Document:

EX-10.4

Exhibit 10.4

GAS GATHERING AGREEMENT

          THIS GAS GATHERING AGREEMENT (this “Agreement”), dated effective July 15, 2009 (the
“Effective Date”), is by and among (i) NGAS Gathering II, LLC, a Kentucky limited liability
company (“NNG”) and Seminole Gas Company, L.L.C., an Oklahoma limited liability company
(“Seminole”), (NNG and Seminole are referred to herein collectively as the “Gathering
System Owners”) and (ii) Seminole Energy Services, LLC, an Oklahoma limited liability company
(“Shipper”). Gathering System Owners and Shipper are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.”

Recitals:

     A. Gathering System Owners own and operate a natural gas gathering system in southeastern
Kentucky, eastern Tennessee, and western Virginia.

     B. Shipper gathers, purchases, and receives natural gas under a Base Contract for Sale and
Purchase of Natural Gas, dated of even date herewith, with Daugherty Petroleum, Inc. (the
“NAESB Purchase Agreement”) that Shipper desires to gather through the Gathering System.

     C. Shipper may purchase or gather additional volumes of gas from time to time that Shipper
desires to gather through the Gathering System.

     D. Gathering System Owners desire and are willing to provide gathering services for Shipper
for volumes delivered to the Gathering System, on and subject to the terms and conditions of this
Agreement.

Agreements:

          NOW, THEREFORE, for good and valuable consideration, Gathering System Owners and Shipper agree
as follows:

Article 1 

Definitions

     1.1 Definitions. The following capitalized terms used in this Agreement shall have the
meanings set forth below:

     “Agreement” is defined in the preamble.

     “Annual Operating Costs” is defined in Section 4.3.

     “Applicable Law” means any applicable law, statute, rule, regulation,
ordinance, order, or other pronouncement, action, or requirement of any Governmental
Authority.

     “Asset Purchase Agreement” means the Asset Purchase Agreement, dated of even
date herewith, among NNG, Seminole, and certain other parties.

     “Btu” mean the International BTU, which is also called the Btu (IT).

     “Business Day” means any day except Saturday, Sunday, or Federal Reserve Bank
holidays.

     “Claims” means all losses, liabilities, or claims, including reasonable
attorneys’ fees and court costs.

     “Day” means a period of 24 consecutive hours, coextensive with a “day” as
defined by the Receiving Transporter.

     “Delivery Points” means (i) the points identified on Exhibit A at which
Gas is delivered to a Receiving Transporter by Gathering System Owners and (ii) any
additional delivery points that from time to time may be added to the Gathering System after
the Effective Date to permit delivery of Gas to other Receiving Transporters.

     “Effective Date” is defined in the preamble.

     “Firm” is defined in the Gas Purchase Contract.

     “Force Majeure” is defined in Section 12.1 and Section 12.2.

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     “Gas” means any mixture of hydrocarbons and noncombustible gases in a gaseous
state consisting primarily of methane.

     “Gathering Fees” is defined in Section 4.6.

     “Gathering System” means the gas gathering system described in Exhibit
A, together with any modifications, alterations, replacements, extensions, or expansions
from time to time to such gathering system, but excluding any Solely Owned Segments that may
be constructed from time to time.

     “Gathering System Owners” is defined in the preamble.

     “Governmental Authority” means any court, government (federal, state, local, or
foreign), department, political subdivision, commission, board, bureau, agency, official, or
other regulatory, administrative, or governmental authority.

     “Gross Heating Value” means the total calorific value (expressed in Btu’s)
obtained by the complete combustion, at constant pressure, of the amount of Gas which would
occupy a volume of one cubic foot at a temperature of sixty degrees Fahrenheit
(60oF), if saturated with water vapor and under a pressure equivalent to fourteen
and seventy-three hundredths (14.73) Psia and under standard gravitational force (980.665 cm
per second per second) with air of the same temperature and pressure as the Gas, when the
products of combustion are cooled to the initial temperature of the Gas and air and when the
water formed by combustion is condensed to the liquid state.

     “IRR” is defined in the Joint Ownership Agreement.

     “IRR Specified Discount Rate” is defined in the Joint Ownership Agreement.

     “Joint Ownership Agreement” means the Joint Ownership Agreement for the
Gathering System, dated of even date herewith, between Seminole and NNG.

     “Mcf” means 1,000 cubic feet of Gas.

     “Mcf/d” means Mcf per day.

     “MMBtu” means one million British thermal units, which is equivalent to one
dekatherm.

     “Month” means the period beginning on the first Day of the calendar month and
ending immediately prior to the commencement of the first Day of the next calendar month.

     “Monthly Capital Fee” is defined in Section 4.2.

     “Monthly Gathering Fee” means, for each Month, a gathering fee of $938,333,
unless Seminole acquires the ownership interest of NNG in the Gathering System under
Schedule  of the NAESB Purchase Agreement, whereupon the Monthly Gathering Fee shall
be reduced to $850,000. The Monthly Fee shall be escalated each Year under Section
4.4.

     “Monthly Operating Fee” means, for each Month, a fee equal to the sum of (i) a
fixed operating expense fee of $175,000 and (ii) a variable operating expense fee of $0.20
for each Mcf of Purchased Gas received at the Receipt Points and gathered hereunder in each
such Month.

     “NAESB Purchase Agreement” is defined in the recitals.

     “Notice” is defined in Section 15.1.

     “Party” and “Parties” are defined in the preamble.

     “Person” means any individual, corporation, partnership, joint venture, limited
liability company, association (whether incorporated or unincorporated), joint-stock
company, trust, Governmental Authority, unincorporated organization, or other entity

     “Primary Term” is defined in Article 2.

     “Purchased Gas” means all Gas gathered and purchased each Month by Shipper
under the Gas Purchase Contract.

     “Quarterly Capital Costs” is defined in Section 4.2.

     “Quarterly Capital Fee” is defined in Section 4.2.

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     “Receipt Points” means (i) the receipt points described in the Special
Provisions to the Gas Purchase Contract, as such exhibit may amended or modified from time
to time and (ii) any new receipt points that may, from time to time, be added to the
Gathering System after the Effective Date to allow Shipper to deliver Third Party Gas.

     “Receiving Transporter” means the Gas gathering or pipeline companies, local
distribution companies, or end-users taking delivery or custody of Gas at, or downstream of,
a Delivery Point.

     “Scheduled Gas” means the quantity of Shipper’s Gas confirmed by Gathering
System Owners and Shipper for gathering on the Gathering System.

     “SES” means Seminole Energy Services LLC.

     “Shipper” is defined in the preamble.

     “Shipper’s Gas” means all Purchased Gas and Third Party Gas delivered at the
Receipt Points.

     “Solely Owned Segment” is defined in the Joint Ownership Agreement.

     “Taxes” is defined in Section 9.1.

     “Third Party Gas” means all Gas delivered by Shipper to the Receipt Points,
other than Purchased Gas.

     “Year” means the period of time beginning on one Day and ending on the same Day
the following year.

     1.2 Attachments. Each exhibit or other attachment to this Agreement is a part of this
Agreement, but if there is any conflict or inconsistency between the main body of this Agreement
and any exhibit or other attachment, the provisions of the main body of this Agreement shall
prevail.

Article 2 

Term

     2.1 Term. The term of this Agreement shall commence on the Effective Date and
continue in effect through the close of the last Day of the Month following the fifteenth (15th)
anniversary of the Effective Date (the “Primary Term”) and, if not terminated in the
Primary Term, shall continue in effect or a second fifteen (15) year term (the “Secondary
Term”) on the same terms and conditions herein, and thereafter from year-to-year unless
terminated by either party upon written notice by either party not less than sixty (60) days prior
to the end of such then current one-year term. This Agreement may not be terminated by the
Gathering System Owners during the Primary Term, or as applicable, Secondary Term unless Shipper is
determined by a final, non-appealable judgment of a court with appropriate jurisdiction to have
engaged in gross negligence or willful misconduct in the performance by Shipper of its obligations
under this Agreement.

     2.2 Termination. This Agreement may terminated prior to the end of the primary term
by Gathering System Owners if Shipper fails to pay any undisputed amounts owed hereunder after
Gathering System Owners provide no less than 60 days prior written notice to Shipper of Shipper’s
failure to pay such undisputed amounts, notifying Shipper of the amounts owed, and stating in such
notice that this Agreement will terminate unless such amounts are paid in full by Shipper prior to
the end of such 60-day period.

Article 3 

Gathering of Gas

     3.1 Gathering System Dedication Gathering System Owners hereby commit and grant to
Shipper, and Shipper hereby reserves from Gathering System Owners, all (100%) of the gathering
capacity on the Gathering System each Day to gather Gas made available by or on behalf of Shipper
at the Receipt Points.

     3.2 Delivery Point Facilities. Gathering System Owners shall maintain, at their cost,
the right to use the connection and metering facilities necessary for delivery and measurement of
Shipper’s Gas into the facilities of the Receiving Transporters at the Delivery Points.

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     3.3 Scheduling. Shipper shall Notify Gathering System Owners not less than 4 Business
Days before the last day of each Month of the total volume of Gas (in Mcf/d and MMBtu’s) that
Shipper expects to deliver to in the following Month, specifying the volumes to be delivered to
Gathering System Owners at each Receipt Points. Shipper may modify its nominations at any time
upon at least 24 hours Notice. The Parties shall coordinate their nomination activities, giving
sufficient time to meet the deadlines of the Receiving Transporters. Each Party shall give the
other Party timely prior Notice, sufficient to meet the requirements of all Receiving Transporters
involved in the transaction, of the quantities of Shipper’s Gas to be delivered to each Delivery
Point each Day. If either Party becomes aware that actual deliveries at the Receipt Points or
Delivery Points are greater or lesser than the quantities of Scheduled Gas, such Party shall
promptly Notify the other Party. Throughout the term of this Agreement, the Parties agree to work
together to refine and improve the scheduling, nominating, and balancing procedures applicable to
Shipper’s Gas to accommodate each Receiving Transporter’s nomination procedures (or changes to such
procedures) and the operational requirements of both Gathering System Owners and Shipper.

     3.4 Memorandum. Gathering System Owners shall enter into and deliver to Shipper, at
Shipper’s request, a fully recordable memorandum of this Agreement, in a form acceptable to
Shipper.

Article 4 

Gathering Fees

     4.1 Purchased Gas. For all volumes (in Mcf’s) of Purchased Gas delivered to the
Receipt Points each Month, Shipper shall pay to Gathering System Owners the sum of the Monthly
Gathering Fee, the Monthly Capital Fee, and the Monthly Operating Fee for that Month.

     4.2 Monthly Capital Fee. No later than 30 days after the end of each calendar
quarter, Gathering System Owners shall determine (i) the total capital costs paid by Gathering
System Owners in the prior calendar quarter that were attributable to expansions or extensions of
the Gathering System made on behalf of, or to service (whether directly or indirectly), the seller
under the NAESB Purchase Agreement (“Quarterly Capital Costs”) and (ii) the amount (if paid
Monthly) that would provide to Gathering System Owners a 20% IRR (meaning an IRR with an IRR
Specified Discount Rate equal to 20%) on all such Quarterly Capital Costs over the remaining
Primary Term or Secondary Term, as the case may be, (the “Quarterly Capital Fee”). The
“Monthly Capital Fee” means, for each Month, the sum of the Quarterly Capital Fees
determined for all prior calendar quarters (or partial calendar quarter in the case of the first
calendar quarter after the Effective Date) in the term hereof.

     4.3 Annual Adjustment of Monthly Operating Fee. 

	 	(i)	 	Purpose. The Monthly Operating Fee is intended to reflect, and
reimburse the Gathering System Owners for, the actual out-of-pocket costs of the
Gathering System Owners of operating, maintenance, replacement and repair of the
Gathering System.
	 
	 	(ii)	 	Statement. On or before the last Day of April each Year, the
Gathering System Owners shall provide a written statement to Shipper showing in
reasonable detail the actual out-of-pocket costs (without overhead) incurred by
Gathering System Owners to operate, maintain, replace and repair the Gathering System
in the prior calendar Year (the “Annual Operating Costs”).
	 
	 	(iii)	 	Adjustment. If the aggregate Monthly Operating Fees paid by Shipper
hereunder for the prior calendar Year (excluding any increase or decrease for any prior
Year adjustment) are less than the Annual Operating Costs for the same period, then
Shipper shall be obligated to make-up such deficit by paying to Gathering System Owners
the amount of such deficit through an increase (in equal Monthly increments) in the
Monthly Operating Fees paid by Shipper for the balance of that calendar Year. If the
aggregate Monthly Operating Fees paid by Shipper hereunder for the prior Year
(excluding any increase or decrease for any prior Year adjustment) exceed the Annual
Operating Costs for the same period, then Gathering System Owners shall be obligated to
refund such excess through a reduction (in equal Monthly increments) in the Monthly
Operating Fees paid by Shipper for the balance of that calendar Year.
	 
	 	(iv)	 	Partial First Year. The first determination of the Annual Operating
Costs by Gathering System Owners hereunder shall be made based on the number of Months
in the first partial calendar Year in the term hereof.
	 
	 	(v)	 	Survival. The obligation to adjust the Monthly Operating Fee shall
survive the termination or expiration of this Agreement. Upon such termination or
expiration, the Annual Operating Costs shall be promptly determined by Gathering System
Owners for the final partial Year in the term hereof. Any adjustment due under this
Section 4.3 shall be paid in cash by Shipper or Gathering

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	 	 	 	System Owners, as the case may be, to the other Party within 15 Days of the date of
Gathering System Owners statement showing the amount owed, but in no event later than
30 Days after the date of termination or expiration of this Agreement.

     4.4 Third Party Gas. For all volumes (in Mcf’s) of Third Party Gas delivered to the
Receipt Points in each Month, Shipper shall pay the Gathering System Owners the fees, charges, or
other amounts that Shipper collects or deducts as gathering fees to gather such Third Party Gas
from the Receipt Points to the Delivery Points under the contracts under which Shipper purchases
and/or gathers such Third Party Gas each Month less an administrative fee of $0.05 per Mcf.
Shipper shall retain, and shall have no obligation to pay to Gathering System Owners, any other
amounts received by Shipper under such contracts for Third Party Gas.

     4.5 Escalation of the Monthly Gathering Fee. The Monthly Gathering Fee shall be
escalated on each anniversary of the Effective Date to equal the product of: (i) the applicable fee
then in effect multiplied by (ii) a factor of 1.015.

     4.6 Gathering Fees. The Monthly Gathering Fee, the Monthly Capital Fee, and the
Monthly Operating Fee are referred to herein collectively as the “Gathering Fees.”

     4.7 Payment. Payment of the Gathering Fees and amounts owed under Section 4.4
shall be made in accordance with the procedures set forth in Article 11.

Article 5 

Quantity of Gas

     5.1 Receipt Points. Shipper agrees to tender, or cause to be tendered, all of
Shipper’s Gas to the Receipt Points each Day, and Gathering System Owners agree to accept Shipper’s
Gas at the Receipt Points, not to exceed the available capacity of the Gathering System on any Day.

     5.2 Gas Redelivery. Gathering System Owners shall redeliver Shipper’s Gas to or on
behalf of Shipper at the Delivery Points. Gathering System Owners agree each Day during the term of
this Agreement to receive into the Gathering System at the Receipt Points, and gather and deliver
on a Firm basis to the Delivery Points, under this Agreement, the total quantity of Gas delivered
by or on behalf of Shipper, up to the available capacity of the Gathering System on each such Day.
Shipper shall bear line loss, dehydration fuel, and applicable compression fuel which may occur or
be necessary to accomplish the gathering of Gas hereunder, other than extraordinary line losses
which result from the proven gross negligence or willful misconduct of Gathering System Owners in
performing their obligations hereunder which shall be borne entirely by Gathering System Owners.
Line loss (or gain), dehydration fuel, and applicable compression fuel shall be measured for each
Month as the difference between the total volume of Gas received by the Gathering System Owners at
the Receipt Points less the total volume of Gas delivered by the Gathering System Owners at the
Delivery Points.

Article 6 

Pressures

          Shipper’s Gas shall be delivered at the Receipt Points at pressures sufficient to effect
delivery into Gathering System Owners’ facilities at the Receipt Points, and to allow Gathering
System Owners to redeliver Shipper’s Gas into the Receiving Transporters at the Delivery Points
under normal operating conditions as they may exist from time to time.

Article 7 

Measurement and Testing

     7.1 Receipt Point Facilities. The volume of Gas delivered by Shipper shall be measured
at the Receipt Points. The facilities to measure the volume and quality of Gas delivered at the
Receipt Points will be owned, maintained, and operated by the Gathering System Owners.

     7.2 Delivery Point Facilities. The volume of Gas delivered by Gathering System Owners
at the Delivery Points shall be metered through a meter caused to be located by Gathering System
Owners at the Delivery Points.

     7.3  Commingled Gas. If, at any time, or from time to time, Gathering System Owners
commingle Gas from any Receipt Point with any other Gas, Gathering System Owners agree to measure
such other Gas prior to such other Gas entering the Gathering System.

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     7.4 Unit of Measurement. The unit of measurement for Gas hereunder shall be one (1)
cubic foot of Gas and the term “cubic foot of Gas” wherever used herein shall mean a cubic foot of
Gas at a temperature of sixty degrees Fahrenheit (60oF) and at a pressure of fourteen
and seventy-three hundredths (14.73) Psia.

     7.5 Meters. The Gas shall be metered by orifice meters or other measurement
facilities (including electronic flow computers) which shall be constructed and installed in
accordance with the applicable provisions of the then current American Gas Association’s Gas
Measurement Committee Report No. 3, as amended. The volumes of Gas received and delivered by
Gathering System Owners as measured at pipeline pressures and temperatures shall be computed from
the meter records and converted into the unit of measurement specified above in accordance with the
methods prescribed in the then current Gas Measurement Committee Report No. 3 of the American Gas
Association, including the appendix thereto. The Gathering System Owners grant to Shipper the
right to monitor the receipt and delivery point meters constituting a portion of the Gathering
System for purposes of verifying compliance with this Agreement and, if the Gathering System Owners
fail to take any meter readings and measurements when and as required under this Agreement, to take
such required meter readings and measurements. Correction shall be made for deviation from the
Ideal Gas Laws at the pressure and temperature at which the Gas is metered. To determine the
factors for such correction a quantitative analysis of the Gas shall be made at reasonable
intervals, and such factors shall be obtained from data contained in the then current
“Super-Compressibility Factors for Natural Gas,” Volumes 1 through 6, inclusive, or in “Tables for
the Determination of Super-Compressibility Factors for Natural Gas Containing Nitrogen and/or
Carbon Dioxide”, Volume 7, as published by the American Gas Association, or any subsequent revision
thereof. For the purposes of measurement and meter calibration, the atmospheric pressure shall be
assumed to be 13.2 pounds per square inch, without regard to variations in natural atmospheric
pressure from time to time.

     7.6 Specific Gravity. The specific gravity of the Gas flowing through the meter or
meters at the Receipt Points shall be determined by Gathering System Owners at such intervals as
may be practicable under the circumstances. All such determinations of specific gravity shall be
made by a standard gravity balance in accordance with the provisions of the Natural Gas Processors
Association Publication No. 3130, entitled “Standard Method for Determining the Specific Gravity of
Gas”, or by a gravitometer employing the “Momentum Method” of specific gravity determinations as
described in Chapter VII, “Determination of Specific Gravity”, of the then current American Gas
Association Gas Measurement Manual. The specific gravity of the Gas flowing through each meter
determined by either of the above-mentioned methods shall be used in computing the volume of Gas
delivered through such meter. The specific gravity determined by any test shall apply from the
date the test was taken until the date of the next test.

     7.7 Temperature. Temperature of the Gas gathered hereunder shall be determined by a
recording thermometer to record the temperature of the Gas flowing through each meter, and the
arithmetic average of the hourly temperatures recorded shall be used in correcting the volumes
delivered hereunder to the unit of measurement specific above.

     7.8  Testing of Equipment. The accuracy of Gathering System Owners’ measuring
equipment shall be verified by test, using means and methods generally acceptable in the gas
industry, at reasonable intervals. Notice of the time and nature of each test shall be given by
Gathering System Owners to Shipper sufficiently in advance to permit convenient arrangement for
Shipper’s representative to be present. Measuring equipment found to be registering inaccurately
shall be adjusted to read as accurately as possible. If, after such notice, Shipper fails to have
a representative present, the results of the test shall nevertheless be considered accurate until
the next test. Gathering System Owners shall, upon written request by Shipper, conduct a test of
Gathering System Owners’ measuring equipment, but no more frequently than once a month. All tests
of such measuring equipment shall be made at Gathering System Owners’ expense, except that Shipper
shall bear the expense of tests made at its request if the inaccuracy is found to be two percent
(2%) or less.

     7.9 Corrections. If, for any reason, any measuring equipment is inoperative or
inaccurate so that the volume of Gas delivered is not correctly indicated by the reading thereof
and, if such reading is in error by more than two percent (2%) in the measurement of Gas, then the
volume of Gas delivered, during the period such measuring equipment is
inoperative or inaccurate, shall be determined by the Parties on the basis of the best data
available using the first of the following methods which is feasible:

	 	(i)	 	by using the registration of any check measuring equipment installed and
accurately registering; or
	 
	 	(ii)	 	by correcting the error if the percentage of error is ascertainable by
calibration, test, or mathematical calculations; or

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	 	(iii)	 	by comparing deliveries made during preceding periods under similar delivery
conditions when the meter was registering accurately.

An adjustment based on such determination shall be made for such period of inaccuracy as may be
definitely known, or if not known, then for one-half (1/2) the period since the date of the last
meter test.

     7.10 Inspections. Gathering System Owners and Shipper shall have the right to inspect
equipment installed or furnished by the other Party, and the charts and other measurement or test
data of the other Party, at all times during business hours, but the reading, calibration, and
adjustment of such equipment and changing of charts shall be performed by the Party installing and
furnishing same. Unless the Parties otherwise agree, each Party shall preserve all original test
data, charts, and other similar records in such Party’s possession for a period of at least two (2)
years.

Article 8 

Quality Specifications

     8.1 Merchantable Gas. Gas delivered by Shipper hereunder shall be merchantable Gas
conforming to the quality specifications in this Article 8.

     8.2 Heating Quality. Shipper’s Gas shall have a Gross Heating Value of not less than
nine hundred sixty-seven (967) Btu’s.

     8.3 Sulfur, Carbon Dioxide, Oxygen, and Nitrogen. Shipper’s Gas shall not contain any
of the following substances in excess of the stated limits: one quarter (1/4) grain of hydrogen
sulfide per hundred cubic feet; twenty (20) grains of total sulfur per hundred (100) cubic feet;
ten parts per million (10 ppm) by volume of oxygen; or three percent (3%) by volume of nitrogen;
more than four percent (4%) by volume of a combined total of carbon dioxide and nitrogen
components; provided, however, that the total carbon dioxide content shall not exceed three percent
(3%) by volume. Shipper shall make reasonable efforts to keep Shipper’s Gas entirely free of
oxygen.

     8.4 Temperature. The temperature of Shipper’s Gas at the Receipt Points shall not be
in excess of one hundred twenty degrees Fahrenheit (120oF).

     8.5 Water and Hydrocarbon Dew Point. Shipper agrees that, at the temperature and
pressure Shipper’s Gas is delivered hereunder, Shipper’s Gas shall not contain any hydrocarbon
fractions which would condense to free liquids in the pipeline at the operating pressure of the
Gathering System.

     8.6 Other Substances. Shipper’s Gas shall be commercially free of solids, sand, dust,
gums, crude oil, water, and hydrocarbons in the liquid phase, and other objectionable substances
which may be injurious to pipelines or which may interfere with the transmission or commercial use
of Shipper’s Gas.

     8.7 Quality Guidelines. Notwithstanding the above, all Gas delivered hereunder shall
conform to the then current quality specifications as contained in the Spectra Energy Partners, LP
- East Tennessee Natural Gas Pipeline tariff (the “East Tennessee Tariff”), other than the
specifications for maximum Btu content and hydrocarbon dewpoint level, which shall not be required
to be met.

     8.8 Tests. Tests to determine the total sulfur, hydrogen sulfide, carbon dioxide,
oxygen, and water vapor content of Shipper’s Gas at the Receipt Points shall be made by Gathering
System Owners, at Shipper’s expense, by approved standard methods in general use in the gas
industry. Such tests shall be scheduled and made at the same time as the meter tests provided for
in Section 7.8, but not more frequently than once each calendar quarter.

     8.9 Sub-Quality Gas. Gathering System Owners shall have the right, upon notice to Shipper, to discontinue or
curtail receipt of Shipper’s Gas hereunder whenever Shipper’s Gas does not conform to the quality
specifications in this Article 8, including Gas containing heavy-end liquid hydrocarbon
compounds, including ethane, such that the Gas cannot be processed by the Rogersville Plant (as
defined in the Gas Purchase Contract) to yield residual gas that conforms to the maximum Btu
specification set forth in the East Tennessee Tariff or that is otherwise acceptable for receipt
and transportation by such pipeline. Shipper shall have the option to condition or treat such
non-conforming Gas to make it conform to the quality specifications of this Agreement, at Shipper’s
cost.

Article 9 

Taxes and Warranties

     9.1 Taxes. Shipper shall pay or cause to be paid, and agrees to hold Gathering
System Owners harmless as to the payment of, all excise, gross production, severance, sales,
occupation and all other taxes, charges, or impositions of every kind and character required by
statute or by any Governmental Authority with respect to

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Shipper’s Gas and the handling thereof prior to receipt thereof by Gathering System Owners.
Gathering System Owners shall pay or cause to be paid all taxes and assessments, if any, imposed
upon Gathering System Owners for the activity of gathering of Shipper’s Gas after receipt and prior
to redelivery thereof by Gathering System Owners. Neither Party shall be responsible or liable for
any taxes or other statutory charges levied or assessed against the facilities of the other Party
used for the purpose of carrying out the provisions of this Agreement.

     9.2 No Liens. Each Party warrants that all Gas delivered by it to the other Party
will be free from all liens and adverse claims created by, through or under it, and each Party
shall indemnify the other against all damages, costs, and expenses arising therefrom.

     9.3 Other Warranties. EXCEPT AS SET FORTH HEREIN, NEITHER PARTY MAKES ANY OTHER
WARRANTIES, EXPRESSED OR IMPLIED, AND SPECIFICALLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE GAS DELIVERED HEREUNDER.

Article 10 

Control, Possession And Title

     10.1 Control and Possession. As between the Parties, Shipper shall be deemed to be in
exclusive control and possession of Shipper’s Gas delivered hereunder and responsible for any
damage or injury caused thereby prior to the time the same shall have been delivered to Gathering
System Owners at the Receipt Points and after Shipper’s Gas is redelivered to or on behalf of
Shipper at the Delivery Points. After delivery of Shipper’s Gas to Gathering System Owners at the
Receipt Points, Gathering System Owners shall be deemed to be in exclusive control and possession
thereof and responsible for any injury or damage caused thereby until redelivered to or on behalf
of Shipper at the Delivery Points.

     10.2 Indemnity. Shipper agrees to indemnify Gathering System Owners and save them
harmless from all Claims arising from or out of Claims of personal injury or property damage from
Shipper’s Gas or other charges thereon which attach when Shipper shall be deemed to be in control
and possession of Shipper’s Gas. Gathering System Owners agree to indemnify Shipper and save it
harmless from all Claims regarding payment, personal injury or property damage from said Gas or
other charges thereon which attach after control and possession passes to Gathering System Owners.
IT IS THE INTENT OF THE PARTIES THAT THE INDEMNITIES SET FORTH IN THIS SECTION 10.2 ARE
WITHOUT REGARD TO THE CAUSES THEREOF, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY
INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE, OR
THE STRICT LIABILITY OF ANY INDEMNIFIED PARTY OR OTHER PERSON.

     10.3 Waiver of Damages. A PARTY’S LIABILITY HEREUNDER SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES ONLY. SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS,
OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT, OR CONTRACT, UNDER ANY INDEMNITY
PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON
REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING THE STRICT LIABILITY OR NEGLIGENCE OF ANY PARTY, WHETHER SUCH STRICT LIABILITY OR
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED
TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE
DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

Article 11 

Billing and Payments

     11.1 Billing. Seminole, as manager of the Gathering System on behalf of the Gathering
System Owners, shall invoice Shipper for volumes of Shipper’s Gas received and allocated for
delivery in the preceding Month and for any other applicable charges, providing supporting
documentation acceptable in industry practice to support the amounts charged.

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     11.2 Payment. Shipper shall remit to Seminole, on behalf of the Gathering System
Owners, the amount due under Section 11.1 in the manner specified in the invoice but no
earlier than the first to occur of (i) the date on which the purchaser of Shipper’s Gas pays
Shipper for Shipper’s Gas purchased in the prior Month and (ii) thirty (30) Days after the end of
the production Month for such Gas; provided, however, that if any customer(s) listed in
Exhibit C hereto shall pay Shipper for any Gas purchased by and delivered to such customer
during the prior Month, payment for such quantity of Shipper’s Gas shall not be made until the
third Business Day after such customer remits payment to Shipper for such quantity of Shipper’s
Gas. If such date is not a Business Day, payment is due on the next Business Day following such
date.

     11.3 Dispute. If Shipper, in good faith, disputes the amount of any such invoice or
any part thereof, Shipper will pay such amount as it concedes to be correct. If Shipper disputes
the amount due, it must provide supporting documentation acceptable in industry practice to support
the amount paid or disputed. If the Parties are unable to resolve such dispute, either Party may
pursue any remedy available at law or in equity to enforce its rights under this Section
11.3.

     11.4 Interest. If Shipper fails to remit the full amount payable when due, interest
on the unpaid portion shall accrue from the date due until the date of payment at a rate equal to
the lower of (i) the then-effective prime rate of interest published under “Money Rates” by
The Wall Street Journal, plus two percent per annum, or (ii) the maximum applicable lawful interest
rate.

     11.5 Audit. A Party shall have the right, at its own expense, upon reasonable Notice
and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the
books, records, and telephone recordings of the other Party only to the extent reasonably necessary
to verify the accuracy of any statement, charge, payment, or computation made under this Agreement,
including confirmation by Shipper of the Annual Operating Costs under Section 4.2. This
right to examine, audit, and to obtain copies shall not be available with respect to proprietary
information not directly relevant to transactions under this Agreement. All invoices and billings
shall be conclusively presumed final and accurate and all associated claims for under- or
overpayments shall be deemed waived unless such invoices or billings are objected to in writing,
with adequate explanation and/or documentation, within 2 Years after the Month of Gas delivery.
All retroactive adjustments under this Section 11.5 shall be paid in full by the Party
owing payment within 30 Days of Notice and substantiation of such inaccuracy.

     11.6 Netting. The Parties shall net all undisputed amounts due and owing, and/or past
due, arising under Agreement such that the Party owing the greater amount shall make a single
payment of the net amount to the other Party in accordance with Section 11.2; provided that
no payment required to be made pursuant to Section 11.3 shall be subject to netting under
this Section 11.6.

Article 12 

Force Majeure

     12.1 Non-Performance. Except with regard to a Party’s obligation to make payments due
under Article 11, neither Party shall be liable to the other for failure to perform
hereunder, to the extent such failure was caused by Force Majeure. The term “Force
Majeure” as employed herein means any cause not reasonably within the control of the Party
claiming suspension, as further defined in Section 12.2.

     12.2 Definition. “Force Majeure” includes, but is not limited to, the
following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires,
storms or storm warnings, such as hurricanes, which result in evacuation of the affected area,
floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or
equipment or lines of pipe; (ii) weather related events affecting an entire geographic region, such
as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption
and/or curtailment of Firm transportation and/or storage by Receiving Transporters; (iv) acts of
others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections
or wars; and (v) governmental actions such as necessity for
compliance with any court order, law, statute, ordinance, regulation, or policy having the
effect of law promulgated by a Governmental Authority having jurisdiction. Shipper and Gathering
System Owners shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to
resolve the event or occurrence once it has occurred in order to resume performance.

     12.3 Nonperformance. Neither Party shall be entitled to the benefit of the provisions
of Force Majeure to the extent performance is affected by any or all of the following
circumstances: (i) the Party claiming excuse failed to remedy the condition and to resume the
performance of such covenants or obligations with reasonable dispatch; or (ii) economic hardship,
to include, without limitation, Shipper’s ability to transport Gas at a lower or more advantageous
fees than the Gathering Fees, or Pipeline Owner’s ability to gather Gas from other shippers at
higher or more advantageous fees than the Gathering Fees.

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     12.4 Strikes. Notwithstanding anything to the contrary herein, the Parties agree that
the settlement of strikes, lockouts, or other industrial disturbances shall be within the sole
discretion of the Party experiencing such disturbance.

     12.5 Notice. The Party whose performance is prevented by Force Majeure must provide
Notice to the other Party. Initial notice may be given orally; however, Notice with reasonably
full particulars of the event or occurrence is required as soon as reasonably possible. Upon
providing Notice of Force Majeure to the other Party, the affected Party will be relieved of its
obligation, from the onset of the Force Majeure event, to make or accept delivery of Gas, as
applicable, to the extent and for the duration of Force Majeure, and neither Party shall be deemed
to have failed in such obligations to the other during such occurrence or event.

Article 13 

Assignment

     13.1 Restriction on Assignment. Neither Party may assign or delegate any of its rights or
obligations under this Agreement, by operation of law, change of control, or otherwise, without the
prior written consent of the other Party, which consent may be withheld at the discretion of such
other Party. If Seminole exercises its option under the Asset Purchase Agreement to acquire all of
the ownership interests in the Gathering System, then, effective upon completion of such
acquisition, either Party may assign or delegate its rights or obligations under this Agreement
with the consent of the other Party, which consent shall not be unreasonably withheld, conditioned,
or delayed. Any purported assignment or delegation without such consent shall be void and
ineffective. Notwithstanding the foregoing, NNG may collaterally assign its interest under this
Agreement to the Administrative Agent (as such term is defined in the NGAS Credit Agreement, as
defined in the APA) for the benefit of the lenders under the NGAS Credit Agreement, as collateral
for the Obligations (as such term is defined therein) so long as the obligations of NNG thereunder
do not exceed in the aggregate $7,500,000 and upon exercise of the NGAS Option (as defined in the
APA) and the payment by Seminole pursuant to the terms thereunder, such collateral assignment shall
be released.

     13.2 Inurement. Subject to the foregoing provision, this Agreement binds and inures
to the benefit of the Parties and their respective successors and assigns.

Article 14 

Jurisdiction

     14.1 Regulatory Bodies. This Agreement is subject to, and each Party will comply
with, all present and future valid laws, rules, and regulations of all federal, state, and local
authorities now or hereafter having jurisdiction over either or both Parties or their facilities.

     14.2 Changes in Laws. If any new or amended law, rule, or regulation materially
prohibits the Gathering System Owners from providing services to Shipper hereunder substantially in
accordance with the original terms of this Agreement or if results in the performance of this
Agreement being rendered uneconomic, in the good faith opinion of Shipper, then Gathering System
Owners and Shipper shall negotiate in good faith to amend the terms of this Agreement so that (i)
the new or amended law, rule, or regulation may be complied with and (ii) Gathering System Owners
and Shipper will both continue to receive the rights and benefits originally provided for herein,
and (iii) Shipper receives the net economic benefit originally contemplated herein.

Article 15 

Notices

     15.1 Notice. All notices, invoices, payments, and other communications made pursuant
to this Agreement (“Notice”) shall be made to the addresses shown in Exhibit B.

     15.2 Method. All Notices required hereunder may be sent by facsimile or mutually acceptable electronic
means, a nationally recognized overnight courier service, first class mail, or hand delivered.

     15.3 Delivery. Notice shall be given when received on a Business Day by the
addressee. In the absence of proof of the actual receipt date, the following presumptions will
apply. Notices sent by facsimile shall be deemed to have been received upon the sending Party’s
receipt of its facsimile machine’s confirmation of successful transmission. If the Day on which
such facsimile is received is not a Business Day or is after five p.m. on a Business Day, then such
facsimile shall be deemed to have been received on the next following Business Day. Notice by
overnight mail or courier shall be deemed to have been received on the next Business Day after it
was sent or such earlier time as is confirmed by the receiving Party. Notice by first class mail
shall be considered delivered five Business Days after mailing.

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Article 16 

Other Provisions

     16.1 Applicable Law. This Agreement shall be construed, enforced and interpreted
according to the laws of the State of Texas, without regard to the conflicts of law rules thereof.
Each Party hereby irrevocably submits to the jurisdiction of the courts of the State of Texas and
the federal courts of the United States of America located in Houston, Texas over any dispute or
proceeding arising out of or relating to this Agreement or any of the transactions contemplated
hereby, and each Party irrevocably agrees that all claims in respect of such dispute or proceeding
shall be heard and determined in such courts. Each Party hereby irrevocably waives, to the fullest
extent permitted by Applicable Law, any objection which it may now or hereafter have to the venue
of any dispute arising out of or relating to this Agreement or any of the transactions contemplated
hereby brought in such court or any defense of inconvenient forum for the maintenance of such
dispute or action. Each Party agrees that a judgment in any dispute heard in the venue specified
by this section may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Applicable Law

     16.2 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT.

     16.3 Representations. Each Party represents to the other Parties during the term
hereof as follows: (i) there are no suits, proceedings, judgments, or orders by or before any
governmental authority that materially adversely affect its ability to perform this Agreement or
the rights of the other Parties hereunder, (ii) it is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its formation, and it has the legal right, power and
authority and is qualified to conduct its business, and to execute and deliver this Agreement and
perform its obligations hereunder, (iii) the making and performance by it of this Agreement is
within its powers, and has been duly authorized by all necessary action on its part, (iv) this
Agreement constitutes a legal, valid, and binding act and obligation of it, enforceable against it
in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws
affecting creditor’s rights generally, and with regard to equitable remedies, to the discretion of
the court before which proceedings to obtain same may be pending, and (v) there are no bankruptcy,
insolvency, reorganization, receivership or other arrangement proceedings pending or being
contemplated by it.

     16.4 Integrated Agreement. If any provision in this Agreement is determined to be
invalid, void or unenforceable by any court having jurisdiction, such determination shall not
invalidate, void, or make unenforceable any other provision, agreement or covenant of this
Agreement.

     16.5 Waiver. No waiver of any breach of this Agreement shall be held to be a waiver
of any other or subsequent breach.

     16.6 Rules of Construction. In construing this Agreement, the following principles
shall be followed:

	 	(i)	 	no consideration shall be given to the fact or presumption that one Party had a
greater or lesser hand in drafting this Agreement;
	 
	 	(ii)	 	examples shall not be construed to limit, expressly or by implication, the
matter they illustrate;
	 
	 	(iii)	 	the word “includes” and its syntactical variants mean “includes, but is not
limited to” and corresponding syntactical variant expressions;
	 
	 	(iv)	 	a defined term has its defined meaning throughout this Agreement, regardless of
whether it appears before or after the place in this Agreement where it is defined;
	 
	 	(v)	 	the plural shall be deemed to include the singular, and vice versa; and
	 
	 	(vi)	 	each gender shall be deemed to include the other genders.

     16.7 No Third Party Beneficiaries.
There is no third party beneficiary to this Agreement.

     16.8 Headings. The headings and subheadings contained in this Agreement are used
solely for convenience and do not constitute a part of this Agreement between the Parties and shall
not be used to construe or interpret the provisions of this Agreement.

     16.9 Confidentiality. Neither Party shall disclose directly or indirectly without the
prior written consent of the other Party the terms of this Agreement to a third Party (other than
the employees, lenders, counsel, accountants and other agents of the Party, or prospective
purchasers of all or substantially all of a Party’s assets or of any rights under this Agreement,
provided such Persons shall have agreed to keep such terms confidential) except (i)

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in order to comply with any applicable law, order, regulation, or exchange rule, (ii) to the
extent necessary for the enforcement of this Agreement, (iii) to the extent necessary to implement
this Agreement, and (iv) to the extent necessary to comply with a regulatory agency’s reporting
requirements. Each Party shall notify the other Party of any proceeding of which it is aware which
may result in disclosure of the terms of any transaction (other than as permitted hereunder) and
use reasonable efforts to prevent or limit the disclosure. The existence of this Agreement is not
subject to this confidentiality obligation. Subject to Section 16.2, the Parties shall be
entitled to all remedies available at law or in equity to enforce, or seek relief in connection
with this confidentiality obligation. The terms of any transaction hereunder shall be kept
confidential by the Parties hereto for one year from the expiration of this Agreement.

     In the event that disclosure is required by a Governmental Authority or applicable law, the
Party subject to such requirement may disclose the material terms of this Agreement to the extent
so required, but shall promptly notify the other Party, prior to disclosure, and shall cooperate
(consistent with the disclosing Party’s legal obligations) with the other Party’s efforts to obtain
protective orders or similar restraints with respect to such disclosure at the expense of the other
Party.

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

	 	 	 	 	 
	 	SEMINOLE ENERGY SERVICES, LLC

 	 
	 	By:  	/s/ Robert B. Rosene, Jr.
 	 
	 	 	Robert B. Rosene, Jr., 	 
	 	 	President 	 
	 
	 	NGAS GATHERING II, LLC

 	 
	 	By:  	./s/ William G. Barr III
 	 
	 	 	William G. Barr III, 	 
	 	 	Chief Executive Officer 	 
	 
	 	SEMINOLE GAS COMPANY, L.L.C.

 	 
	 	By:  	/s/ Robert B. Rosene, Jr.
 	 
	 	 	Robert B. Rosene, Jr., 	 
	 	 	President 	 
	 

12EX-10.5

Exhibit 10.5

SPECIAL PROVISIONS FOR NAESB BASE CONTRACT

FOR SALE AND PURCHASE OF NATURAL GAS

     Seminole Energy Services, LLC (“Buyer”) and Daugherty Petroleum, Inc. (“Seller”) hereby agree
as of July 15, 2009 (the “Effective Date”) to the following Special Provisions, which hereby amend
and modify the NAESB Base Contract for Sale and Purchase of Natural Gas (including the General
Terms and Conditions) (the “Base Contract”) executed by the parties on July 15, 2009. All
capitalized terms, unless otherwise defined herein, have the meanings set forth in the Base
Contract.

Modifications to Base Contract

     1. Additional Definitions. Section 2 of the Base Contract is hereby amended to add the following definitions:

     “Asset Purchase Agreement” is defined in the Gathering Agreement.

     “Committed Reserves” means all of Seller’s Interests in and to all natural gas reserves in and
under or that otherwise may be attributable to any of the lands or geographic area covered by, or
included within the four corners of, the map depicted on Exhibit A, excepting and excluding
therefrom the Gausdale/KayJay, Fount, Pineville, and Skinner Production Areas.

     “Contract Quantity” means the sum of Seller’s Daily Deliverability of Gas and the Existing
Contracts Volume, not to exceed an aggregate of 30,000 Mcf’s per Day.

     “Delivery Points” means the points on the Gathering System described in Exhibit B
where Buyer purchases Seller’s Gas hereunder.

     “Existing Contracts” means the Gas Gathering Agreement, dated March 14, 2006, between NGAS
Gathering, LLC and Chesapeake Appalachia, L.L.C. and the Gas Gathering Agreement, dated October 5,
2004, between Duke Energy Gas Services Corporation and Forexco, Inc.

     “Existing Contracts Volume” means the volume of Gas to be gathered by Seller under the
Existing Contracts on any Day, together with volumes of Gas to be sold by Seller to Stand Energy
under the Stand Contract to the extent permitted herein below.

     “Forward Sale Agreement” is defined in Section 15.13 hereof.

     “Gathering Agreement” means the Gas Gathering Agreement, dated of even date herewith, between
Buyer and Seminole Stone Mountain, LLC and NGAS Gathering II, LLC.

     “Gathering Fees” is defined in the Gathering Agreement.

     “Gathering System” is defined in the Joint Ownership Agreement.

     “Joint Ownership Agreement” is defined in the Asset Purchase Agreement, as such joint
Ownership Agreement may be amended from time to time.

     “Processing Agreement” means the Gas Processing Agreement, dated September 14, 2007, among
Seller, as producer, and Seller and Seminole Gas Company, as plant owners.

     “Receipt Points” means the points on the Gathering System described in Exhibit B where
Seller’s Gas is received by Buyer into the Gathering System.

     “Rogersville Plant” means the Rogersville Gas Processing Plant in Christian County, Tennessee.

     “Seller’s Daily Deliverability of Gas” means the volume of Gas which is physically capable of
being produced by Seller on any Day in accordance with applicable laws and good industry practices
from the Committed Reserves.

     “Seller’s Interests” means the oil, gas, and mineral interests owned or controlled by Seller
or its Affiliates in and to any of the lands or geographic area covered by, or included within the
four corners of, the map depicted on Exhibit A, excepting and excluding therefrom the
Gausdale/KayJay, Fount, Pineville, and Skinner Production Areas, as the same may be extended or
expanded from time to time., whether now owned or hereafter acquired, and the production therefrom,
and all interests in any wells, whether now existing or drilled hereafter, on or completed

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on any of the lands or geographic area covered by, or included within the four corners of, the
map depicted on Exhibit A, excepting and excluding therefrom the Gausdale/KayJay, Fount,
Pineville, and Skinner Production Areas, as the same may be extended or expanded from time to
time., or within any pooled area, communitized area, or unit, even though Seller’s Interest may be
incorrectly or incompletely stated, all as the same shall be enlarged by the discharge of any
burdens or by the removal of any charges or encumbrances to which any of same may be subject as of
the Effective Date, and any and all replacements, renewals, and extensions or amendments of any of
the same.

     “Stand Contract” means that certain Base Contract for Short-Term Sale and Purchase of Natural
Gas dated as of November 21, 2001, by and among Seller and Stand Energy, as amended, together with
any and all existing confirmations, purchase orders or other commitments remaining under (or
executed in connection with) this contract.

     “Stand Energy” means Stand Energy Corporation.

     “Stand Lockbox” means a new, segregated bank account established by Buyer, and which Buyer
shall have the sole right to withdraw funds or amounts. The purpose of the Stand Lockbox will be
to receive Stand Proceeds, and neither Buyer nor Seller shall deposit any other amounts therein.

     “Stand Proceeds” means any payments, proceeds, fees or other amounts to be paid to Seller in,
under or in connection with the Stand Contract, together with any interest or earnings thereon, if
any, to the extent deposited in the Stand Lockbox.

     2. Quantity. Section 3.1 is amended to add the following sentence:

     “Seller shall deliver, and Buyer shall receive, the Contract Quantity each Day
on a Firm basis. Seller’s Gas and the Existing Contracts Volume shall be delivered
to Buyer at the Receipt Points for gathering on the Gathering System, and Seller’s
Gas shall be purchased by Buyer at the Delivery Points, all as set forth herein.
The Existing Contracts Volume shall be gathered, but not purchased, by Buyer
hereunder. For purposes of clarity, the Contract Quantity shall include only Gas
volumes attributable to the Committed Reserves and the Existing Contracts and Seller
shall not deliver, and Buyer shall have no obligation to receive hereunder, any Gas
volumes produced or owned by third parties, other than Gas produced by Seller and
its Affiliates in wells located on the lands described in Exhibit A and the
Existing Contracts Volume, which shall be gathered, but not purchased, by Buyer
hereunder. Buyer shall never be obligated to receive on any Day volumes of Gas
hereunder in excess of 30,000 Mcf’s per Day, as such maximum volume is allocated to
each Receipt Point as shown in Exhibit B, except that Seller, prior to the
second anniversary of the Effective Date, shall have the right to deliver volumes to
the Fonde Receipt Point in excess of the maximum volume shown in Exhibit B
for such Receipt Point up to the lower of (x) the maximum available receipt capacity
at such Fonde Receipt Point, or (y) a volume that when added to all volumes
delivered by Seller at all Receipt Points does not exceed 30,000 Mcf’s per Day, by
written notice to Buyer. If Seller elects to deliver such additional volumes to the
Fonde Receipt Point, then Seller shall reduce (but not increase) the volumes
delivered at one or more of the other Receipt Points so that the total volumes
delivered hereunder never exceed 30,000 Mcf’s per Day. Any such election by Seller
shall remain in effect until the second anniversary of the Effective Date and, for
the term of the Contract, unless, prior to the second anniversary of the Effective
Date, Seller notifies Buyer of any additional increase (but not decrease) in the
volumes to be delivered to the Fonde Receipt Point (up to 30,000 Mcf’s per Day), and
the corresponding reductions in the volumes delivered at one or more of the other
Receipt Points necessary to cause the total volumes delivered hereunder to never
exceed 30,000 Mcf’s per Day. Such final election by Seller shall remain in effect
for the remaining term of this Agreement.”

     3. Seller’s Reserves Commitment. The following Section 3.5 shall be added to Section 3 of the Base Contract:

     3.5 Seller’s Reserves Commitment

          (a) Commitment. Each Day Seller shall make available to Buyer at the Delivery Points
all of Seller’s Daily Deliverability of Gas. Subject only to Seller’s reservations below, Seller
exclusively commits to the performance of this Agreement the Committed Reserves, represents that
the Committed Reserves are not otherwise subject to any purchase and sale agreement, except as shown on Schedule
3.5, and agrees not to sell, transfer, or deliver to any third party any Gas produced from the
Committed Reserves. Seller agrees to cause any

2

 

existing or future Affiliates of Seller to be bound by, and to execute and join as a party,
this Agreement. Seller agrees that this dedication is a covenant running with the land.

          (b) Seller’s Reservations. Seller reserves the following rights (and reasonable
quantities of Gas to satisfy same): (i) to operate wells producing from the Committed Reserves as
a reasonably prudent operator, (ii) to separate or process the Gas using only mechanical, ambient
temperature equipment located at surface production facilities on the Subject Leases, (iii) to use
Gas produced from the Committed Reserves for operating the wells located thereon, (iv) to pool or
unitize the Committed Reserves, in which event this Agreement shall cover Seller’s Interest
therein, and (v) to process Gas delivered hereunder in the Rogersville Plant for the extraction of
natural gas liquids under the Processing Agreement. In addition, Seller’s reservations also
include the volumes of Gas sold under the Stand Contract, subject to the provisions of Section
3.6 and 3.7 below with regard thereto.

          (c) Memorandum. Seller shall enter into and deliver to Buyer, at Buyer’s request, a
fully recordable memorandum of this Contract, in a form acceptable to Buyer.

     4. Contract Price. The following Section 3.6 and Section 3.7 and Section 3.8 shall be
added to Section 3 of the Base Contract:

     3.6. Contract Price.

          (a) Net Proceeds. As full and complete consideration for the purchase of Seller’s
Gas hereunder, Buyer shall remit to Seller the amount by which (i) the proceeds from all physical
sales received by Buyer from the resale of such Gas at or downstream of the Delivery Points,
adjusted for any and all credits or debits from Fixed Price Trigger Transactions as may be entered
into and identified as such from time to time, together all Stand Proceeds received by Buyer or
deposited in the Stand Lockbox during the Month in question (collectively, the “Monthly Net
Proceeds”) exceeds (ii) the Gathering Fees for the same Month under the Gathering Agreement, less
an administrative fee of $0.015 per MMBtu of Seller’s Gas purchased hereunder; provided, however,
that the $0.015 administrative fee will not be deducted or charged by Buyer with regard to either
(x) the volumes of Gas sold directly by Seller under the Stand Contract, or (y) volumes of Gas
purchased by Buyer where there is no back-to-back contract with a third party, as contemplated in
Section 3.6(d) below. 

          (b) Seller’s Payment Obligation. Seller shall owe and pay to Buyer all of the same
Gathering Fees as are provided as Gathering Fees under the Gathering Agreement. Notwithstanding
the netting permitted by Buyer under Section 3.6(a) above, Seller shall always be
obligated each Month to pay to Buyer the amount, if any, by which (i) the Gathering Fees for that
Month exceeds (ii) the Monthly Net Proceeds for such Month. For example, if, for any reason
(including the occurrence of a Force Majeure event or diminished Committed Reserves), the Gas
volumes delivered by Seller in a Month are insufficient to result in Monthly Net Proceeds received
by Buyer that exceed the Gathering Fees in the same Month, Seller shall be required to pay to
Buyer the amount of such difference.

          (c) Annual Adjustment. The term “Gathering Fees,” when used in Section
3.6(a) and (b), means all of the Gathering Fees as defined in the Gathering Agreement,
as adjusted from time to time under Section 4.2, Section 4.3 and Section
4.5 of the Gathering Agreement.

          (d) Marketing Efforts/Prices. Except as hereinafter provided in Section 3.7,
Buyer and Seller agree that Buyer shall be the first purchaser (First Purchaser) of Seller’s Gas
at the Delivery Points hereunder. The price paid to Seller by Buyer as First Purchaser shall be
identical to the price received by First Purchaser from a Second Purchaser, as hereinafter
defined, for Gas at the Delivery Points less an administrative fee of $0.015 per MMBtu. Using
commercially reasonable efforts First Purchaser shall coordinate with Seller regarding the various
terms, prices, and other conditions pursuant to which Gas shall be sold by First Purchaser to
third parties (Second Purchaser[s]) at the Delivery Points. Accordingly, Buyer as First Purchaser
shall solicit offers from potential Second Purchaser(s) it deems appropriate to purchase Gas at
the Delivery Points. To the extent First Purchaser elects to do so, at its sole option and
election, First Purchaser shall have the right to propose terms and prices for its purchase of the
Seller’s Gas as a Secondary Purchaser or to match the terms and price of the then highest-priced
offer received from a third-party Secondary Purchaser (if First Purchaser elects to match, then
preference will be given to First Purchaser’s offer and First Purchaser shall purchase and pay the
offered amounts, subject to the other terms hereof). In addition, Seller shall have the right and
option to notify First Purchaser by verbal or written communication of possible sales
opportunities with potential Second Purchaser(s) of Seller’s Gas (insofar as the proposed term of
such opportunities would not extend beyond the term of this Agreement). Using commercially reasonable efforts, First Purchaser shall timely present to Seller (whether
verbally or in writing) such offers as it may obtain from potential third-party Second Purchasers
for such volumes of Gas at the Delivery

3

 

Points, and if it so elects to also present to Seller the First Purchaser’s own offer or
offers to match the then highest-priced third-party offer received and currently presented. Seller
shall elect and direct at its sole discretion which offer First Purchaser should pursue, accept,
and confirm (or if First Purchaser has offered to match the highest-priced offer from a
third-party Second Purchaser currently presented to Seller then to accept the matching offer of
First Purchaser); further provided, however, that it shall be Seller’s sole choice and election
as to which of the offer(s) presented by First Purchaser to Seller (or which Seller forwarded to
First Purchaser) are the highest or best offer(s) for First Purchaser to accept and confirm. If
Seller fails to respond and confirm to First Purchaser which offer(s) to accept and pursue prior
to the time when First Purchaser must commit, make a purchase election, or make any proposed
nominations in connection with such sales opportunity, then in order to avoid the constraint or
shut-in of gathered volumes, First Purchaser shall have the right to elect, in its sole
discretion, which sales opportunity (and the terms and prices referred to in First Purchaser’s
notice to Seller) represents the best offer in its reasonable commercial judgment, to accept for
the limited purpose of avoiding constraint or shut in of such volumes, but only insofar as First
Purchaser does NOT enter into sales commitments with regard to such uncommitted volumes that have
a term longer than 45 days. If (x) Seller provides First Purchaser, prior to First Purchaser’s
commitment of such volumes to a sales opportunity solely in order to avoid constraint or shut in
of such volumes, with the above described directions (any verbal response or direction from Seller
must be followed-up in writing to First Purchaser within 24 hours by Seller) regarding a sales
opportunity to sell the Gas purchased hereunder at the Delivery Points to a Second Purchaser (or
to First Purchaser directly or in connection with an election by First Purchaser to match such
third-party offer[s]) and having a term no longer than the term of this Agreement, or (y) Seller
selects sales opportunity identified by First Purchaser (assuming First Purchaser notified Seller
of multiple sales opportunities), then (A) First Purchaser shall enter into a sales contract to
sell such volumes on such terms as so directed by Seller, and providing that such Second Purchaser
meets the standard credit qualifications and requirements of First Purchaser, then First Purchaser
shall take all credit risk (including risk of collection and payment) of such sale of Gas; or, (B)
in the event that Seller accepts and directs the sale of Gas by First Purchaser to a Second
Purchaser that fails to meet the standard credit qualifications and requirements of First
Purchaser then Seller shall assume and bear all credit risk (including risk of collection and
payment) of such purchasers by Second Purchaser but First Purchaser shall forego the $0.015
administrative fee hereinabove referenced. In addition, however, and notwithstanding the above,
Seller shall continue to assume and bear all such credit risk regarding volumes of Gas sold to
Stand Energy under the Stand Contract.

     3.7 Stand Contract; Direction of Stand Proceeds; Appointment of Agent

          (a) Stand Contract. To the extent the Stand Contract can be assigned to Buyer, Seller
shall assign its rights under the Stand Contract to Buyer as part of the assets under the Asset
Purchase Agreement. To the extent that the Stand Contract cannot be assigned to Buyer at the
Closing under the Asset Purchase Agreement, then:

          (i) Seller shall, simultaneous with the Closing under the Asset Purchase Agreement,
notify Stand Energy in writing, stating that Seller thereafter directs and requires (and
take such other action as may be required to cause) Stand Energy to pay and deposit all
Stand Proceeds into the Stand Lockbox. Such direction of payment of the Stand Proceeds
shall not be changed or modified by Seller during the term of this Agreement, without
Buyer’s prior written approval. In addition, Seller shall not agree to any new
confirmations, sales of Gas, or other commitments to sell Gas with Stand Energy under the
Stand Contract without Buyer’s prior written approval; and any further sales or commitments
to sell any of Seller’s Gas to Stand Energy during the term of this Agreement, if any, shall
be made only through Buyer under this Agreement; provided, however, that to the extent Buyer
does consent to a subsequent sales transaction under the existing Stand Contract, the other
provisions below (including, without limitation, the direction of payments to the Stand
Lockbox and the appointment of Buyer as agent, shall apply with regard thereto).

          (ii) Seller assigns and transfers to Buyer all rights to receive all Stand Proceeds,
subject to the provisions of Section 3.6 above. Any Stand Proceeds paid to Seller
shall immediately be deposited by Seller in the Stand Lockbox.

          (iii) In addition, Seller irrevocably designates and appoints Buyer as its sole and
exclusive marketing agent under the Stand Energy Contract, and Buyer is hereby granted the
authority, in Seller’s place and stead, to receive and deliver any notices or
communications, nominations, or other notices in, under or pursuant to the Stand Energy
Contract. When requested by Buyer, Seller shall notify Stand Energy in writing, stating
that Buyer is Seller’s exclusive agent for such purposes and Seller thereafter directs and
requires (and Seller shall take such other action as may be required to cause) that any
further communications or notices under the Stand Energy Contract should be directed to
Buyer with a copy to Seller. This appointment of Buyer is irrevocable until the earlier of (1) the
termination of the Stand Energy Contract (including all remaining confirmations and
commitments thereunder) or (2) the

4

 

termination of this Agreement. Seller shall not change or modify the directions to
Stand Energy described above without Buyer’s prior written approval. Notwithstanding any
provisions hereof or in the Stand Energy Contract to the contrary, Buyer shall have no
liability or obligation to pay any amount or sum whatsoever to Stand Energy (or any other
interested parties thereunder) under the Stand Energy Contract and Buyer shall not have any
other liability or obligation to Seller with regard to the Stand Energy Contract, except
solely with regard to Buyer’s liability to Seller under Section 3.6 above,
REGARDLESS OF WHETHER ARISING FROM OR ATTRIBUTABLE TO, IN WHOLE OR IN PART, THE STRICT
LIABILITY, NEGLIGENCE OR OTHER FAULT OF SELLER, BUYER, STAND ENERGY, OR ANY OTHER PERSON.

     3.8 Appointment as Administrative Agent. Buyer also is hereby appointed, and shall
be, the point operator and administrative agent at the delivery point for purposes of
confirming downstream nominations of the Seller’s Gas purchased or received at the Delivery
Points, and for purposes of confirming operational volume imbalance receipts and deliveries
at the Delivery Points, as well as such related functions related thereto.

     5. Gathering. Section 4.1 of the Base Contract shall be amended in its
entirety as follows:

     “Seller shall have sole responsibility for transporting gas to the Receipt
Points. Buyer shall cause Seller’s gas to be received at the Receipt Points and
shall cause Seller’s gas to be gathered and redelivered to the Delivery Points.
Seller shall bear line loss, dehydration fuel, and applicable compression fuel which
may occur or be necessary to accomplish the gathering of Seller’s Gas from the
Receipt Points to the Delivery Points, other than any extraordinary line losses
retained by the Gathering System operator under the Gathering Agreement. Line loss
(or gain), dehydration fuel, and applicable compression fuel shall be measured for
each Month as the difference between the total volume of Gas received by the
Gathering System from all shippers at the Receipt Points less the total volume of
Gas delivered by the Gathering System operator on behalf of all shippers to the
Delivery Points and then allocated by Buyer to Seller’s Gas at each Delivery Point.
Seller shall retain the right to process its Gas delivered hereunder in the
Rogersville Plant for the extraction of natural gas liquids under the terms of the
Processing Agreement. The quantity (in MMBtu’s) of Seller’s Gas purchased hereunder
by Buyer at the Delivery Points (which shall exclude the Existing Contracts Volume)
shall be deemed to be equal to the sum of (in MMBtu’s) (i) for Seller’s Gas
processed in the Rogersville Plant, the quantity of residue gas remaining at the
tailgate of the Rogersville Plant as measured under the Processing Agreement and
(ii) for Seller’s Gas delivered to other Delivery Points, the quantity of Seller’s
Gas sold and measured under the Gas Sales Contracts under which Buyer resells such
Gas at such Delivery Points. Seller grants to Buyer and its Affiliates or designees
the right to monitor the receipt and delivery point meters constituting a portion of
the Gathering System for purposes of verifying compliance with this Agreement and
the Gathering Agreement, and, if the Seller or its Affiliate fail to take any meter
readings and measurements when and as required under this Agreement or the Gathering
Agreement, Seller, on behalf of itself and its Affiliates, authorizes Buyer or any
Buyer Affiliate or designee to take such required meter readings and measurements.”

     6. Scheduling. Section 4.2 of the Base Contract shall be amended in its
entirety as follows:

     “Seller shall Notify Buyer not less than 5 Business Days before the last day of
each Month of the total volume of Gas (in Mcf/d and MMBtu’s) that Seller expects to
deliver to in the following Month, specifying the volumes to be delivered at each
Receipt Point. Seller may modify their nominations at any time upon at least 24
hours Notice. The parties shall coordinate their nomination activities, giving
sufficient time to meet the deadlines of the Gathering System operator and the
Receiving Transporters at the Delivery Points. Each party shall give the other
party timely prior Notice, sufficient to meet the requirements of the Gathering
System operator and the Receiving Transporters involved in the transaction, of the
quantities of Gas to be delivered to each Delivery Point each Day. If either party
becomes aware that actual deliveries at the Receipt Points or Delivery Points are
greater or lesser than the quantities of scheduled Gas, such party shall promptly
Notify the other party. Throughout the term of this Agreement, the parties agree to
work together to refine and improve the scheduling, nominating, and balancing
procedures applicable to Seller’s Gas to accommodate the Gathering System operator
and each Receiving Transporter’s nomination procedures (or changes to such
procedures) and the operational requirements of both Seller and Buyer.”

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     7. Quality and Measurement. Section 5 of the Base Contract shall be amended
in its entirety as follows:

     “All gas delivered by Seller shall meet the pressure, quality, and heat content
requirements set forth in the Gathering Agreement, as amended from time to time.
Measurement of gas quantities shall be in accordance with Article 7 of the
Gathering Agreement.”

     8. Taxes. Section 6 of the Base Contract shall be amended in its entirety as
follows:

     “Seller shall pay or cause to be paid all taxes, fees, levies, penalties,
licenses or charges imposed by any government authority (“Taxes”) on or with respect
to the Gas prior to the Delivery Points and all Taxes at the Delivery Points, other
than Taxes payable in respect of the gathering of Seller’s Gas from the Receipt
Points to the Delivery Points which shall be paid by Buyer. Buyer shall pay or
cause to be paid all Taxes on or with respect to the Gas after the Delivery Point(s)
and all Taxes payable in respect of the gathering of Seller’s Gas from the Receipt
Points to the Delivery Points, other than Taxes payable in respect of the processing
of Seller’s Gas under the Processing Agreement which shall be paid by Seller. If a
party is required to remit or pay Taxes that are the other party’s responsibility
hereunder, the party responsible for such Taxes shall promptly reimburse the other
party for such Taxes. Any party entitled to an exemption from any such Taxes or
charges shall furnish the other party any necessary documentation thereof.”

     9. Section 7.2. Section 7.2 of the Base Contract shall be amended in its entirety as follows:

     “Buyer shall remit to Seller all amounts due hereunder, in the manner specified
in the Base Contract, in immediately available funds, on or before the Payment Date
but no earlier than the first to occur of (i) the date on which the purchaser of
Seller’s Gas pays Buyer for Seller’s Gas purchased in the prior Month or (ii) thirty
(30) Days after the end of the production Month for such Gas; provided,
however, that if any of the customers listed in Exhibit C hereto
shall fail to pay Buyer for gas purchased and delivered the prior month, payment of
such quantity of Seller’s Gas shall not be made until the third Business Day after
such customer remits payment to Buyer for such quantity of Seller’s Gas. If such
date is not a Business Day, payment is due on the next Business Day following such
date. In the event any payments are due Buyer hereunder, payment to Buyer shall be
made in accordance with this Section 7.2, including any payments that may be
due by Seller to Buyer under Section 3.6(b) above.”

     10. Title and Indemnity. Section 8.1, 8.2, and 8.3 of the
Base Contract shall be amended in their entirety as follows:

     8.1. Title to the Gas shall pass from Seller to Buyer at the Delivery Points,
Existing Gas Volumes other than Existing Gas Volumes gathered hereunder, the title
to which shall not pass to Buyer. Seller shall have responsibility for and assume
any liability with respect to Gas prior to its delivery to Buyer at the Receipt
Points. Buyer shall have responsibility for and assume any liability with respect
to Gas after its delivery to Buyer at the Receipt Points, other than matters related
to title to the Gas which shall remain with Seller until title has passed to Buyer
at the Delivery Points for Gas purchased hereunder.

     8.2. Seller warrants that they will have the right to convey and will transfer
good and merchantable title to all Gas sold to Buyer hereunder, free and clear of
all liens, encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN
SECTION 15.8 AND SECTION 15.15, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE
DISCLAIMED.

     8.3. Seller agrees to indemnify Buyer and save it harmless from all losses,
liabilities or claims including reasonable attorneys’ fees and costs of court
(“Claims”), from any and all persons, arising from or out of personal injury
(including death) or property damage from said Gas prior to delivery to Buyer at the
Receipt Points. Buyer agrees to indemnify Seller and save it harmless from all
Claims from any and all persons arising from or out of claims regarding personal
injury (including death) or property damage from said Gas or other charges thereon
after delivery to Buyer at the Receipt Points. In addition, Seller agrees to
indemnify Buyer and save it harmless from all Claims from any and all persons
arising from or out of (i) title to Gas prior to the Delivery Points, (ii) breach or default by Seller of its obligations under any contract,
agreement, or applicable law to pay or perform any amounts due to any royalty owner,
partner, or limited partner of any

6

 

partnership or limited partnership of which Seller is an Affiliate or to any
other third party, and (iii) personal injury (including death) or property damage
from Gas after redelivery by Buyer to the Delivery Points, other than the Rose Hill
Delivery Point. IT IS THE INTENT OF THE PARTIES THAT THE INDEMNITIES SET FORTH IN
THIS SECTION BE WITHOUT REGARD TO THE CAUSES THEREOF, INCLUDING, WITHOUT LIMITATION,
THE NEGLIGENCE OF ANY INDEMNIFIED PARTY OR OTHER PERSON, WHETHER SUCH NEGLIGENCE BE
SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE, OR THE STRICT LIABILITY OF ANY
INDEMNIFIED PARTY OR OTHER PERSON

     11. Section 10.1. Section 10.1 shall be deleted for all purposes.

     12. Delivery Period. The first sentence of Section 12 shall be amended in its entirety to read as
follows:

     “The Delivery Period, and the primary term of this Agreement, shall commence on
the Effective Date shown in the Base Contract and continue in effect until the
fifteenth (15th) anniversary of such Effective Date (the “Primary Term”),
and, if not terminated during the Primary Term, shall continue in effect for a
second fifteen (15) year term (“Secondary Term”) on the same terms and conditions
herein, and thereafter from year-to-year unless terminated by either party upon
written notice by either party not less than sixty (60) days prior to the end of
such then current one-year term..”

     13. Assignment. Section 15.1 shall be amended in its entirety to read as follows:

     “No party may assign or delegate any of its rights or obligations under this
Agreement, by operation of law, change of control, or otherwise, without the prior
written consent of the other party, which consent may be withheld at the discretion
of such other party. If an Affiliate of Buyer exercises its option under the Asset
Purchase Agreement to acquire all of the ownership interests in the Gathering
System, then, effective upon completion of such acquisition, either party may assign
or delegate its rights or obligations under this Agreement with the consent of the
other party, which consent shall not be unreasonably withheld, conditioned, or
delayed. Any purported assignment or delegation without any such consent shall be
void and ineffective. Subject to the foregoing provisions, this Agreement binds and
inures to the benefit of the parties hereto and their respective successors and
assigns.”

     14. Section 15. The following sections shall be added to Section 15 of the Base Contract:

     15.13. A reference is herein made to the Forward Sales Agreement, in substantially the form
attached hereto as Exhibit 15.13 (“Forward Sales Agreement”) At Buyer’s sole election (so
indicated to Seller in writing at the time this Agreement is executed), the Buyer and Seller shall
contemporaneously execute and deliver such Forward Sales Contract, consistent with the volumes and
weighted average fixed price contemplated therein.

     15.14. This Agreement shall be construed, enforced, and interpreted according to the laws of
the State of Texas, without regard to the conflicts of law rules thereof. Each party hereby
irrevocably submits to the jurisdiction of the courts of the State of Texas and the federal courts
of the United States of America located in Houston, Texas over any dispute or proceeding arising
out of or relating to this Agreement or any of the transactions contemplated hereby, and each party
irrevocably agrees that all claims in respect of such dispute or proceeding shall be heard and
determined in such courts. Each party hereby irrevocably waives, to the fullest extent permitted
by applicable law, any objection which it may now or hereafter have to the venue of any dispute
arising out of or relating to this Agreement or any of the transactions contemplated hereby or
thereby brought in such court or any defense of inconvenient forum for the maintenance of such
dispute or action. Each party agrees that a judgment in any dispute heard in the venue specified
by this section may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by applicable law.

     15.15. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR TRANSACTION HEREUNDER.

     15.16. Each party represents to the other party during the term hereof as follows: (i) there
are no suits, proceedings, judgments, or orders by or before any governmental authority that
materially adversely affect its ability to perform this Agreement or the rights of the other party
hereunder, (ii) it is duly organized, validly existing, and in

7

 

good standing under the laws of the jurisdiction of its formation, and it has the legal right,
power and authority and is qualified to conduct its business, and to execute and deliver this
Agreement and perform its obligations hereunder, (iii) the making and performance by it of this
Agreement is within its powers, and has been duly authorized by all necessary action on its part,
(iv) this Agreement constitutes a legal, valid, and binding act and obligation of it, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other laws affecting creditor’s rights generally, and with regard to equitable remedies, to the
discretion of the court before which proceedings to obtain same may be pending, and (v) there are
no bankruptcy, insolvency, reorganization, receivership or other arrangement proceedings pending or
being contemplated by it.

     15.17. The obligations of Seller under this Agreement are guaranteed by Daugherty Petroleum,
Inc., a Kentucky corporation and NGAS Resources, Inc., a British Columbian corporation as provided
in that certain Guaranty dated of even date herewith.  

     15.18. If any new or amended law, rule, or regulation materially prohibits Buyer from
receiving or purchasing Gas from Seller hereunder substantially in accordance with the original
terms of this Agreement or if results in the performance of this Agreement being rendered
uneconomic, in the good faith opinion of Buyer, then Buyer and Seller shall negotiate in good faith
to amend the terms of this Agreement so that (i) the new or amended law, rule, or regulation may be
complied with and (ii) Buyer and Seller will both continue to receive the rights and benefits
originally provided for herein, and (iii) Buyer receives the net economic benefit originally
contemplated herein.

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     IN WITNESS WHEREOF, Buyer and Seller have executed these Special Provisions to supplement and,
where applicable, to modify and amend the Base Contract by and between the Buyer and Seller,
effective for all purposes as of the Effective Date.

	 	 	 	 	 
	 	SEMINOLE ENERGY SERVICES, LLC

 	 
	 	By:  	/s/ Robert B. Rosene, Jr.
 	 
	 	 	Robert B. Rosene, Jr., 	 
	 	 	President 	 
	 
	 	DAUGHERTY PETROLEUM, INC.

 	 
	 	By:  	./s/ William G. Barr III
 	 
	 	 	William G. Barr III, 	 
	 	 	Chief Executive Officer 	 
	 

9

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