary
of State of Texas in connection with the Existing Credit Agreement.

 

3.                                       UCC-3 Financing
Statement Amendment amending item 2 above in connection with the resignation of
NGP Capital Resources Company as collateral agent and appointment of CIT
Capital USA Inc. as successor collateral agent under the Security Documents.

 

4                                          Amended and Restated
Security Agreement June 26, 2009 by the Borrower in favor of CIT Capital
USA Inc., as the collateral agent for the benefit of the Creditors.

 

5.                                       UCC-1 Financing
Statement naming the Borrower as debtor and CIT Capital USA Inc., as the
collateral agent for the benefit of the Creditors, as secured party, covering
all assets of the Borrower and filed with the Secretary of State of Texas in
connection with item 4 above.

 

6.                                       Guaranty
Agreement dated June 26, 2009 by Resaca Operating Company in favor of CIT
Capital USA Inc., as the collateral agent for the benefit of the Creditors.

 

 

Schedule I

 

To

 

Annex I

 

DESCRIPTION OF PLEDGED SECURITIES

 

Securities
pledged:

 

	
  Owner

  	
   

  	
  Issuer

  	
   

  	
  Percentage

  Owned

  	
   

  	
  Percentage

  Pledged

  	
   

  	
  Class of

  Stock or other

  Equity Interest

  	
   

  	
  No. of

  Shares

  	
   

  	
  Certificate

  No.

  
	
  Resaca Exploitation, Inc.

  	
   

  	
  Resaca Operating Company

  	
   

  	
  100%

  	
   

  	
  100%

  	
   

  	
  Common

  	
   

  	
  1000

  	
   

  	
  1

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