-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RzUVU+snpaB8tpzOIiT5ExSGxAg1LR4GN5jCYdYPosKfEhcVTuhbNQp5Jra1aP9r fp14NatStBP5Z1FpfGE0RQ== 0001193125-10-165511.txt : 20100726 0001193125-10-165511.hdr.sgml : 20100726 20100726081344 ACCESSION NUMBER: 0001193125-10-165511 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20100726 DATE AS OF CHANGE: 20100726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Chesapeake Midstream Partners, L.P. CENTRAL INDEX KEY: 0001483096 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 800534394 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-164905 FILM NUMBER: 10968453 BUSINESS ADDRESS: STREET 1: 777 NW GRAND BOULEVARD CITY: OKLAHOMA CITY STATE: OK ZIP: 73118 BUSINESS PHONE: (405) 935-1500 MAIL ADDRESS: STREET 1: 777 NW GRAND BOULEVARD CITY: OKLAHOMA CITY STATE: OK ZIP: 73118 S-1/A 1 ds1a.htm AMENDMENT NO. 7 TO FORM S-1 Amendment No. 7 to Form S-1

As filed with the Securities and Exchange Commission on July 26, 2010

Registration No. 333-164905

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 7

to

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Chesapeake Midstream Partners, L.P.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   4922   80-0534394

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

777 NW Grand Boulevard

Oklahoma City, Oklahoma 73118

(405) 935-1500

(Address, Including Zip Code, and Telephone Number, Including Area Code, of

Registrant’s Principal Executive Offices)

J. Mike Stice

777 NW Grand Boulevard

Oklahoma City, Oklahoma 73118

(405) 935-1500

(Name, Address, Including Zip Code, and Telephone Number, Including Area

Code, of Agent for Service)

 

 

Copies to:

 

D. Alan Beck, Jr.

Alan P. Baden

Vinson & Elkins L.L.P.

1001 Fannin Street, Suite 2500

Houston, Texas 77002

(713) 758-2222

 

Joshua Davidson

Baker Botts L.L.P.

One Shell Plaza

910 Louisiana Street

Houston, Texas 77002

(713) 229-1234

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer  ¨

   Accelerated filer  ¨

Non-accelerated filer  þ

   Smaller reporting company  ¨
(Do not check if a smaller reporting company)   

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Explanatory Note

This Amendment No. 7 to the Registration Statement on Form S-1 (File No. 333-164905) of Chesapeake Midstream Partners, L.P. is being filed solely to amend Item 16 of Part II thereof and to transmit certain exhibits thereto. This Amendment No. 7 does not modify any provision of the preliminary prospectus constituting Part 1 or Items 13, 14, 15 or 17 of Part II of the Registration Statement. Accordingly, this Amendment No. 7 does not include a copy of the preliminary prospectus.


Part II

Information required in the registration statement

 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below are the expenses (other than underwriting discounts and commissions and structuring fees) expected to be incurred in connection with the issuance and distribution of the securities registered hereby. With the exception of the SEC registration fee and the FINRA filing fee, the amounts set forth below are estimates.

 

SEC registration fee

   $ 34,849

FINRA filing fee

     49,375

Printing and engraving expenses

     750,000

Fees and expenses of legal counsel

     2,100,000

Accounting fees and expenses

     250,000

Transfer agent and registrar fees

     25,000

New York Stock Exchange listing fee

     250,000

Miscellaneous

     40,776
      

Total

   $ 3,500,000
      

 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Chesapeake Midstream Partners, L.P.

Subject to any terms, conditions or restrictions set forth in the partnership agreement, Section 17-108 of the Delaware Revised Uniform Limited Partnership Act empowers a Delaware limited partnership to indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever. The section of the prospectus entitled “The Partnership Agreement—Indemnification” discloses that we will generally indemnify officers, directors and affiliates of our general partner to the fullest extent permitted by the law against all losses, claims, damages or similar events and is incorporated herein by reference.

Under our partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages or similar events:

 

   

our general partner;

 

   

any departing general partner;

 

   

any person who is or was an affiliate of our general partner or any departing general partner;

 

   

any person who is or was a manager, managing member, director, officer, employee, agent, fiduciary or trustee of our partnership, our subsidiaries, our general partner, any departing general partner or any of their affiliates;

 

   

any person who is or was serving as a manager, managing member, director, officer, employee, agent, fiduciary or trustee of another person owing a fiduciary duty to us or our subsidiaries;

 

   

any person who controls our general partner or any departing general partner; and

 

   

any person designated by our general partner.

Any indemnification under these provisions will only be out of our assets. Unless our general partner otherwise agrees, it will not be personally liable for, or have any obligation to contribute or lend funds or assets to us to enable us to effectuate, indemnification. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under our partnership agreement.

 

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Additionally, pursuant to the omnibus agreement, we will be entitled to indemnification for certain liabilities, and we will be required to indemnify Chesapeake Midstream Ventures for certain liabilities. The section of the prospectus entitled “Certain Relationships and Related Party Transactions—Agreements with Affiliates—Omnibus Agreement” describes in more detail indemnification obligations under the omnibus agreement and is incorporated herein by reference.

Pursuant to the services agreement, we and our affiliates will be entitled to indemnification for certain liabilities, and we will be required to indemnify certain affiliates of Chesapeake. The section of the prospectus entitled “Certain Relationships and Related Party Transactions—Agreements with Affiliates—Services Agreement” describes in more detail indemnification obligations under the services agreement and is incorporated herein by reference.

We have agreed to indemnify Chesapeake and certain affiliates of Chesapeake against any loss or expense with respect to certain surety bonds issued for our benefit and for which we are obligated to provide indemnity insurance to Chesapeake. We may also be required to indemnify Chesapeake in connection with future surety bond issuances made for our benefit. The section of the prospectus entitled “Certain Relationships and Related Party Transactions—Agreements with Affiliates—Surety Bond Indemnification Agreement” describes in more detail our obligation to indemnify Chesapeake with respect to our surety bond indemnification agreement and is incorporated herein by reference.

The underwriting agreement to be entered into in connection with the sale of the securities offered pursuant to this registration statement, the form of which has been filed as an exhibit to this registration statement, provides for indemnification of Chesapeake, GIP and our general partner, our general partner’s directors and certain of our general partner’s officers, and any person who controls our general partner, including indemnification for liabilities under the Securities Act.

Chesapeake Midstream GP, L.L.C.

Section 18-108 of the Delaware Limited Liability Company Act (the “Delaware LLC Act”) provides that, subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, a Delaware limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. The limited liability company agreement of Chesapeake Midstream GP, L.L.C., our general partner, provides that our general partner shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director or officer of our general partner, or is or was serving at the request of our general partner as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (an “indemnitee”), against expenses (including reasonable attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such indemnitee in connection with such action, suit or proceeding to the full extent permitted by the Delaware LLC Act, upon such determination having been made as to such indemnitee’s good faith and conduct as is required by the Delaware LLC Act. The limited liability company agreement of our general partner also provides that expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by our general partner in advance of the final disposition of such action, suit or proceeding to the extent, if any, authorized by our general partner’s sole member in accordance with the provisions of the Delaware LLC Act, upon receipt of an undertaking by or on behalf of the indemnitee to repay such amount unless it shall ultimately be determined that indemnitee is entitled to be indemnified by our general partner. Officers, directors and affiliates of our general partner are also indemnified by us, as described above.

Our general partner will purchase insurance covering its officers and directors against liabilities asserted and expenses incurred in connection with their activities as officers and directors of our general partner or any of its direct or indirect subsidiaries.

 

II-2


Chesapeake Energy Corporation

Section 1031 of the Oklahoma General Corporation Act generally provides that an Oklahoma corporation has the power to indemnify (a) any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys’ fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit, or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful; and (b) any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses, including attorneys’ fees, actually and reasonably incurred by the person in connection with the defense or settlement of an action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which the person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses which the court shall deem proper.

Article VIII of Chesapeake’s restated certificate of incorporation provides that Chesapeake shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of Chesapeake) by reason of the fact that he or she is or was a director, officer, employee or agent of Chesapeake or is or was serving at the request of Chesapeake as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of Chesapeake and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. In addition, Article VI of Chesapeake’s amended and restated bylaws generally provides that Chesapeake shall indemnify any person who is a director, officer, employee or agent of Chesapeake or is or was serving at the request of Chesapeake as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise to the fullest extent permitted by Section 1031 of the Oklahoma General Corporation Act.

Chesapeake has entered into indemnity agreements with each of its officers and directors, including Messrs. J. Mike Stice, Aubrey K. McClendon and Marcus C. Rowland, which generally provide that Chesapeake shall indemnify its officers and directors in connection with serving in their capacity as an officer, director, employee or agent of Chesapeake or an affiliate or serving at the request of Chesapeake as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the fullest extent permitted by law. In addition, Chesapeake provides liability insurance for each of its directors and executive officers.

 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On February 12, 2010, in connection with the formation of Chesapeake Midstream Partners, L.P. (the “Partnership”), the Partnership issued to (i) its general partner the 2.0% general partner interest in the Partnership for $20 and (ii) Chesapeake Midstream Ventures, L.L.C. the 98.0% limited partner interest in the Partnership for $980. The issuance was exempt from registration under Section 4(2) of the Securities Act. There have been no other sales of unregistered securities within the past three years.

 

II-3


ITEM 16. EXHIBITS.

The following documents are filed as exhibits to this registration statement:

 

Exhibit
Number

      

Description

  1.1      Form of Underwriting Agreement
  3.1**      Certificate of Limited Partnership of Chesapeake Midstream Partners, L.P.
  3.2**      Form of Amended and Restated Agreement of Limited Partnership of Chesapeake Midstream Partners, L.P. (included as Appendix A in the prospectus included in this Registration Statement)
  3.3**      Certificate of Formation of Chesapeake Midstream GP, L.L.C.
  3.4**      Form of Amended and Restated Limited Liability Company Agreement of Chesapeake MLP Operating, L.L.C.
  5.1**      Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered
  8.1**      Opinion of Vinson & Elkins L.L.P. relating to tax matters
10.1**      Credit Agreement
10.2†      Chesapeake Gas Gathering Agreement
10.3†      Total Gas Gathering Agreement
10.4†      Additional Agreement
10.5      Form of Contribution Agreement
10.6**      Form of Omnibus Agreement
10.7**      Form of Amended and Restated Services Agreement
10.8**†      Form of Gas Compressor Master Rental and Servicing Agreement
10.9**      Form of Amended and Restated Employee Transfer Agreement
10.10**      Form of Amended and Restated Employee Secondment Agreement
10.11**      Form of Amended and Restated Shared Services Agreement with respect to J. Mike Stice
10.12**      Amended and Restated Employment Agreement of J. Mike Stice
10.13**      Amendment to Employment Agreement of J. Mike Stice
10.14**      Employment Agreement of Robert S. Purgason
10.15**      Employment Agreement of David C. Shiels
10.16      Form of Registration Rights Agreement
10.17**      Form of Chesapeake Midstream Management Incentive Compensation Plan
10.18**      Form of Chesapeake Midstream Long-Term Incentive Plan
10.19**      Award Agreement under Chesapeake Midstream Management Incentive Compensation Plan-Robert S. Purgason
10.20**      Award Agreement under Chesapeake Midstream Management Incentive Compensation Plan-David C. Shiels
10.21**      Form of First Amendment to Credit Agreement

 

II-4


Exhibit
Number

      

Description

21.1**      List of Subsidiaries of Chesapeake Midstream Partners, L.P.
23.1**      Consent of PricewaterhouseCoopers LLP
23.2**      Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
23.3**      Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1)
23.4**      Consent of Director Nominee (Daberko)
23.5**      Consent of Director Nominee (Frederickson)
23.6**      Consent of Director Nominee (Kelly)
24.1**      Powers of Attorney (contained on the signature page to this registration statement)

 

* To be filed by amendment.
** Previously filed.
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

 

II-5


ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(2) For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

  i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

  ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

  iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

  iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(3) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

II-6


(4) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant undertakes to send to each common unitholder, at least on an annual basis, a detailed statement of any transactions with Chesapeake or its subsidiaries, and of fees, commissions, compensation and other benefits paid, or accrued to Chesapeake or its subsidiaries for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.

The registrant undertakes to provide to the common unitholders the financial statements required by Form 10-K for the first full fiscal year of operations of the company.

 

II-7


Signatures

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma City, State of Oklahoma, on July 26, 2010.

 

Chesapeake Midstream Partners, L.P.
By:  

Chesapeake Midstream GP, L.L.C.,

its general partner

By:  

/s/ J. MIKE STICE

Name:   J. Mike Stice
Title:   Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and the dates indicated.

 

Signature

  

Title

 

Date

/s/ J. MIKE STICE

J. Mike Stice

   Chief Executive Officer (Principal Executive Officer)   July 26, 2010

/s/ DAVID C. SHIELS

David C. Shiels

   Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)   July 26, 2010

*

Matthew C. Harris

   Director   July 26, 2010

*

Aubrey K. McClendon

   Director   July 26, 2010

*

Marcus C. Rowland

   Director   July 26, 2010

*

William A. Woodburn

   Director   July 26, 2010

 

*By:   /s/ J. MIKE STICE
  J. Mike Stice, Attorney-in-Fact

 

II-8


Exhibit
Number

      

Description

  1.1      Form of Underwriting Agreement
  3.1**      Certificate of Limited Partnership of Chesapeake Midstream Partners, L.P.
  3.2**      Form of Amended and Restated Agreement of Limited Partnership of Chesapeake Midstream Partners, L.P. (included as Appendix A in the prospectus included in this Registration Statement)
  3.3**      Certificate of Formation of Chesapeake Midstream GP, L.L.C.
  3.4**      Form of Amended and Restated Limited Liability Company Agreement of Chesapeake MLP Operating, L.L.C.
  5.1**      Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered
  8.1**      Opinion of Vinson & Elkins L.L.P. relating to tax matters
10.1**      Credit Agreement
10.2†      Chesapeake Gas Gathering Agreement
10.3†      Total Gas Gathering Agreement
10.4†      Additional Agreement
10.5      Form of Contribution Agreement
10.6**      Form of Omnibus Agreement
10.7**      Form of Amended and Restated Services Agreement
10.8**†      Form of Gas Compressor Master Rental and Servicing Agreement
10.9**      Form of Amended and Restated Employee Transfer Agreement
10.10**      Form of Amended and Restated Employee Secondment Agreement
10.11**      Form of Amended and Restated Shared Services Agreement with respect to J. Mike Stice
10.12**      Amended and Restated Employment Agreement of J. Mike Stice
10.13**      Amendment to Employment Agreement of J. Mike Stice
10.14**      Employment Agreement of Robert S. Purgason
10.15**      Employment Agreement of David C. Shiels
10.16      Form of Registration Rights Agreement
10.17**      Form of Chesapeake Midstream Management Incentive Compensation Plan
10.18**      Form of Chesapeake Midstream Long-Term Incentive Plan
10.19**      Award Agreement under Chesapeake Midstream Management Incentive Compensation Plan-Robert S. Purgason
10.20**      Award Agreement under Chesapeake Midstream Management Incentive Compensation Plan-David C. Shiels
10.21**      Form of First Amendment to Credit Agreement
21.1**      List of Subsidiaries of Chesapeake Midstream Partners, L.P.
23.1**      Consent of PricewaterhouseCoopers LLP

 

II-9


Exhibit
Number

      

Description

23.2**      Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
23.3**      Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1)
23.4**      Consent of Director Nominee (Daberko)
23.5**      Consent of Director Nominee (Frederickson)
23.6**      Consent of Director Nominee (Kelly)
24.1**      Powers of Attorney (contained on the signature page to this registration statement)

 

* To be filed by amendment.
** Previously filed.
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

 

II-10

EX-1.1 2 dex11.htm FORM OF UNDERWRITING AGREEMENT Form of Underwriting Agreement

EXHIBIT 1.1

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

21,250,000 Common Units

Representing Limited Partner Interests

UNDERWRITING AGREEMENT

July [], 2010

UBS Securities LLC

Citigroup Global Markets Inc.

Morgan Stanley & Co. Incorporated

Barclays Capital Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Credit Suisse Securities (USA) LLC

Goldman, Sachs & Co.

Wells Fargo Securities LLC

As Representatives of the several

    Underwriters named in Schedule I attached hereto

c/o UBS Securities LLC

299 Park Avenue

New York, New York 10171-0026

c/o Morgan Stanley & Co. Incorporated

1585 Broadway

New York, New York 10036

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Ladies and Gentlemen:

Chesapeake Midstream Partners, L.P., a Delaware limited partnership (the “Partnership”), proposes to issue and sell to the several underwriters named in Schedule I hereto (the “Underwriters”), for whom UBS Securities LLC, Citigroup Global Markets Inc., Morgan Stanley & Co. Incorporated, Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co. and Wells Fargo Securities LLC are acting as the representatives (the “Representatives”), an aggregate of 21,250,000 common units (the “Firm Units”) representing limited partner interests in the Partnership (“Common Units”). In addition, solely for the purpose of covering over-allotments, the Partnership proposes to grant to the Underwriters the option to purchase up to an additional 3,187,500 Common Units (the “Additional Units”). The Firm Units and the Additional Units are hereinafter collectively sometimes referred to as the “Units.” The Units are described in the Prospectus which is referred to below.


It is understood and agreed to by all parties hereto that the Partnership was recently formed to indirectly own, operate and grow the midstream gathering assets that are currently owned and operated directly or indirectly by Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (the “JV”), as described more particularly in the Pricing Disclosure Package, the Prospectus and the Contribution Documents (as such terms are hereinafter defined).

As of the date hereof:

A. Chesapeake Midstream Operating, L.L.C., an Oklahoma limited liability company (“CMO”), owns a 100% limited liability company interest in Chesapeake Midstream Holdings, L.L.C., a Delaware limited liability company (“Chesapeake Holdings”). Chesapeake Midstream Development, L.P., a Delaware limited partnership (“CMD”), owns a 100% limited liability company interest in CMO. Chesapeake Midstream Management, L.L.C., a Delaware limited liability company (“CMM”), is the general partner of CMD. Chesapeake Energy Marketing, Inc., an Oklahoma corporation (“CEMI”), owns all of the limited partner interests in CMD. Each of Chesapeake Operating, Inc., an Oklahoma corporation (“COI”), and CEMI is a wholly owned subsidiary of Chesapeake Energy Corporation, an Oklahoma corporation (“CHK”). CMO, CMD, CMM, CEMI, COI and CHK are collectively referred to as the “Chesapeake GP Entities.”

B. GIP-A Holding (CHK), L.P., a Delaware limited partnership (“GIP-A”), GIP-B Holding (CHK), L.P., a Delaware limited partnership (“GIP-B”), GIP-C Holding (CHK), L.P., a Delaware limited partnership (“GIP-C” and together with GIP-A and GIP-B, the “GIP Entities”), and Chesapeake Holdings collectively own 100% of the limited liability company interests in the JV. The JV owns a 100% limited liability company interest in Bluestem Gas Services, L.L.C., an Oklahoma limited liability company (“Bluestem”), a 100% limited liability company interest in Chesapeake Midstream Gas Services, L.L.C., an Oklahoma limited liability company (“CMGS”), a 100% limited liability company interest in Oklahoma Midstream Gas Services, L.L.C., an Oklahoma limited liability company (“OMGS”), a 100% limited liability company interest in Texas Midstream Gas Services, L.L.C., an Oklahoma limited liability company (“TMGS”), and a 100% limited liability company interest in Ponder Midstream Gas Services, L.L.C., a Delaware limited liability company (“PMGS,” and together with Bluestem, CMGS, OMGS and TMGS, the “Operating Subsidiaries”).

It is further understood and agreed to by all parties hereto that the following additional transactions have occurred or will occur on or before the Initial Delivery Date (as defined below):

(a) the JV entered into the Amended and Restated Gas Gathering Agreement with certain affiliates of CHK, the Additional Agreement with CHK and Total E&P USA, Inc. and certain of their affiliates, the Gas Compressor Master Rental and Servicing Agreement with a wholly owned subsidiary of CHK and the Barnett Gas Gathering Agreement with Total E&P USA, Inc. and certain of its affiliates (collectively, the “Gas Gathering Agreements”); and the JV changed its name to “Chesapeake MLP Operating, L.L.C.” (the “OLLC”);

 

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(b) the GIP Entities and Chesapeake Holdings formed Chesapeake Midstream Ventures, L.L.C., a Delaware limited liability company (“Midstream Ventures”), to which Chesapeake Holdings contributed $1,500, GIP-A contributed $527.45, GIP-B contributed $204.59 and GIP-C contributed $767.96 in exchange for a 50% member interest, a 17.5816953% member interest, a 6.8197258% member interest and a 25.5985789% member interest, respectively, in Midstream Ventures;

(c) Midstream Ventures formed Chesapeake Midstream GP, L.L.C., a Delaware limited liability company (the “General Partner”), and contributed $1,000 in exchange for all of the member interests in the General Partner;

(d) Midstream Ventures and the General Partner formed the Partnership under the terms of the Delaware LP Act and contributed $980 and $20, respectively, in exchange for a 98% limited partner interest and a 2% general partner interest, respectively, in the Partnership;

(e) Midstream Ventures distributed its 98% limited partner interest in the Partnership to Holdings, GIP-A, GIP-B and GIP-C pro rata in accordance with their ownership interests in Midstream Ventures, resulting in limited partnership ownership in the Partnership of 49%, 17.230061443%, 6.683331284% and 25.086607273%, respectively;

(f) the OLLC and the Partnership entered into that certain First Amendment to Credit Agreement, dated [•], 2010 and effective upon the closing of the offering of Firm Units contemplated hereby (the “First Amendment”), with Wells Fargo Bank, National Association (the “Administrative Agent”) and the other lenders party thereto (the “Lenders”), which amends that certain Credit Agreement, dated September 30, 2009, among the OLLC, the Administrative Agent and the Lenders (as amended by the First Amendment, the “Credit Agreement”);

(g) the Partnership Parties, Chesapeake Holdings and the GIP Entities will enter into a contribution agreement (the “Contribution Agreement” and together with any related bills of sales, conveyances and similar transfer documents in connection with the Transactions, the “Contribution Documents”), pursuant to which (i) Chesapeake Holdings and the GIP Entities will collectively convey a 2% interest in the OLLC to Midstream Ventures (the “Interest”); (ii) Midstream Ventures will convey the Interest to the General Partner as a capital contribution; (iii) the General Partner will convey the Interest to the Partnership in exchange for (A) a continuation of the General Partner’s 2% general partner interest in the Partnership and (B) the incentive distribution rights, as such term is defined in the Partnership Agreement (as defined below) (the “Incentive Distribution Rights”); and (iv) Chesapeake Holdings and the GIP Entities will collectively convey the remaining 98% limited liability company interest in the OLLC to the Partnership in exchange for (A) in the case of Chesapeake Holdings, 23,913,061 Common Units and 34,538,061 subordinated units representing limited partner interests in the Partnership (the “Subordinated Units”) and (B) in the case of the GIP Entities (1) 20,725,561 Common Units, (2) the right to receive the Deferred Insurance and Distribution (as defined in the Contribution Agreement), and (3) 34,538,061 Subordinated Units, respectively (such Common Units and Subordinated Units described in clause (iv), including any Common Units issuable pursuant to the right to receive additional Common Units described in clause (B)(2) being collectively referred to herein as the “Sponsor Units”).

 

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(h) the public offering of the Units contemplated hereby (the “Offering”) will be consummated;

(i) the Partnership will use the net proceeds of the Offering to pay transaction expenses, estimated to be $3.5 million, and to make a capital contribution of $[•] million to the OLLC, and the OLLC will apply such capital contribution in the manner described under “Use of Proceeds” in the Pricing Disclosure Package and the Prospectus;

(j) (A) CHK, CMM, the General Partner and the OLLC will enter into that certain Amended and Restated Employee Transfer Agreement (the “Employee Transfer Agreement”); (B) CHK, CMM, the General Partner and the OLLC will enter into that certain Amended and Restated Employee Secondment Agreement (the “Employee Secondment Agreement”); (C) CMM, COI, the General Partner, the Partnership and the OLLC will enter into that certain Amended and Restated Services Agreement (the “Services Agreement”); (D) CHK, the General Partner, the GIP Entities, and the OLLC will enter into that certain Amended and Restated Shared Services Agreement (the “Shared Services Agreement”); and (E) the Partnership, the GIP Entities and Chesapeake Holdings will enter into that certain Registration Rights Agreement (the “Registration Rights Agreement”);

(k) Midstream Ventures will amend and restate its limited liability company agreement (as so amended and restated, the “Midstream Ventures Agreement”);

(l) the Partnership will amend and restate its agreement of limited partnership (as so amended and restated, the “Partnership Agreement”);

(m) the General Partner will amend and restate its limited liability company agreement (as so amended and restated, the “General Partner Agreement”);

(n) the OLLC will amend and restate its limited liability company agreement (as so amended and restated, the “OLLC Operating Agreement”); and

(o) Chesapeake Holdings, Midstream Ventures and the Partnership will enter into an omnibus agreement (the “Omnibus Agreement”) pursuant to which, among other things, (i) Chesapeake Holdings will provide the Partnership, or cause CHK to provide the Partnership, with certain rights relating to certain future midstream business opportunities and (ii) the parties will agree to certain indemnification obligations.

Midstream Ventures, the General Partner, the Partnership and the OLLC are collectively called the “Partnership Parties.” The Partnership Parties and the Operating Subsidiaries are collectively called the “Partnership Entities.” The Partnership Entities, the GIP Entities and Chesapeake Holdings are collectively called the “CHKM Entities.”

The transactions contemplated in subsections (a) through (o) above are referred to herein as the “Transactions.” The “Transaction Documents” shall mean the Contribution Documents, the Omnibus Agreement, the Gas Gathering Agreements, the Credit Agreement, the Employee Transfer Agreement, the Employee Secondment Agreement, the Services Agreement, the Shared Services Agreement and the Registration Rights Agreement. The “Organizational Documents” shall mean the certificates of formation of each of the Partnership Entities other

 

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than the Partnership, the certificate of limited partnership of the Partnership, the Midstream Ventures Agreement, the General Partner Agreement, the Partnership Agreement and the limited liability company agreements of the OLLC and the Operating Subsidiaries. The “Operative Agreements” shall mean the Transaction Documents and the Organizational Documents.

The Partnership hereby acknowledges that, in connection with the proposed offering of the Units, it has requested UBS Financial Services, Inc. (the “DUP Administrator”) to administer a directed unit program (the “Directed Unit Program”) under which up to 1,062,500 Firm Units, or 5% of the Firm Units (the “Reserved Units”), shall be reserved for sale by the DUP Administrator at the initial public offering price to the officers, directors and employees of the General Partner and its affiliates and certain other persons associated with the CHKM Entities, as designated by the Partnership (the “Directed Unit Participants”) as part of the distribution of the Units by the Underwriters, subject to the terms of this Agreement, the applicable rules, regulations and interpretations of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and all other applicable laws, rules and regulations. The number of Units available for sale to the general public will be reduced to the extent that Directed Unit Participants purchase Reserved Units. The Underwriters may offer any Reserved Units not purchased by Directed Unit Participants to the general public on the same basis as the other Units being issued and sold hereunder. The Partnership has supplied the DUP Administrator with the names, addresses and telephone numbers of the individuals or other entities which the Partnership has designated to be participants in the Directed Unit Program. It is understood that any number of those so designated to participate in the Directed Unit Program may decline to do so.

This is to confirm the agreement among the Partnership Parties and the Underwriters concerning the purchase of the Units from the Partnership by the Underwriters.

The Partnership Parties and the Underwriters agree as follows:

1. Sale and Purchase.

(a) Upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Partnership agrees to issue and sell to the respective Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase from the Partnership the number of Firm Units set forth opposite the name of such Underwriter in Schedule I attached hereto, subject to adjustment in accordance with Section 9 hereof, in each case at a purchase price of $[            ] per Common Unit. The Partnership is advised by you that the Underwriters intend (i) to make a public offering of their respective portions of the Firm Units as soon after the effectiveness of this Agreement as in your judgment is advisable and (ii) initially to offer the Firm Units upon the terms set forth in the Prospectus. You may from time to time increase or decrease the public offering price after the initial public offering to such extent as you may determine.

(b) In addition, the Partnership hereby grants to the several Underwriters the option (the “Over-Allotment Option”) to purchase, and upon the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Underwriters shall have the right to purchase, severally and not jointly, from the Partnership, ratably in accordance with the number of Firm Units to be purchased by each of them, all or a portion of the Additional Units as may be necessary to cover over-allotments made in connection with the offering of the Firm Units, at the same purchase price per unit to be paid by the Underwriters to the Partnership

 

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for the Firm Units. The Over-Allotment Option may be exercised by the Representatives, on behalf of the several Underwriters, at any time and from time to time on or before the thirtieth day following the date of the Prospectus (the “Over-Allotment Option Period”), by written notice to the Partnership. Such notice shall set forth the aggregate number of Additional Units as to which the Over-Allotment Option is being exercised and the date and time when the Additional Units are to be delivered (any such date and time being herein referred to as the “Option Delivery Date”); provided, however, that no Option Delivery Date shall be earlier than the Initial Delivery Date (as defined below) nor earlier than the second business day after the date on which the Over-Allotment Option shall have been exercised (unless the subject Additional Units are to be purchased on the Initial Delivery Date) nor later than the fifth business day after the date on which the Over-Allotment Option shall have been exercised. The number of Additional Units to be sold to each Underwriter shall be the number which bears the same proportion to the aggregate number of Additional Units being purchased as the number of Firm Units set forth opposite the name of such Underwriter on Schedule I hereto bears to the total number of Firm Units (subject, in each case, to such adjustment as the Representatives may determine to eliminate fractional Common Units), subject to adjustment in accordance with Section 9 hereof.

2. Payment and Delivery. Payment of the purchase price for the Firm Units shall be made to the Partnership by Federal Funds wire transfer against delivery of the certificates for the Firm Units to you through the facilities of The Depository Trust Company (“DTC”) for the respective accounts of the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York City time, on [            ], 2010 (unless another time shall be agreed to by the Representatives and the Partnership or unless postponed in accordance with the provisions of Section 9 hereof). The time at which such payment and delivery are to be made is hereinafter sometimes called the “Initial Delivery Date.” Electronic transfer of the Firm Units shall be made to you at the time of purchase in such names and in such denominations as you shall specify. The Option Delivery Date and the Initial Delivery Date are each referred to herein as a “Delivery Date.”

Payment of the purchase price for the Additional Units shall be made on the Option Delivery Date in the same manner and at the same office and time of day as the payment for the Firm Units. Electronic transfer of the Additional Units shall be made to you on the Option Delivery Date in such names and in such denominations as you shall specify.

Deliveries of the documents described in Section 4 hereof with respect to the purchase of the Units shall be made at the offices of Vinson & Elkins L.L.P. at 1001 Fannin, Houston, Texas, at 10:00 A.M., New York City time, on the date of the closing of the purchase of the Firm Units or the Additional Units, as the case may be.

3. Representations and Warranties of the Partnership Parties. The Partnership Parties, jointly and severally, represent and warrant to, and agree with, each of the Underwriters that:

(a) Registration. A registration statement on Form S-1 (File No. 333-164905) (the “Initial Registration Statement”) in respect of the Units has been filed with the Securities and Exchange Commission (the “Commission”); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you for each of the other Underwriters, have been declared effective by the Commission in such form, other than a

 

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registration statement, if any, increasing the size of the offering (a “Rule 462(b) Registration Statement”), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including the rules and regulations of the Commission thereunder, the “Securities Act”), which became effective upon filing. For purposes of this Agreement:

(i) any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) under the Securities Act is hereinafter called a “Preliminary Prospectus”;

(ii) the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the final prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act and deemed by virtue of Rule 430A under the Securities Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective (each, an “effective date”), are hereinafter collectively called the “Registration Statement”;

(iii) the Preliminary Prospectus dated [            ], 2010 relating to the Units that was included in the Registration Statement immediately prior to the Applicable Time (as defined below) is hereinafter called the “Pricing Prospectus”;

(iv) the final prospectus, in the form first filed pursuant to Rule 424(b) under the Securities Act, is hereinafter called the “Prospectus”;

(v) “free writing prospectus” has meaning set forth in Rule 405 under the Securities Act, and any “issuer free writing prospectus” as defined in Rule 433 under the Securities Act relating to the Units is hereinafter called an “Issuer Free Writing Prospectus”;

(vi) the Pricing Prospectus, as supplemented by those Issuer Free Writing Prospectuses and the other information and documents, if any, listed in Schedule II hereto, taken together, are hereinafter called the “Pricing Disclosure Package”; and

(vii) the “Applicable Time” means [            ] (New York City time) on the date of this Agreement.

The Partnership has prepared and filed, in accordance with Section 12 of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”), a registration statement (as amended, the “Exchange Act Registration Statement”) on Form 8-A (File No. [            ]) under the Exchange Act to register, under Section 12g of the Exchange Act, the class of securities consisting of the Common Units. The Exchange Act Registration Statement has become effective as provided in Section 12 of the Exchange Act.

(b) No Stop Order. No stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or, to the knowledge of the Partnership Parties, threatened by the Commission. No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued and no proceeding for that purpose has been initiated or, to the knowledge of the Partnership Parties, threatened by the Commission.

 

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(c) No Material Misstatements or Omissions in Registration Statement. The Registration Statement conforms, and any further amendments or supplements to the Registration Statement will conform, in all material respects to the applicable requirements of the Securities Act and did not, as of the applicable effective date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 11.

(d) No Material Misstatements or Omissions in Prospectus. The Prospectus will conform, when filed with the Commission under Rule 424(b), in all material respects to the applicable requirements of the Securities Act, and will not, as of its date and on the applicable Delivery Date, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Prospectus in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 11.

(e) No Material Misstatements or Omissions in Pricing Disclosure Package. The Pricing Prospectus, when filed with the Commission, conformed in all material respects to the applicable requirements of the Securities Act. Each Issuer Free Writing Prospectus conformed or will conform in all material respects to the applicable requirements of the Securities Act on the date of first use. The Pricing Disclosure Package, as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; each Issuer Free Writing Prospectus, as of its time of first use, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus; provided that no representation or warranty is made as to information contained in or omitted from the Pricing Disclosure Package in reliance upon and in conformity with written information furnished to the Partnership through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 11.

(f) Partnership Not an “Ineligible Issuer.” The Partnership was not at the time of initial filing of the Registration Statement, is not on the date hereof and will not be on the applicable Delivery Date an “ineligible issuer” (as defined in Rule 405 under the Securities Act).

(g) Forward-Looking and Supporting Information. Each of the statements made by the Partnership in the Registration Statement and the Pricing Disclosure Package and to be made in the Prospectus (and any supplements thereto) within the coverage of Rule 175(b) under the Securities Act, including (but not limited to) any statements with respect to projected results of

 

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operations, estimated available cash and future cash distributions of the Partnership, and any statements made in support thereof or related thereto under the heading “Our Cash Distribution Policy and Restrictions on Distributions” or the anticipated ratio of taxable income to distributions, was made or will be made with a reasonable basis and in good faith.

(h) Formation, Due Qualification and Authority. Each of the CHKM Entities and Chesapeake GP Entities has been duly formed and is validly existing as a corporation, limited partnership or limited liability company, as the case may be, in good standing under the laws of its jurisdiction of incorporation, organization or formation, as the case may be. Each of the Partnership Entities is duly registered or qualified to do business and is in good standing as a foreign limited partnership or limited liability company, as the case may be, in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such registration or qualification, except where the failure so to register or qualify would not reasonably be expected to (i) have a material adverse effect on the business, properties, financial condition, results of operations or prospects of the Partnership Entities taken as a whole (a “Material Adverse Effect”) or (ii) subject the limited partners of the Partnership to any material liability or disability. Each of the Partnership Entities has all requisite power and authority necessary to execute, deliver and perform its obligations under the Transaction Documents to which it is a party, to own or lease its properties currently owned or leased or to be owned or leased at each Delivery Date, and to conduct its business as currently conducted or as to be conducted at each Delivery Date, in each case in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Each of the Chesapeake GP Entities has all requisite power and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party and to conduct its business as currently conducted or as to be conducted at each Delivery Date, in each case in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Each of the GIP Entities has all partnership power and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party and to conduct its business as currently conducted or as to be conducted at each Delivery Date, in each case in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(i) Power and Authority to Act as the Manager. Midstream Ventures has full limited liability company power and authority to act as the manager of the General Partner. The Partnership has full limited liability company power and authority to act as the manager of the OLLC, and the OLLC has full limited liability company power and authority to act as the manager of each of the Operating Subsidiaries, in each case in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(j) Power and Authority to Act as a General Partner. The General Partner has full limited liability company power and authority to act as the general partner of the Partnership in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(k) Ownership of Midstream Ventures. At each Delivery Date, the GIP Entities will own, collectively, 50% of the issued and outstanding limited liability company interests in Midstream Ventures, and Chesapeake Holdings will own 50% of the issued and outstanding limited liability company interests in Midstream Ventures. At each Delivery Date, all of such interests will have been duly authorized and validly issued in accordance with the Midstream

 

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Ventures Agreement and will be fully paid (to the extent required under the Midstream Ventures Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware Limited Liability Company Act (the “Delaware LLC Act”)); and the GIP Entities and Chesapeake Holdings will own such limited liability company interests free and clear of all liens, encumbrances, security interests, charges or other claims (“Liens”).

(l) Ownership of the General Partner. At each Delivery Date, Midstream Ventures will be the sole member of the General Partner and will own 100% of the limited liability company interests in the General Partner; such limited liability company interests will be duly authorized and validly issued in accordance with the General Partner Agreement and will be fully paid (to the extent required under the General Partner Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and Midstream Ventures will own such limited liability company interests free and clear of all Liens.

(m) Ownership of the General Partner Interest and the Incentive Distribution Rights in the Partnership. At each Delivery Date, the General Partner will be the sole general partner of the Partnership and will own a 2.0% general partner interest in the Partnership (the “GP Interest”), and all of the Incentive Distribution Rights; the GP Interest and the Incentive Distribution Rights will be duly authorized and validly issued in accordance with the Partnership Agreement and will be fully paid (to the extent required under the Partnership Agreement) and, in the case of the Incentive Distribution Rights, nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP Act”); and the General Partner will own such GP Interest and Incentive Distribution Rights free and clear of all Liens, other than those created pursuant to the lock-up agreements described in Section 4(i) hereof.

(n) Ownership of the Sponsor Units. Assuming no purchase by the Underwriters of any Additional Units, at the Initial Delivery Date, after giving effect to the Transactions, the GIP Entities and Chesapeake Holdings will collectively own all of the Sponsor Units; the Sponsor Units and the limited partner interests represented thereby will be duly authorized and validly issued in accordance with the Partnership Agreement and will be fully paid (to the extent required under Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and the GIP Entities and Chesapeake Holdings will own the Sponsor Units free and clear of all Liens, other than those Liens created pursuant to the lock-up agreements described in Section 4(i) hereof and, with respect to the Sponsor Units held by Chesapeake Holdings, Liens created pursuant to the credit agreement of CMD and CMO.

(o) Valid Issuance of the Units. At each Delivery Date, the Firm Units or the Additional Units, as the case may be, and the limited partner interests represented thereby, will be duly authorized in accordance with the Partnership Agreement and, when issued and delivered to the Underwriters against payment therefor in accordance with this Agreement, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act).

 

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(p) Capitalization of the Partnership. Assuming no purchase by the Underwriters of any Additional Units, at the Initial Delivery Date, after giving effect to the Transactions, the issued and outstanding partnership interests of the Partnership will consist of 69,076,122 Common Units, 69,076,122 Subordinated Units, the GP Interest, the Incentive Distribution Rights and any limited partnership interests issued to independent directors of the General Partner pursuant to the Partnership’s long-term incentive plan; and other than the Sponsor Units, the Incentive Distribution Rights and any limited partnership interests issued to independent directors of the General Partner pursuant to the Partnership’s long-term incentive plan, the Firm Units will be the only limited partner interests in the Partnership issued and outstanding at each Delivery Date.

(q) Ownership of the OLLC by the Partnership. At each Delivery Date, the Partnership will be the sole member of the OLLC and will own 100% of the limited liability company interests in the OLLC; such limited liability company interests will be duly authorized and validly issued in accordance with the OLLC Operating Agreement and will be fully paid (to the extent required under the OLLC Operating Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and the Partnership will own such limited liability company interests free and clear of all Liens, except for those Liens securing obligations under the Credit Agreement.

(r) Ownership of the Operating Subsidiaries. At each Delivery Date, the OLLC will own, directly or indirectly, 100% of the limited liability company interests in each of the Operating Subsidiaries. At each Delivery Date, such equity interests will have been duly authorized and validly issued in accordance with the Organizational Documents of each Operating Subsidiary and will be fully paid (to the extent required under such Organizational Documents) and nonassessable (except as such nonassessability may be affected by Sections 18-607 and 18-804 of the Delaware LLC Act); and the OLLC will own, directly or indirectly, such equity interests free and clear of all Liens, except for those Liens securing obligations under the Credit Agreement.

(s) No Other Subsidiaries. Other than the Partnership Entities, the General Partner does not own, and at each Delivery Date will not own, directly or indirectly, any equity or long-term debt securities of any corporation, partnership, limited liability company, joint venture, association or other entity. Other than the Partnership’s ownership of its 100% limited liability company interest in the OLLC and the OLLC’s ownership of its 100% limited liability company interest in each of the Operating Subsidiaries, neither the Partnership nor the OLLC owns, and at each Delivery Date, neither will own, directly or indirectly, any equity or long-term debt securities of any corporation, partnership, limited liability company, joint venture, association or other entity.

(t) No Preemptive Rights, Registration Rights or Options. Except as described in the Registration Statement and except for such rights as have been effectively waived, the Pricing Disclosure Package and the Prospectus or as provided in the Midstream Ventures Agreement or the General Partner Agreement, there are no options, warrants, preemptive rights or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any capital stock, limited liability company interests, partnership interests or other equity interests in any Partnership Entity. Neither the filing of the Registration Statement nor the offering or sale of the Units as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Common Units or other securities of the Partnership.

 

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(u) Authority and Authorization. Each of the Partnership Parties has all requisite power and authority to execute and deliver this Agreement and perform its respective obligations hereunder. The Partnership has all requisite power and authority to issue, sell and deliver (i) the Units, in accordance with and upon the terms and conditions set forth in this Agreement, the Partnership Agreement, the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) the Sponsor Units and the Incentive Distribution Rights, in accordance with and upon the terms and conditions set forth in the Partnership Agreement and the Contribution Documents. At each Delivery Date, all corporate, partnership and limited liability company action, as the case may be, required to be taken by the CHKM Entities, the Chesapeake GP Entities or any of their respective stockholders, members or partners for the authorization, issuance, sale and delivery of the Units, the Sponsor Units and the Incentive Distribution Rights, the execution and delivery of the Operative Agreements and the consummation of the transactions (including the Transactions) contemplated by this Agreement and the Operative Agreements shall have been validly taken.

(v) Authorization of Underwriting Agreement. This Agreement has been duly authorized and validly executed and delivered by each of the Partnership Parties.

(w) Enforceability of Operative Agreements. At or before the Initial Delivery Date:

(i) the Partnership Agreement will have been duly authorized, executed and delivered by the General Partner and Midstream Ventures and will be a valid and legally binding agreement of the General Partner and Midstream Ventures, enforceable against each of the General Partner and Midstream Ventures in accordance with its terms;

(ii) the General Partner Agreement will have been duly authorized, executed and delivered by Midstream Ventures and will be a valid and legally binding agreement of Midstream Ventures, enforceable against Midstream Ventures in accordance with its terms;

(iii) the Midstream Ventures Agreement will have been duly authorized, executed and delivered by the GIP Entities and Chesapeake Holdings and will be a valid and legally binding agreement of each of them, enforceable against each of them in accordance with its terms;

(iv) the OLLC Operating Agreement will have been duly authorized, executed and delivered by the Partnership and will be a valid and legally binding agreement of the Partnership, enforceable against the Partnership in accordance with its terms;

(v) the limited liability company agreements of the Operating Subsidiaries will have been duly authorized, executed and delivered by the OLLC and will be valid and legally binding agreements of the OLLC, enforceable against the OLLC in accordance with their respective terms; and

(vi) each of the Transaction Documents will have been duly authorized, executed and delivered by each CHKM Entity party thereto and will be valid and legally binding agreements of each CHKM Entity party thereto, enforceable against such CHKM Entity in accordance with their respective terms;

 

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provided, that with respect to each such agreement, the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (ii) public policy, any applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing.

(x) Sufficiency of Contribution Documents. The Contribution Documents will be legally sufficient to transfer or convey to the Partnership Entities satisfactory title to, or valid rights to use or manage, all properties not already held by them that are, individually or in the aggregate, required to enable the Partnership Entities to conduct their operations in all material respects as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, subject to the conditions, reservations, encumbrances and limitations contained in the Contribution Documents. The Partnership, the OLLC and the Operating Subsidiaries, upon execution and delivery of the Contribution Documents and consummation of the transactions contemplated thereby, will directly or indirectly succeed in all material respects to the business, assets, properties, liabilities and operations reflected in the pro forma financial statements of the Partnership.

(y) No Conflicts. None of (i) the offering, issuance or sale by the Partnership of the Units, (ii) the execution, delivery and performance of this Agreement or the Operative Agreements by the CHKM Entities and the Chesapeake GP Entities parties hereto or thereto, as the case may be, or (iii) the consummation of the Transactions, (A) conflicts or will conflict with or constitutes or will constitute a violation of the limited liability company agreement, partnership agreement, certificate of formation, certificate of limited partnership or other governing document of any of the CHKM Entities or the Chesapeake GP Entities, (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event which, with notice or lapse of time or both, would constitute such a default) under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which any of the CHKM Entities or the Chesapeake GP Entities is a party or by which any of them or any of their respective properties may be bound, (C) violates or will violate any statute, law or regulation or any order, judgment, decree or injunction of any court or governmental agency or body directed to any of the CHKM Entities or the Chesapeake GP Entities or any of their respective properties in a proceeding to which any of them or their respective property is a party or (D) results or will result in the creation or imposition of any Lien upon any property or assets of any of the CHKM Entities or the Chesapeake GP Entities, which conflicts, breaches, violations, defaults or Liens, in the case of clauses (B), (C) or (D), would (i) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) materially impair the ability of any of the CHKM Entities or Chesapeake GP Entities to consummate the Transactions.

(z) No Consents. No permit, consent, approval, authorization, order, registration, filing or qualification (“consent”) of or with any court, governmental agency or body having jurisdiction over any of the CHKM Entities or any of their respective properties or assets is required in connection with (i) the offering, issuance or sale by the Partnership of the Units, (ii) the execution, delivery and performance of this Agreement and the Operative Agreements by the CHKM Entities party hereto and thereto, as the case may be, or (iii) the consummation by the CHKM Entities of the Transactions except, in the case of clauses (i) through (iii), (A) for

 

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registration of the Units under the Securities Act and consents required under the Exchange Act and applicable state securities or “Blue Sky” laws in connection with the purchase and distribution of the Units by the Underwriters, (B) for such consents that have been, or prior to the Initial Delivery Date will be, obtained or made (C) for such consents that, if not obtained, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or materially impair the ability of any of the CHKM Entities or Chesapeake GP Entities to consummate the Transactions, and (D) as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(aa) No Defaults. None of the Partnership Entities is (i) in violation of its limited liability company agreement, partnership agreement, certificate of formation, certificate of limited partnership or other governing document, (ii) in violation of any law, statute, ordinance, administrative or governmental rule or regulation applicable to it or of any order, judgment, decree or injunction of any court or governmental agency or body having jurisdiction over any of the Partnership Entities or any of their properties or assets or (iii) in breach, default (or an event which, with notice or lapse of time or both, would constitute such a default) or violation in the performance of any obligation, agreement, covenant or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or other agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound, which breach, default or violation in the case of clauses (ii) or (iii) would, if continued, reasonably be expected to have a Material Adverse Effect or materially impair the ability of any of the CHKM Entities or Chesapeake GP Entities to consummate the Transactions. To the knowledge of the Partnership Parties, no third party to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which any of the CHKM Entities is a party or by which any of them is bound or to which any of their properties is subject, is in breach, default or violation of any such agreement, which breach, default or violation, if continued, would reasonably be expected to have a Material Adverse Effect or materially impair the ability of any of the CHKM Entities or Chesapeake GP Entities to consummate the Transactions.

(bb) Conformity of Securities to Descriptions in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The Units, when issued and delivered in accordance with the terms of the Partnership Agreement and this Agreement against payment therefor as provided therein and herein, and the Sponsor Units, the Incentive Distribution Rights and the GP Interest, when issued and delivered in accordance with the terms of the Partnership Agreement and the Contribution Documents, will conform in all material respects to the descriptions thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(cc) Private Placement. The sale and issuance of (i) the Sponsor Units to the GIP Entities and Chesapeake Holdings and (ii) the Incentive Distribution Rights and the GP Interest to the General Partner are exempt from the registration requirements of the Securities Act and securities laws of any state having jurisdiction with respect thereto, and none of the Partnership Entities has taken or will take any action that would cause the loss of such exemption. The Partnership has not sold or issued any securities that would be integrated with the offering of the Units contemplated by this Agreement pursuant to the Securities Act or the interpretations thereof by the Commission.

 

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(dd) Independent Public Accountants. PricewaterhouseCoopers LLP, who has certified or shall certify the audited financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus (or any amendment or supplement thereto), is, and was during the periods covered by such financial statements, an independent registered public accounting firm with respect to the Partnership Entities as required by the Securities Act and the Public Company Accounting Oversight Board.

(ee) Financial Statements. The historical financial statements (including the related notes and supporting schedules) included in the Registration Statement, the Pricing Disclosure Package and the Prospectus present fairly in all material respects the financial condition of CMD, the Partnership and the General Partner as of the dates indicated, and comply as to form with the applicable accounting requirements of the Securities Act and have been prepared in accordance with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved. The summary historical and pro forma financial and operating information set forth in the Registration Statement, the Pricing Prospectus and the Prospectus under the caption “Summary—Summary Historical and Unaudited Pro Forma Financial and Operating Data” and the selected historical and pro forma financial and operating information set forth under the caption “Selected Historical and Unaudited Pro Forma Financial and Operating Data” in the Registration Statement, the Pricing Prospectus and the Prospectus is fairly presented in all material respects and prepared on a basis consistent with the audited and unaudited historical financial statements and pro forma financial statements, as applicable, from which it has been derived. There are no financial statements (historical or pro forma) that are required to be included in the Registration Statement, any Preliminary Prospectus or the Prospectus that are not so included as required. The other financial information of CMD, the Partnership and the General Partner and their subsidiaries, including non-GAAP financial measures, if any, contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus has been derived from the accounting records of CMD, the Partnership and the General Partner and their subsidiaries, and fairly presents in all material respects the information purported to be shown thereby.

(ff) Pro Forma Financial Statements. The pro forma financial statements of the Partnership included in the Registration Statement, the Pricing Prospectus and the Prospectus include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the pro forma financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus. The pro forma financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Securities Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements.

(gg) No Material Adverse Change. None of the Partnership Entities has sustained, since the date of the latest audited financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, investigation, order or decree, otherwise than as

 

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set forth or contemplated in the Registration Statement, the Pricing Disclosure Package and the Prospectus and other than as would not reasonably be expected to have a Material Adverse Effect. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, in each case excluding any amendments or supplements to the foregoing made after the execution of this Agreement, there has not been (i) any material adverse change, or any development involving, individually or in the aggregate, a prospective material adverse change, in the condition, financial or otherwise, business, properties, management, financial condition, prospects, net worth or results of operations of the Partnership Entities taken as a whole, (ii) any transaction which is material to the Partnership Entities taken as a whole, other than transactions in the ordinary course of business as such business is described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (iii) any dividend or distribution of any kind declared, paid or made on the security interests of any of the Partnership Entities, in each case other than as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(hh) Legal Proceedings or Contracts to be Described or Filed. There are no legal or governmental proceedings pending or, to the knowledge of the Partnership Parties, threatened, against any of the Partnership Entities, or to which any of the Partnership Entities is a party, or to which any of their respective properties is subject, that are required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus that are not described as required by the Securities Act. There are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required by the Securities Act. Each contract, document or other agreement described in the Registration Statement, the Pricing Disclosure Package or the Prospectus is in full force and effect and is valid and enforceable by and against the Partnership Entities, as the case may be, in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as would not reasonably be expected to have a Material Adverse Effect. Statements made in the Pricing Disclosure Package and the Prospectus insofar as they purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings or contracts and other documents, constitute accurate summaries of the terms of such statutes, rules and regulations, legal and governmental proceedings and contracts and other documents in all material respects.

(ii) Certain Relationships and Related Transactions. No relationship, direct or indirect, exists between or among any Partnership Entity on the one hand, and the directors, managers, officers, members, partners, stockholders, customers or suppliers of any Partnership Entity, on the other hand, that is required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus and is not so described. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by any Partnership Entity to or for the benefit of any of the officers, directors or managers of any Partnership Entity or their respective family members.

(jj) Title to Properties. Following consummation of the Transactions and at each Delivery Date, the Partnership Entities will have good and indefeasible title to all real property

 

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(exclusive of easements, rights-of-ways and other similar instruments) and good title to all personal property described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as owned by the Partnership Entities, free and clear of all Liens and defects, except (i) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (ii) those created, arising under or securing the Credit Agreement or (iii) as do not materially interfere with the use of such properties taken as a whole as they have been used in the past and are proposed to be used in the future as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus; provided that, with respect to any real property and buildings held under lease by the Partnership Entities, such real property and buildings are held under valid and subsisting and enforceable leases with such exceptions as do not materially interfere with the use of the properties of the Partnership Entities taken as a whole as they have been used in the past as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are proposed to be used in the future as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(kk) Rights-of-Way. Following consummation of the Transactions and at each Delivery Date, each of the Partnership Entities will have such easements, rights-of-way or other similar agreements from each person (collectively, “rights-of-way”) as are necessary to conduct its business in the manner described, and subject to the limitations contained, in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for (i) qualifications, reservations and encumbrances as may be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) such rights-of-way that, if not obtained, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; each of the Partnership Entities has, or upon consummation of the Transactions will have, other than as set forth, and subject to the limitations contained, in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fulfilled and performed all its material obligations with respect to such rights-of-way and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such rights-of-way, except for such revocations, terminations and impairments that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, none of such rights-of-way contains any restriction that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(ll) Governmental Permits. Each of the Partnership Entities has, or at each Delivery Date will have, such permits, consents, licenses, franchises, certificates and authorizations of governmental or regulatory authorities (“governmental permits”) as are necessary to own or lease its properties and to conduct its business in the manner described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, subject to such qualifications set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and except for such governmental permits that, if not obtained, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, each of the Partnership Entities has, and at each Delivery Date will be in compliance with the terms and conditions of, all such governmental permits, except where the failure so to comply would not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect; and no event has occurred that would prevent the governmental permits from being renewed or

 

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reissued or which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any impairment of the rights of the holder of any such governmental permit, except for such non-renewals, non-issuances, revocations, terminations and impairments that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(mm) Books and Records. Each Partnership Entity (i) makes and keeps books, records and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of its assets and (ii) maintains systems of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of its financial statements in conformity with generally accepted accounting principles and to maintain accountability for its assets; (C) access to its assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(nn) Disclosure Controls and Procedures. (i) The Partnership has established and maintains disclosure controls and procedures (to the extent required by and as such term is defined in Rule 13a-15 under the Exchange Act), (ii) such disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Partnership in the reports it files or will file or submit under the Exchange Act, as applicable, is accumulated and communicated to management of the General Partner and each other Partnership Entity, including their respective principal executive officers and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure to be made and (iii) such disclosure controls and procedures are effective in all material respects to perform the functions for which they were established to the extent required by Rule 13a-15 of the Exchange Act.

(oo) No Changes in Internal Controls. Since the date of the most recent balance sheet of CMD reviewed or audited by PricewaterhouseCoopers LLP, (i) none of the Partnership Entities is aware of (A) any significant deficiencies in the design or operation of internal controls that could adversely affect the ability of any of the Partnership Entities to record, process, summarize and report financial data in any material respect, or any material weaknesses in internal controls or (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls of any of the Partnership Entities, and (ii) there have been no significant changes in internal controls or in other factors that has or could significantly and adversely affect internal controls.

(pp) Tax Returns. Each of the Partnership Entities has filed (or has obtained extensions with respect to) all material federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof, which returns are complete and correct in all material respects, and has timely paid all taxes shown to be due pursuant to such returns. No tax deficiency has been determined adversely to any of the Partnership Entities, and none of the Partnership Parties has any knowledge of any tax deficiency or related assessment, fine or penalty that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except those that are being contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles.

 

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(qq) ERISA. Other than with respect to items that would not reasonably be expected to have a Material Adverse Effect, (i) at each Delivery Date, each Partnership Entity and CMM and each employee benefit plan or program maintained by any Partnership Entity or CMM will be in compliance in form and in operation with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”), and any other applicable law except any amendments that are not yet required to be executed, (ii) no “reportable event” (as defined in ERISA) has occurred or is reasonably expected to occur with respect to any “pension plan” (as defined in ERISA) for which any Partnership Entity or CMM or any entity treated as a single employer within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the “Code”) or Section 4001 of ERISA (collectively “ERISA Affiliate”) (after giving effect to the Transactions), would have any liability, and (iii) no Partnership Entity or CMM or ERISA Affiliate (after giving effect to the Transactions) expects to incur liability under (A) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (B) Sections 412 or 4971 of the Code as a result of the Transactions. Other than with respect to items that would not reasonably be expected to have a Material Adverse Effect, each pension plan established and which is currently maintained by any Partnership Entity or CMM that is intended to be qualified under Section 401 of the Code is so qualified and, to the knowledge of the Partnership Parties, no event or fact exists which would adversely affect such qualification. To the knowledge of the Partnership Parties as of the date of this Agreement, none of the Partnership Entities or CMM or any ERISA Affiliate currently maintains, contributes to or has any liability (contingent or otherwise) with respect to a “defined benefit plan” (within the meaning of Section 3(35) of ERISA) or a pension plan that is subject to Title IV of ERISA.

(rr) Investment Company. None of the Partnership Entities is nor after sale of the Units to be sold by the Partnership hereunder and application of the net proceeds from such sale as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the caption “Use of Proceeds” will be, an “investment company” or a company “controlled by” an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”).

(ss) Intellectual Property. Each of the Partnership Entities, with respect to the assets to be owned or leased by the Partnership Entities at each Delivery Date, owns or possesses adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses in the manner and subject to such qualifications described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and has no reason to believe that the conduct of its business will conflict with, and has not received any notice of any claim of conflict with, any such rights of others, except for such conflicts that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(tt) Environmental Compliance. Each of the Partnership Entities (i) is in compliance with any and all foreign, federal, state and local laws and regulations relating to the prevention of pollution or the protection of the environment or imposing liability or standards of conduct

 

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concerning any Hazardous Material (as hereinafter defined) (“Environmental Laws”), (ii) has received and is in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as they are currently being conducted, (iii) has not received written or oral notice of any actual or potential liability under any Environmental Law, and (iv) is not a party to or affected by any pending or, to the knowledge of the Partnership Parties, threatened action, suit or proceeding relating to any alleged violation of any Environmental Law or any actual or alleged release or threatened release or cleanup at any location of any Hazardous Material, except where such noncompliance or deviation from that described in (i)-(iv) above would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The term “Hazardous Material” means (A) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (B) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under any applicable Environmental Law. None of the Partnership Entities has received written notice that they are currently named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, including, but not limited to, with respect to any of the properties being contributed to the Partnership Entities pursuant to the Transactions.

(uu) Effect of Environmental Laws. In the ordinary course of its business, each Partnership Entity periodically reviews the effect of Environmental Laws on its business, operations and properties, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures reasonably likely to be required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related and reasonably foreseeable constraints on operating activities and any reasonably foreseeable liabilities to third parties). On the basis of such review, each Partnership Entity has reasonably concluded that such associated costs and liabilities would not, individually or in the aggregate, have a Material Adverse Effect.

(vv) Sarbanes-Oxley Act of 2002. At each Delivery Date, the Partnership and, to the knowledge of the Partnership Parties, the directors and officers of the General Partner in their capacities as such, will be in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002, the rules and regulations promulgated therewith and the rules of the New York Stock Exchange (“NYSE”) that are effective and applicable to the Partnership.

(ww) No Labor Dispute. No labor dispute with the employees of the Partnership Entities or CMM exists or, to the knowledge of any of the Partnership Parties, is imminent or threatened that would reasonably be expected to have a Material Adverse Effect.

(xx) Insurance. The Partnership Entities maintain or are entitled to the benefits of insurance covering their properties, operations, personnel and businesses against such losses and risks, in such amounts and from such insurers as is commercially reasonable for the conduct of their respective businesses and the value of their respective properties. None of the Partnership Entities has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance (including after giving effect to the Transactions). The Partnership Entities are in compliance with the terms of such policies in all material respects, and all such insurance is duly in full force

 

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and effect on the date hereof and will be duly in full force and effect at each Delivery Date. There are no claims by the Partnership Entities under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and the Partnership Entities have not received written or oral notice that they will be denied renewal of their existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue their businesses at a cost that would not reasonably be expected to have a Material Adverse Effect.

(yy) Litigation. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there is (i) no action, suit or proceeding before or by any court, arbitrator or governmental agency, body or official, domestic or foreign, now pending or, to the knowledge of the Partnership Parties, threatened, to which any of the CHKM Entities is or may be a party or to which the business or property of any of the CHKM Entities is or may be subject, (ii) no injunction, restraining order or order of any nature issued by a federal or state court or foreign court of competent jurisdiction to which any of the CHKM Entities is or may be subject, that, in the case of clauses (i) and (ii) above, is reasonably expected to (A) individually, or in the aggregate, have a Material Adverse Effect, (B) prevent or result in the suspension of the offer, issuance or sale of the Units, or (C) call into question the validity of this Agreement, any of the Operative Agreements or the consummation of the Transactions.

(zz) No Distribution of Other Offering Materials. None of the Partnership Entities has distributed and, prior to the later to occur of the final Delivery Date and completion of the distribution of the Units, will not distribute, any offering material in connection with the offering and sale of the Units other than the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package, the Prospectus and any Issuer Free Writing Prospectus to which the Representatives have consented in accordance with this Agreement.

(aaa) Foreign Corrupt Practices Act. None of the Partnership Entities, nor any director or officer of a Partnership Entity, nor, to the Partnership Parties’ knowledge, any employee, agent or representative of the Partnership Entities, has taken any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to influence official action or secure an improper advantage; and the Partnership Entities and their affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintain policies and procedures designed to promote and achieve compliance with such laws.

(bbb) Anti-Money Laundering. The operations of the Partnership Entities are and have been conducted at all times in material compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Partnership Entities conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental

 

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agency, authority or body or any arbitrator involving the Partnership or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Partnership Parties, threatened.

(ccc) Office of Foreign Assets Control.

(i) The Partnership Parties represent that none of the Partnership Entities or, to the knowledge of the Partnership Parties, any director or officer of any of the Partnership Entities, is an individual or entity (“Person”) that is, or is owned or controlled by a Person that is:

(A) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council (“UNSC”), the European Union (“EU”), Her Majesty’s Treasury (“HMT”), or other relevant sanctions authority (collectively, “Sanctions”), nor

(B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba, Iran, North Korea, Sudan and Syria).

(ii) The Partnership Parties represent and covenant that the Partnership Entities will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

(A) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or

(B) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).

(ddd) Listing. The Units have been approved for listing on the NYSE, subject only to official notice of issuance.

(eee) Market Stabilization. The Partnership has not taken and will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Partnership or facilitate the sale or resale of the Units.

(fff) Statistical and Market-Related Data. All statistical or market-related data included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, if any, are based on or derived from sources that the Partnership believes to be reliable and accurate, and the Partnership has obtained the written consent to the use of such data from such sources to the extent required.

(ggg) FINRA Affiliations. To the knowledge of the Partnership Parties, there are no affiliations or associations between any member of FINRA and any of the General Partner’s officers or directors or the Partnership’s 5% or greater security holders, except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

 

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(hhh) Distribution Restrictions. No subsidiary of the Partnership is currently prohibited, directly or indirectly, from paying any distributions to the Partnership, from making any other distribution on such subsidiary’s equity interests, from repaying to the Partnership any loans or advances to such subsidiary from the Partnership or from transferring any of such subsidiary’s property or assets to the Partnership or any other subsidiary of the Partnership, except as prohibited under the Credit Agreement.

(iii) Directed Unit Program. The Registration Statement, the Prospectus and the Pricing Disclosure Package comply, and any amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Registration Statement, the Prospectus and the Pricing Disclosure Package, as amended or supplemented, if applicable, are distributed in connection with the Directed Unit Program. The Partnership has not offered, or caused the DUP Administrator to offer, Units to any person pursuant to the Directed Unit Program with the specific intent to unlawfully influence (i) a customer or supplier of the Partnership Entities to alter the customer’s or supplier’s level or type of business with the Partnership Entities, or (ii) a trade journalist or publication to write or publish favorable information about the Partnership Entities or their industry.

Any certificate signed by any officer of any Partnership Party and delivered to the Representatives or to counsel for the Underwriters pursuant to this Agreement shall be deemed a representation and warranty by such Partnership Party to each Underwriter as to the matters covered thereby.

4. Conditions to the Underwriters’ Obligations. The respective obligations of the Underwriters hereunder to purchase the Firm Units and the Additional Units, as the case may be, are subject to the accuracy, when made and on the applicable Delivery Date, of the representations and warranties of the Partnership Parties contained herein, to the accuracy of the statements of the Partnership Parties and the officers of the General Partner, on behalf of the Partnership, made in any certificates delivered pursuant hereto, to the performance by the Partnership Parties of their respective obligations hereunder, and to each of the following additional terms and conditions:

(a) Registration Statement. The Registration Statement, the Exchange Act Registration Statement and any registration statement required to be filed, prior to the sale of the Units, under the Securities Act pursuant to Rule 462(b) shall have been filed and shall have become effective under the Securities Act or the Exchange Act, as the case may be.

(b) Timely Filings. The Prospectus, and any supplement thereto, shall have been filed in the manner and within the time period required by Rule 424(b); any other material required to be filed by the Partnership pursuant to Rule 433(d) under the Securities Act shall have been filed with the Commission within the applicable time periods prescribed for such filings by Rule 433; and no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Partnership Parties or any Underwriter, threatened by the Commission. No Prospectus or amendment or supplement to the Registration Statement, the Pricing Disclosure Package or the Prospectus shall have been filed to which the Representatives shall have reasonably objected in writing.

 

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(c) No Changes. (i) None of the Partnership Entities shall have sustained, since the date of the latest audited financial statements included in the Pricing Disclosure Package and the Prospectus, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, other than as set forth or contemplated in the Pricing Disclosure Package and the Prospectus, and (ii) since the respective dates as of which information is given in the Pricing Disclosure Package and the Prospectus, there shall not have been any change in the capitalization or long-term debt of any of the Partnership Entities or any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business, properties, management, operations or prospects of the Partnership Entities, taken as a whole, other than as set forth or contemplated in the Pricing Disclosure Package and the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Units being delivered at such Delivery Date on the terms and in the manner contemplated in the Pricing Disclosure Package and the Prospectus.

(d) Officers’ Certificate. The Underwriters shall have received on the applicable Delivery Date a certificate, dated such Delivery Date and signed by the Chief Executive Officer and the Chief Financial Officer of the General Partner:

(i) certifying that no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use has been issued and no proceedings for that purpose have been instituted or, to the Partnership’s knowledge, threatened;

(ii) to the effect that the representations and warranties of the Partnership Parties contained in this Agreement are true and correct as of such Delivery Date, and that the Partnership Parties have complied with all of the agreements and satisfied all of the conditions on their part to be performed or satisfied hereunder on or before such Delivery Date; and

(iii) certifying that they have carefully examined the Registration Statement, the Prospectus and the Pricing Disclosure Package, as well as each electronic road show used in connection with the offering of the Units, and, in their opinion (A) the Registration Statement, as of the Effective Date, (B) the Prospectus, as of its date and on the applicable Delivery Date, or (C) the Pricing Disclosure Package, as of the Applicable Time, did not contain any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein (except in the case of the Registration Statement, in the light of the circumstances under which they were made) not misleading.

(e) Opinion of Issuer’s Counsel. Vinson & Elkins L.L.P. shall have furnished to the Representatives their written opinion, as counsel for the Partnership Entities, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives, substantially in the form attached hereto as Exhibit A.

(f) Opinion of Oklahoma Counsel. Commercial Law Group, P.C. shall have furnished to the Representatives their written opinion, as special Oklahoma counsel for the Partnership Entities and the CHKM GP Entities, addressed to the Underwriters and dated such

 

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Delivery Date, in form and substance reasonably satisfactory to the Representatives, substantially in the form attached hereto as Exhibit B. [NTD: Checking to see whether we can get a reliance letter for the underwriters on enforceability of credit agreement]

(g) Opinion of Underwriters’ Counsel. The Representatives shall have received from Baker Botts L.L.P., counsel for the Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the issuance and sale of the Units, the Registration Statement, the Prospectus and the Pricing Disclosure Package and other related matters as the Representatives may reasonably require, and the Partnership shall have furnished to such counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters.

(h) Comfort Letters. The Underwriters shall have received, on each of the date hereof and each Delivery Date, a letter dated the date hereof or the applicable Delivery Date, as the case may be, in form and substance satisfactory to the Underwriters, from PricewaterhouseCoopers LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus; provided that the letter delivered on the date hereof shall use a “cut-off date” within three business days of the date hereof and each letter delivered on a Delivery Date shall use a “cut-off date” within two business days of the Delivery Date.

(i) Lock-up Agreements. The “lock-up” agreements, each substantially in the form of Exhibit C hereto, between you and the persons listed on Schedule III to this Agreement relating to sales and certain other dispositions of Common Units or certain other securities, shall have been delivered to you on or before the date hereof and shall be in full force and effect on the Delivery Date.

(j) Listing. The Units shall have been approved for listing on the NYSE, subject only to notice of issuance at or prior to the applicable Delivery Date.

(k) FINRA. FINRA shall not have raised any objection with respect to the fairness or reasonableness of the underwriting, or other arrangements of the transactions, contemplated hereby.

(l) Additional Information. The CHKM Entities shall have furnished to the Representatives at each Delivery Date such further information, certificates and documents as the Representatives may reasonably request.

All such opinions, certificates, letters and documents mentioned above or elsewhere in this Agreement shall be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to the Representatives and to counsel for the Underwriters.

5. Covenants of the Partnership Parties. The Partnership Parties covenant with each Underwriter as follows:

(a) Furnish Information. To furnish such information as may be required and otherwise to cooperate in qualifying the Units for offering and sale under the securities or blue sky laws of such states or other jurisdictions as you may designate and to maintain such qualifications in effect so long as you may request for the distribution of the Units; provided, however, that the Partnership shall not be required to qualify as a foreign limited partnership or to consent to the service of process under the laws of any such jurisdiction (except service of process with respect to the offering and sale of the Units); and to promptly advise you of the

 

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receipt by the Partnership of any notification with respect to the suspension of the qualification of the Units for offer or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(b) Prospectus. To make available to the Underwriters in New York City, as soon as practicable after this Agreement becomes effective, and thereafter from time to time to furnish to the Underwriters, as many copies of the Prospectus (or of the Prospectus as amended or supplemented if the Partnership shall have made any amendments or supplements thereto after the effective date of the Registration Statement) as the Underwriters may request for the purposes contemplated by the Securities Act; in case any Underwriter is required to deliver (whether physically or through compliance with Rule 172 under the Act or any similar rule), in connection with the sale of the Units, a prospectus after the nine-month period referred to in Section 10(a)(3) of the Securities Act, the Partnership will prepare, at its expense, promptly upon request such amendment or amendments to the Registration Statement and the Prospectus as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Securities Act;

(c) Rule 462(b). If, at the time this Agreement is executed and delivered, it is necessary or appropriate for a post-effective amendment to the Registration Statement, or a Registration Statement under Rule 462(b) under the Securities Act, to be filed with the Commission and become effective before the Units may be sold, the Partnership will use its reasonable best efforts to cause such post-effective amendment or such Registration Statement to be filed and become effective, and will pay any applicable fees in accordance with the Securities Act, as soon as practicable; and the Partnership will advise you promptly and, if requested by you, will confirm such advice in writing, (i) when such post-effective amendment or such Registration Statement has become effective, and (ii) if Rule 430A under the Securities Act is used, when the Prospectus is filed with the Commission pursuant to Rule 424(b) under the Securities Act (which the Partnership agrees to file in a timely manner in accordance with such rules and regulations under the Securities Act);

(d) Registration Statement. If, at any time during the period when a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of the Units, the Registration Statement shall cease to comply with the requirements of the Securities Act with respect to eligibility for the use of the form on which the Registration Statement was filed with the Commission, to (i) promptly notify you, (ii) promptly file with the Commission a new registration statement under the Securities Act, relating to the Units, or a post-effective amendment to the Registration Statement, which new registration statement or post-effective amendment shall comply with the requirements of the Securities Act and shall be in a form satisfactory to you, (iii) use its best efforts to cause such new registration statement or post-effective amendment to become effective under the Securities Act as soon as practicable, (iv) promptly notify you of such effectiveness and (v) take all other action necessary or appropriate to permit the public offering and sale of the Units to continue as contemplated in the Prospectus; all references herein to the Registration Statement shall be deemed to include each such new registration statement or post-effective amendment, if any;

(e) Commission Notices. To advise you promptly, confirming such advice in writing, of any request by the Commission for amendments or supplements to the Registration Statement, the Exchange Act Registration Statement, any Preliminary Prospectus, the Prospectus or any

 

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Issuer Free Writing Prospectus or for additional information with respect thereto, or of notice of institution of proceedings for, or the entry of a stop order, suspending the effectiveness of the Registration Statement and, if the Commission should enter a stop order suspending the effectiveness of the Registration Statement, to use its reasonable best efforts to obtain the lifting or removal of such order as soon as practicable; to advise you promptly of any proposal to amend or supplement the Registration Statement, any Preliminary Prospectus or the Prospectus, and to provide you and Underwriters’ counsel copies of any such documents for review and comment a reasonable amount of time prior to any proposed filing and to file no such amendment or supplement to which you shall reasonably object in writing;

(f) Exchange Act Reports. To file promptly all reports and documents and any preliminary or definitive proxy or information statement required to be filed by the Partnership with the Commission in order to comply with the Exchange Act for so long as a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of the Units;

(g) Pricing Disclosure Package. If the Pricing Disclosure Package is being used to solicit offers to buy the Units at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Pricing Disclosure Package in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Pricing Disclosure Package conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Pricing Disclosure Package to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Pricing Disclosure Package so that the statements in the Pricing Disclosure Package as so amended or supplemented will not, in the light of the circumstances when the Pricing Disclosure Package is delivered to a prospective purchaser, be misleading or so that the Pricing Disclosure Package, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Pricing Disclosure Package, as amended or supplemented, will comply with applicable law;

(h) Prospectus. To advise the Underwriters promptly of the happening of any event within the period during which a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of the Units, which event could require the making of any change in the Prospectus then being used so that the Prospectus would not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, and to advise the Underwriters promptly if, during such period, it shall become necessary to amend or supplement the Prospectus to cause the Prospectus to comply with the requirements of the Securities Act, and, in each case, during such time, subject to Section 5(d) hereof, to prepare and furnish, at the Partnership’s expense, to the Underwriters promptly such amendments or supplements to such Prospectus as may be necessary to reflect any such change or to effect such compliance;

(i) Review of Amendments. At any time during the period when a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of the Units,

 

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before amending or supplementing the Registration Statement, the Pricing Disclosure Package or the Prospectus, including through any report filed under the Exchange Act, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule;

(j) Rule 433. To comply with Rule 433(d) under the Securities Act (without reliance on Rule 164(b) under the Securities Act) and with Rule 433(g) under the Securities Act; and not to take any action that would result in an Underwriter or the Partnership being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder;

(k) Earnings Statement. To make generally available to the Partnership’s security holders and to you as soon as reasonably practicable, but in any event not later than fifteen (15) months after the effective date of the Registration Statement, an earning statement covering a period of at least twelve months beginning with the first fiscal quarter of the Partnership occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the Securities Act;

(l) Copies. To furnish to you nine copies of the Registration Statement, the Prospectus and the Pricing Disclosure Package, each as initially filed with the Commission, and of all amendments thereto (including all exhibits thereto) and sufficient copies of the foregoing (other than exhibits) for distribution of a copy to each of the other Underwriters;

(m) Financial Statements. To furnish to you as early as practicable prior to any Delivery Date, but not later than two business days prior thereto, a copy of the latest available unaudited interim and monthly consolidated financial statements, if any, of the Partnership and the Subsidiaries which have been read by the Partnership’s independent registered public accountants, as stated in their letter to be furnished pursuant to Section 4(g) hereof;

(n) Use of Proceeds and Rule 463. To apply the net proceeds from the sale of the Units in the manner set forth under the caption “Use of Proceeds” in the Pricing Disclosure Package and the Prospectus; and to file with the Commission such information on Form 10-Q or Form 10-K as may be required by Rule 463 under the Securities Act;

(o) Lock-up Agreement. Beginning on the date hereof and ending on, and including, the date that is 180 days after the date of the Prospectus (the “Lock-Up Period”), without the prior written consent of UBS Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated, not to (i) issue, sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act and the rules and regulations of the Commission promulgated thereunder, with respect to, any Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) file or cause to become effective a registration statement under the Securities Act relating to the offer and sale of any Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or

 

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exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of Common Units or such other securities, in cash or otherwise or (iv) publicly announce an intention to effect any transaction specified in clause (i), (ii) or (iii), except, in each case, for (A) the registration of the offer and sale of the Units as contemplated by this Agreement, (B) the issuance of awards not exercisable during the Lock-Up Period pursuant to the Partnership’s long-term incentive plan described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (C) the issuance of Common Units and other securities pursuant to the Contribution Documents as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (D) the issuance of Common Units or any securities convertible or exchangeable into Common Units as payment of any part of the purchase price for businesses that are acquired by the Partnership or its subsidiaries, provided that any recipient of such Common Units must agree in writing to be bound by the terms of this Section 5(o) for the remaining term of the Lock-Up Period, (E) the Partnership may file (or participate in the filing of) a registration statement solely relating to the entrance by the Partnership into a definitive agreement related to an acquisition by the Partnership or its subsidiaries, provided that, notwithstanding anything in this Agreement to the contrary, the prior approval of UBS Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated shall be required in the event that the Partnership files (or participates in the filing of) a registration statement during the Lock-Up Period prior to the entrance by the Partnership into a definitive agreement related to such acquisition, and (F) the Partnership may issue Common Units or any securities that are convertible or exchangeable into Common Units pursuant to an effective registration statement that is filed pursuant to clause (E), provided that the number of Common Units issued or into which such other securities are convertible or exchangeable shall not exceed 5% of the number of Common Units outstanding; provided, further, however, that if (a) during the period that begins on the date that is fifteen (15) calendar days plus three (3) business days before the last day of the Lock-Up Period and ends on the last day of the Lock-Up Period, the Partnership issues an earnings release or material news or a material event relating to the Partnership occurs; or (b) prior to the expiration of the Lock-Up Period, the Partnership announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up Period, then the restrictions imposed by this Section shall continue to apply until the expiration of the date that is fifteen (15) calendar days plus three (3) business days after the date on which the issuance of the earnings release or the material news or material event occurs;

(p) Press Release. Prior to any Delivery Date, to issue no press release or other communication directly or indirectly and hold no press conferences with respect to the Partnership or any Subsidiary, the financial condition, results of operations, business, properties, assets, or liabilities of the Partnership or any Subsidiary, or the offering of the Units, without your prior consent;

(q) No Other Prospectus. Not, at any time at or after the execution of this Agreement, to, directly or indirectly, offer or sell any Common Units by means of any “prospectus” (within the meaning of the Securities Act), or use any “prospectus” (within the meaning of the Securities Act) in connection with the offer or sale of the Units, in each case other than the Pricing Disclosure Package and the Prospectus;

 

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(r) Stabilization. Not to, and to cause the Subsidiaries not to, take, directly or indirectly, any action designed, or which will constitute, or has constituted, or might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Partnership to facilitate the sale or resale of the Units;

(s) Listing. To use its reasonable best efforts to cause the Units to be listed on the NYSE and to maintain the listing of the Common Units on the NYSE;

(t) Transfer Agent. To maintain a transfer agent and, if necessary under the jurisdiction of formation of the Partnership, a registrar for the Common Units; and

(u) Directed Unit Program. To cause each Directed Unit Participant who purchases $100,000 or more of Reserved Units to execute a lock-up agreement in the form of Exhibit D hereto and otherwise to cause the Reserved Units to be restricted from sale, transfer, assignment, pledge or hypothecation to such extent as may be required by FINRA and its rules, and to direct the transfer agent to place stop transfer restrictions upon such Reserved Units during the period beginning on the date hereof and ending on and including the date that is 25 days after the date of the Prospectus or any such longer period of time as may be required by FINRA and its rules; and to comply with all applicable securities and other laws, rules and regulations in each jurisdiction in which the Reserved Units are offered in connection with the Directed Unit Program.

6. Covenant to Pay Costs. The Partnership Parties agree to pay all costs, expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, each Preliminary Prospectus, the Pricing Disclosure Package, the Prospectus, each Issuer Free Writing Prospectus and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment), (ii) the registration, issue, sale and delivery of the Units including any transfer taxes and stamp or similar duties payable upon the sale, issuance or delivery of the Units to the Underwriters, (iii) the producing, word processing and/or printing of this Agreement, any Agreement Among Underwriters, any dealer agreements and any closing documents (including compilations thereof) and the reproduction and/or printing and furnishing of copies of each thereof to the Underwriters and (except closing documents) to dealers (including costs of mailing and shipment), (iv) the qualification of the Units for offering and sale under state or foreign laws and the determination of their eligibility for investment under state or foreign law (including the legal fees and filing fees and other disbursements of counsel for the Underwriters) and the printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers, (v) any listing of the Units on any securities exchange or qualification of the Units for quotation on the NYSE and any registration thereof under the Exchange Act, (vi) any filing for review of the public offering of the Units by FINRA, including the filing fees and up to $20,000 in legal fees of counsel to the Underwriters relating to FINRA matters, (vii) the fees and disbursements of any transfer agent or registrar for the Units, (viii) the costs and expenses of the Partnership Parties relating to presentations or meetings undertaken in connection with the marketing of the offering and sale of the Units to prospective investors and the Underwriters’ sales forces, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in

 

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connection with the road show presentations, travel, lodging and other expenses incurred by the officers of the Partnership Parties and any such consultants, provided that the Partnership Parties are obligated to pay only fifty percent (50%) of the cost and expense of any aircraft chartered in connection with the road show, (ix) the costs and expenses of qualifying the Units for inclusion in the book-entry settlement system of the DTC, (x) the preparation and filing of the Exchange Act Registration Statement, including any amendments thereto, (xi) the offer and sale of the Reserved Units, including all costs and expenses of the DUP Administrator and the Underwriters, including the fees and disbursement of counsel for the Underwriters, and (xii) the performance of the Partnership Parties other obligations hereunder.

It is understood, however, that except as otherwise provided in this Section 6, Section 8 or Section 10 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on any resale of the Units by any Underwriter, any advertising expenses connected with any offers they may make and the transportation and other expenses incurred by the Underwriters on their own behalf in connection with presentations to prospective purchasers of the Units.

7. Reimbursement of the Underwriters’ Expenses. If, after the execution and delivery of this Agreement, the Units are not delivered for any reason other than the termination of this Agreement pursuant to clauses (i), (iii), (iv) or (v) of Section 8(b) hereof or the default by one or more of the Underwriters in its or their respective obligations hereunder, the Partnership Parties shall, in addition to paying the amounts described in Section 6 hereof, reimburse the Underwriters for all of their reasonable out-of-pocket expenses, including the fees and disbursements of their counsel.

8. Effective Date of Agreement; Termination.

(a) This Agreement shall become effective when the parties hereto have executed and delivered this Agreement.

(b) The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of the Representatives, if since the time of execution of this Agreement, there shall have occurred: (i) a suspension or material limitation in trading in securities generally on the NYSE; (ii) a suspension or material limitation in trading in the Partnership’s securities on the NYSE; (iii) a general moratorium on commercial banking activities declared by either federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) an outbreak or escalation of hostilities or acts of terrorism involving the United States or a declaration by the United States of a national emergency or war; or (v) any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v), in the sole judgment of the Representatives, makes it impractical or inadvisable to proceed with the public offering or the delivery of the Units on the terms and in the manner contemplated in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(c) If the Representatives elect to terminate this Agreement as provided in this Section 8, the Partnership and each other Underwriter shall be notified promptly in writing.

(d) If the sale to the Underwriters of the Units, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted under this Agreement, or if such

 

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sale is not carried out because the Partnership Parties shall be unable to comply with any of the terms of this Agreement, the Partnership Parties shall not be under any obligation or liability under this Agreement (except to the extent provided in Sections 6, 7 and 10) and the Underwriters shall be under no obligation or liability to the Partnership Parties under this Agreement (except to the extent provided in Section 10 hereof) or to one another hereunder.

9. Increase in Underwriters’ Commitments.

(a) Subject to Sections 4 and 8 hereof, if any Underwriter shall default in its obligation to take up and pay for the Firm Units to be purchased by it hereunder (otherwise than for a failure of a condition set forth in Section 4 hereof or a reason sufficient to justify the termination of this Agreement under the provisions of Section 8 hereof) and if the number of Firm Units which all Underwriters so defaulting shall have agreed but failed to take up and pay for does not exceed 10% of the total number of Firm Units, the non-defaulting Underwriters (including the Underwriters, if any, substituted in the manner set forth below) shall take up and pay for (in addition to the aggregate number of Firm Units they are obligated to purchase pursuant to Section 1 hereof) the number of Firm Units agreed to be purchased by all such defaulting Underwriters, as hereinafter provided. Such Units shall be taken up and paid for by such non-defaulting Underwriters in such amount or amounts as you may designate with the consent of each Underwriter so designated or, in the event no such designation is made, such Units shall be taken up and paid for by all non-defaulting Underwriters pro rata in proportion to the aggregate number of Firm Units set forth opposite the names of such non-defaulting Underwriters in Schedule I.

(b) Without relieving any defaulting Underwriter from its obligations hereunder, the Partnership agrees with the non-defaulting Underwriters that it will not sell any Firm Units hereunder unless all of the Firm Units are purchased by the Underwriters (or by substituted Underwriters selected by you with the approval of the Partnership or selected by the Partnership with your approval). If a new Underwriter or Underwriters are substituted by the Underwriters or by the Partnership for a defaulting Underwriter or Underwriters in accordance with the foregoing provision, the Partnership or you shall have the right to postpone the Delivery Date for a period not exceeding five business days in order that any necessary changes in the Registration Statement, the Pricing Disclosure Package and the Prospectus and other documents may be effected. The term “Underwriter” as used in this Agreement shall refer to and include any Underwriter substituted under this Section 9 with like effect as if such substituted Underwriter had originally been named in Schedule I hereto.

(c) If the aggregate number of Firm Units which the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the total number of Firm Units which all Underwriters agreed to purchase hereunder, and if neither the non-defaulting Underwriters nor the Partnership shall make arrangements within the five business day period stated above for the purchase of all the Firm Units which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall terminate without further act or deed and without any liability on the part of the Partnership to any Underwriter and without any liability on the part of any non-defaulting Underwriter to the Partnership. Nothing in this paragraph, and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

 

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10. Indemnity and Contribution.

(a) The Partnership Parties, jointly and severally, agree to indemnify, defend and hold harmless each Underwriter, its partners, directors, officers, agents and members, any person who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any “affiliate” (within the meaning of Rule 405 under the Securities Act) of such Underwriter, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, any such Underwriter or any such person may incur under the Securities Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Partnership) or arises out of or is based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as any such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter through you to the Partnership expressly for use in, the Registration Statement or arises out of or is based upon any omission or alleged omission to state a material fact in the Registration Statement in connection with such information, which material fact was not contained in such information and which material fact was required to be stated in such Registration Statement or was necessary to make such information not misleading, (ii) any untrue statement or alleged untrue statement of a material fact included in any Prospectus (the term Prospectus for the purpose of this Section 10(a) being deemed to include any Preliminary Prospectus, the Pricing Disclosure Package, the Pricing Prospectus, the Prospectus, any Issuer Free Writing Prospectus and any amendments or supplements to the foregoing) or in any “issuer information” (as defined in Rule 433 under the Securities Act) of the Partnership or arises out of or is based upon any omission or alleged omission to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except, with respect to such Prospectus, insofar as any such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter through you to the Partnership expressly for use in, such Prospectus or arises out of or is based upon any omission or alleged omission to state a material fact in such Prospectus in connection with such information, which material fact was not contained in such information and which material fact was necessary in order to make the statements in such information, in the light of the circumstances under which they were made, not misleading, or (iii) the Directed Unit Program, except, with respect to this clause (iii), insofar as such loss, damage, expense, liability or claim is finally judicially determined to have resulted from the gross negligence or willful misconduct of the DUP Administrator in conducting the Directed Unit Program.

Without limitation of and in addition to its obligations under the other paragraphs of this Section 10, the Partnership Parties, jointly and severally, agree to indemnify, defend and hold harmless the DUP Administrator and its partners, directors, officers, agents and members, and any person who controls the DUP Administrator within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the

 

33


reasonable cost of investigation) which, jointly or severally, the DUP Administrator or any such person may incur under the Securities Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim (1) arises out of or is based upon (a) any of the matters referred to in clauses (i) through (iii) of the first paragraph of this Section 10(a), or (b) any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or on behalf or with the consent of the Partnership for distribution to Directed Unit Participants in connection with the Directed Unit Program or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (2) is or was caused by the failure of any Directed Unit Participant to pay for and accept delivery of Reserved Units that the Directed Unit Participant has agreed to purchase; or (3) otherwise arises out of or is based upon the Directed Unit Program; provided, however, that the Partnership Parties shall not be responsible under this clause (3) for any loss, damage, expense, liability or claim that is finally judicially determined to have resulted from the gross negligence or wilful misconduct of the DUP Administrator in conducting the Directed Unit Program. Section 10(d) shall apply equally to any Proceeding (as defined below) brought against the DUP Administrator or any such person in respect of which indemnity may be sought against the Partnership Parties pursuant to the immediately preceding sentence, except that the Partnership Parties shall be liable for the expenses of one separate counsel (in addition to any local counsel) for the DUP Administrator and any such person, separate and in addition to counsel for the persons who may seek indemnification pursuant to the first paragraph of this Section 10(a), in any such Proceeding.

(b) Each Underwriter, severally and not jointly, agrees to indemnify, defend and hold harmless the Partnership Parties, the General Partner’s directors, the General Partner’s officers who signed the Registration Statement and any person who controls the Partnership Parties within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, the Partnership Parties or any such person may incur under the Securities Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter through you to the Partnership expressly for use in, the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Partnership), or arises out of or is based upon any omission or alleged omission to state a material fact in such Registration Statement in connection with such information, which material fact was not contained in such information and which material fact was required to be stated in such Registration Statement or was necessary to make such information not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in, and in conformity with information concerning such Underwriter furnished in writing by or on behalf of such Underwriter through you to the Partnership expressly for use in, the Pricing Prospectus, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, or arises out of or is based upon any omission or alleged omission to state a material fact in the Pricing Prospectus, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus in connection with such information, which material fact was not contained in such information and which material fact was necessary in order to make the statements in such information, in the light of the circumstances under which they were made, not misleading.

 

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(c) If any action, suit or proceeding (each, a “Proceeding”) is brought against a person (an “indemnified party”) in respect of which indemnity may be sought against the Partnership Parties or an Underwriter (as applicable, the “indemnifying party”) pursuant to subsection (a) or (b), respectively, of this Section 10, such indemnified party shall promptly notify such indemnifying party in writing of the institution of such Proceeding and such indemnifying party shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses; provided, however, that the omission to so notify such indemnifying party shall not relieve such indemnifying party from any liability which such indemnifying party may have to any indemnified party or otherwise. The indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be borne by such indemnifying party and paid as incurred (it being understood, however, that such indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the indemnified parties who are parties to such Proceeding. The indemnifying party shall not be liable for any settlement of any Proceeding effected without its written consent but, if settled with its written consent, such indemnifying party agrees to indemnify and hold harmless the indemnified party or parties from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this Section 10(c), then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 business days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have fully reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days’ prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of such indemnified party.

(d) If the indemnification provided for in this Section 10 is unavailable to an indemnified party under subsections (a) or (b) of this Section 10 or insufficient to hold an indemnified party harmless in respect of any losses, damages, expenses, liabilities or claims referred to therein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, damages, expenses, liabilities or claims (i) in such proportion as is appropriate to reflect the relative benefits received by the Partnership Parties on the one hand and the Underwriters on the other hand from the offering of the Units or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Partnership Parties on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such

 

35


losses, damages, expenses, liabilities or claims, as well as any other relevant equitable considerations. The relative benefits received by the Partnership Parties on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Partnership Parties, and the total underwriting discounts and commissions received by the Underwriters, bear to the aggregate public offering price of the Units. The relative fault of the Partnership Parties on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Partnership Parties or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, damages, expenses, liabilities and claims referred to in this subsection shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating, preparing to defend or defending any Proceeding.

(e) The Partnership Parties and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in subsection (c) above. Notwithstanding the provisions of this Section 10, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Units underwritten by such Underwriter and distributed to the public were offered to the public exceeds the amount of any damage which such Underwriter has otherwise been required to pay by reason of such untrue statement or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to this Section 10 are several in proportion to their respective underwriting commitments and not joint.

(f) The indemnity and contribution agreements contained in this Section 10 and the covenants, warranties and representations of the Partnership Parties contained in this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter and its partners, directors, officers or members or any person (including each partner, officer, director or member of such person) who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or on behalf of the Partnership Parties, their respective directors or officers or any person who controls the Partnership Parties within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and shall survive any termination of this Agreement or the issuance and delivery of the Units. The Partnership Parties and each Underwriter agree promptly to notify each other of the commencement of any Proceeding against it and, in the case of the Partnership Parties, against any of Partnership Parties’ officers or directors in connection with the issuance and sale of the Units, or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus.

11. Information Furnished by the Underwriters. The concession amount in the third paragraph and the information in the twelfth, thirteenth, fourteenth, fifteenth, sixteenth, nineteenth and twenty-second paragraphs in the “Underwriting” section, only insofar as such

 

36


statements relate to the amount of selling concession or to over-allotment and stabilization activities that may be undertaken by the Underwriters, constitute the only information furnished by or on behalf of the Underwriters, as such information is referred to in Sections 3 and 10 hereof.

12. Notices. Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram or facsimile and, if to the Underwriters, shall be sufficient in all respects if delivered or sent to, if to the Underwriters: (i)UBS Securities LLC, 299 Park Avenue, New York, NY 10171-0026, Attention: Syndicate Department; (ii) Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department; (iii) Citigroup Global Markets Inc., fax no.: (212) 816-7912, with a copy to Citigroup Global Markets Inc., at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel; (iv) Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019; (v) Merrill Lynch, Pierce, Fenner & Smith Incorporated, 9 West 57th Street, New York, New York 10019; (vi) Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: LCD-IBD; (vii) Goldman, Sachs & Co., 200 West Street, New York, New York 10282, Attention: Registration Department, phone no.: (866) 471-2526; and (viii) Wells Fargo Securities, LLC, 375 Park Avenue, New York, New York 10152; and if to the Partnership Parties: Chesapeake Midstream Partners, L.P., 777 NW Grand Boulevard, Oklahoma City, Oklahoma 73118, Attention: Chief Executive Officer, fax no.: (405) 879-6111.

13. Governing Law; Construction. This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement (“Claim”), directly or indirectly, shall be governed by, and construed in accordance with, the laws of the State of New York. The section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.

14. Submission to Jurisdiction. Except as set forth below, no Claim may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts shall have exclusive jurisdiction over the adjudication of such matters, and the Partnership Parties consent to the jurisdiction of such courts and personal service with respect thereto. The Partnership Parties each hereby consent to personal jurisdiction, service and venue in any court in which any Claim arising out of or in any way relating to this Agreement is brought by any third party against any Underwriter or any indemnified party. Each Underwriter and the Partnership Parties (on its behalf and, to the extent permitted by applicable law, on behalf of its equity owners and affiliates) waive all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement. The Partnership Parties agree that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Partnership Parties and may be enforced in any other courts to the jurisdiction of which the Partnership Parties are or may be subject, by suit upon such judgment.

15. Parties at Interest. The Agreement herein set forth has been and is made solely for the benefit of the Underwriters and the Partnership Parties and to the extent provided in Section 10 hereof, the controlling persons, partners, directors, officers, members and affiliates referred to in such Section, and their respective successors, assigns, heirs, personal

 

37


representatives and executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement.

16. No Fiduciary Relationship. The Partnership Parties hereby acknowledge that the Underwriters are acting solely as underwriters in connection with the purchase and sale of the Partnership’s Common Units. The Partnership Parties further acknowledge that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis, and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Partnership Parties, their respective management, partners, members or creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the purchase and sale of the Partnership’s securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Partnership Parties, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Partnership Parties hereby confirm their understanding and agreement to that effect. The Partnership Parties and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions and that any opinions or views expressed by the Underwriters to the Partnership Parties regarding such transactions, including, but not limited to, any opinions or views with respect to the price or market for the Partnership’s securities, do not constitute advice or recommendations to the Partnership Parties. The Partnership Parties and the Underwriters agree that the Underwriters are acting as principal and not the agent or fiduciary of the Partnership Parties, and no Underwriter has assumed, and none of them will assume, any advisory responsibility in favor of the Partnership Parties with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Underwriter has advised or is currently advising the Partnership Parties on other matters). The Partnership Parties hereby waive and release, to the fullest extent permitted by law, any claims that the Partnership Parties may have against the Underwriters with respect to any breach or alleged breach of any fiduciary, advisory or similar duty to the Partnership Parties in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

17. PATRIOT Act. In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Partnership Parties, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.

18. Counterparts. This Agreement may be signed by the parties in one or more counterparts which together shall constitute one and the same agreement among the parties.

19. Successors and Assigns. This Agreement shall be binding upon the Underwriters and the Partnership Parties and their successors and assigns and any successor or assign of any substantial portion of the Partnership Parties and any of the Underwriters’ respective businesses and/or assets.

20. Miscellaneous. UBS Securities LLC, an indirect, wholly owned subsidiary of UBS AG, is not a bank and is separate from any affiliated bank, including any U.S. branch or

 

38


agency of UBS AG. Because UBS Securities LLC is a separately incorporated entity, it is solely responsible for its own contractual obligations and commitments, including obligations with respect to sales and purchases of securities. Securities sold, offered or recommended by UBS Securities LLC are not deposits, are not insured by the Federal Deposit Insurance Corporation, are not guaranteed by a branch or agency, and are not otherwise an obligation or responsibility of a branch or agency.

[signature pages follow]

 

39


If the foregoing correctly sets forth the agreement among the Partnership Parties and the Underwriters, please indicate your acceptance in the space provided for that purpose below.

 

Very truly yours,
CHESAPEAKE MIDSTREAM VENTURES, L.L.C.
By:  

 

  Name:   J. Mike Stice
  Title:   Chief Executive Officer
CHESAPEAKE MIDSTREAM GP, L.L.C.
By:  

 

  Name:   J. Mike Stice
  Title:   Chief Executive Officer
CHESAPEAKE MIDSTREAM PARTNERS, L.P.
By:   Chesapeake Midstream GP, L.L.C., its general partner
  By:  

 

  Name:   J. Mike Stice
  Title:   Chief Executive Officer
CHESAPEAKE MLP OPERATING, L.L.C.
By:  

 

  Name:   J. Mike Stice
  Title:   Chief Executive Officer

 

40


Accepted:
For themselves and as Representatives of the several Underwriters named in Schedule I hereto:
By:   UBS Securities LLC
By:  

 

  Name:
  Title:
By:  

 

  Name:
  Title:
By:   Citigroup Global Markets Inc.
By:  

 

  Name:
  Title:
By:   Morgan Stanley & Co. Incorporated
By:  

 

  Name:
  Title:
By:   Barclays Capital Inc.
By:  

 

  Name:
  Title:

 

41


By:   Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:  

 

      Name:
      Title:
By:   Credit Suisse Securities (USA) LLC
By:  

 

  Name:
  Title:
By:   Goldman, Sachs & Co.
By:  

 

  Goldman, Sachs & Co.
By:   Wells Fargo Securities LLC
By:  

 

  Name:
  Title:

 

42


Schedule I

 

Underwriter

   Number of Firm Units To Be
Purchased

UBS Securities LLC

  

Citigroup Global Markets Inc.

  

Morgan Stanley & Co. Incorporated

  

Merrill Lynch, Pierce, Fenner & Smith Incorporated

  

Barclays Capital Inc.

  

Credit Suisse Securities (USA) LLC

  

Goldman, Sachs & Co.

  

Wells Fargo Securities, LLC

  

BBVA Securities Inc

  

BMO Capital Markets Inc

  

Deutsche Bank Securities, Inc.

  

Raymond James & Associates, Inc.

  

RBS Securities Inc.

  

Scotia Capital (USA) Inc.

  

BNP Paribas Securities Corp

  

Comerica Securities, Inc.

  

Credit Agricole Securities (USA) Inc.

  

ING Financial Markets LLC

  

Mitsubishi UFJ Securities (USA), Inc.

  

Piper Jaffray & Co.

  

RBC Capital Markets Corporation

  

SunTrust Robinson Humphrey, Inc.

  

TD Securities (USA) LLC

  
    

Total:

   21,250,000
    


Schedule II

Pricing Disclosure Package

 

1. Preliminary Prospectus dated July 21, 2010.

 

2. [Identify all free writing prospectuses filed by the Partnership under Rule 433(d) of the Securities Act]

 

3. Number of Firm Units: 21,250,000 Common Units Public Offering Price: $[    ] per Unit


Schedule III

Persons Delivering Lock-up Agreements

J. Mike Stice

Robert S. Purgason

David C. Shiels

Matthew C. Harris

Aubrey K. McClendon

Marcus C. Rowland

William A. Woodburn

David A. Daberko

Philip L. Frederickson

Suedeen G. Kelly

Domenic J. Dell’Osso

Chesapeake Midstream GP, L.L.C.

Chesapeake Midstream Ventures, L.L.C.

Chesapeake Midstream Holdings, L.L.C.

GIP-A Holding (CHK), L.P.

GIP-B Holding (CHK), L.P.

GIP-C Holding (CHK), L.P.


Schedule IV

Foreign Qualifications of the Partnership Entities

 

Entity

  

Jurisdiction in which registered or qualified

Bluestem Gas Services, L.L.C.    None
Chesapeake Midstream Gas Services, L.L.C.    Arkansas, Kansas, Louisiana, New Mexico and Texas
Chesapeake Midstream GP, L.L.C.    None
Chesapeake MLP Operating, L.L.C.    Oklahoma and Texas
Chesapeake Midstream Partners, L.P.    None
Chesapeake Midstream Ventures, L.L.C.    None
Oklahoma Midstream Gas Services, L.L.C.    None
Ponder Midstream Gas Services, L.L.C.    Texas
Texas Midstream Gas Services, L.L.C.    Texas


EXHIBIT A

FORM OF OPINION OF VINSON & ELKINS LLP

1. Each of the Partnership Parties, PMGS and Chesapeake Holdings (the “DE/TX CHKM Entities”) has been duly formed and is validly existing as a limited partnership or limited liability company, as the case may be, in good standing under the laws of its jurisdiction of organization or formation, as the case may be, with all partnership or limited liability company, as the case may be, power and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party, to own or lease its properties currently owned or leased or to be owned or leased at each Delivery Date, and to conduct its business as currently conducted or as to be conducted at each Delivery Date, in each case, in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Each of the Partnership Entities is duly registered or qualified to do business and is in good standing as a foreign limited partnership or foreign limited liability company, as the case may be, in each jurisdiction set forth under its name on Schedule IV to this Agreement.

2. Midstream Ventures and the Partnership each has full limited liability company power and authority to act as the manager of the General Partner and the OLLC, respectively, in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The OLLC has full limited liability company power and authority to act as the manager of each of the Operating Subsidiaries, in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

3. The General Partner has full limited liability company power and authority to act as the general partner of the Partnership in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

4. The GIP Entities collectively own 50% of the issued and outstanding limited liability company interests in Midstream Ventures, and Chesapeake Holdings owns 50% of the issued and outstanding limited liability company interests in Midstream Ventures. Such interests have been duly authorized and validly issued in accordance with the Midstream Ventures Agreement, and are fully paid (to the extent required under the Midstream Ventures Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and the GIP Entities and Chesapeake Holdings own such limited liability company interests free and clear of all Liens (A) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the GIP Entities or Chesapeake Holdings as debtor is on file in the office of the Secretary of State of the State of Delaware or (B) otherwise known to such counsel, without independent investigation, other than those created by or arising under the Delaware LLC Act or the Midstream Ventures Agreement.

5. Midstream Ventures is the sole member of the General Partner and owns 100% of the limited liability company interests in the General Partner. Such limited liability company interests have been duly authorized and validly issued in accordance with the General Partner Agreement, and are fully paid (to the extent required under the General Partner Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and Midstream Ventures owns such

 

A-1


limited liability company interests free and clear of all Liens (A) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming Midstream Ventures as debtor is on file in the office of the Secretary of State of the State of Delaware or (B) otherwise known to such counsel, without independent investigation, other than those created by or arising under the Delaware LLC Act or the General Partner Agreement.

6. The General Partner is the sole general partner of the Partnership and owns a 2.0% general partner interest in the Partnership, and all of the Incentive Distribution Rights; the GP Interest and the Incentive Distribution Rights have been duly authorized and validly issued in accordance with the Partnership Agreement and are fully paid (to the extent required under the Partnership Agreement) and, in the case of the Incentive Distribution Rights, nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and the General Partner owns such GP Interest and Incentive Distribution Rights free and clear of all Liens (A) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the General Partner as debtor is on file in the office of the Secretary of State of the State of Delaware or (B) otherwise known to such counsel, without independent investigation, other than those created by or arising under the Delaware LP Act or the Partnership Agreement.

7. The GIP Entities and Chesapeake Holdings collectively own all of the Sponsor Units; the Sponsor Units and the limited partner interests represented thereby have been duly authorized and validly issued in accordance with the Partnership Agreement and are fully paid (to the extent required under Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act); and the GIP Entities and Chesapeake Holdings own the Sponsor Units free and clear of all Liens (A) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the GIP Entities or Chesapeake Holdings as debtor is on file in the office of the Secretary of State of the State of Delaware or (B) otherwise known to such counsel, without independent investigation, other than those created by or arising under the Delaware LP Act or the Partnership Agreement, except for those Liens created pursuant to the lock-up agreements described in Section 4(i) of the Agreement and, with respect to the Sponsor Units held by Chesapeake Holdings, Liens created pursuant to the credit agreement of CMD and CMO.

8. The Partnership is the sole member of the OLLC and owns 100% of the limited liability company interests in the OLLC. Such limited liability company interests have been duly authorized and validly issued in accordance with the OLLC Operating Agreement, and are fully paid (to the extent required under the OLLC Operating Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and the Partnership owns such limited liability company interests free and clear of all Liens (A) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the Partnership as debtor is on file in the office of the Secretary of State of the State of Delaware, (B) other than those Liens created, arising under or securing the Credit Agreement or (C) otherwise known to such counsel, without independent investigation, other than those created by or arising under the Delaware LLC Act.

9. The OLLC is the sole member of each of the Operating Subsidiaries and owns 100% of the limited liability company interests in each of the Operating Subsidiaries. Such limited liability company interests have been duly authorized and validly issued in accordance

 

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with the governing documents of the applicable Operating Subsidiary, and are fully paid (to the extent required under such governing documents) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and the OLLC owns such limited liability company interests free and clear of all Liens (A) in respect of which a financing statement under the Uniform Commercial Code of the State of Delaware naming the OLLC as debtor is on file in the office of the Secretary of State of the State of Delaware, (B) other than those Liens created, arising under or securing the Credit Agreement or (C) otherwise known to such counsel, without independent investigation, other than those created by or arising under the Delaware LLC Act.

10. At the applicable Delivery Date, after giving effect to the Transactions and the offering of the Units to be issued on such Delivery Date as contemplated by this Agreement, the issued and outstanding partnership interests of the Partnership consists of 69,076,122 Common Units, 69,076,122 Subordinated Units, the GP Interest, the Incentive Distribution Rights and any limited partnership interests issued to independent directors of the General Partner pursuant to the Partnership’s long-term incentive plan. Other than the Sponsor Units, the Incentive Distribution Rights and any limited partnership interests issued to independent directors of the General Partner pursuant to the Partnership’s long-term incentive plan, the Units issued on the applicable Delivery Date are the only limited partner interests in the Partnership issued and outstanding on such Delivery Date.

11. The Units to be issued and sold by the Partnership to the Underwriters and the limited partner interests represented thereby have been duly authorized in accordance with the Partnership Agreement and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act).

12. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or as provided in the Midstream Ventures Agreement or the General Partner Agreement, there are no options, warrants, preemptive rights or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any capital stock, limited liability company interests, partnership interests or other equity interests in any Partnership Entity pursuant to any limited liability company agreement or partnership agreement or other governing document of any Partnership Entity or any agreement or instrument listed as an exhibit to the Registration Statement to which any of the Partnership Entities is a party or by which any of them may be bound. To the knowledge of such counsel, neither the filing of the Registration Statement nor the offering or sale of the Units as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Common Units or other securities of the Partnership, except such rights as have been waived or satisfied.

13. Each of the Partnership Parties has all requisite power and authority to execute and deliver this Agreement and perform its respective obligations hereunder. The Partnership has all requisite power and authority to issue, sell and deliver (i) the Units, in accordance with and upon the terms and conditions set forth in this Agreement, the Partnership Agreement, the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) the Sponsor Units and the Incentive Distribution Rights, in accordance with and upon the terms and conditions set forth in the Partnership Agreement and the Contribution Documents.

 

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All partnership and limited liability company action, as the case may be, required to be taken by the CHKM Entities or any of their members or partners for the authorization, issuance, sale and delivery of the Units, the Sponsor Units and the Incentive Distribution Rights, the execution and delivery of the Operative Agreements by each of the CHKM Entities and the consummation of the Transactions has been validly taken.

14. This Agreement has been duly authorized and validly executed and delivered by each of the Partnership Parties.

15. Each of the Operative Agreements has been duly authorized and validly executed and delivered by each of the DE/TX CHKM Entities that is a party thereto. Each of the Organizational Agreements constitutes a valid and legally binding agreement of the DE/TX CHKM Entities that are parties thereto, enforceable against each of them in accordance with its respective terms, subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (ii) public policy, any applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing.

16. The Contribution Documents are in a form legally sufficient as between the parties thereto to transfer or convey all of the equity interests in OLLC to the Partnership, as described in the Contribution Documents, Pricing Disclosure Package and Prospectus, subject to the conditions, reservations, encumbrances and limitations described therein.

17. None of (i) the offering, issuance or sale by the Partnership of the Units, (ii) the execution, delivery and performance of this Agreement or the Operative Agreements by the CHKM Entities or the Chesapeake GP Entities parties hereto or thereto, as the case may be, or (iii) the consummation of the Transactions, (A) conflicts or will conflict with or constitutes or will constitute a violation of the limited liability company agreement, partnership agreement, certificate of formation, certificate of limited partnership or other governing document of any of the DE/TX CHKM Entities or CMD and CMM (the “Delaware Chesapeake GP Entities”), (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event which, with notice or lapse of time or both, would constitute such a default) under any agreement or instrument filed as an exhibit to the Registration Statement (other than the Credit Agreement), (C) violates or will violate the Delaware LLC Act or the Delaware LP Act, the laws of the State of Texas or federal law or any order, judgment, decree or injunction known to us of any U.S. Federal or Delaware court or governmental agency or authority having jurisdiction over any of the CHKM Entities or the Chesapeake GP Entities or any of their properties or assets in a proceeding to which any of them or their respective property is a party or (D) results or will result in the creation or imposition of any Lien upon any property or assets of any of the Partnership Entities, which conflicts, breaches, violations, defaults or Liens, in the case of clauses (B), (C) or (D), would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

18. No permit, consent, approval, authorization, order, registration, filing or qualification (“consent”) of or with any federal, Delaware or Texas court, governmental agency or body having jurisdiction over the Partnership Entities is required in connection with the offering, issuance or sale by the Partnership of the Units, the execution, delivery and performance of this Agreement and the Operative Agreements by the CHKM Entities party

 

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hereto and thereto, as the case may be, or the consummation by the CHKM Entities of the Transactions, except (i) for registration of the Units under the Securities Act and filings and consents required under the Exchange Act, (ii) applicable state securities or “Blue Sky” laws in connection with the purchase and distribution of the Units by the Underwriters, as to which such counsel need not express any opinion, (iii) for such consents that have been obtained or made and (iv) for such consents that, if not obtained, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

19. The statements set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the captions “Our Cash Distribution Policy and Restrictions on Distributions,” “Provisions of Our Partnership Agreement Relating to Cash Distributions,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,” “Business—Regulation of Operations,” “Business—Environmental Matters,” “Certain Relationships and Related Party Transactions,” “Conflicts of Interest and Fiduciary Duties,” “Description of the Common Units,” “The Partnership Agreement,” “Material Tax Consequences,” “Investment in Chesapeake Midstream Partners, L.P. by Employee Benefit Plans” and “Underwriting,” insofar as they purport to constitute summaries of provisions of federal or state statutes, rules or regulations, the Delaware LP Act or the Delaware LLC Act or of any specific agreement or instrument, constitute complete and accurate summaries thereof in all material respects; and the descriptions of the Common Units contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the captions “Summary—The Offering,” “Our Cash Distribution Policy and Restrictions on Distributions,” “Provisions of Our Partnership Agreement Relating to Cash Distributions,” “Description of the Common Units” and “The Partnership Agreement” constitute accurate summaries of the terms of the Common Units in all material respects.

20. The opinion letter of Vinson & Elkins L.L.P. that is filed as Exhibit 8.1 to the Registration Statement is confirmed, and the Underwriters may rely upon such opinion letter as if it were addressed to them.

21. The Registration Statement has been declared effective under the Securities Act; to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the knowledge of such counsel, threatened by the Commission; and any required filing of the Prospectus pursuant to Rule 424(b) under the Securities Act has been made in the manner and within the time period required by such Rule.

22. The Registration Statement, at the time it was declared effective, and the Prospectus, when filed with the Commission pursuant to Rule 424(b) under the Securities Act and at each Delivery Date, and any further amendments and supplements thereto made by the Partnership prior to the date of such opinion letter (other than the financial statements, the notes and schedules thereto and other financial data included in or omitted from the Registration Statement or the Prospectus, as to which such counsel need not express any opinion) appear on their face to comply as to form in all material respects with the requirements of the Securities Act.

23. None of the Partnership Entities is or immediately following the sale of the Units to be sold by the Partnership hereunder and application of the net proceeds from such sale as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the caption “Use of Proceeds,” will be an “investment company” within the meaning of the Investment Company Act.

 

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24. To the knowledge of such counsel, there are no (i) legal or governmental proceedings pending or threatened to which any of the Partnership Entities is a party or to which any of their respective properties is subject that are required to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus but are not so described as required by the Securities Act and (ii) agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required by the Securities Act.

In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Partnership Entities, the independent registered public accounting firm of the Partnership and representatives of the Underwriters, at which the contents of the Registration Statement, the Pricing Disclosure Package and the Prospectus and related matters were discussed, and although such counsel has not independently verified, is not passing upon, and is not assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus (except to the extent specified in the foregoing opinions), based on the foregoing, no facts have come to such counsel’s attention that lead such counsel to believe that:

(A) the Registration Statement, at the time it was declared effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading,

(B) the Pricing Disclosure Package, as of the Applicable Time, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or

(C) the Prospectus, as of its date and at each Delivery Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

it being understood that such counsel expresses no statement or belief with respect to (a) the financial statements and related schedules, including the notes thereto and the auditors’ reports thereon, contained therein and (b) the other financial information contained therein.

In rendering such opinion, such counsel may (i) rely in respect of matters of fact upon certificates of officers and other employees of the CHKM Entities and the Chesapeake GP Entities to the extent such counsel deems appropriate and upon information obtained from public officials, (ii) assume that all documents submitted to them as originals are authentic, that all copies submitted to them conform to the originals thereof, and that the signatures on all documents examined by them are genuine, (iii) state that their opinion is limited to federal laws, the Delaware LP Act, the Delaware LLC Act and the laws of the State of Texas, (iv) with respect to the opinions expressed as to the due qualification or registration as a foreign limited partnership or limited liability company, as the case may be, of the CHKM Entities, state that such opinions are based upon certificates of foreign qualification or registration provided by the

 

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Secretary of State of the states listed on an annex to be attached to such counsel’s opinion (each of which shall be dated as of a date not more than 10 days prior to the applicable Delivery Date and shall be provided to counsel to the Underwriters) and express no conclusions beyond what are stated in such certificates, (v) state that they express no opinion with respect to (A) any permits to own or operate any real or personal property or (B) state or local taxes or state or local tax statutes to which any of the members or partners of the CHKM Entities and the Chesapeake GP Entities may be subject, and (vi) with respect to the existence of any Lien for which a financing statement under the Uniform Commercial Code of any state is on file, such counsel’s opinion is based solely upon such counsel’s review of a specific search of such state’s Secretary of State (each of which shall be as of a date not more than 10 days prior to the applicable Delivery Date and shall be provided to counsel to the Underwriters).

 

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EXHIBIT B

FORM OF OPINION OF OKLAHOMA COUNSEL

1. Each of Bluestem, OMGS, CMGS and TMGS (the “Oklahoma CHKM Entities”) has been duly formed and is validly existing as a limited partnership or limited liability company, as the case may be, in good standing under the laws of the State of Oklahoma, with all partnership or limited liability company, as the case may be, power and authority necessary to enter into and perform its obligations under the Transaction Documents to which it is a party, to own or lease its properties currently owned or leased or to be owned or leased at each Delivery Date, and to conduct its business as currently conducted or as to be conducted at each Delivery Date, in each case, in all material respects as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

2. None of (i) the offering, issuance or sale by the Partnership of the Units, (ii) the execution, delivery and performance of this Agreement or the Operative Agreements by the CHKM Entities or the Chesapeake GP Entities parties hereto or thereto, as the case may be, or (iii) the consummation of the Transactions, (A) conflicts or will conflict with or constitutes or will constitute a violation of the limited liability company agreement, partnership agreement, certificate of formation, certificate of limited partnership or other governing document of any of the Oklahoma CHKM Entities or CMO, CEMI, COI and CHK (the “Oklahoma Chesapeake GP Entities”) or (B) conflicts or will conflict with or constitutes or will constitute a breach or violation of, or a default (or an event which, with notice or lapse of time or both, would constitute such a default) under the Credit Agreement or any agreement or instrument relating to indebtedness included as an exhibit to CHK’s Annual Report on Form 10-K for the year ended December 31, 2009, Quarterly Report on Form 10-Q with respect to periods in 2010 or Current Reports on Form 8-K with respect to periods in 2010.

3. No permit, consent, approval, authorization, order, registration, filing or qualification (“consent”) of or with any Oklahoma court, governmental agency or body having jurisdiction over the Partnership Entities is required in connection with the offering, issuance or sale by the Partnership of the Units, the execution, delivery and performance of this Agreement and the Operative Agreements by the CHKM Entities party hereto and thereto, as the case may be, or the consummation by the CHKM Entities of the Transactions, except (i) for registration of the Units under the Securities Act and filings and consents required under the Exchange Act, (ii) applicable state securities or “Blue Sky” laws in connection with the purchase and distribution of the Units by the Underwriters, as to which such counsel need not express any opinion, (iii) for such consents that have been obtained or made and (iv) for such consents that, if not obtained, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4. Each of the Operative Agreements has been duly authorized and validly executed and delivered by each of the Oklahoma CHKM Entities that is a party thereto and each of the Oklahoma Chesapeake GP Entities that is a party thereto.

In rendering such opinion, such counsel may (i) rely in respect of matters of fact upon certificates of officers and other employees of the CHKM Entities and the Chesapeake GP Entities and upon information obtained from public officials, (ii) assume that all documents submitted to him as originals are authentic, that all copies submitted to him conform to the

 

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originals thereof, and that the signatures on all documents examined by him are genuine, (iii) state that such opinions are limited to the laws of the State of Oklahoma, (iv) state that such counsel expresses no opinion with respect to (A) any permits to own or operate any real or personal property or (B) federal, state or local taxes or state or local tax statutes to which any of the CHKM Entities and the Chesapeake GP Entities may be subject.

In addition, such counsel shall state that such opinion letter may be relied upon only by the Underwriters and its counsel in connection with the offering and no other use or distribution of this opinion letter may be made without such counsel’s prior written consent.

 

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EXHIBIT C

FORM OF LOCK-UP LETTER

[                    ], 2010

UBS Securities LLC

Citigroup Global Markets Inc.

Morgan Stanley & Co. Incorporated

Barclays Capital Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Credit Suisse Securities (USA) LLC

Goldman, Sachs & Co.

Wells Fargo Securities LLC

As Representatives of the several

    Underwriters named in Schedule I attached hereto

c/o UBS Securities LLC

299 Park Avenue

New York, New York 10171-0026

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

c/o Morgan Stanley & Co. Incorporated

1585 Broadway

New York, New York 10036

Ladies and Gentlemen:

This Lock-Up Agreement is being delivered to you in connection with the proposed Underwriting Agreement (the “Underwriting Agreement”) to be entered into by Chesapeake Midstream Ventures, L.L.C., a Delaware limited liability company, Chesapeake Midstream GP, L.L.C., a Delaware limited liability company, Chesapeake Midstream Partners, L.P., a Delaware limited partnership (the “Partnership”), Chesapeake MLP Operating, L.L.C., a Delaware limited liability company, and you and the other underwriters named in Schedule I to the Underwriting Agreement, with respect to the public offering (the “Offering”) of common units representing limited partner interests in the Partnership (the “Common Units”).

In order to induce you to enter into the Underwriting Agreement, the undersigned agrees that, for a period (the “Lock-Up Period”) beginning on the date hereof and ending on, and including, the date that is 180 days after the date of the final prospectus relating to the Offering, the undersigned will not, without the prior written consent of UBS Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree

 

C-1


to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with the Securities and Exchange Commission (the “Commission”) in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder (the “Exchange Act”) with respect to, any Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of Common Units or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii). The foregoing sentence shall not apply to (a) the registration of the offer and sale of Common Units as contemplated by the Underwriting Agreement and the sale of the Common Units to the Underwriters (as defined in the Underwriting Agreement) in the Offering, (b) bona fide gifts, provided the recipient thereof agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Agreement and no filing under Section 16 of the Exchange Act is required to be made during the Lock-Up Period in connection such disposition or (c) dispositions to any trust for the direct or indirect benefit of the undersigned and/or the immediate family of the undersigned, provided that such trust agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Agreement and no filing under Section 16 of the Exchange Act is required to be made during the Lock-Up Period in connection such disposition. For purposes of this paragraph, “immediate family” shall mean the undersigned and the spouse, any lineal descendent, father, mother, brother or sister of the undersigned.

In addition, the undersigned hereby waives any rights the undersigned may have to require registration of Common Units in connection with the Offering. The undersigned further agrees that, for the Lock-Up Period, the undersigned will not, without the prior written consent of UBS Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated, make any demand for, or exercise any right with respect to, the registration of Common Units or any securities convertible into or exercisable or exchangeable for Common Units, or warrants or other rights to purchase Common Units or any such securities.

Notwithstanding the above, if (a) during the period that begins on the date that is fifteen (15) calendar days plus three (3) business days before the last day of the Lock-Up Period and ends on the last day of the Lock-Up Period, the Partnership issues an earnings release or material news or a material event relating to the Partnership occurs; or (b) prior to the expiration of the Lock-Up Period, the Partnership announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up Period, then the restrictions imposed by this Lock-Up Agreement shall continue to apply until the expiration of the date that is fifteen (15) calendar days plus three (3) business days after the date on which the issuance of the earnings release or the material news or material event occurs.

 

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In addition, the undersigned hereby waives any and all preemptive rights, participation rights, resale rights, rights of first refusal and similar rights that the undersigned may have in connection with the Offering, except for any such rights as have been heretofore duly exercised.

The undersigned hereby confirms that the undersigned has not, directly or indirectly, taken, and hereby covenants that the undersigned will not, directly or indirectly, take, any action designed, or which has constituted or will constitute or might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Partnership to facilitate the sale or resale of shares of Common Units.

The undersigned hereby authorizes the Partnership and its transfer agent, during the Lock-Up Period, to decline the transfer of or to note stop transfer restrictions on the stock register and other records relating to shares of Common Units or other securities subject to this Lock-Up Agreement of which the undersigned is the record holder, and, with respect to shares of Common Units or other securities subject to this Lock-Up Agreement of which the undersigned is the beneficial owner but not the record holder, the undersigned hereby agrees to cause such record holder to authorize the Partnership and its transfer agent, during the Lock-Up Period, to decline the transfer of or to note stop transfer restrictions on the stock register and other records relating to such shares or other securities.

If (i) the Partnership notifies you in writing that it does not intend to proceed with the Offering, (ii) the registration statement filed with the Commission with respect to the Offering is withdrawn or (iii) for any reason the Underwriting Agreement shall be terminated prior to the Delivery Date (as defined in the Underwriting Agreement), this Lock-Up Agreement shall be terminated and the undersigned shall be released from its obligations hereunder.

The undersigned understands that the Partnership and the Underwriters are relying upon this agreement in proceeding toward consummation of the Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.

Whether or not the Offering actually occurs depends on a number of factors, including market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Partnership and the Underwriters.

[signature page follows]

 

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Yours very truly,

 

Name:

 

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EXHIBIT D

FORM OF DUP LOCK-UP LETTER

[                    ], 2010

UBS Securities LLC

Citigroup Global Markets Inc.

Morgan Stanley & Co. Incorporated

Barclays Capital Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Credit Suisse Securities (USA) LLC

Goldman, Sachs & Co.

Wells Fargo Securities LLC

As Representatives of the several

    Underwriters named in Schedule I attached hereto

c/o UBS Securities LLC

299 Park Avenue

New York, New York 10171-0026

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

c/o Morgan Stanley & Co. Incorporated

1585 Broadway

New York, New York 10036

Ladies and Gentlemen:

This Lock-Up Agreement is being delivered to you in connection with the proposed Underwriting Agreement (the “Underwriting Agreement”) to be entered into by Chesapeake Midstream Ventures, L.L.C., a Delaware limited liability company, Chesapeake Midstream GP, L.L.C., a Delaware limited liability company, Chesapeake Midstream Partners, L.P., a Delaware limited partnership (the “Partnership”), Chesapeake MLP Operating, L.L.C., a Delaware limited liability company, and you and the other underwriters named in Schedule I to the Underwriting Agreement, with respect to the public offering (the “Offering”) of common units representing limited partner interests in the Partnership (the “Common Units”).

In order to induce you to enter into the Underwriting Agreement, the undersigned agrees that, for a period (the “Lock-Up Period”) beginning on the date hereof and ending on, and including, the date that is 25 days after the date of the final prospectus relating to the Offering, the undersigned will not, without the prior written consent of UBS Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated, (i) sell, offer to sell, contract or

 

D-1


agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with the Securities and Exchange Commission (the “Commission”) in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder (the “Exchange Act”) with respect to, any Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Units or any other securities of the Partnership that are substantially similar to Common Units, or any securities convertible into or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of Common Units or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii). The foregoing sentence shall not apply to (a) the registration of the offer and sale of Common Units as contemplated by the Underwriting Agreement and the sale of the Common Units to the Underwriters (as defined in the Underwriting Agreement) in the Offering, (b) bona fide gifts, provided the recipient thereof agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Agreement and no filing under Section 16 of the Exchange Act is required to be made during the Lock-Up Period in connection such disposition or (c) dispositions to any trust for the direct or indirect benefit of the undersigned and/or the immediate family of the undersigned, provided that such trust agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Agreement and no filing under Section 16 of the Exchange Act is required to be made during the Lock-Up Period in connection such disposition. For purposes of this paragraph, “immediate family” shall mean the undersigned and the spouse, any lineal descendent, father, mother, brother or sister of the undersigned.

In addition, the undersigned hereby waives any rights the undersigned may have to require registration of Common Units in connection with the Offering. The undersigned further agrees that, for the Lock-Up Period, the undersigned will not, without the prior written consent of UBS Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated, make any demand for, or exercise any right with respect to, the registration of Common Units or any securities convertible into or exercisable or exchangeable for Common Units, or warrants or other rights to purchase Common Units or any such securities.

Notwithstanding the above, if (a) during the period that begins on the date that is fifteen (15) calendar days plus three (3) business days before the last day of the Lock-Up Period and ends on the last day of the Lock-Up Period, the Partnership issues an earnings release or material news or a material event relating to the Partnership occurs; or (b) prior to the expiration of the Lock-Up Period, the Partnership announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up Period, then the restrictions imposed by this Lock-Up Agreement shall continue to apply until the expiration of the date that is fifteen (15) calendar days plus three (3) business days after the date on which the issuance of the earnings release or the material news or material event occurs.

 

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In addition, the undersigned hereby waives any and all preemptive rights, participation rights, resale rights, rights of first refusal and similar rights that the undersigned may have in connection with the Offering, except for any such rights as have been heretofore duly exercised.

The undersigned hereby confirms that the undersigned has not, directly or indirectly, taken, and hereby covenants that the undersigned will not, directly or indirectly, take, any action designed, or which has constituted or will constitute or might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Partnership to facilitate the sale or resale of shares of Common Units.

The undersigned hereby authorizes the Partnership and its transfer agent, during the Lock-Up Period, to decline the transfer of or to note stop transfer restrictions on the stock register and other records relating to shares of Common Units or other securities subject to this Lock-Up Agreement of which the undersigned is the record holder, and, with respect to shares of Common Units or other securities subject to this Lock-Up Agreement of which the undersigned is the beneficial owner but not the record holder, the undersigned hereby agrees to cause such record holder to authorize the Partnership and its transfer agent, during the Lock-Up Period, to decline the transfer of or to note stop transfer restrictions on the stock register and other records relating to such shares or other securities.

If (i) the Partnership notifies you in writing that it does not intend to proceed with the Offering, (ii) the registration statement filed with the Commission with respect to the Offering is withdrawn or (iii) for any reason the Underwriting Agreement shall be terminated prior to the Delivery Date (as defined in the Underwriting Agreement), this Lock-Up Agreement shall be terminated and the undersigned shall be released from its obligations hereunder.

The undersigned understands that the Partnership and the Underwriters are relying upon this agreement in proceeding toward consummation of the Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.

Whether or not the Offering actually occurs depends on a number of factors, including market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Partnership and the Underwriters.

[signature page follows]

 

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Yours very truly,

 

Name:

[Signature Page to Lock-up Agreement]

 

D-4

EX-10.2 3 dex102.htm CHESAPEAKE GAS GATHERING AGREEMENT Chesapeake Gas Gathering Agreement

Exhibit 10.2

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

AMENDED AND RESTATED

GAS GATHERING AGREEMENT

THIS AMENDED AND RESTATED GAS GATHERING AGREEMENT (this “Agreement”), dated January 25, 2010, but effective as of February 1, 2010 (the “Effective Date”), is by and among (i) Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”), (ii) Chesapeake Energy Marketing, Inc., an Oklahoma corporation (“CEMI”), (iii) Chesapeake Operating, Inc., an Oklahoma corporation (“COI”), (iv) Chesapeake Exploration L.L.C., an Oklahoma limited liability company (“CELLC”), (v) Chesapeake Louisiana L.P., an Oklahoma limited partnership (“CLLP”), and (vi) DDJET Limited LLP, a Texas limited liability partnership (“DDJET” and together with CELLC, and CLLP, the “CHK Producers”). CEMI, COI, and the CHK Producers are referred to herein collectively as the “Producers.” Gatherer and Producers are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals:

A. Gatherer and Producers entered into a Gas Gathering Agreement dated September 30, 2009 and Gatherer and Producers now desire to amend and restate that Gas Gathering Agreement in its entirety to be effective for all purposes as of the Effective Date as provided herein.

B. Gatherer owns and operates natural gas gathering systems and related facilities in Arkansas, Kansas, New Mexico, Oklahoma, and Texas.

C. Producers own or control, and have the right to deliver, natural gas for gathering, compression, dehydration, treating, and processing, as applicable, on such gathering systems, and Gatherer desires to provide gathering, compression, dehydration, treating and processing services, as applicable, for such gas, on the terms and subject to the conditions in the Agreement.

Agreements:

NOW, THEREFORE, for good and valuable consideration, Gatherer and Producers agree as follows:

Article 1

Definitions

1.1 Defined Terms. The following capitalized terms used in this Agreement and the attached exhibits and schedules shall have the meanings set forth below:

Acceptable Letter of Credit” means one or more direct-pay, irrevocable, standby letters of credit from a major U.S. commercial bank or a foreign bank with a U.S. branch office in either case having a credit rating of at least “A-” (or its equivalent successor rating) from Standard & Poor’s Corporation or “A3” (or its equivalent successor rating) from Moody’s Investor Services, Inc.


Additional Agreement” means the Additional Agreement among Gatherer, Producers, and the Total Parties, dated February 1, 2010.

Adequate Assurance of Performance” is defined in Section 7.7.

Adjusted Barnett Annual Minimum Volume” is defined in Section 4(d) of Exhibit A.

Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person, whether by contract, voting power, or otherwise. For purposes of this definition, Gatherer shall not be considered an Affiliate of any of Producers or any of their other Affiliates and Producers and their Affiliates (other than Gatherer) shall not be considered an Affiliate of Gatherer.

Agreement” is defined in the preamble.

Airport Board” is defined in Section 12.14.

Annual Barnett Gathered Volumes” means, for each Year in the Minimum Volume Period, the sum of (i) the volume (in Mcf’s) of Producers’ Gas delivered to the Barnett Gathering Systems in such Year and (ii) the volume (in Mcf’s) of MV Mitigation Gas delivered to the Barnett Gathering Systems in such Year.

Annual Barnett Excess Volumes” means, for each Year in the Minimum Volume Period, the amount, if any, by which (i) the volume (in Mcf’s) of Producers’ Gas delivered to the Barnett Gathering Systems in such Year exceeds (ii) the Adjusted Barnett Annual Minimum Volume for such Year.

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

Applicable Rating” means a senior, unsecured rating of at least “**” (or the then equivalent) from Standards & Poor’s Rating Service and of “**” (or the then equivalent) by the rating service of Moody’s Investors Services, Inc., or an equivalent rating from any other NRSRO.

Assumed Obligations” is defined in Section 9.1.

Attached Facilities” is defined in Section 2.4.

Barnett Annual Minimum Volume” means, for each Year in the Minimum Volume Period, the volume (expressed in Mcf’s) of Producers’ Gas shown in Schedule A7 for such Year.

Barnett AMI” means the geographic area described in Schedule A5.

 

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Barnett Dedicated Properties” means all interests of Producers and their Affiliates (and their successors and assigns) in oil, gas, and/or mineral leases covering lands located within the Barnett AMI, whether now owned or hereafter acquired, and all Gas produced or delivered therefrom or attributable thereto, and all interests of Producers or their Affiliates (and their successors and assigns) in all oil or gas wells, whether now existing or drilled hereafter, on, or completed on, lands covered by any such oil, gas, and/or mineral lease or on other lands within the Barnett AMI, including the wells described in Part I of Schedule A4, but excluding (i) any oil, gas, and/or mineral leases purchased by Producers or their Affiliates after the Effective Date that are subject to a dedication to a gas gathering system (other than the Barnett Gathering System) owned and operated by a Person that is not an Affiliate of Producers (other than Gatherer) that was in effect prior to (and was not entered into in connection with or as part of) such acquisition (but only to the extent of such dedication), (ii) the properties described in Part II of Schedule A4, and (iii) any other non-material properties dedicated by Producers as of the Effective Date to a gathering system owned and operated by a Person not an Affiliate of Producers (other than Gatherer), not to exceed ** net mineral acres.

Barnett Delayed Connections” is defined in Section 6(b)(1) of Exhibit A.

Barnett Delivery Points” means (i) the points identified in Schedule A3 at which Gas is delivered to a Barnett Receiving Transporter by Gatherer, (ii) any additional delivery points that, from time to time, are added at the request of Producers (at Producers’ expense) to the Barnett Gathering Systems after the Effective Date to permit delivery of Gas to the same or other Barnett Receiving Transporters, as provided in Section 6(f) of Exhibit A, and (iii) any additional delivery points added to the Barnett Gathering Systems for gas lift operations at Producers’ request and expense, as provided in Section 6(b)(2) or Section 11 of Exhibit A.

Barnett Fees” means the gathering and other fees (in $/Mcf) shown for each Barnett Gathering System in Schedule A2 and the other charges specified in Exhibit A.

Barnett Gathering System” means each of the discrete gas gathering systems described in Schedule A1, together with any modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time, to each such gathering system.

Barnett Gathering Systems” means, collectively, all of the Barnett Gathering Systems.

Barnett Maximum Daily Quantity” means, for each of the Barnett Gathering Systems shown in Schedule A6, the maximum volume of Producers’ Gas and MV Mitigation Gas (each expressed in Mcf’s) that Gatherer is obligated to receive on any Day on each such Barnett Gathering System.

Barnett Receipt Points” means (i) the receipt points described in Schedule A4 and (ii) any new receipt points that may, from time to time, be added by Gatherer to the Barnett Gathering Systems after the Effective Date to permit Producers to deliver Gas to the Barnett Gathering Systems.

 

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Barnett Receiving Transporters” means the intrastate or interstate pipeline companies, gathering companies, local distribution companies, or end-users taking delivery or custody of Producers’ Gas and MV Mitigation Gas at, or immediately downstream of, a Barnett Delivery Point.

Base Pressure” means a constant pressure (expressed in pounds per square inch absolute) determined in accordance with the following table:

 

Area in which Gas is produced

   Base Pressure
(in pounds per  square
inch absolute)

Arkansas

   14.65

Kansas

   14.65

New Mexico

  

15.025

Oklahoma

   14.65

MMS or BLM Properties

   14.73

Texas

   14.65

Btu” means the amount of heat energy needed to raise the temperature of one avoirdupois pound of water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at the applicable Base Pressure.

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

CELLC” is defined in the preamble.

CEMI” is defined in the preamble.

Change of Control” means as to any Producer an event that causes such Producer to cease to be Controlled by CHK; provided that an event that causes CHK to be Controlled by another Person shall not constitute a Change of Control.

CHK” means Chesapeake Energy Corporation, an Oklahoma corporation.

CHK Producers” is defined in the preamble.

Claims” means all claims, losses, liabilities, damages, fines, penalties, costs, or expenses, including reasonable attorneys’ fees and court costs.

CLLP” is defined in the preamble.

 

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Control” (and the correlative terms “controlling,” “controlled by,” and “under common control with”) means as to any entity the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the Securities Exchange Act of 1934, as amended) of the power or authority, through ownership of voting securities, by contract, or otherwise, to control or direct the management and policies of the entity. Notwithstanding anything herein to the contrary, other than with respect to the term “Affiliates” as used in the definition of “Producers’ Gas”, the term “Control” and its correlative terms shall not apply to the definition of “Producers’ Gas.”

CPT” means the prevailing local time in the Central time zone.

Cubic Foot” means a volume of Gas occupying a space of one cubic foot at a temperature of 60°F and at the applicable Base Pressure.

Day” means the 24-hour period beginning at 9:00 a.m., CPT, on one calendar day and ending at 9:00 a.m., CPT, on the following calendar day.

DDJET” is defined in the preamble.

Dedicated Properties Owner Acknowledgment Form” is defined in Section 9.3(a).

Dedicated Properties” means, collectively, the Barnett Dedicated Properties, the Midcon Dedicated Properties, and Producers’ Remaining Properties.

Delivery Points” means the Barnett Delivery Points, the Midcon Delivery Points, and the PRP Delivery Points.

DFW Gathering System” is defined in Section 12.14.

DFW Lease” is defined in Section 12.14.

DFW License” is defined in Section 12.14.

DFW O&M Terms” is defined in Section 12.14.

DFW PDP Volumes” is defined in Section 12.14.

Drip Liquids” means all distillates, condensate, and other hydrocarbon liquids that are collected by Gatherer between the Receipt Points and the Delivery Points on a Gathering System, including all distillates, condensate, and other hydrocarbons allocated to Producers’ Gas under Third Party Gathering Agreements.

Economic Value” means, as to any contract, the reasonably projected gross revenue payable under such contract over the term of such contract (including any part of such term that may have expired prior to the date of determination of such projected gross revenue).

 

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Effective Date” is defined in the preamble.

Electric Power Charge” means, on any Gathering System, the actual cost charged to Gatherer, or incurred by Gatherer, for electric power consumed in the operation of compression equipment used to provide services for Producers’ Gas and MV Mitigation Gas hereunder.

Equivalent Quantity” means, on any Day on a Gathering System, a quantity of Gas (in MMBtu’s) that is thermally equivalent to the quantity of Producers’ Gas and MV Mitigation Gas received from Producers at the Receipt Points on that Gathering System on that Day less Producers’ allocated share of System Fuel and Losses on that Gathering System.

Excess Suspension Days” is defined in Section 8.7.

Fees” means (i) for the Barnett Gathering Systems, the Barnett Fees, (ii) for the Midcon Gathering Systems, the Midcon Fees, and (iii) for each PRP Gathering System, the PRP Fees.

FERC” means the Federal Energy Regulatory Commission or any successor Governmental Authority thereto under the Natural Gas Act.

Field Telemetry” means the communication network, including radios, antennas, towers, associated landlines, and networking equipment, used to transmit and receive data between field sites and the SCADA software.

Force Majeure Event” is defined in Section 8.2.

Force Majeure Volumes” is defined in Section 8.6.

Fuel Gas” means Gas (whether measured or estimated) used by Gatherer to operate compressors, dehydrators, treaters, and related equipment and facilities on, or to vent, relieve, or blowdown equipment and facilities of, the Gathering Systems, including any Fuel Gas passed through to Gatherer under Third Party Gathering Agreements.

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

Gatherer” is defined in the preamble.

Gathering System” means, individually, any Barnett Gathering System, Midcon Gathering System, or PRP Gathering System.

Gathering System Owner Acknowledgment Agreement” is defined in Section 9.2(a).

Gathering Systems” means, collectively, the Barnett Gathering Systems, the Midcon Gathering Systems, and the PRP Gathering Systems.

 

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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.

Greenhouse Gas Credits” is defined in Section 10.2.

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 60°F, and at a reference pressure equal to 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. The Gross Heating Value so determined shall be corrected assuming saturation at flowing conditions, expressed in Btu per Cubic Foot and reported at the applicable Base Pressure; provided, however, that if the water vapor content of the Gas delivered is 7 pounds or less per one million (1,000,000) Cubic Feet, the Gas shall be assumed to be dry. The Btu’s contained in hydrogen sulfide or other non-hydrocarbon components will be excluded in any calculation of the number of Btu’s contained in Gas under this Agreement.

Industry Expert” means a major, independent accounting firm or other qualified expert, which firm or expert shall not be regularly engaged by or otherwise have a material relationship with either Producers or CHK Parent, on the one hand, or Gatherer or its members, on the other hand, and shall not otherwise have a conflict of interest in relation to Producers and CHK Parent, on the one hand, and Gatherer or its members, on the other hand.

Lost and Unaccounted for Gas” means the losses in Gas quantities (expressed in Btu’s) that occur on a Gathering System, other than Gas used for Fuel Gas and shrinkage due to Drip Liquids, including any such losses (expressed in Btu’s) passed through to Gatherer under any Third Party Gathering Agreement.

Maintenance Suspension Volumes” is defined in Section 8.7.

Mcf” means one thousand Cubic Feet of Gas.

Mcf/d” means Mcf’s per Day.

Midcon AMI” means the geographic area described in Schedule B5.

Midcon Dedicated Properties” means all interests of Producers and their Affiliates (and their successors and assigns) in oil, gas, and mineral leases covering lands located within the Midcon AMI, whether now owned or hereafter acquired, and all Gas produced or delivered therefrom or attributable thereto, and all interests of Producers or their Affiliates (and their successors and assigns) in all oil or gas wells, whether now existing or drilled hereafter, on, or completed on, lands covered by any such oil, gas, and/or mineral lease or on other lands within the Midcon AMI, including the wells described in Part I of Schedule B4, but excluding (i) any oil, gas and/or mineral leases

 

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purchased by Producers or their Affiliates after the Effective Date that are subject to a dedication to a gas gathering system or agreement (other than the Midcon Gathering System) that was in effect prior to (and was not entered into in connection with or as part of) such acquisition (but only to the extent of such dedication) and (ii) the properties described in Part II of Schedule B4 and any other non-material properties or Gas volumes that are dedicated as of the Effective Date to a gathering system other than a Midcon Gathering System.

Midcon Delivery Points” means (i) the points identified in Schedule B3 at which Gas is delivered to a Midcon Receiving Transporter by Gatherer, (ii) any additional delivery points that, from time to time, are added at the request of Producers (at Producers’ expense) to the Midcon Gathering Systems after the Effective Date to permit delivery of Gas to other Midcon Receiving Transporters, as provided in Section 5(f) of Exhibit B, and (iii) any additional delivery points added to the Midcon Gathering Systems for gas lift operations, as provided in Section 9 of Exhibit B.

Midcon Fees” means the gathering and other fees (expressed in $/Mcf) shown for each Midcon Gathering System in Schedule B2 and the other charges specified in Exhibit B.

Midcon Gathering System” means each of the discrete gas gathering systems described in Schedule B1, together with any modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time, to each such gathering system.

Midcon Gathering Systems” means, collectively, all of the Midcon Gathering Systems.

Midcon/PRP Redetermination Period” is defined in Section 3(a) of Exhibit B.

Midcon Receipt Points” means (i) the receipt points described in Schedule B4 and (ii) any new receipt points that may, from time to time, be added by Gatherer to the Midcon Gathering Systems after the Effective Date to permit Producers to deliver Gas to the Midcon Gathering Systems.

Midcon Receiving Transporters” means the intrastate or interstate pipeline companies, gathering companies, local distribution companies, or end-users taking delivery or custody of Producers’ Gas at, or immediately downstream of, a Midcon Delivery Point.

Minimum Volume Period” means with respect to the Barnett Annual Minimum Volume, the period beginning on June 30, 2009 and ending on the earlier to occur of (a) June 30, 2019 and (b) the last Day of the Month in which Producers have delivered, or if not delivered, paid for under Section 4(b) of Exhibit A, Annual Barnett Gathered Volumes equal to the Total Barnett Annual Minimum Volumes.

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

 

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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.

MV Mitigation Gas” means, for any Year, the volume (expressed in Mcf’s) of Gas delivered to a Gathering System by Producers that satisfies the following: (i) such Gas is not Producers’ Gas; (ii) such Gas is produced from a well in which none of the Producers or their Affiliates owns any interest and where the connection of such well to such Gathering System was made by Producers at no cost to Gatherer; and (iii) with respect to the Barnett Gathering Systems, such Gas is to be delivered during the Minimum Volume Period to meet, but not exceed, the Adjusted Barnett Annual Minimum Volume in any Year and with respect to the Midcon Gathering Systems, such Gas is to be delivered prior to June 30, 2019 to meet, but not exceed, the Scheduled Revenue for any such Year.

Notice” is defined in Section 11.2.

NRSRO” means any credit rating agency that has been approved as a Nationally Recognized Statistical Rating Organization by the U.S. Securities and Exchange Commission.

Oil and Gas Lease” is defined in Section 12.12(a).

Oil and Gas Lease Partial Assignment” is defined in Section 12.12(c).

Parent” means, with respect to a particular Person, the person that Controls such particular Person and is not itself Controlled by any other Person.

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

Payout” means, for a Reimbursed Connection constructed to a Gathering System pursuant to Section 6(c)(1)(C) of Exhibit A or Section 5(c)(3) of Exhibit B, the first Day of the Month following the date on which the aggregate discount on the Fees paid by Producers hereunder for Producers’ Gas gathered through such Reimbursed Connection equals the sum of the capital costs incurred by Producers to construct the pipeline, equipment and other facilities comprising such connection plus an amount equivalent to an internal rate of return on such capital costs using the Target IRR. An example of Payout is attached as Exhibit F.

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 Measurement Device” means the meter body (which may consist of an orifice meter, positive meter, turbine meter, ultrasonic meter, v-cone, or coriolis meter), tube, orifice plate, connected pipe and fittings used in the measurement of Gas flow.

Primary Term” is defined in Article 2.

 

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Prime Rate” is defined in Section 7.4.

Priority 1 Service” is the highest level of service for each of gathering, compression, dehydration and treating on a Gathering System.

Priority 2 Service” is the level of service for each of gathering, compression, dehydration and treating on a Gathering System that is secondary only to Priority 1 Service on that Gathering System.

Priority 3 Service” is fully interruptible service for each of gathering, compression, dehydration and treating on a Gathering System, and is subordinate to both Priority 1 Service and Priority 2 Service.

Producers” is defined in the preamble.

Producers’ Gas” means all Gas owned or controlled by Producers or their Affiliates and produced from or otherwise attributable to the Dedicated Properties. As used in this definition and except as otherwise provided in the following sentence, the phrase “controlled by” refers to Gas owned by Persons other than Producers or their Affiliates and produced from Producer Wells in the Barnett AMI or the Midcon AMI or any Producer Well comprising a part of Producers’ Remaining Properties during the period that one or more of Producers or their Affiliates has the contractual right (pursuant to a marketing, agency, operating, unit or similar agreement) to market such Gas; and if for any reason the contractual right of Producers or their Affiliates to market any such Gas (the “subject Gas”) terminates or expires, then the subject Gas shall cease to constitute Producers’ Gas upon such termination or expiration. The phrase “controlled by” does not refer to, and Producers’ Gas does not include, Gas owned by Persons other than Producers or their Affiliates and produced from Producer Non-Operated Wells; except that if (i) due to a default by the Total Parties under the Total Agreement or otherwise Gatherer does not receive and gather Gas of the Total Parties under the Total Agreement, (ii) such Gas becomes controlled by Producers under a marketing, agency, operating, unit, or similar arrangement, and (iii) such Gas is received by Gatherer at the Barnett Receipt Points, then such Gas shall be deemed to be Producers’ Gas under this Agreement.

Producer Non-Operated Well” means any well or wells in which any of the Producers or their Affiliates owns or holds a working interest that is not a Producer Well.

Producer Well” means any well for which any of the Producers or their Affiliates (i) has been designated as the operator under the applicable operating agreement or other similar contract for such well or (ii) has submitted a filing or notice with the applicable Governmental Authority having jurisdiction over such well designating any Producer or any of its Affiliates as operator of such well.

Producers’ Remaining Properties” means the wellbores of the oil and gas wells described in Schedule C2.

 

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Producers’ Wellhead Meters” means the Primary and Secondary Measurement Devices installed on the applicable wells.

PRP Delivery Points” means, with respect to a PRP Gathering System, (i) the points identified in Schedule C6 for such PRP Gathering System at which Gas is delivered to a PRP Receiving Transporter by Gatherer, (ii) any additional delivery points that, from time to time, may be added by Gatherer to such PRP Gathering System after the Effective Date to permit delivery of Gas to other PRP Receiving Transporters, as provided in Section 4(a) of Exhibit C, and (iii) any additional delivery points added to such PRP Gathering System for gas lift operations, as provided in Section 10 of Exhibit C.

PRP Fees” means the gathering and other fees (expressed in $/Mcf) shown in Schedule C2 for each PRP Gathering System and the other charges specified in Exhibit C.

PRP Gathering System” means each of the discrete gas gathering systems described in Schedule C1, together with any modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time, to each such gathering systems.

PRP Receipt Points” means, with respect to a PRP Gathering System, (i) the receipt points described in Schedule C3 for such PRP Gathering System and (ii) any new receipt points that may, from time to time, be added by Gatherer to such PRP Gathering System after the Effective Date to permit Producers to deliver Gas to such PRP Gathering System.

PRP Receiving Transporters” means the intrastate or interstate pipeline companies, gathering companies, local distribution companies, or end-users taking delivery or custody of Producers’ Gas and MV Mitigation Gas at, or immediately downstream of, a PRP Delivery Point.

Receipt Points” means the Barnett Receipt Points, the Midcon Receipt Points, and the PRP Receipt Points.

Receiving Transporter” means any of the Barnett Receiving Transporters, the Midcon Receiving Transporters or the PRP Receiving Transporters.

Secondary Measurement Device” means the pressure and temperature transducers, the flow computer, power equipment (or solar panels and batteries), and communication devices used to measure the temperature and pressure on the Primary Measurement Device, calculate gas flow, and to communicate the results to a Field Telemetry network.

Separate GGA” means a Gas Gathering Agreement substantially in the form of this Agreement and (in connection with a transfer by Producers) approved by Gatherer, acting reasonably, and (in connection with a transfer by Gatherer) approved by Producers, acting reasonably.

 

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Separate GGA Gatherer Obligations” is defined in Section 9.5(a).

Separate GGA Producer Obligations” is defined in Section 9.5(c).

Subject Well” is defined in Section 12.12(b).

Surface Estate” is defined in Section 12.12(a).

Surface Estate Owner” is defined in Section 12.12(a).

System Fuel and Losses” means, with respect to a Gathering System, the sum of: (i) all Fuel Gas used on the Gathering System; (ii) all Lost and Unaccounted for Gas on the Gathering System; (iii) all shrinkage due to Drip Liquids on the Gathering System; and (iv) all allocations under Third Party Gathering Agreements for Fuel Gas, Lost and Unaccounted For Gas, and shrinkage due to Drip Liquids, in each case, whether estimated or measured.

Third Party Gathering Agreements” means agreements and contracts between third parties and Gatherer under which Gatherer uses third party pipelines and other facilities to provide gathering services hereunder.

Total Agreement” means (i) the Gas Gathering Agreement between Gatherer and Total E&P USA, Inc. and Total Gas & Power North America, Inc., dated February 1, 2010 and (ii) if the agreement described in clause (i) is terminated prior to this Agreement, then “Total Agreement” means the agreement described in clause (i) as it was in effect immediately prior to such termination.

Total Barnett Annual Minimum Volumes” is defined in Schedule A7.

Total Parties” means the parties to the Total Agreement other than Gatherer.

Year” means, unless the context provides otherwise, the period of time from and after January 1 of a calendar year through December 31 of the same calendar year.

1.2 Other Defined Terms. In addition to the terms defined in Section 1.1, the following terms are used in this Agreement and the attached exhibits and schedules and are defined in the exhibits and schedules of this Agreement as shown below.

 

Defined Term

 

Section and Exhibits

Additional Volume   Section 5(b)(6) of Exhibit A
Additional Volume Wells   Section 5(b)(6) of Exhibit A
Actual Barnett Cap Ex   Section 3(c)(ii) of Exhibit A
Actual Barnett Compression Expense   Section 3(c)(viii) of Exhibit A
Actual Barnett Incremental Revenues   Section 3(c) of Exhibit A
Actual Barnett Revenues   Section 3(c)(xi) of Exhibit A

 

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Actual Current Revenues   Section 3(c) of Exhibit A
Actual Midcontinent Ad Val Tax   Section 3(b)(v) of Exhibit B
Actual Midcontinent Cap Ex   Section 3(b)(ii) of Exhibit B
Actual Midcontinent Compression Expense   Section 3(b)(viii) of Exhibit B
Actual Midcontinent Revenues   Section 3(b)(xi) of Exhibit B
Annual Barnett Revenues Differential   Section 3(c) of Exhibit A
Annual Net Cash Flow Difference   Section 3(c) of Exhibit A
Annual Redetermination Period   Section 3(b) of Exhibit B
Applicable Barnett Revenues Differential   Section 3(c)(xiii) of Exhibit A
Applicable Midcontinent Revenues Differential   Section 3(b)(xii) of Exhibit B
Applicable Third Party Gas  

Section 4(i)(ii) of Exhibit A; Section

4(h)(ii) of Exhibit B; or Section 4(h)(ii)

of Exhibit C, as the context may require

Average Barnett Fee   Section 4(b) of Exhibit A
Balance   Section 5(e) of Exhibit A
Balancing   Section 5(e) of Exhibit A
Barnett Cap Ex   Section 3(c) of Exhibit A
Barnett Central ** Delivery Points   Section 4(b) of Schedule A2
Barnett Compression Expense Difference   Section 3(c) of Exhibit A
Barnett Compression Expenses   Section 3(c) of Exhibit A
Barnett Fee Adjustment   Section 3(c) of Exhibit A
Barnett Nominations   Section 5(d) of Exhibit A
Barnett North   Section 1(f)(ii) of Exhibit A
Barnett Redetermination Cap   Section 3(c) of Exhibit A
Barnett Scheduled Revenues   Section 3(c)(x) of Exhibit A
Completion Date   Section 6(c)(1) of Exhibit A
Compression Expenses  

Section 3(e) of Exhibit B; or Section 3(b)

of Exhibit B, as the context may require

Dedicated Assets  

Section 3(f) of Exhibit A; or Section 3(e)

of Exhibit B, as the context may require

Estimated Cap Ex Ad Valorem Tax Change   Section 3(c)(v) of Exhibit A
First Barnett Redetermination Notice   Section 3(a) of Exhibit A
First Midcon Redetermination Notice   Section 3(a) of Exhibit B
Gatherer’s Increased Deliverability  

Section 6(f) of Exhibit A; Section 5(f) of

Exhibit B; or Section 5(b) of Exhibit C,

as the context may require

Gatherer’s Receipt Meters   Section 8(a)(1) of Exhibit A
Imbalancing   Section 5(e) of Exhibit A
Increased (or Decreased) Revenues from the Barnett Fee Adjustment   Section 3(c) of Exhibit A
Midcon Cap Ex   Section 3(c) of Exhibit B
Midcon Fee Adjustment   Section 3(c) of Exhibit B
Midcontinent Ad Val Tax Projections   Section 3(b)(iv) of Exhibit B

 

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Midcontinent Cap Ex   Section 3(b) of Exhibit B
Midcontinent Compression Expense Difference   Section 3(b)(ix) of Exhibit B
Midcontinent Fee Adjustment   Section 3(b) of Exhibit B
Midcontinent Redetermination Cap   Section 3(b) of Exhibit B
Midcontinent Redetermination Notice   Section 3(a) of Exhibit B
Midcontinent Scheduled Revenues   Section 3(b)(x) of Exhibit B
MVC Additional Volume Wells Amount   Section 5(b)(6) of Exhibit A
Net Cash Flow Difference   Section 3(b) of Exhibit B
Nominate   Section 5(c) of Exhibit A
Notifying Party   Section 3(d) of Exhibit A; or Section 3(c) of Exhibit B, as the context may require
OBA   Section 5(f)(3) of Exhibit A
Operating Cash Flow   Section 12 of Exhibit A; Section 10 of Exhibit B; or Section 11 of Exhibit C, as the context may require
Original Barnett Cap Ex Projections   Section 3(c)(i) of Exhibit A
Original Barnett Compression Expense Projections   Section 3(c)(vi) of Exhibit A
Original Midcon Cap Ex Projections   Section 3(b) of Exhibit B
Original Midcontinent Compression Expense Projections   Section 3(b)(vii) of Exhibit B
Pad Notice   Section 6(b)(1) of Exhibit A
**   Section 4(b) of Schedule A2
** Agreement   Section 4(b) of Schedule A2
** Event   Section 4(c) of Schedule A2
Producers’ Barnett Reservations   Section 1(b) of Exhibit A
Producers’ Midcon Reservations   Section 1(a) of Exhibit B
Producers’ PRP Reservations   Section 1(b) of Exhibit C
Producers’ Wellhead Meters   Section 8(a)(1) of Exhibit A
Projected Additional Volume Wells Amount   Section 5(b)(6) of Exhibit A
Projected Barnett Cap Ex   Section 3(c) of Exhibit A
Projected Barnett Volumes   Section 3(c) of Exhibit A
Receiving Party   Section 3(d) of Exhibit A; or Section 3(c) of Exhibit B, as the context may require
Reimbursed Connection   Section 6(c)(1)(C) of Exhibit A; or Section 5(c)(3) of Exhibit B, as the context may require
Revised Project Barnett Compression Expense   Section 3(c)(vii) of Exhibit A
Revised Projected Barnett Cap Ex   Section 3(c)(iii) of Exhibit A
Revised Projected Barnett Revenues   Section 3(c)(xii) of Exhibit A
Revised Projected Barnett Volumes   Section 3(c)(xii) of Exhibit A
Second Barnett Redetermination Notice   Section 3(b) of Exhibit A
Second Midcon Redetermination Notice   Section 3(b) of Exhibit A
Target IRR   Section 3(c) of Exhibit A; or Section 3(b) of Exhibit B, as the context may require
Terminal Value   Section 3(c)(xv) of Exhibit A
Terminal Value Multiple   Section 3(c)(xv) of Exhibit A
Third Party Btu   Section 4(i)(ii) of Exhibit A; Section 4(h)(ii) of Exhibit B; or Section 4(h)(ii) of Exhibit C, as the context may require

 

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Total Ad Val Tax Difference   Section 3(b)(vi) of Exhibit B
Total Barnett Compression Expense Difference   Section 3(c)(ix) of Exhibit A
Total Cap Ex Difference   Section 3(c)(iv) of Exhibit A; or Section 3(b)(iii) of Exhibit B, as the context may require

1.3 Attachments. Each exhibit, schedule, or other attachment to this Agreement is a part of this Agreement and incorporated herein for all purposes. When the term “Agreement” is used herein, it means this Agreement and all of the exhibits, schedules, and other attachments hereto. A list of the exhibits, schedules, and other attachments to this Agreement is attached behind the signature page.

Article 2

Term

2.1 Term. Unless terminated sooner as provided below, the term of this Agreement shall commence on September 30, 2009 and continue in effect through September 30, 2029 (the “Primary Term”) and shall continue in effect from 12-month period to 12-month period thereafter, unless terminated by either Party upon Notice to the other Party no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable.

2.2 Termination. This Agreement may be terminated as follows:

(i) by Gatherer if (A) Producers fail to perform any of their material obligations under this Agreement and (B) such failure is not (x) excused by a Force Majeure Event under Article 8 or (y) cured by Producers within 60 Days after Notice thereof by Gatherer to Producers, or if such failure can not be cured within such 60-Day period, Producers have not commenced remedial action to cure such failure (and continued to diligently and timely pursue the completion of such remedial action); or

(ii) by Producers if (A) Gatherer fails to perform any of its material obligations under this Agreement and (B) such failure is not (x) excused by a Force Majeure Event under Article 8 or (y) cured by Gatherer within 60 Days after Notice thereof by Producers to Gatherer, or if such failure can not be cured within such 60-Day period, Gatherer has not commenced remedial action to cure such failure (and continued to diligently and timely pursue the completion of such remedial action); provided that if such failure by Gatherer relates to only one or more of the facilities or gathering systems included in the Gathering System (and not the entire Gathering System), Producers may terminate this Agreement only to the extent it relates to such facilities or gathering systems; and if such termination relates to any of the Barnett Gathering Systems, Producers’ obligations in respect of the Barnett Annual Minimum Volume will be reduced accordingly (and if such termination relates to any Barnett Gathering System (or related facilities) or Midcon Gathering System (or related facilities), then any appropriate changes to the redetermination of the Barnett Fes or Midcon Fees (as applicable) pursuant to Exhibit A or B shall be made to reflect such system or facilities ceasing to be covered by this Agreement); or

 

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(iii) by Gatherer if Producers fail to pay any undisputed amount when due under this Agreement if such failure is not remedied within 15 Business Days after Notice of such failure is given by Gatherer to Producers; or

(iv) by Gatherer by Notice to Producers if CHK Parent takes or suffers any of the actions set forth in Section 2.2(v) below as applied to CHK Parent; or

(v) by Gatherer by Notice to Producers if a Producer (1) makes an assignment or any general arrangement for the benefit of creditors, (2) files a petition or otherwise commences, authorizes, or acquiesces in the commencement of a proceeding or cause under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against them, or (3) otherwise becomes bankrupt or insolvent (however evidenced).

2.3 Damages for Early Termination. If a Party terminates this Agreement under Section 2.2 above, then such Party may pursue any and all remedies at law or in equity for its Claims resulting from such termination subject to Section 6.3.

2.4 Acknowledgement

(i) Notwithstanding anything to the contrary expressed or implied, the deemed consent of Producers described in the following clause (ii) shall be limited to the ownership interests of Producers and their Affiliates in the Attached Facilities and such consent shall not apply to or bind the ownership interest of any other Person (or such other Person) in the Attached Facilities.

(ii) If this Agreement is terminated by Gatherer under Section 2.2 or Gatherer disconnects a Receipt Point from a Gathering System in accordance with the terms of this Agreement, Producers’ execution of this Agreement shall be deemed a consent by Producers to the disconnection by Gatherer under Section 3.73 of the Texas Administration Code of the applicable Gathering System from any facilities in which one or more Producers or their Affiliates holds an ownership interest therein (in the case of the termination of this Agreement) or of any facilities at a Receipt Point in which one or more Producers or their Affiliates holds an ownership interest therein (in the case of the disconnection of a Receipt Point), as applicable (the “Attached Facilities), if and to the extent such rule is ever interpreted to govern transactions of the type evidenced hereby, and to the disconnection of any other Attached Facilities under any corresponding or similar Applicable Law of any state in which a Gathering System is located.

Article 3

Services Provided by Gatherer

Producers agree to deliver, and Gatherer agrees to connect, receive, gather, compress, dehydrate, treat, and process, as applicable, and redeliver, Producers’ Gas and MV Mitigation Gas, on the Gathering Systems, for the Fees and on and subject to the terms and conditions provided in this Agreement.

 

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Article 4

Fees

4.1 Fees. As consideration for Gatherer providing the services contemplated in Article 3, Producers shall pay Gatherer the Fees each Month for the volumes of Producers’ Gas and MV Mitigation Gas delivered to the Receipt Points in each such Month.

4.2 Escalation of Fees. Each of the Fees shall be escalated effective as of January 1 of each Year as stipulated in Schedule A2 with respect to the Barnett Fees, in Schedule B2 with respect to the Midcon Fees, and in Schedule C2 with respect to the PRP Fees.

4.3 Payment. Payment of the Fees shall be made in accordance with the procedures set forth in Article 7.

Article 5

Taxes and Warranties Regarding Title and Producers’ Gas

5.1 Taxes. Producers shall pay or cause to be paid, and agree to indemnify and hold harmless Gatherer and its Affiliates from and against 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 Producers’ Gas and MV Mitigation Gas and the handling thereof prior to receipt thereof by Gatherer at the Receipt Points. Subject to Section 10.2, Gatherer shall pay or cause to be paid all taxes and assessments, if any, imposed upon Gatherer for the activity of gathering of Producers’ Gas and MV Mitigation Gas after receipt at the Receipt Points and prior to redelivery thereof by Gatherer at the Delivery Points.

5.2 Warranties.

(a) Title. Producers warrant to Gatherer (i) with respect to Producers’ Gas and MV Mitigation Gas owned by Producers, that Producers have good title to Producers’ Gas and MV Mitigation Gas delivered to the Receipt Points and the full right, power and authority to cause such Producers’ Gas and MV Mitigation Gas to be delivered to the Receipt Points and gathered, treated, dehydrated and otherwise handled by Gatherer as provided in this Agreement, and to deliver such Producers’ Gas and MV Mitigation Gas to the Delivery Points as provided in this Agreement, and (ii) with respect to Producers’ Gas and MV Mitigation Gas controlled by Producers, that it has the full right, power, and authority to cause such Producers’ Gas and MV Mitigation Gas to be delivered to the Receipt Points and gathered, treated, dehydrated, and otherwise handled by Gatherer as provided in this Agreement and to direct Gatherer to deliver such Producers’ Gas and MV Mitigation Gas to the Delivery Points as provided in this Agreement. Producers shall indemnify, defend, and hold harmless Gatherer from and against all Claims (i) asserted by owners of royalty, overriding royalty, or working interests or any other purported owners of interests or rights in Producers’ Gas and MV Mitigation Gas or (ii) asserted by Persons from whom Producers purchased or otherwise acquired Producers’ Gas and MV Mitigation Gas prior to the Receipt Points, including co-working interest owners and overriding royalty owners whose Gas is delivered by Producers to Gatherer hereunder.

 

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(b) Intrastate Gas Only. Producers warrant to Gatherer that (i) the delivery of Producers’ Gas and MV Mitigation Gas at one or more Receipt Points hereunder will not subject any of the Gathering Systems or any portion thereof to regulation by FERC as (x) a natural gas company under the Natural Gas Act or (y) a Section 311 transporter under the Natural Gas Policy Act of 1978 and (ii) with the possible exception of Gas purchased solely for gas lift purposes, none of Producers’ Gas and MV Mitigation Gas delivered at one or more Receipt Points is Gas that has been transported by a natural gas company, as defined in the Natural Gas Act, or by a Section 311 transporter under the Natural Gas Policy Act of 1978, at any point prior to such delivery.

(c) Indemnity. Producers agree to indemnify and hold harmless Gatherer and its Affiliates from and against any breach of Producers’ warranties in this Section 5.2.

5.3 Other Warranties. EXCEPT AS SET FORTH IN THIS ARTICLE 5 AND THE OTHER PROVISIONS OF THIS AGREEMENT AND THE EXHIBITS, SCHEDULES, AND OTHER ATTACHMENTS, 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 AND REDELIVERED HEREUNDER.

Article 6

Control, Possession, and Waiver

6.1 Control and Possession. As between the Parties, Producers shall be deemed to be in exclusive control and possession of Producers’ Gas and MV Mitigation Gas delivered hereunder and responsible for any damage or injury caused thereby prior to the time Producers’ Gas and MV Mitigation Gas shall have been delivered to Gatherer at the Receipt Points and after Producers’ Gas and MV Mitigation Gas is redelivered to or on behalf of Producers at the Delivery Points. At and after delivery of Producers’ Gas and MV Mitigation Gas to Gatherer at the Receipt Points, Gatherer 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 Producers at the Delivery Points.

6.2 Indemnity. Producers agree to indemnify, defend, and hold harmless Gatherer and its Affiliates from any and all Claims arising from or out of (i) bodily injury or property damage attributable to Producers’ Gas or MV Mitigation Gas when Producers shall be deemed to be in control and possession of Producers’ Gas or MV Mitigation Gas as provided in Section 6.1 and (ii) the delivery by Producers of Producers’ Gas or MV Mitigation Gas that does not meet the quality specifications in this Agreement. Except to the extent a Claim (or Claims) is covered by the indemnity in the preceding sentence, Gatherer agrees to indemnify, defend, and hold harmless Producers and their Affiliates from all Claims arising from or out of bodily injury or property damage attributable to Producers’ Gas and MV Mitigation Gas when Gatherer shall be deemed to be in control and possession of Producers’ Gas and MV Mitigation Gas as provided in Section 6.1. In addition, Gatherer agrees to indemnify, defend, and hold harmless Producers and

 

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their Affiliates from all Claims asserted by Surface Estate Owners arising out of Gatherer’s use of the easements and rights of way that are assigned to Gatherer from time to time pursuant to Section 12.12. THE INDEMNITIES SET FORTH IN THIS SECTION 6.2 ARE TO BE CONSTRUED 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.

6.3 Waiver of Damages. A PARTY’S LIABILITY UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES 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, ALL OF THE SAME BEING HEREBY EXPRESSLY WAIVED AND NEGATED. 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. The waiver in this Section 6.3 shall not limit or otherwise affect Producers’ and Gatherer’s rights and obligations under Section 10.2.

Article 7

Billing and Payments

7.1 Billing. As soon as practicable each Month, Gatherer shall invoice Producers in electronic format for services provided hereunder in the preceding Month and provide a statement setting forth (i) the volumes and quantities (expressed in Mcf’s and MMBtu’s) of Producers’ Gas and MV Mitigation Gas received at each Receipt Point and redelivered to each Delivery Point and the volumes and quantities of System Fuel and Losses, if measured or ascertainable by Gatherer, (ii) the Fees for such Producers’ Gas and MV Mitigation Gas, (iii) any adjustments for prior periods, and (iv) all amounts due by Producers hereunder. If actual measurements of volumes of Producers’ Gas or MV Mitigation Gas are not available by the 15th Day of the Month following the Month of receipt by Gatherer, then, on or after such 15th Day (or if such Day is not a Business Day, on or after the next Business Day), Gatherer may prepare and submit its invoice based on Gatherer’s good faith estimate of the volumes of Producers’ Gas and MV Mitigation Gas received in such Month. If Gatherer submits an invoice based on estimated volumes, Gatherer shall prepare and submit to Producers an invoice based on actual measurements on or before the close of business, CPT, of the 45th Day (or if such 45th Day is not a Business Day, on the following Business Day) after the applicable Month of delivery of

 

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Producers’ Gas or MV Mitigation Gas. Gatherer’s invoices shall include information reasonably sufficient to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to any actual measurements, and any adjustments to prior period volumes and quantities. Gatherer will use its commercially reasonable efforts to take such actions as may be appropriate to permit Gatherer by June 30, 2011 to submit invoices for actual volumes of Producers’ Gas and MV Mitigation Gas received, gathered, and handled hereunder not later than the close of business, CPT, on the 15th day of the Month following the Month of delivery of Producers’ Gas or MV Mitigation Gas.

7.2 Payment. Producers shall remit to Gatherer the amount due under Section 7.1, by wire transfer by the 25th Day of each Month or 10 Days from the date of receipt of Gatherer’s electronic invoice, whichever is later. If such due date is not a Business Day, payment is due on the next Business Day following such date.

7.3 Dispute. If Producers, in good faith, dispute the amount of any invoice of Gatherer that is based on actual measurements (not estimated volumes) or any part thereof, Producers will pay Gatherer such amount, if any, that is not in dispute and shall provide Gatherer Notice, no later than within 30 Days after the date that payment of such invoice would be due under Section 7.2, of the disputed amount accompanied by supporting documentation acceptable in industry practice to support the disputed amount. 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 Agreement. If Notice of a disputed invoice is not furnished to Gatherer by the date above, Producers shall be deemed to have waived the right to dispute such invoice, subject to Producers’ rights under Section 7.5 below.

7.4 Late Payments. If Producers fail to pay the amount of any invoice rendered by Gatherer hereunder when such amount is due, interest thereon shall accrue from, but excluding, the due date to and including the date payment thereof is actually made at the lesser of the Prime Rate plus 2%, computed on an annualized basis and compounded Monthly, or the maximum rate of interest permitted by Applicable Law, not to exceed the maximum legal rate. “Prime Rate” means the prime rate on corporate loans at large U.S. money center commercial banks as set forth in The Wall Street Journal “Money Rates” table under the Heading “Prime Rate,” or any successor thereto, on the first date of publication for the Month in which payment is due. Gatherer shall render a late payment charge invoice and Producers shall make payment upon receipt of such invoice.

7.5 Audit. Each Party or its designated representatives 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 (including electronic measurement data, meter charts or records and other similar information supporting relevant calculations), and telephone recordings of the other Party and its Affiliates to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under this Agreement. This right to examine, audit, and to obtain copies shall not be available with respect to information not directly relevant to transactions under this Agreement. All invoices and billings, adjusted as contemplated in accordance with the second sentence of Section 7.1, shall be conclusively presumed final and accurate and all associated claims for underpayments or overpayments shall be deemed waived unless such invoices or billings are objected to in writing,

 

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with adequate explanation and/or documentation, within two Years after the Month of Gas delivery. Any retroactive adjustment made in response to information furnished under an audit under this Section 7.5 shall be paid in full by the Party owing payment within 30 Days of Notice and substantiation of such inaccuracy.

7.6 Minor Adjustments. No adjustments, retroactive or prospective, shall be made to volumes for prior periods, whether the result of volume allocation errors or any other reason other than meter calibration error, that involve changes that would be less than 100 Mcf’s per Month.

7.7 Financial Responsibility. If (i) Producers fail to pay according to the provisions hereof and such failure continues for a period of 5 Business Days after Notice of such failure is provided to Producers or (ii) Gatherer has reasonable grounds for insecurity regarding the performance by Producers of any obligation under this Agreement, then Gatherer, by Notice to Producers, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance by Producers. “Adequate Assurance of Performance” means, at the option of Producers, (x) advance payment in cash by Producers to Gatherer for services to be provided under this Agreement in the following Month or (y) delivery to Gatherer by Producers of an Acceptable Letter of Credit in an amount equal to not less than the aggregate proceeds due from Producers under Section 7.2 for the prior 2 Month period. If Gatherer reasonably believes Producers will not deliver the Barnett Annual Minimum Volume for the Barnett Gathering Systems in such Year, Gatherer may require that any advance payment in cash by Producers to Gatherer be in an amount up to the aggregate proceeds due from Producers under Section 7.2 for the prior 2 Month period and that any Acceptable Letter of Credit be in an amount up to the aggregate proceeds paid by Producers under Section 7.2 for the prior 3 Month period. If Producers fail to provide Adequate Assurance of Performance to Gatherer within 48 hours of Gatherer’s Notice or if Producers or CHK Parent suffer any of the actions set forth in Section 2.2(v), then Gatherer shall have the right to suspend or reduce all services under this Agreement without prior Notice and without limiting any other rights or remedies available to it under this Agreement or otherwise. If Gatherer exercises the right to suspend or reduce services under this Section 7.7, then Producers shall not be entitled to take, or cause to be taken, any action hereunder or otherwise against Gatherer for such suspension or reduction. Failure of Gatherer to exercise its right to suspend or reduce service as provided in this Section 7.7 shall not constitute a waiver by Gatherer of any rights or remedies Gatherer may have under this Agreement, Applicable Law, or otherwise.

Article 8

Force Majeure

8.1 Non-Performance. If a Party is rendered unable, wholly or in part, by reason of a Force Majeure Event to perform its obligations under this Agreement, other than Producers’ obligations to make payments when due hereunder, then such Party’s obligations shall be suspended to the extent affected by the Force Majeure Event.

8.2 Definition. “Force Majeure Event” means any cause or event not reasonably within the control of the Party whose performance is sought to be excused thereby including the following causes and events (to the extent such causes and events are not reasonably within the

 

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control of the Party claiming suspension): acts of God, strikes, lockouts, or other industrial disputes or disturbances, acts of the public enemy, wars, blockades, insurrections, civil disturbances and riots, epidemics, landslides, lightning, earthquakes, fires, tornadoes, hurricanes, storms, floods, washouts and warnings for any of the foregoing which may necessitate the precautionary shut-down of wells, plants, pipelines, gathering systems, or other related facilities; arrests, orders, requests, directives, restraints and requirements of governments and government agencies and people, either federal or state, civil and military; any application of government conservation or curtailment rules and regulations; explosions, sabotage, breakage or accidents to equipment, machinery, gathering systems, plants, facilities or lines of pipe; outages (shutdown) for the making of repairs, alterations, relocations or inspections to lines of pipe, gathering systems, plants or equipment; inability to secure labor or materials, freezing of wells or lines of pipe, partial or entire failure of wells or lines of pipe, partial or entire failure of gas supply, electric power shortages, necessity for compliance with any court order, or any law, statute, ordinance, regulation or order promulgated by a Governmental Authority having or asserting jurisdiction, inclement weather that necessitates extraordinary measures and expense to construct facilities or maintain operations, or any other causes, whether of the kind enumerated herein or otherwise, not reasonably within the control of the Party claiming suspension. Such term shall likewise include, in those instances where either Party 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 to acquire, or delays on the part of such Party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such servitudes, rights-of-way, grants, permits or licenses, and 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 Authority 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. “Force Majeure Event” also includes any event of force majeure or other interruption occurring with respect to the facilities or services of either Party’s Affiliates or third party service providers providing a service or providing any equipment, goods, supplies, or other services or items necessary to the performance of such Party’s obligations hereunder, including the occurrence of an event of force majeure event under a Third Party Gathering Agreement.

8.3 Excluded Events. “Force Majeure Event” specifically excludes the following occurrences or events: the loss, interruption, or curtailment of interruptible transportation on any Receiving Transporter necessary to take delivery of Producers’ Gas and MV Mitigation Gas at any Delivery Point, unless and only to the extent the same event also curtails firm transportation at the same Delivery Point; increases or decreases in Gas supply, allocation or reallocation of production by well operators; loss of markets; loss of supply; and failure of specific, individual wells or appurtenant facilities in the absence of a Force Majeure Event broadly affecting other wells in the same geographic area. Price changes due to market conditions with respect to the purchase or sale of Gas gathered hereunder or economics associated with the delivery, connection, receipt, gathering, compression, dehydration, treatment, processing or redelivery of Gas quantities hereunder shall not constitute Force Majeure Events. In addition, the non-availability or lack of funds or failure to pay money when due shall not constitute Force Majeure Events.

 

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8.4 Strikes. The settlement of strikes or lockouts shall be entirely within the discretion of the Party having the difficulty, and any obligation hereunder to remedy a Force Majeure Event 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 sole discretion of the Party having the difficulty.

8.5 Notice. The Party whose performance is affected by a Force Majeure Event must provide Notice to the other Party. Initial Notice may be given orally, but written Notice with reasonably full particulars of the Force Majeure Event is required as soon as reasonably possible after the occurrence of the Force Majeure Event. The Party affected by a Force Majeure Event shall use reasonable commercial efforts to (i) remedy and (ii) mitigate the effects of the Force Majeure Event.

8.6 Force Majeure Credit. If, during the Minimum Volume Period, Producers are unable to deliver volumes of Producers’ Gas and MV Mitigation Gas to a Gathering System due to a Force Majeure Event affecting Gatherer, then the volume (expressed in Mcf’s) of Producers’ Gas and MV Mitigation Gas (the “Force Majeure Volumes”) that Producers were prevented from delivering to the affected Gathering System due to such Force Majeure Event affecting Gatherer shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A for the same Year in which such Force Majeure Event occurs. The term “Force Majeure Volumes” does not, however, include any volumes of Producers’ Gas attributable to, or that could be delivered from, Barnett Delayed Connections (including any connection with respect to which Gatherer has furnished to Producers a Pad Notice in accordance with Section 6(b)(1) of Exhibit A), which are addressed in Section 6 of Exhibit A.

8.7 Maintenance and Other Operations. Gatherer may suspend its performance hereunder to the extent required to make necessary or reasonably desirable inspections, alterations, or repairs (not required as the result of the occurrence of a Force Majeure Event) to any part of a Gathering System and to make any required relocations or modifications of pipelines and other equipment and facilities comprising part of a Gathering System. Gatherer shall give Producers 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 Producers will not be affected. If, during the Minimum Volume Period, Gatherer suspends such performance with respect to any segment in excess of ** total Days in any Month (such excess Days, the “Excess Suspension Days”), then the volume (expressed in Mcf’s) of Producers’ Gas and MV Mitigation Gas (the “Maintenance Suspension Volumes”) that corresponds to the product of (i) the Excess Suspension Days multiplied by (ii) the average daily deliveries of Producers’ Gas and MV Mitigation Gas on the affected Gathering System for the 30-Day period immediately prior to the first Day in the Month in which suspension occurred (excluding any Day during such 30-Day period when no Producers’ Gas and MV Mitigation Gas is delivered to such Gathering System or the delivery of Producers’ Gas or MV Mitigation Gas to such Gathering System is affected by any maintenance downtime) but less the volumes of Producers’ Gas and MV Mitigation Gas actually received on the affected Gathering System on the Excess Suspension Day shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A for the same Year in which such suspension occurs.

 

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Article 9

Assignment

9.1 General

(a) Restriction on Assignment. Except as provided in this Article 9, neither Party shall assign any of its rights, or delegate any of its obligations, under this Agreement (including by operation of law) without the prior written consent of the other Party, such consent not to be unreasonably withheld or delayed. For purposes of this Section 9.1, a Change of Control with respect to a Producer shall be considered an assignment of this Agreement by such Producer.

(b) Permitted Assignments. No assignment of this Agreement shall be made by Producers, except (i) to a Person that is acquiring an interest in or all or part of the Dedicated Properties contemporaneous with such assignment and (ii) with the prior written consent of Gatherer. No assignment of this Agreement shall be made by Gatherer, except (A) to a Person that is acquiring an interest in or all or a part of a Gathering System contemporaneous with such assignment and (B) with the prior written consent of Producers. Notwithstanding the foregoing, each Party may assign its rights under this Agreement to an Affiliate of such Party without the consent of the other Party and each Party may pledge this Agreement (or pledge any of its rights under this Agreement including the right to receive payments due hereunder) to secure any credit facility or indebtedness of such Party or its Affiliates without the consent of the other Party and may assign any of its rights, or delegate any of its obligations, under this Agreement to one or more of its Affiliates without the consent of the other Party; provided, no such assignment or pledge shall relieve the assignor Party from any of its obligations hereunder.

(c) Partial Assignments in Minimum Volume Period. If in connection with any permitted assignment under Section 9.1(b) that would occur during the Minimum Volume Period less than all of the Gatherer’s rights and obligations under this Agreement are proposed to be assigned, or less than all of Producers’ rights and obligations under this Agreement are proposed to be assigned, as applicable, then the Party whose consent is required shall have the right to consider and approve (in addition to other relevant matters) the manner in which redetermination of Fees, well connect obligations, natural gas minimum volume throughput commitment, maximum daily natural gas quantity limitations and similar matters are proposed to be retained by the assignor Party, to be assumed by the proposed assignee, or to be otherwise allocated among the assignor Party and the assignee.

(d) Assumed Obligations. Any permitted assignee of either Party’s rights and obligations under this Agreement shall assume and be responsible for the payment and performance of the assignor Party’s rights and obligations under this Agreement that are required to be paid or performed after the effective date of such assignment (the “Assumed Obligations”), the assignor Party shall remain liable for the obligations required to be paid and performed under this Agreement prior to the effective date of such assignment, the assignor Party shall be liable for the Assumed Obligations unless the assignor Party is released from such Assumed Obligations under Section 9.5, and the assignor Party and the permitted assignee shall be co-obligors as to the Assumed Obligations unless the assignor Party is released from such Assumed Obligations under Section 9.5.

 

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9.2 Sale of Gathering System.

(a) Transfer by Gatherer. If Gatherer sells, transfers, or otherwise disposes of an interest in all or any part of a Gathering System and no assignment of rights and obligations under this Agreement occurs under Section 9.1, Gatherer shall cause the acquiring Person to either (i) enter into an agreement with Producers, substantially in the form attached as Exhibit H (a “Gathering System Owner Acknowledgement Agreement”) whereby such Person acknowledges Producers’ rights to have Producers’ Gas connected to, received by, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered to Producers on and over the Gathering System in accordance with the terms of this Agreement or (ii) enter into a Separate GGA with Producers with respect to the part of the Gas Gathering System acquired by such Person. Neither the entry into a Gathering System Owner Acknowledgment Agreement or a Separate GGA shall constitute an assignment for purposes of Section 9.1.

(b) Continued Performance by Gatherer. With respect to each Gathering System Owner Acknowledgement Agreement, Gatherer shall continue to be obligated to perform its obligations under this Agreement as if the sale, transfer, or other disposition of the interest in or part of the Gathering System acquired by the Person who is a party to such Gathering System Owner Acknowledgement Agreement had not occurred.

(c) Separate GGA. With respect to each Separate GGA referenced in this Section 9.2, unless released under Section 9.5(a), (i) Gatherer shall continue to be obligated to perform and pay its obligations under this Agreement as if the sale, transfer, or other disposition of the interest in or part of the Gathering System acquired by the Person who is a party to such Separate GGA had not occurred and (ii) the performance or payment of any such obligations by the Person who is a party to such Separate GGA (or its permitted successors and assigns under the terms of such Separate GGA) shall be accepted by Producers and be considered as performed or paid by Gatherer.

9.3 Sale of Dedicated Properties.

(a) Transfer by Producers. If Producers or their Affiliates sell, transfer, or otherwise dispose of any of the Dedicated Properties (or any interest therein), including the sale or transfer of a production payment, overriding royalty interest, net profits interest, or other similar interest, and no assignment of rights and obligations under this Agreement occurs under Section 9.1, Producers shall cause, or shall cause their Affiliates to cause, the acquiring Person to either (i) enter into an agreement with Gatherer, substantially in the form attached as Exhibit I (a “Dedicated Properties Owner Acknowledgement Agreement”) whereby such Person acknowledges the dedication to the Gathering System of Producers’ Gas from the Dedicated Properties (or interest therein) acquired by such Person or (ii) enter into a Separate GGA with Gatherer with respect to the Dedicated Properties (or interest therein) acquired by such Person. Neither the entry into a Dedicated Properties Owner Acknowledgment Agreement or a Separate GGA shall constitute an assignment for purposes of Section 9.1.

(b) Continued Performance by Producers. With respect to each Dedicated Properties Owner Acknowledgement Agreement, Producers shall continue to be obligated to perform and pay their obligations under this Agreement as if the sale, transfer or other disposition of the Dedicated Properties (or any interest therein) acquired by the Person who is a party to such Dedicated Properties Owner Acknowledgement Agreement had not occurred.

 

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(c) Separate GGA. With respect to each Separate GGA referenced in this Section 9.3, unless released under Section 9.5(b), (i) Producers shall continue to be obligated to perform and pay their obligations under this Agreement as if the sale, transfer or other disposition of the Dedicated Properties (or interest therein) acquired by the Person who is a party to such Separate GGA had not occurred and (ii) the performance or payment of any such obligations by the Person who is a party to such Separate GGA (or its permitted successors and assigns under the terms of such Separate GGA) shall be accepted by Gatherer and be considered as performed or paid by Producers.

9.4 Separate Gas Gathering Agreement.

(a) Completion. As to each Separate GGA relating to (i) any Barnett Gathering System to be entered into in the Minimum Volume Period, (ii) any Midcon Gathering System to be entered into prior to June 30, 2019, and (iii) any PRP Gathering System to be entered into prior to June 30, 2019, the Separate GGA will need to be completed by the insertion of the relevant information in any blanks contained in such Separate GGA. Volumes of Gas received in the Barnett Gathering Systems under a Separate GGA shall be applied to the Adjusted Barnett Annual Minimum Volume to the extent that (i) such volumes would have constituted Producers’ Gas or MV Mitigation Gas if the Barnett Dedicated Properties covered by such Separate GGA had continued to be owned by Producers or their Affiliates and (ii) the Adjusted Barnett Annual Minimum Volume has not otherwise been reduced to reflect volumes delivered under such Separate GGA.

(b) Producers Terms. If the Separate GGA is being entered into in connection with a sale, transfer or other disposition by Gatherer of part of the Gathering System, then Producers shall have the right to approve the information to be inserted in any of the blanks contained in such form, such approval not to be unreasonably withheld or delayed.

(c) Gatherer Terms. If the Separate GGA is being entered into in connection with the sale, transfer or other disposition by Producers of an interest in or part of the Dedicated Properties, then Gatherer shall have the right to approve the information to be inserted in any of the blanks contained in such form, such approval not to be unreasonably withheld or delayed.

9.5 Release.

(a) Release of Gatherer. If the assignee under an assignment consented to by Producers under Section 9.1 or the acquiring Person under a Separate GGA entered into under Section 9.2(a) has (or the guarantor of its obligations under a guaranty provided pursuant to the following sentence has) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then Gatherer shall be released from the Assumed Obligations applicable to such assignment or the obligations of such acquiring Person under such Separate GGA, as applicable (the “Separate GGA Gatherer Obligations”). If at the time of the assignment or the entry into the Separate GGA, as applicable, such assignee or acquiring Person does not have a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then

 

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such assignee or acquiring Person, as applicable, may provide to Producers a guaranty of such assignee’s/acquiring Person’s Assumed Obligations or the Separate GGA Gatherer Obligations, as applicable, from a Person with (at time of such assignment or entry into such Separate GGA) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, which guaranty shall be in a form reasonably acceptable to Producers.

(b) Requested Gatherer Release. If in connection with any assignment or Separate GGA under Section 9.5(a) the acquiring Person does not have (and is unable to provide a guarantor with) a credit rating equal to or greater than the Applicable Rating and thus is not entitled to a release under such Section 9.5(a)(i), Gatherer may nevertheless request that Gatherer be released from the Assumed Obligations or Separate GGA Gatherer Obligations, as applicable, and in connection with each such request the financial ability of the acquiring Person (and any guarantor provided by such acquiring Person) and credit support provided by such acquiring Person or any guarantor to satisfy the Assumed Obligations or Separate GGA Gathering Obligations shall be taken into consideration and Producers shall not unreasonably withhold or delay the approval of such request.

(c) Release of Producers. If the assignee under an assignment consented to by Gatherer under Section 9.1 or the acquiring Person under a Separate GGA entered into under Section 9.3(a) has (or the guarantor of its obligations under a guaranty provided pursuant to the following sentence has) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then Producers shall be released from the Assumed Obligations applicable to such assignment or the obligations of such acquiring Person under such Separate GGA, as applicable (the “Separate GGA Producer Obligations”). If at the time of the assignment or the entry into the Separate GGA, as applicable, such assignee or acquiring Person does not have a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then such assignee or acquiring Person, as applicable, may provide to Gatherer a guaranty of such assignee’s/acquiring Person’s Assumed Obligations or Separate GGA Producer Obligations under such Separate GGA, as applicable, from a Person with (at time of such assignment or entry into such Separate GGA) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, which guaranty shall be in a form reasonably acceptable to Gatherer.

(d) Requested Producers Release. If in connection with any assignment or Separate GGA referenced in Section 9.5(c) the acquiring Person does not have (and is unable to provide a guarantor with) a credit rating equal to or greater than the Applicable Rating and thus is not entitled to a release under such Section 9.5(c), Producers may nevertheless request that Producers be released from the Assumed Obligations or Separate GGA Producer Obligations, as applicable, and in connection with each such request the financial ability of the acquiring Person (and any guarantor provided by such acquiring Person) and credit support provided by such acquiring Person or any guarantor to satisfy the Assumed Obligations or Separate GGA Producer Obligations shall be taken into consideration and Gatherer shall not unreasonably withhold or delay the approval of such request.

9.6 Inurement. Subject to this Article 9, this Agreement binds and inures to the benefit of the Parties and their respective successors and assigns.

 

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Article 10

Jurisdiction and Additional Charges

10.1 Regulatory Bodies. This Agreement is subject to, and each Party will comply with, all Applicable Laws of any Governmental Authority now or hereafter having jurisdiction over either or both Parties or their facilities.

10.2 Additional Fees and Changes in Laws. Producers shall reimburse Gatherer for Producers’ allocable share of (a) any additional, increased, or subsequently applicable taxes (other than income taxes and any real or personal property or other ad valorem tax imposed on any Gathering System) implemented or imposed after September 30, 2009 that are lawfully levied on or paid by Gatherer with respect to its performance under this Agreement or on any part of a Gathering System and (b) any new or subsequently applicable assessments, fees or other charges implemented or imposed on Gatherer with respect to the services provided hereunder, including any such assessments, fees or other charges arising from any carbon tax or cap and trade law, rule or regulation adopted after September 30, 2009. Producers’ allocable share of any such amounts shall be based on the ratio that Producers’ Gas and MV Mitigation Gas (each expressed in Mcf’s) received at the Receipt Points in the State or States in which such amounts are imposed bears to the total volume of Gas (expressed in Mcf’s) received at such Receipt Points, in each case during the applicable period for which such taxes, assessments, fees or other charges are incurred or imposed, as the case, may be. To the extent that any of Gatherer’s activities pursuant to this Agreement produce or result in the generation of or otherwise qualify for any emission reduction credits or emission offset credits or bonus emission allowances (collectively, “Greenhouse Gas Credits”) and Producers have paid for an allocable share of the costs of such activities pursuant to this Section 10.2, then Producers shall be entitled to receive, and Gatherers shall obtain and convey to Producers, their allocable share of any such Greenhouse Gas Credits. If any Governmental Authority takes any action (including issuance of any “policy statement,” rule, or regulation) whereby the receipt, gathering, treating, or delivery of Producers’ Gas and MV Mitigation Gas as contemplated under this Agreement shall be prohibited or subject to terms, conditions or regulations, including rate or price controls or ceilings or open access requirements not in effect on September 30, 2009 and which, in the reasonable judgment of Gatherer, materially adversely affect the economics of the services provided, and Fees received, under this Agreement, then, upon Notice by Gatherer to Producers, the Parties shall as promptly as practicable meet to negotiate in good faith such changes to the terms of this Agreement as may be necessary or appropriate to preserve and continue for the Parties the rights and benefits originally contemplated for the Parties by this Agreement, including the returns expected by Gatherer, with such amendment to this Agreement to be effective no later than the effective date of such new or amended Applicable Law.

Article 11

Notices

11.1 Agency. For all purposes of this Agreement, Producers individually and collectively irrevocably appoint CEMI as their agent to receive and make all notices, invoices, payments and other communications under this Agreement from or applicable to Producers and to make, withhold, grant and take all approvals, consents, decisions, and actions required or permitted of Producers under or in connection with this Agreement.

 

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11.2 Notice. All notices, invoices, payments, and other communications made under this Agreement (“Notice”) shall be in writing and sent to the addresses shown in Exhibit E.

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

11.4 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.

Article 12

Other Provisions

12.1 Governing 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 Harris County, Texas over any dispute or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each Party hereby 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. 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.

12.2 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.

12.3 Specific Performance. The Parties acknowledge and agree (i) that each Party would be irreparably harmed by a breach by the other Party of any of their obligations under this Agreement and (ii) that there would be no adequate remedy at law or damages to compensate the non-breaching Party for any such breach. The Parties agree that the non-breaching Party shall be entitled to injunctive relief requiring specific performance by the breaching Party of its obligations under this Agreement, and the Parties hereby consent and agree to the entry of such injunctive relief.

12.4 Representations. 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

 

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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. Producers and Gatherer jointly acknowledge and agree that (a) with the possible exception of Ponder Midstream Gas Services, L.L.C. and assets owned by it, the movement of Gas on each Gathering System under this Agreement constitutes (and is intended to constitute for purposes of all Applicable Laws in effect in each state) a movement of Producers’ Gas and MV Mitigation Gas that is not subject to the jurisdiction of the FERC pursuant to the Natural Gas Act or Section 311 of the Natural Gas Policy Act, (b) the Fees have been freely negotiated and agreed upon as a result of good faith negotiations and are not discriminatory or preferential, but are just, fair, and reasonable in light of the Parties’ respective covenants and undertakings herein during the term of this Agreement, and (c) neither Producers nor Gatherer had an unfair advantage over the other during the negotiation of this Agreement.

12.5 Processing Rights. Subject to the following sentence, Producers retain all processing rights with respect to Producers’ Gas and MV Mitigation Gas and Gatherer shall not process Producers’ Gas or MV Mitigation Gas unless Producers agree in writing to such processing. Gatherer shall have the right to process Producers’ Gas covered by the processing agreements between one or more Producers and Gatherer described on Exhibit J. Without the prior written consent of Gatherer, Producers shall have no right to locate a processing plant or other processing-type facilities (whether owned by Producers, their Affiliates, or a third party) on any portion or segment of any of the Gathering Systems. If Producers propose to engage or contract (or renew or extend the term of any existing contract or agreement) with a third party to process any of Producers’ Gas gathered on any Gathering System, Producers shall provide Gatherer with the opportunity to submit a proposal to Producers to perform such processing services.

12.6 Enforceability. 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.

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

12.8 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;

 

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(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) unless otherwise specified, the plural shall be deemed to include the singular, and vice versa; and

(vi) each gender shall be deemed to include the other genders.

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

12.10 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.

12.11 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 Affiliates, employees, lenders, royalty owners, co-working interest owners, counsel, accountants, and agents of the Party, or a prospective or permitted assignee under Article 9 or prospective or actual purchaser of an interest in any Gathering System or in any of the Dedicated Properties, provided such Persons shall have agreed to keep such terms confidential), except (i) to comply with any Applicable Law or exchange rule, (ii) to the extent necessary for the enforcement of this Agreement, or (iii) 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 this Agreement (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. The entry into, or filing of a memorandum in the applicable public records with respect to this Agreement, a Separate GGA, a Dedicated Properties Owner Acknowledgment Agreement, or a Gathering System Owner Acknowledgment Agreement shall not constitute a breach of this Section 12.11. 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 this Agreement shall be kept confidential by the Parties for one Year from the expiration or termination of this Agreement. If 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.

 

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12.12 Easements.

(a) Surface Rights. Oil and gas leases, oil and gas rights derived under farmout agreements, surface damage releases, right of way agreements, pooling orders and similar agreements and rights held by Producers covering the Barnett Dedicated Properties (collectively referred to herein as an “Oil and Gas Lease”) may permit Producers to lay gathering pipelines and related facilities for the purpose of moving natural gas and crude oil from any well producing from the oil, gas and mineral estate covered by such Oil and Gas Lease or lands pooled or unitized with such Oil and Gas Lease. The surface of the land covered by an Oil and Gas Lease is referred to herein as the “Surface Estate” and the owner of such Surface Estate is referred to herein as a “Surface Estate Owner.”

(b) Cooperation. With respect to any easements/rights of way across Surface Estates needed by Gatherer to connect the Gathering System to existing or future wells producing from the oil, gas and mineral estate covered by the related Oil and Gas Lease or lands pooled or unitized with such Oil and Gas Lease (a “Subject Well”), Gatherer shall first attempt to obtain such easements/right of ways from the Surface Estate Owners. If Gatherer is unable to obtain any such easement/right of way from a Surface Estate Owner, Gatherer may notify the Producers thereof and request that the Producer holding the related Oil and Gas Lease reasonably cooperate with Gatherer in attempting to obtain the needed easement/right of way and such Producer shall so reasonably cooperate with Gatherer. The aforesaid obligation of Producer to reasonably cooperate with Gatherer shall not require Producer to pay any consideration to a Surface Estate Owner unless there is a contemporaneous reimbursement by Gatherer.

(c) Partial Assignment. If the needed easement/right of way has not been obtained after such cooperative efforts or Gatherer in good faith believes that such efforts will not be successful, Gatherer may request that the applicable Producer execute and deliver to Gatherer an assignment in the form of Exhibit L (a “Oil and Gas Lease Partial Assignment”). Provided that the applicable Oil and Gas Lease permits the assignment contemplated by the form attached as Exhibit L and (if applicable) any required consent from the other party to the Oil and Gas Lease is obtained, Gatherer and the applicable Producer shall cooperate in completing such form by inserting or attaching a description of the applicable Oil and Gas Lease, Subject Well and Surface Estate, Gatherer and Producer shall execute such completed Oil and Gas Lease Partial Assignment, and Producer shall have the right to record such Oil and Gas Lease Partial Assignment in the applicable public records. Gatherer shall not be required to pay any separate consideration to Producers for any such Oil and Gas Lease Partial Assignment. As reflected in the form attached as Exhibit L, Gatherer’s use of the Surface Estate covered by each Oil and Gas Lease Partial Assignment shall be subject to the terms of the related Oil and Gas Lease.

(d) Removal. As between Gatherer and Producers, any property of Gatherer placed in, on or under any such Surface Estate pursuant to an Oil and Gas Lease Partial Assignment shall remain the property of Gatherer, subject to removal by Gatherer (at its expense) when necessary or desirable (as determined by Gatherer in its sole and reasonable judgment provided that such removal shall not result in Gatherer being in breach of its other obligations under this Agreement). Gatherer shall have a reasonable time after the expiration or termination of this Agreement to remove its property placed on, in or under a Surface Estate under any such Oil and Gas Lease Partial Assignment. If under the terms of the Oil and Gas Lease applicable to any Oil and Gas Lease Partial Assignment the property placed in, on or under the Surface Estate by Gatherer is required to be removed upon the expiration or termination of such Oil and Gas Lease,

 

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then Gatherer shall be obligated to effect such removal (at its expense) in a manner consistent with the terms of such Oil and Gas Lease and any applicable regulations. The obligations of Gatherer under this Section 12.12 shall survive the expiration or termination of this Agreement.

12.13 Cooperation Meetings. As frequently as necessary, CEMI, on behalf of Producers, and Gatherer shall meet at a mutually agreeable location to discuss and review Producers’ drilling and other development plans on the Dedicated Properties, Gatherer’s expansion plans for the Gathering Systems, and any other information regarding Producers’ and Gatherer’s operations that may be appropriate or helpful to the Parties performance under this Agreement.

12.14 DFW Gathering System.

(a) Agency. CELLC hereby designates Gatherer as its lawful agent to design, construct, operate, maintain and repair the DFW Gathering System and to discharge all business, accounting, legal and regulatory matters related to the DFW Gathering System as the agent for CELLC (the “O&M Activities”) until the DFW O&M Terms become effective as provided below. Gatherer hereby accepts such designation. Gatherer shall be responsible for all costs incurred in connection with O&M Activities conducted by Gatherer, its Affiliates and other Persons engaged by Gatherer or its Affiliates to perform O&M Activities. In compensation for paying the costs of such O&M Activities, Gatherer shall receive all revenues derived from the operation of the DFW Gathering System during the term of this designation, including the applicable Barnett Fees paid for all volumes of Producers’ Gas and MV Mitigation Gas delivered to the DFW Gathering System during the term of this designation. The designation hereunder shall terminate on the date the DFW O&M Terms become effective below.

(b) DFW O&M Terms. During the period between the Effective Date of this Agreement and February 12, 2010, the Parties will negotiate in good faith, execute, and deliver an addendum to this Agreement covering the operation and maintenance of the DFW Gathering System (the “DFW O&M Terms”). The DFW O&M Terms will contain the following terms and other terms as may be reasonable for an operation and maintenance agreement of this type:

(i) Gatherer shall operate and maintain the DFW Gathering System in substantially the same manner as Gatherer operates and maintains the other Barnett Gathering Systems and Gatherer shall exercise commercially reasonable efforts to operate the DFW Gathering System in compliance with the Oil and Gas Lease dated October 4, 2006 among Dallas/Fort Worth International Airport Board, City of Dallas, City of Fort Worth (collectively, “Airport Board”) and CELLC (the “DFW Lease”) and the Pipeline License executed on June 11, 2007 and June 12, 2007 by and between Dallas/Fort Worth International Airport Board and CELLC (the “DFW License”).

(ii) Gatherer will receive as a fee for its services for all Gas gathered from wells connected to the DFW Gathering System an amount equal to all revenues derived from operation of the DFW Gathering System during the term of the DFW O&M Terms, including the applicable Barnett Fees paid to Gatherer pursuant to this Agreement during the term of the DFW O&M Terms.

 

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(iii) The DFW O&M Terms will be coterminous with this Agreement, subject to early termination as provided below.

(iv) Producers will indemnify and defend Gatherer (and its successors and assigns) from and against any and all liabilities, losses, costs and expenses associated with the operation of the DFW Gathering System and not typically assumed by an operator of assets similar to the DFW Gathering System, including all such liabilities, losses, costs, and expenses related to abandonment, restoration, and clean-up obligations associated with all or any portion of the DFW Gathering System and any loss, cost, liability or obligation arising from or relating to any requirement that may be imposed to relocate all or any portion of the DFW Gathering System.

(v) Gatherer will indemnify and defend Producers (and their respective successors and assigns) from and against any and all liabilities, losses, costs and expenses related to or arising from any breach by Gatherer of the DFW O&M Terms.

(vi) Gatherer’s prior written consent, which consent shall not be unreasonably withheld, shall be required to any changes to the DFW Lease or DFW License that would affect Gatherer’s rights or obligations under the DFW O&M Terms.

(vii) Gatherer will be an independent contractor and not an agent or partner of Producers or its Affiliates.

(viii) The O&M Terms will include rights of the Producers to terminate the DFW O&M Terms if any party other than CELLC (or its Affiliates) alleges a material breach of the DFW Lease or DFW License as a result of Gatherer’s operations hereunder and Gatherer shall have a right to terminate the DFW O&M Terms upon a termination of the DFW Lease or the DFW License. Upon any such termination, Producers would make a termination payment to Gatherer that equals the economic benefits that the Gatherer would have received if the DFW O&M Terms had not been so terminated and Producers shall indemnify Gatherer from any other losses arising from such early termination. If Producers make such termination payment, 75% of the DFW PDP Volumes remaining to be delivered as of the date of such termination shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A for the same Year. “DFW PDP Volumes” means the proved developed producing volumes of Producers’ Gas to be delivered to DFW Gathering System determined as of the Effective Date.

(c) DFW License Termination. Producers may terminate this agency if any party other than CELLC (or its Affiliates) alleges a material breach of the DFW Lease or DFW License as a result of Gatherer’s operations hereunder and Gatherer shall have a right to terminate this agency upon a termination of the DFW Lease or the DFW License. Upon any termination of the DFW Lease or DFW License, Producers shall make a termination payment to Gatherer that equals the economic benefits that the Gatherer would have received if this agency had not

 

34


terminated and Producers shall indemnify Gatherer from any other losses arising from such early termination. If Producers make such termination payment, the DFW PDP Volumes remaining to be delivered as of the date of such termination shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A for the same Year.

(d) Agency Termination. CELLC represents to Gatherer that the Agency Agreement, dated August 1, 2008, among CELLC, Chesapeake Operating, Inc., and Chesapeake Midstream Operating, L.L.C. has been terminated and is of no further force or effect.

(e) Indemnity. Producers shall indemnify, defend, and hold harmless Gatherer from all Claims asserted by the Airport Board against Gatherer arising from Producers entry into the arrangements contemplated hereunder.

(f) Definition. “DFW Gathering System” means the gathering system described as the “DFW Gathering System” in Schedule A1 as it exists on the Effective Date.

12.15 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Gatherer and Producers.

12.16 Amended and Restated Agreement. Effective as of February 1, 2010, this Agreement amends and restates in its entirety the Gas Gathering Agreement between Producers and Gatherer dated September 30, 2009. Except as provided in this Section 12.16, the terms and provisions of such original Gas Gathering Agreement (as they existed prior to the amendment and restatement of such terms and provisions herein) shall continue to apply (without modification) as to all matters required to be paid or performed by the Parties under this Agreement as to periods prior to February 1, 2010. The Parties acknowledge and agree that the volumes shown for Year 2010 in Schedule A7 (the second Year of the Minimum Volume Period) include the deficit volumes required under Section 4(b) of Exhibit A to be carried forward to Year 2010 from Year 2009 and added to the Adjusted Barnett Annual Minimum Volume for Year 2010. Producers also acknowledge and agree that they remain liable to pay Gatherer for the shortfall volume for Year 2009 that occurred in excess of such deficit volumes carried forward to Year 2010.

 

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

 

CEMI:
CHESAPEAKE ENERGY MARKETING, INC.
By:  

/s/ James C. Johnson

Name:   James C. Johnson
Title:   President
CHK Producers:
CHESAPEAKE EXPLORATION, L.L.C.
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:   Senior Vice President—Marketing
 
CHESAPEAKE LOUISIANA, L.P.
By:   CHESAPEAKE OPERATING, INC.
  its General Partner
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:   Senior Vice President—Marketing
 
DDJET LIMITED LLP
By:   CHESAPEAKE EXPLORATION, L.L.C.
  its General Partner
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:   Senior Vice President—Marketing
 

SIGNATURE PAGE

GAS GATHERING AGREEMENT


CHESAPEAKE OPERATING, INC.
By:  

/s/ James C. Johnson

Name:   James C. Johnson
Title:   Senior Vice President—Marketing
Gatherer:

CHESAPEAKE MIDSTREAM PARTNERS,

L.L.C.

By:  

/s/ J. Mike Stice

Name:   J. Mike Stice
Title:   Chief Executive Officer
 
 

SIGNATURE PAGE

GAS GATHERING AGREEMENT


List of Exhibits and Schedules

 

Exhibits

 
Exhibit A   Barnett Gathering System Terms and Conditions
Exhibit B   Midcon Gathering System Terms and Conditions
Exhibit C   PRP Gathering System Terms and Conditions
Exhibit D   Nominations and Measurement Practices
Exhibit E   Addresses for Notice
Exhibit F   Payout Calculation
Exhibit G   [Intentionally Deleted]
Exhibit H   Gathering System Owner Acknowledgement Agreement
Exhibit I   Dedicated Properties Owner Acknowledgement Agreement
Exhibit J   Existing Processing Agreements
Exhibit K   [Intentionally Deleted]
Exhibit L   Oil and Gas Lease Partial Assignment
Exhibit M   Memorandum of Gathering Agreement

Schedules

 
Schedule A1   Barnett Gathering Systems
Schedule A2   Barnett Fees
Schedule A3   Barnett Delivery Points
Schedule A4   Barnett Dedicated Wells, Receipt Points, and Pressures
Schedule A5   Barnett AMI
Schedule A6   Barnett Maximum Daily Quantity
Schedule A7   Barnett Annual Minimum Volume
Schedule A8   Barnett Redetermination Model and Examples
Schedule A9   Minimum Volume Commitment Example
Schedule A10   Barnett Type Curve
Schedule A11   Barnett Unconnected Wells
Schedule B1   Midcon Gathering Systems
Schedule B2   Midcon Fees
Schedule B3   Midcon Delivery Points
Schedule B4   Midcon Dedicated Wells, Receipt Points, and Pressures
Schedule B5   Midcon AMI
Schedule B6   [Intentionally Deleted]
Schedule B7   [Intentionally Deleted]
Schedule B8   Midcon Redetermination Model and Examples
Schedule C1   PRP Gathering Systems
Schedule C2   PRP Fees
Schedule C3   PRP Receipt Points and Pressures
Schedule C4   [Intentionally Deleted]
Schedule C6   PRP Delivery Points


Exhibit A

BARNETT GATHERING SYSTEMS TERMS AND CONDITIONS

The following terms and conditions shall apply to the gathering of Producers’ Gas and (where applicable) MV Mitigation Gas on the Barnett Gathering Systems.

1. Barnett Dedication.

(a) Producers’ Commitment. Subject only to Producers’ Barnett Reservations, Producers exclusively dedicate and commit to the performance of this Agreement the Barnett Dedicated Properties, represent that the Barnett Dedicated Properties are not otherwise subject to any other gas gathering agreement or other commitment or arrangement that would permit or require Producers’ Gas from the Barnett Dedicated Properties to be gathered on any other gas gathering system, and agree not to deliver any Gas produced from the Barnett Dedicated Properties and owned or controlled by Producers or their Affiliates to any other gas gatherer, gas purchaser, gas marketer, or other Person prior to the Barnett Delivery Points. Producers agree to cause any existing or future Affiliates of Producers to be bound by, and to execute and join as a party, this Agreement. The dedication and commitment made by Producers and their Affiliates under this Agreement is a covenant running with the land.

(b) Producers’ Reservations. Producers reserve the following rights (“Producers’ Barnett Reservations”): (i) to operate wells producing from the Barnett Dedicated Properties as a reasonably prudent operator, (ii) to separate or process Gas prior to delivery at the Barnett Receipt Points so long as such Producers’ Gas and MV Mitigation Gas meets the gas specifications herein after such separation or processing, (iii) to use Gas produced from the Barnett Dedicated Properties for lease operations, and (iv) to pool, communitize, or unitize Producers’ interests in the Barnett Dedicated Properties.

(c) Transfer of Producers’ Interests. Any transfer by Producers or their Affiliates of any of their interests in the Barnett Dedicated Properties shall comply with Article 9 of this Agreement.

(d) Memorandum. Producers shall enter into and deliver to Gatherer, at Gatherer’s request, a fully recordable memorandum of this Agreement, substantially in the form of Exhibit M.

2. Barnett Fees.

(a) Gathering and Compression Fees. As consideration for receiving Producers’ Gas or MV Mitigation Gas at each Barnett Receipt Point each Month, Producers shall pay Gatherer each Month an amount equal to the applicable Barnett Fees (expressed in $/Mcf) for each Barnett Receipt Point shown in Schedule A2 (as supplemented from time to time) applied to the volume of Producers’ Gas and MV Mitigation Gas (net of gas lift volumes) received at each such Barnett Receipt Point during such Month. In addition to payment of such amounts, Producers shall reimburse Gatherer each Month for Producers’ allocated share of Electric Power Charges on each Barnett Gathering System and any other Barnett Fees shown in Schedule A2, in each case based on the volume of Producers’ Gas and MV Mitigation Gas (net of gas lift volumes) received at each such Barnett Receipt Point during such Month.

 

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(b) Dehydration Service Fees. Producers’ Gas and MV Mitigation Gas delivered to the Barnett Receipt Points may have a water vapor content that exceeds the quality specification for water vapor content permitted from time to time by one or more of the Barnett Receiving Transporters. In such event, Gatherer will dehydrate, if necessary, Producers’ Gas or MV Mitigation Gas to reduce its water vapor content to 7 pounds per million Cubic Feet. The fee for such dehydration services is included in the Barnett Fees. In addition to the Barnett Fees, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with dehydration services performed under this Section 2(b). Gatherer shall be responsible for the costs incurred in disposing of water removed from Producers’ Gas or MV Mitigation Gas during dehydration. If the quality specification for water content is reduced below 7 pounds per million Cubic Feet by one or more of the Barnett Receiving Transporters, then the Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to reimburse Gatherer for the cost of additional dehydration services to comply with such specifications.

(c) Treating Service Fees. Producers’ Gas or MV Mitigation Gas delivered to the Barnett Receipt Points may have carbon dioxide or hydrogen sulfide content that exceeds the quality specification for carbon dioxide or hydrogen sulfide content required from time to time by one or more of the Barnett Receiving Transporters. In such event, without limiting Gatherer’s rights under Section 10(c) of this Exhibit A, Gatherer will treat, if necessary, Producers’ Gas or MV Mitigation Gas to reduce the carbon dioxide content to 2% and hydrogen sulfide to not more than 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas. The fee for Gatherer providing such treating services is included in the Barnett Fees to the extent such services are provided by Gatherer with facilities comprising part of a Barnett Gathering System on September 30, 2009. If additional facilities are required to provide such treating services or if the quality specification for carbon dioxide or hydrogen sulfide of the Barnett Receiving Transporters is reduced below 2% and 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas, then Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to Gatherer to provide such additional treating services. If the Parties are unable to agree upon an additional fee, then Gatherer may refuse to accept receipt of such Producers’ Gas or MV Mitigation Gas for delivery to such Barnett Receiving Transporter. Gatherers’ right to negotiate additional treating fees or right to refuse further deliveries of such Producers’ Gas or MV Mitigation Gas shall apply to each additional reduction in quality specification for carbon dioxide or hydrogen sulfide content of the Barnett Receiving Transporters. In addition to the fees referred to above, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with treating services performed in accordance with this Section 2(c). If Gatherer removes carbon dioxide from Producers’ Gas or MV Mitigation Gas gathered on any Barnett Gathering System, Producers shall have the right (but not the obligation) to keep title to and retain all such carbon dioxide removed from Producers’ Gas or MV Mitigation Gas. If Producers so elect to retain title to such carbon dioxide, then Producers shall be responsible (at their sole risk, cost and expense) to arrange for the taking and delivery of such carbon dioxide at and from each point on the Barnett Gathering System where such carbon dioxide is so removed, and Gatherer shall make such carbon dioxide available for taking at prevailing pressures after treating. Notwithstanding the foregoing, nothing in this Section 2.3(c) shall require Gatherer to install facilities or incur any capital expense associated with such delivery.

 

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3. Redetermination of Barnett Fees.

(a) First Barnett Redetermination Notice. Either Producers or Gatherer may, at any time during the six-month period commencing at 7:00 a.m. (CPT) on September 30, 2011, provide Notice to the other Party of its desire to redetermine all or any portion of the Barnett Fees (the “First Barnett Redetermination Notice”). Upon receipt by Producers or Gatherer of the First Barnett Redetermination Notice, the Parties shall, as promptly thereafter as is commercially practicable, enter into discussions and negotiations regarding whether all or any portion of the Barnett Fees should be adjusted, which discussions and negotiations shall take into account (in addition to other relevant items) the factors specified below in Section 3(c) of this Exhibit A.

(b) Second Barnett Redetermination Notice. At any time during the two-year period commencing at 7:00 a.m. (CPT) on September 30, 2014, either Producers or Gatherer may give the Second Barnett Redetermination Notice. The Party that elects to give the Second Barnett Redetermination Notice shall provide Notice to the other Party of its desire to redetermine all or any portion of the Barnett Fees (the “Second Barnett Redetermination Notice”). Upon receipt by the other Party of the Second Barnett Redetermination Notice, the Parties shall as promptly thereafter as is commercially practicable enter into discussions and negotiations regarding whether all or any portion of the Barnett Fees should be adjusted, which discussions and negotiations shall take into account (in addition to other relevant items) the factors specified below in Section 3(c) of this Exhibit A.

(c) Factors for Redetermination. Gatherer and Producers acknowledge that the following are the principal purposes for the inclusion by the Parties of the right to redetermine and adjust the Barnett Fees under this Section 3 of Exhibit A: (i) to mitigate the high degree of uncertainty in forecasting (A) future capital expenditures (including capital expenditures related to rights-of-way, construction labor, maintenance, connections to or expansions or extensions of, or pipeline integrity costs of the Barnett Gathering Systems) (hereinafter referred to as “Barnett Cap Ex”), (B) future compression expenses (whether capitalized or expensed) (including costs associated with rentals payments, standby fees, mobilization and demobilization, facility construction, environmental testing, pollution control equipment, emissions control equipment, permitting, acquisition of emissions allowances, maintenance, overhauls, and electricity facilities such as power lines and substations, but excluding electricity costs) (hereinafter referred to as “Barnett Compression Expense”), (C) the impact (positive or negative) on revenues realized by Gatherer related to Producers’ Gas and MV Mitigation Gas from varying Barnett Fees (including varying fee-tiers that result from changes in pressure at the Barnett Receipt Points or from changes in the Gas volume mix across Barnett Gathering Systems that have varying system fees) and (D) the impact on the timing of revenues realized by Gatherer as a result of shifts or accelerations in the Barnett Annual Minimum Volume commitment resulting from delays in completion of connections, Force Majeure or maintenance activities within the targeted time periods in accordance with this Exhibit A, and (ii) to assure that the Barnett Fees permit the Gatherer to achieve an acceptable return (expressed in terms of the unlevered, pre-income tax IRR to Gatherer) over the Minimum Volume Period on the actual and projected increased or decreased cash flow as compared to cash flows forecasted as of the date of this Agreement as set forth on Schedule A8. Upon receipt by Producers or Gatherer of the First Barnett Redetermination Notice or the Second Barnett Redetermination Notice, the Parties shall as promptly thereafter as is commercially practicable enter into discussions and negotiations to

 

A-3


determine whether the Barnett Fees should be adjusted, which discussions and negotiations shall take into account (in addition to other relevant items) that Producers and Gatherer intend that the net present value, discounted (to July 1, 2009) at an unlevered, pre-income tax rate of **% (“Target IRR”), of the “Annual Net Cash Flow Difference” shall be equal to zero (0), where the “Annual Net Cash Flow Difference” is (i) for each Year (or portion thereof) in the Minimum Volume Period, the sum of the following: (A) the Total Cap Ex Difference (as defined below), (B) Estimated Cap Ex Ad Valorem Tax Change (as defined below), (C) Applicable Barnett Revenues Differential (as defined below), (D) the Barnett Compression Expense Difference (as defined below), and (E) the Increased (or Decreased) Revenues from the Barnett Fee Adjustment (as defined below), and (ii) as of the first Year after the Minimum Volume Period the Terminal Value (as defined below). For purposes of this Section 3(c), the first Year shall be deemed to have commenced on July 1, 2009 (as if this Agreement were in effect on such date and as if the Minimum Volume Period started on such date). For purposes of adjusting the Barnett Fees pursuant to this Section 3(c), the Producers and Gatherer shall determine and take into account (in addition to other relevant factors) the following:

(i) the amount of the Barnett Cap Ex projected as of September 30, 2009 to be incurred from and after July 1, 2009 for each Year (or portion thereof) of the Minimum Volume Period in respect of the Barnett Gathering Systems (the “Original Barnett Cap Ex Projections”) as set forth in the first line under “Capital Expenditures and Ad Valorem” in Schedule A8;

(ii) the amount of Barnett Cap Ex actually expended by Gatherer for each Year (or portion thereof) prior to the date of determination, excluding any capital required to be excluded in accordance with Section 3(g) below (the “Actual Barnett Cap Ex”);

(iii) the amount of Barnett Cap Ex projected to be expended by Gatherer for each Year (or portion thereof) during the remainder of the Minimum Volume Period as such projected amounts are adjusted based on the specific factors then affecting actual capital expenditures and excluding projected capital expenditure amounts required to be excluded in accordance with Section 3(g) below (the “Revised Projected Barnett Cap Ex”);

(iv) for each Year (or portion thereof) of the Minimum Volume Period, the difference (expressed as a positive or negative number, as applicable) between (A) the amount for such Year (or portion thereof) specified in the Original Barnett Cap Ex Projections and (B) (I) the Actual Barnett Cap Ex for such Year (or portion thereof) and (II) for each Year (or portion thereof) during the remainder of the Minimum Volume Period, the Revised Projected Barnett Cap Ex (the difference for each Year (or portion thereof) of the Minimum Volume Period, the “Total Cap Ex Difference”);

(v) the estimated incremental or reduced ad valorem taxes for each Year (or portion thereof) of the Minimum Volume Period and for the Year thereafter resulting from the Total Cap Ex Difference, such estimate to be calculated in accordance with the methodology specified in footnote (4) of Schedule A8 (such estimated incremental or reduced ad valorem taxes, the “Estimated Cap Ex Ad Valorem Tax Change”);

(vi) the amount of the Barnett Compression Expense projected as of September 30, 2009 to be incurred from and after July 1, 2009 for each Year (or portion thereof) of the

 

A-4


Minimum Volume Period in respect of the Barnett Gathering Systems (the “Original Barnett Compression Projections”) as set forth in the first line under “Barnett Compression Expense” in Schedule A8;

(vii) the amount of Barnett Compression Expense actually expended by Gatherer for each Year (or portion thereof) prior to the date of determination, excluding any compression expense required to be excluded in accordance with Section 3(g) below (the “Actual Barnett Compression Expense”);

(viii) the amount of Barnett Compression Expense projected to be expended by Gatherer for each Year (or portion thereof) during the remainder of the Minimum Volume Period and for the Year thereafter as such projected amounts are adjusted based on the specific factors then affecting actual expenditures (including Gas volumes, pressure requirements, horsepower requirements, permitting costs, emissions costs, rental payments, maintenance costs, overhaul costs, and other factors) and excluding projected compression expense amounts required to be excluded in accordance with Section 3(g) below (the “Revised Projected Barnett Compression Expense”);

(ix) for each Year (or portion thereof) of the Minimum Volume Period and for the Year thereafter, the difference (expressed as a positive or negative number, as applicable) between (A) the amount for such Year (or portion thereof) specified in the Original Barnett Compression Projections and (B) (I) the Actual Barnett Compression Expense for such Year (or portion thereof) and (II) for each Year (or portion thereof) during the remainder of the Minimum Volume Period, the Revised Projected Barnett Compression Expense (the difference for each Year (or portion thereof) of the Minimum Volume Period, the “Barnett Compression Expense Difference”);

(x) the revenues projected as of September 30, 2009 to be received by Gatherer from and after July 1, 2009 (“Original Barnett Revenue Projections”) from Producers’ Gas in respect of the Barnett Gathering Systems for each Year (or portion thereof) during the Minimum Volume Period as specified in the first line item under “Revenues from Producers” in Schedule A8;

(xi) the actual revenues realized by Gatherer for each Year (or portion thereof) to the date of determination from Producers’ Gas and MV Mitigation Gas in respect of the Barnett Gathering Systems and excluding projected revenue amounts required to be excluded in accordance with Section 3(g) below (the revenues for each such Year (or portion thereof), the “Actual Barnett Revenues”);

(xii) the volumes of Producers’ Gas and MV Mitigation Gas projected to be received at the Barnett Receipt Points during each Year (or portion thereof) of the remainder of the Minimum Volume Period and for the Year thereafter, as such projected amounts are further adjusted by the specific factors then affecting actual realizations, utilizing updated forecasts of future drilling (the “Revised Projected Barnett Volumes”), and the net revenues projected to be realized for each Year of the remainder of the Minimum Volume Period from the Revised Projected Barnett Volumes for such Year, utilizing the Barnett Fees for such Year determined in accordance with Schedule A2 and excluding projected revenue amounts required to be excluded in accordance with Section 3(g) below (such net revenues, the “Revised Projected Barnett Revenues”);

 

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(xiii) for each Year (or portion thereof) of the Minimum Volume Period, the difference (expressed as a positive or negative number, as applicable) between (A) (I) the Actual Barnett Revenues for such Year (or portion thereof) with respect to the period preceding the date of determination and (II) with respect to the remainder of the Minimum Volume Period, the Revised Projected Barnett Revenues for each Year (or portion thereof) in the remainder of the Minimum Volume Period, and (B) the Original Barnett Revenue Projections for such Year (or portion thereof) (the amount for each Year calculated in accordance with this clause (ix) of Section 3(c), the “Applicable Barnett Revenues Differential”);

(xiv) for each Year (or portion thereof) of the remainder of the Minimum Volume Period the increase (or decrease) in revenues projected to be received in respect of the Revised Projected Barnett Volumes for such Year and the Barnett Fee Adjustment (as defined below) (the “Increased (or Decreased) Revenues from the Barnett Fee Adjustment”) determined in accordance with this Section 3(c); and

(xv) the terminal value (the “Terminal Value”), such Terminal Value to be calculated as the product of (A) ** (the “Terminal Value Multiple”) and (B) the Increased (or Decreased) Revenues from the Barnett Fee Adjustment for the first Year after the Minimum Volume Period (calculated as illustrated under the caption “Barnett Fee Adjustment Required to Achieve Target IRR” in Schedule A8) plus the Estimated Cap Ex Ad Valorem Tax Change and the Barnett Compression Expense Difference for the first Year after the Minimum Volume Period.

Taking into account the factors described in items (i) through (xv)) above, the fee adjustment (the “Barnett Fee Adjustment;” to be expressed in $ per Mcf), if any, to the Barnett Fees proposed to be made in response to the First Barnett Redetermination Notice or Second Barnett Redetermination Notice, as the case may be (which adjusted Barnett Fees, if any, will be effective as specified in Section 3(f) of this Exhibit A), shall be such that the net present value, discounted (to July 1, 2009) at the Target IRR, of the Annual Net Cash Flow Difference is equal to zero (0), with the Annual Net Cash Flow Difference to be calculated based on a determination of Increased (or Decreased) Revenues from the Barnett Fee Adjustment for each Year in the remainder of Minimum Volume Period and for the Year thereafter using such Barnett Fee Adjustment escalated as contemplated pursuant to the fourth sentence of this paragraph. In making any determination with respect to whether the Barnett Fees should be adjusted under this Section 3(c), any reduction or increase in operating or general and administrative expenses (excluding Barnett Compression Expense) shall be disregarded for purposes of such model determination. Any Barnett Fee Adjustment made under this Section 3(c) of Exhibit A may be an increase or decrease in the applicable Barnett Fees; provided, however, that the cumulative upward or downward Barnett Fee Adjustments made under this Section 3(c) of Exhibit A in respect of the First Barnett Redemption Notice and Second Barnett Redemption Notice shall not exceed 27.5% of $** per Mcf subject to escalation in accordance with Schedule A2 (such limitation the “Barnett Redetermination Cap”). The Barnett Fee Adjustment will be allocated among the various annually escalated Barnett Fees set forth on Schedule A2 in order (i) to increase or decrease (as applicable) the Barnett Fees in each pressure tier specified in Schedule A2

 

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such that the projected volume weighted average Barnett Fees charged for Producers Gas and MV Mitigation Gas that follows such redetermination are adjusted by the Barnett Fee Adjustment, subject to the Barnett Redetermination Cap for the Year of redetermination, and (ii) subject to conformity with clause (i) of this sentence, to preserve as closely as possible the differences in Barnett Fees between the specified Receipt Point pressure fee tiers set forth in Schedule A2 (as escalated in accordance with Schedule A2) The Barnett Fees as adjusted by any Barnett Fee Adjustment determined in accordance with this Section 3(c) shall be escalated after the date of determination of the Barnett Fee Adjustment in accordance with Schedule A2. Schedule A8 sets forth an illustrative example of the Barnett Fee Redetermination methodology assuming the redetermination is as of January 1, 2012.

(d) Industry Expert. If, within 30 Days after the other Party’s receipt of the First Barnett Redetermination Notice or Second Barnett Redetermination Notice, as applicable, the Parties have not entered into an amendment to this Agreement reflecting the Parties’ agreement regarding adjustments to the Barnett Fees, then either Party may notify the other of its request to have an Industry Expert determine adjustments to all or any portion of the Barnett Fees (the Party to give such a notice, the “Notifying Party”, and the recipient of such a notice, the “Receiving Party”). Upon the receipt of such a request for an Industry Expert determination from the Notifying Party, the Notifying Party and Receiving Party shall confer in good faith for up to 5 Business Days to agree on the selection of an Industry Expert to determine if, taking into account the factors enumerated above in Section 3(c) of this Exhibit A, an adjustment to the Barnett Fees is appropriate. If the Parties are unable to agree upon the selection of an Industry Expert within such 5 Business Day period, then each of the Notifying Party and Receiving Party will select an Industry Expert and the two firms so selected will select a Person to serve as the Industry Expert. Following such selection of an Industry Expert, each Party shall present to the Industry Expert a written statement of its position on proposed adjustments to the Barnett Fees (including its methodology for calculating such adjustments) not later than 30 Days after the selection of such Industry Expert. The Industry Expert may, within 30 Days after its receipt of such statements, request such additional information from either or both Parties as the Industry Expert may deem reasonably necessary or desirable for purposes of making its determination. Each Party agrees to promptly provide the Industry Expert with all information so requested of it. The Industry Expert shall make its determination in a manner consistent with Section 3(c) of this Exhibit A above and Schedule A8. The Industry Expert shall be instructed to determine and submit to the Parties its decision regarding adjustments to all or any portion of the Barnett Fees; provided, however, that any increase or decrease to any Fee determined by the Industry Expert shall be subject to the Barnett Redetermination Cap. The decision of the Industry Expert shall be conclusive, binding upon, and non-appealable by the Parties; provided that, the decision of the Industry Expert shall not be binding on the Gatherer unless and until it has received an opinion from its counsel that such Fees as proposed to be adjusted will be treated as qualifying income (as defined in Section 7704(d) of the Internal Revenue Code of 1986, as amended). In making a determination under this Section 3(d) of Exhibit A, an Industry Expert shall be authorized to engage such independent consultants, which may include an independent reservoir engineering firm or engineering firm that is a recognized leader in advising midstream companies on the design and estimated construction costs of gathering systems in the Barnett region, provided that each of such consultants must not have a material conflict of interest in relation to Producers and CHK Parent, on the one hand, or Gatherer or its members, on the other hand. The costs and expenses of the Industry Expert and such other consultants shall be shared equally by the Parties.

 

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(e) [Intentionally Deleted]

(f) Effect of Redetermined Fee. Any Barnett Fees redetermined under this Section 3 of Exhibit A shall apply as of the first day of the Month following the date on which such redetermined Barnett Fees are finally determined, and shall remain in effect for the remainder of the Primary Term (or, if such redetermined Barnett Fee relates to the First Barnett Redetermination Notice, until the Barnett Fees are redetermined under the Second Barnett Redetermination Notice, if any, which redetermined Barnett Fees shall remain in effect for the then remainder of the Primary Term).

(g) Excluded Cap Ex, Revenues and Compression Expense. The amount of Actual Barnett Cap Ex, Revised Projected Barnett Cap Ex, Actual Barnett Compression Expense and Revised Projected Barnett Compression Expense determined in accordance with this Section 3 shall exclude any capital expended (in the case of the Actual Barnett Cap Ex determination), costs paid (in the case of the Actual Barnett Compression Expense) or projected to be expended (in the case of the Revised Projected Barnett Cap Ex and Revised Projected Barnett Compression Expense) for additional facilities in accordance with Section 2(b), Section 2(c), Section 5(a), Section 5(b)(2), Section 6(c), Section 6(d), Section 6(f), or Section 13 of this Exhibit A. The amount of revenues used in the calculations pursuant to Section 3(c) above shall exclude (i) any additional fees agreed to by Producers and Gatherer for additional facilities installed by Gatherer pursuant to Section 2(b), Section 2(c), Section 5(a), Section 5(b)(2), Section 6(c), Section 6(d) or Section 6(f) of this Exhibit A, (ii) any revenues earned or expected to be earned by Gatherer for services on the Barnett Gathering Systems for Gas received at the Barnett Receipt Points other than Producers’ Gas and MV Mitigation Gas, (iii) any revenues attributable to Fuel Gas or to electricity costs, and (iv) any revenues earned by Gatherer to the extent allocated to any Capital Project installed by or on behalf of Gatherer in accordance with Section 13 of this Exhibit A. Any capital expenditures made by Gatherer on behalf of third parties on the Barnett Gathering Systems shall not be included in the Barnett Cap Ex, Actual Barnett Cap Ex, Projected Barnett Cap Ex, Actual Barnett Compression Expense or Revised Projected Barnett Compression Expense under this Section 3. To the extent capital was expended by the Gatherer for the benefit of Producers (with respect to Producers’ Gas or MV Mitigation Gas) and third parties (with respect to Gas of such third parties), the parties will endeavor to allocate the portion of the capital expended (or projected to be expended) on behalf of the Producers for inclusion in this calculation while excluding the portion allocated to third parties.

(h) Year. As used in this Section 3 of this Exhibit A, the term “Year” means a calendar year or a period of 12 calendar months, as the case may be.

4. Minimum Volume Commitment.

(a) Producers’ Obligation. Producers commit and agree to deliver to Gatherer for gathering on the Barnett Gathering Systems in each Year during the Minimum Volume Period no less than the Adjusted Barnett Annual Minimum Volume for each such Year. The exclusive remedies for any failure of Producers to comply with their obligations under the preceding sentence are set forth in Section 4(b) of this Exhibit A.

 

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(b) Deficit Volumes. If Annual Barnett Gathered Volumes in the first Year (2009) of the Minimum Volume Period (which for purposes of this Section 4(b) shall be deemed to begin on the Deemed Start Date as defined in Section 4(g) below) are less than the Adjusted Barnett Annual Minimum Volume for such first Year, then such deficit volume (up to, but not more than, 10% of the Adjusted Barnett Annual Minimum Volume for such first Year and reflected in Mcf’s) shall be carried forward to the second Year (2010) and added to the Adjusted Barnett Annual Minimum Volume for such second Year. If there is a shortfall in the first Year in excess of 10% of the Adjusted Barnett Annual Minimum Volume for such first Year, then Producers shall pay Gatherer in cash, no later than 30 Days following the receipt by Producers from Gatherer of an invoice therefor, accompanied by reasonable support for the amount invoiced therein, an amount equal to the shortfall volume in excess of 10% of the Adjusted Barnett Annual Minimum Volume for such first Year multiplied by the Average Barnett Fees (defined below) for such first Year, as partial liquidated and agreed damages for Producers’ failure to deliver the Adjusted Barnett Annual Minimum Volume in such first Year. If the Annual Barnett Gathered Volumes in the second Year of the Minimum Volume Period are less than the Adjusted Barnett Annual Minimum Volume for such second Year (as the Adjusted Barnett Annual Minimum Volume for such second Year may be increased as provided above), then Producers shall pay Gatherer in cash, no later than 30 Days following the receipt by Producers from Gatherer of an invoice therefor accompanied by reasonable support for the amount invoiced therein an amount equal to the shortfall volume for such second Year (expressed in Mcf’s) multiplied by the Average Barnett Fees for such second Year, as liquidated and agreed damages for Producers’ failure to deliver the Adjusted Barnett Annual Minimum Volume in such second Year. If the Annual Barnett Gathered Volumes delivered to the Barnett Gathering Systems in any Year after the second Year of the Minimum Volume Period are less than the Adjusted Barnett Annual Minimum Volume for such Year, then Producers shall pay Gatherer in cash, no later than 30 Days following the receipt by Producers from Gatherer of an invoice therefor accompanied by reasonable support for the amount invoiced therein for an amount equal to the shortfall volume for such Year (expressed in Mcf’s) multiplied by the Average Barnett Fees for the Year in which such shortfall volume occurred, as liquidated and agreed damages for Producers’ failure to deliver the Barnett Annual Minimum Volume in such Year. As used herein, the term “Average Barnett Fee” means, for each Year in the Minimum Volume Period, the Barnett Fee specified in Schedule A2 for Receipt Point Pressures between ** to ** psig for each such Year, escalated as specified in such Schedule A2 and subject to redetermination in accordance with Section 3 of this Exhibit A.

(c) Barnett Excess Volumes. Annual Barnett Excess Volumes shall be accumulated as a credit to be used to reduce the Adjusted Barnett Annual Minimum Volume in future Years as provided herein. Annual Barnett Excess Volumes shall be used to first reduce the Adjusted Barnett Annual Minimum Volume in the last Year of the Minimum Volume Period and then once the Adjusted Barnett Annual Minimum Volume for such Year is completely satisfied from such Annual Barnett Excess Volumes, any remaining Annual Barnett Excess Volumes will credited to the Adjusted Barnett Annual Minimum Volume for the preceding Year or Years.

(d) Adjusted Barnett Annual Minimum Volume. The “Adjusted Barnett Annual Minimum Volume” shall be determined for each Year in the Minimum Volume Period, solely for purposes of the calculation under Section 4(b) above, as follows: for each such Year the Barnett Annual Minimum Volume, as shown in Schedule A6, shall be (i) decreased by (w)

 

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volumes of Producers’ Gas not delivered in such Year that are attributable to Barnett Delayed Connections, (x) any Force Majeure Volumes or Maintenance Suspension Volumes not delivered in such Year, (y) the Annual Barnett Excess Volumes, if any, that are applicable to such Year as provided in Section 4(c) above, and (z) upon any termination of Gatherer’s rights to operate the DFW Gathering System under Section 12.14, 75% of any remaining DFW PDP Volumes that would have been produced in such Year and (ii) increased by (x) the volumes of Producers’ Gas attributable to Barnett Delayed Connections that are connected to a Barnett Gathering System in such Year, (y) the Force Majeure Volumes credited under clause (i)(y) above after resumption of deliveries on the affected Barnett Gathering System, and (z) in the last Year of the Minimum Volume Period, any MVC Additional Volume Wells Amount. Notwithstanding the preceding sentence, the Adjusted Barnett Annual Minimum Volume shall not be determined for the period between the Deemed Start Date and September 30, 2009 and the Barnett Annual Minimum Volume shall apply to such period for purposes of Section 4(b).

(e) No Increase in MDQ. No increase or decrease in the Adjusted Barnett Annual Minimum Volume hereunder for a Year will cause an increase or decrease in the Barnett Maximum Daily Quantity for such Year.

(f) No Suspension. Producers’ obligations to make payments under this Exhibit A shall not be suspended by the inability of Producers to deliver Producers’ Gas or MV Mitigation Gas under this Agreement due to the occurrence of Force Majeure Events affecting Producers.

(g) Deemed Start Date. Notwithstanding anything in this Agreement to the contrary, for purposes of this Section 4 the first Year shall be deemed to begin as of 12:01 a.m., CPT on July 1, 2009 (the “Deemed Start Date”), and the Annual Barnett Gathered Volumes in the first Year of the Minimum Volume Period shall include the actual volumes of Producers Gas received at the Barnett Receipt Points for the period from such Deemed Start Date to September 30, 2009.

(h) Example Calculation. An example calculation of payments that may be due under this Section 4 of Exhibit A is shown in Schedule A9.

5. Gas Delivery.

(a) Receipt and Delivery. Producers agree to tender, or cause to be tendered, to the Barnett Receipt Points, Producers’ Gas and MV Mitigation Gas, each Day, and Gatherer agrees to accept Producers’ Gas and MV Mitigation Gas at the Barnett Receipt Points and redeliver Producers’ Gas and MV Mitigation Gas to the Barnett Delivery Points, subject to and on the terms provided in this Agreement. Nominations of Producers’ Gas and MV Mitigation Gas shall be made in accordance with the procedures in Exhibit D.

(b) Maximum Daily Quantity.

(1) Barnett MDQ. In no event shall Gatherer ever be required to accept from Producers on any of the Barnett Gathering Systems a volume of Producers’ Gas and MV Mitigation Gas in excess of the Barnett Maximum Daily Quantity for that Barnett Gathering System.

 

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(2) Increase in MDQ. If Producers have a volume of Producers’ Gas and MV Mitigation Gas available to deliver in excess of the Barnett Maximum Daily Quantity for a Barnett Gathering System, Producers may request that Gatherer increase the Barnett Maximum Daily Quantity for that Barnett Gathering System. Such request shall be made by Notice to Gatherer stating the amount (in Mcf’s) by which Producers desire to increase the Barnett Maximum Daily Quantity and the term of such increase. Gatherer shall accept such increase in the Barnett Maximum Daily Quantity prior to December 31, 2015 to the extent excess capacity is then available on the Barnett Gathering System, taking into account commitments and offers previously made by Gatherer to third parties (including letters of intent) for capacity on that Barnett Gathering System and considering the effects such increase may have on Gatherer’s ability to maintain required pressures on that Barnett Gathering System, but for no longer than the remaining term of the Minimum Volume Period. If Gatherer makes such excess capacity available to Producers (i) the Barnett Maximum Daily Quantity shall be increased by the amount of such excess capacity made available to Producers for the term of such increase (with the Barnett Fees to apply to Producers’ Gas and MV Mitigation Gas that utilizes such increased capacity) and (ii) Producers shall commit to deliver, or pay the applicable Barnett Fees with respect to, **% of such increase in the Barnett Maximum Daily Quantity commencing on the date such increased Barnett Maximum Daily Quantity becomes effective and continuing for the term of such increase (even if such volumes are not delivered). Such commitment by Producers under clause (ii) shall not affect or reduce Producers’ obligations to pay the Barnett Fees for all Producers’ Gas and MV Mitigation Gas delivered hereunder.

(3) MDQ After End of Minimum Volume Period. Effective as of the end of the Minimum Volume Period and continuing until the end of the first full Year following the end of the Minimum Volume Period, the Barnett Maximum Daily Quantity for each Barnett Gathering System shall be redetermined to equal **% of the average daily volumes of Producers’ Gas received and gathered hereunder at the Priority 1 Service level on such Barnett Gathering System in the final 6 Months of the Minimum Volume Period, but such redetermined Barnett Maximum Daily Quantity shall not exceed the Barnett Maximum Daily Quantity in effect for such Barnett Gathering System in the last Month of the Minimum Volume Period. For each Year thereafter, the Barnett Maximum Daily Quantity for each Barnett Gathering System shall be to equal **% of the average daily volumes of Producers’ Gas received and gathered hereunder at the Priority 1 Service level on each such Barnett Gathering System in the prior Year, but such redetermined Barnett Maximum Daily Quantity shall not exceed the Barnett Maximum Daily Quantity in effect for such Barnett Gathering System in the last Month of the Minimum Volume Period.

(4) Priority 3 Service. If Producers have volumes of Producers’ Gas and MV Mitigation Gas available on a Barnett Gathering System from time to time in excess of the Barnett Maximum Daily Quantity for such Barnett Gathering System, Producers may request, and Gatherer shall provide, to the extent available, Priority 3 Service for such volumes of Producers’ Gas and MV Mitigation Gas at rates to be agreed to by the Parties.

(5) Delivery Point Changes. To the extent Producers’ Nominations of Gas to a Barnett Delivery Point or Barnett Delivery Points would not permit Gatherer to accept

 

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the Barnett Maximum Daily Quantity on any Barnett Gathering System, Producers shall exercise commercially reasonable efforts to nominate Gas at other Barnett Delivery Points to permit Gatherer to accept the Barnett Maximum Daily Quantity on any such Barnett Gathering System.

(6) Volumes in Excess of MDQ. If (i) Producers have a volume of Producers’ Gas and MV Mitigation Gas available to deliver in excess of the Barnett Maximum Daily Quantity for a Barnett Gathering System, (ii) Producers request that Gatherer accept such volume (the “Additional Volume”) on such Barnett Gathering System, and (iii) there is no capacity available on such Barnett Gathering System at the time of such request, then within 30 Days following receipt of such request Gatherer may offer to take such actions as are necessary to make available new capacity on such Barnett Gathering System sufficient to cover the Additional Volume. If within 10 Days following Producers’ receipt of such offer the Parties have not reached an agreement on the fees that would apply to such new capacity (or if Gatherer does not make an offer within the aforesaid 30 Day period), then Producers may request and Gatherer shall execute a written release from this Agreement of the spacing/drilling units of the wells that produce the Additional Volume (the “Additional Volume Wells”). With respect to any release pursuant to the preceding paragraph, Producers shall reasonably determine the volumes of Gas that would be produced from the Additional Volume Wells over the first 3 Years of the productive life of such wells, such determination to be based on the type curve shown in Schedule A10 (the sum of such volumes, the “Projected Additional Volume Wells Amount”). The “MVC Additional Volume Wells Amount” shall be equal to the amount by which the Projected Additional Volume Wells Amount exceeds the average daily capacity of such Barnett Gathering System used by Persons other than Producers and their Affiliates over the most recent 30 Day period preceding such release for which such information is available. Once determined, the MVC Additional Volume Wells Amount shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A in the last Year of the Barnett Annual Minimum Volume Period.

(7) **. The Maximum Daily Quantity for the Barnett Central Gathering System has been established based on ** providing the Barnett Delivery Points and the compression services contemplated by the ** Agreement. Gatherer is not a party to the ** Agreement and thus Gatherer shall have no liability to Producers for any failure of ** to perform under such agreement, for any curtailment or suspension of the services provided under such agreement or for any termination or expiration of such agreement. Producers shall be responsible for all obligations to ** under the ** Agreement, including the payment of all fees and other amounts due or owed thereunder. Producers do not guarantee or warrant **’s performance or nonperformance. If (i) ** curtails or suspends services at the Barnett Delivery Points on the Barnett Central Gathering System, including the occurrence of a force majeure event or similar interruption affecting **, (ii) Producers reduce the contracted volumes of Gas or volumes of Gas delivered under the ** Agreement, (iii) the pressures at any such Barnett Delivery Point increase as the result of changes by ** in any Month, or (iv) the ** Agreement terminates or expires without being renewed, the Parties recognize and agree

 

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that (x) the capacity of the Barnett Central Gathering System will be reduced in varying amounts and durations until such time as those services or equivalent services are restored or replaced, (y) the Gatherer shall have no obligation to accept Producers’ Gas and MV Mitigation Gas in excess of such reduced capacity, and (c) any such reductions in capacity shall not result in an decrease in the Barnett Annual Minimum Volume. The Parties agree that the restoration or replacement of such services shall not result in an increase in the Maximum Daily Quantity for the Barnett Central Gathering System or an increase in the Barnett Annual Minimum Volume. The provisions of this Section 7 and Section 4 of Schedule A2 shall apply to any replacements of the ** Agreement, whether with **, its successors, or other Person providing low pressure service.

(8) Nominations. Producers may request that volumes of Producers’ Gas and MV Mitigation Gas delivered to one Barnett Gathering System be transferred to a Barnett Delivery Point serving another Barnett Gathering System. Subject to Section 5(b), Gatherer will use commercially reasonable efforts to accommodate such request subject to (i) excess capacity being available to make such cross system movement and (ii) the pressures in the system served by such Barnett Delivery Point being able to accommodate the requested volume.

(c) Equivalent Quantities. Gatherer shall, as nearly as practicable each Day, deliver for Producers’ account Equivalent Quantities of Gas at the Barnett Delivery Points. All receipts and deliveries of Producers’ Gas and MV Mitigation Gas less System Fuel and Losses shall be balanced on a MMBtu basis, and all quantities referred to herein shall be adjusted for the Gross Heating Value thereof.

(d) Equal Receipt and Delivery. The Parties intend that Producers’ Gas and MV Mitigation Gas will be received and delivered hereunder at reasonably uniform rates, and Producers shall not, in any manner, use any Barnett Gathering System for storage or peaking purposes without Gatherer’s prior written approval, which approval may be withheld in Gatherer’s discretion.

(e) Proration. Producers shall, at all times, be holders of Priority 1 Service with respect to all Producers’ Gas and MV Mitigation Gas received by the Barnett Gathering Systems up to the Barnett Maximum Daily Quantity, subject to Gatherer’s obligations under third party gas gathering agreements relating to any of the Barnett Gathering Systems in effect on September 30, 2009 under which Gatherer provides a similar level of service. If capacity on a Barnett Gathering System is curtailed or reduced, or capacity is insufficient for the needs of all shippers desiring to use such capacity, the holders of Priority 3 Service will be curtailed first, the holders of Priority 2 Service will be curtailed next, and the holders of Priority 1 Service shall be curtailed last. As among the holders of Priority 1 Service, subject to the terms of the Additional Agreement, the capacity available to Priority 1 Service under the preceding sentence shall be allocated among the holders of Priority 1 Service based on the Economic Value of each contract granting such Priority 1 Service, with the contract having the highest Economic Value being the last Gas curtailed. As among the holders of Priority 2 Service, the capacity available to Priority 2 Service (if any) under the first sentence of this paragraph shall be allocated among the holders of such Priority 2 Service based on the percentage derived by dividing the volume of Gas nominated by each holder of Priority 2 Service by the total volume of Gas nominated by all

 

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holders of Priority 2 Service, in each case as such nominations exist as of the first of the relevant Month or, if applicable, such other day as such nominations are required to be made. As among holders of Priority 3 Service, the capacity available to Priority 3 Service (if any) under the first sentence of this Section 5(e) of Exhibit A shall be fully interruptible.

(f) Information. Each Party will furnish or cause to be furnished to the other Party hereto all data required to accurately account for all Producers’ Gas and MV Mitigation Gas received and delivered hereunder.

(g) Third Party Arrangements. Producers shall make, or cause to be made, all necessary arrangements with other pipelines or third parties at or upstream of the Barnett Receipt Points and at or downstream of the Barnett Delivery Points to effect Gatherer’s receipt and delivery of Producers’ Gas and MV Mitigation Gas. Such arrangements must be coordinated with Gatherer’s Gas Control Department and must, at all times, be acceptable to Gatherer, in its sole discretion.

(h) Allocations. The Barnett Receipt Points and Barnett Delivery Points may be at locations through which other volumes of Gas are being measured. As a result, the measurement of Producers’ Gas and MV Mitigation Gas under this Agreement may involve the allocation of Gas delivered. Upon the written request from a Party to the other Party, the Party receiving such request will furnish or cause to be furnished to the other Party hereto all data reasonably available to the furnishing Party that is required to account as accurately as reasonably possible for all Gas received and delivered hereunder.

(i) Commingling.

(i) Although Producers shall retain title to Producers’ Gas and MV Mitigation Gas delivered to Gatherer at the Barnett Receipt Points hereunder, Producers’ Gas and MV Mitigation Gas shall constitute part of the supply of Gas from all sources to the Barnett Gathering Systems, and as such Gatherer shall, subject to its obligation to deliver an Equivalent Quantity each Day and to the following provisions of this Section 5(i), have the right to commingle Producers’ Gas and MV Mitigation Gas with Gas of other Persons.

(ii) If (A) a Person other than Producers or their Affiliates delivers Gas to a Barnett Gathering System and (B) with respect to such Barnett Gathering System Producers or their Affiliates have a processing agreement downstream of such Barnett Gathering System with respect to Producers’ Gas and MV Mitigation Gas moved through such Barnett Gathering System, then prior to such Gas being delivered to such Barnett Gathering System Gatherer shall take (or require the third party producer to take) such actions as may be necessary to determine the Btu content of the Gas stream that would be delivered to such Barnett Gathering System by such Person (the “Third Party Btu Content”). If any such third party Gas has a Third Party Btu Content that is ** Btus higher or lower than the average Btu content of Producers’ Gas and MV Mitigation Gas delivered to such Barnett Gathering System based on the most recent Gas quality sample for which Btu content information is available (“Applicable Third Party Gas”), then Gatherer will provide Notice to Producers and the provisions of clause (iii) immediately below shall apply.

 

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(iii) With respect to any Applicable Third Party Gas, Gatherer shall provide Notice to Producers of the Person proposing to move such gas over the applicable Barnett Gathering System if Gatherer receives the consent of such Person to disclose such information to Producers. For a period of 30 Days after any such Notice by Gatherer Producers and their Affiliates may pursue the establishment of a marketing arrangement with such Person whereby Producers or their Affiliates purchase such Third Party Gas at the wellhead. If Gatherer is unable to disclose information about such Person or if Producers are unable to reach an agreement with any such Person proposing to move Third Party Gas over the applicable Barnett Gathering System by the end of such 30 Day period, then promptly following request by Producers, Gatherer and Producers, together or separately, shall enter into discussions and negotiations with the applicable gas processor to effect such changes as may be necessary to eliminate or substantially mitigate any reduction in natural gas liquids that would be allocated to Producers resulting from commingling such Applicable Third Party Gas.

(iv) The provisions of this Section 5(i) shall not apply to volumes of Gas delivered under third party gathering agreements in effect on September 30, 2009.

(j) Lost and Unaccounted for Gas. Gatherer will conduct the services required to be performed by Gatherer under this Agreement using practices, methods and acts which are engaged in or which have been approved by a significant portion of the natural gas gathering industry. Producers acknowledge, however, that certain volumetric losses in Producers’ Gas and MV Mitigation Gas will occur even if such services are conducted in accordance with the preceding sentence, and such losses attributable to Lost and Unaccounted for Gas shall be shared and allocated among Producers and other third party shippers on each Barnett Gathering System in the proportion that each party delivers Gas to that Barnett Gathering System. Producers’ allocated share of Lost and Unaccounted for Gas on the Barnett Gathering Systems shall be based on actual losses on the Barnett Gathering Systems and shall not be subject to any minimum or maximum limits.

(k) Fuel Gas. Reductions in volumes of Producers’ Gas and MV Mitigation Gas due to Fuel Gas used for gathering, compression, dehydration, processing, and treating shall be shared and allocated among Producers and other third party shippers on each Barnett Gathering System in the proportion that each shipper delivers Gas to that Barnett Gathering System. Reductions due to Fuel Gas use on each Barnett Gathering System for dehydration and treating shall be shared and allocated among Producers and third party shippers as specified in Sections 2(b) and 2(c) of this Exhibit A.

(l) Drip Liquids. Producers acknowledge that certain reductions in volumes of Producers’ Gas and MV Mitigation Gas will occur due to shrinkage from Drip Liquids in each Barnett Gathering System, and such reductions attributable to Drip Liquids shall be shared and allocated among Producers and other third parties whose Gas is gathered on that Barnett Gathering System in the proportion to the C5+ constituents contained in the Gas delivered by each such shipper to the Barnett Gathering System. Such allocations shall be based on the most

 

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recent quality analysis available to Gatherer for such Gas. Gatherer shall provide Notice to Producers from time to time of the quantities of Drip Liquids collected on the Barnett Gathering Systems and attributable to Producers’ Gas and MV Mitigation Gas. Gatherer (or Gatherer’s agent) will cause such Drip Liquids to be collected and removed from Gatherer’s tanks and sold from time to time. Within a reasonable period of time after any such sale, Gatherer (or Gatherer’s agent) shall remit or credit to Producers their allocated share of the net proceeds received from such sale of Drip Liquids less the actual, reasonable costs and expenses incurred to collect, transport, and sell such Drip Liquids. Drip Liquids shall be measured by the Drip Liquids purchaser.

6. New Connections to Barnett Gathering Systems.

(a) Notice of New Pad and Well Connections.

(1) New Pad Connections. CEMI shall provide Gatherer prior Notice as soon as practicable of the expected date of first production for each new pad or pads with one or more Producer Wells in the Barnett AMI. Such Notice to Gatherer shall include (i) the location of the pad or pads and wells to be connected to the Barnett Gathering System, and (ii) the projected date of final completion and testing of such well or wells to be connected to the Barnett Gathering System on such pad or pads. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party such other information and data regarding such pads and wells reasonably requested by such Party, including, if requested by Gatherer, Producers’ good faith estimate of the Gas reserves for each such well or wells and the projected monthly production profile for the first 5 Years after initial production for each such well or wells. Because of the interrelated nature of the actions of the Parties required to obtain the necessary permits, authorizations, and rights of way from the appropriate state and local agencies and other Persons necessary to drill and complete each such well and construct the required extensions of the Barnett Gathering System to the pad or pads for such well or wells, the Parties agree to work together in good faith to obtain such permits, authorizations, and rights of way as expeditiously as reasonably practicable, as provided herein. The Parties agree to cooperate with each other and to communicate regularly regarding their efforts to obtain such permits, authorizations, and rights of way.

(2) New Well Connections. CEMI, on behalf of Producers, shall use its commercially reasonable efforts to provide Gatherer no less than 90 days’ prior Notice of the location of, and expected date of first production for, new Producer Wells in the Barnett AMI on a pad or pads that are already connected to a Barnett Gathering System. Such Notice to Gatherer shall include the projected date of final completion and testing of such well or wells located on the existing pad or pads specified in the Notice. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party such other information and data regarding such pads and wells reasonably requested by such Party.

 

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(b) Completion of Connections During Minimum Volume Period.

(1) New Pad Connections. During the Minimum Volume Period, when CEMI, on behalf of Producers, provides Notice under Section 6(a)(1) above, then Gatherer shall cause the necessary facilities to be constructed to tie-in such pad or pads to the applicable Barnett Gathering System subject to Producers complying with their obligations under Section 6(a)(1). Gatherer shall complete such facilities by the later of (x) the date of first production of such pad or pads with one or more Producer Wells and (y) 21 Months after the date of Producers’ Notice (as the same may be extended pursuant to the following sentence, the “Completion Date”). If Gatherer is delayed in completing such facilities by (i) Force Majeure Events or (ii) the actions of Producers or their representatives that are inconsistent with the cooperation requirements of Section 6(a)(1) above, then the Completion Date for such connection shall be extended for a period equal to that during which Gatherer’s performance was precluded by such events or actions. If Gatherer fails to complete its facilities necessary to connect any such pad or pads to a Barnett Gathering System on or before the Completion Date for that pad or pads, as such Completion Date may be extended as provided above (the “Barnett Delayed Connections”), then the Producers, as their sole remedy for Gatherer failing to connect such Barnett Delayed Connections by the applicable Completion Date (but without limiting the following provisions of this Section 6(b)(1)), shall be entitled to a delay in their obligations with respect to the Adjusted Barnett Annual Minimum Volume under Section 4(d) of this Exhibit A for volumes of Producers’ Gas that would have been delivered from such Barnett Delayed Connections between the Completion Date for such Barnett Delayed Connections and the date on which such Barnett Delayed Connections are connected by Gatherer, as such delayed volumes are reasonably determined by Gatherer based on the type curve shown in Schedule A10. If at any time after Gatherer’s receipt of the notice from CEMI regarding the connection of a new pad Gatherer becomes aware that it will not be able to connect such pad to the Barnett Gathering System (whether before or after the Completion Date for such pad) due to Force Majeure Events, then Gatherer shall provide Notice thereof to CEMI as soon as practicable after becoming so aware and shall include with such Notice evidence that substantiates such inability to connect such pad (a “Pad Notice”). With respect to each pad covered by a Pad Notice, the spacing/drilling units for the wells that will produce from such pad shall be released from this Agreement pursuant to a written release executed by Gatherer and delivered to CEMI promptly following the sending of the related Pad Notice. If the release of any pad occurs after such pad has become a Barnett Delayed Connection and any volumes of Producers Gas that would have been delivered from such Barnett Delayed Connection have been included in the Adjusted Barnett Annual Minimum Volume under Section 4(d) of this Exhibit A, then the Parties shall reverse all of such adjustment as soon as practicable after the related Pad Notice.

(2) New Well Connections. During the Minimum Volume Period, when CEMI provides Notice under Section 6(a)(2) of this Exhibit A, Gatherer shall be responsible for the cost to install the pipe and ancillary equipment from the outlet flange of the meter tube of the Primary Measurement Device to the existing common gas header, including any modifications thereto, on the existing pad for the Producers Wells covered by such Notice but only where Gatherer has not installed a Gatherer’s Receipt Meter on such existing pad. Producers shall be responsible for the cost of connecting (i) such new Producer Wells on pads on a Barnett Gathering System where Gatherer has installed a Gatherer’s Receipt Meter and (ii) new Barnett Delivery Points added to the Barnett Gathering Systems for gas lift operations under Section 11 of this Exhibit A.

 

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(3) Existing Wells. Notwithstanding Sections 6(b)(1) and (2) above, Gatherer shall only be required to use its commercially reasonable efforts to connect the wells and pads listed in Schedule A11 by the date shown for each such well or pad in Schedule A11. The volumes attributable to any such well or pad shall not be included in the calculation of the Adjusted Barnett Annual Minimum Volume if Gatherer fails to complete the connection of such well or pad by such date. Producers confirm to Gatherer that (i) the completion date shown for each such well or pad in Schedule A11 is no earlier than 21 Months from the date of Producers’ initial Notice requesting connection of such well or pad and (ii) that such dates have not been delayed by Producers at any time.

(4) MV Mitigation Gas. During the Minimum Volume Period, if requested by CEMI, Gatherer shall work with CEMI to construct new connections to the Barnett Gathering Systems to accept deliveries of MV Mitigation Gas to the extent (i) CEMI reasonably demonstrates to Gatherer that delivery of such MV Mitigation Gas would permit CEMI to meet the Barnett Annual Minimum Volume in any Year, (ii) deliveries of MV Mitigation Gas from such connections would not cause the volumes of all Gas received on such Barnett Gathering Systems to exceed the applicable Barnett Maximum Daily Quantity and otherwise would meet all applicable requirements for Producers’ Gas delivered under this Agreement, and (iii) such connections are constructed entirely at CEMI’s expense. Gas delivered through any such connection will be charged at the then prevailing Barnett Fees for Producers’ Gas delivered to such Barnett Gathering System.

(5) MAOP Limit. Notwithstanding the foregoing provisions of this Section 6, Gatherer shall not be required to make any connection to any of the Barnett Gathering Systems described in Part II of Schedule A1 if the delivery pressures at such new connection would exceed the maximum allowable operating pressures for such Barnett Gathering System.

(c) Completion of Connections After Minimum Volume Period.

(1) New Pad Connections. When CEMI provides Notice under Section 6(a)(1) above after the end of the Minimum Volume Period, Gatherer, at its sole discretion, will determine whether the prevailing Barnett Fees at that time will allow it to earn an acceptable return on such connection and whether or not it will make the requested connection.

(A) New Connection. If Gatherer agrees to make such a requested connection, then Gatherer will Notify Producers of its determination within 15 Days after receipt of Producers Notice and Gatherer shall use its commercially reasonable efforts to complete such connection by its Completion Date and Producers will be charged at the then prevailing Barnett Fees for Producers’ Gas delivered through such connection. Gatherer’s failure to Notify Producers shall be deemed to constitute a refusal by Gatherer to construct the requested connection.

(B) Gatherer Declines to Make Connection. If Gatherer declines to make such a requested connection, Gatherer and Producers shall enter into

 

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discussions and negotiations to determine the gathering and other fees that would be paid to permit Gatherer to make such new connection. If the Parties reach agreement on such gathering and other fees, then Gatherer shall complete such connection as soon as reasonably practicable and such gathering and other fees shall be the Barnett Fees to be received by Gatherer hereunder for all Producers’ Gas received at the Barnett Receipt Point for that connection and Schedule A2 shall be amended to reflect such revised Barnett Fees.

(C) No Agreement. If the Parties fail to reach agreement within a reasonable period of time on the gathering and other fees with respect to a requested connection, Gatherer shall provide to Producers its estimated costs for such connection and Producers may elect to (i) if capacity is available, reimburse Gatherer for its costs to construct and complete such connection to a Barnett Gathering System (a “Reimbursed Connection”) or (ii) request and receive a release from the dedication under this Agreement for the spacing/drilling units of the affected wells if Producers reasonably determine that the terms offered for services by a third party gatherer in the Barnett AMI are more favorable than those under this Agreement. Producers shall furnish Notice to Gatherer of Producers’ election under the preceding sentence for each affected connection, and if Producers elect to reimburse Gatherer for the costs of any such connection, then (x) Gatherer shall proceed to commence and complete such connection, subject to Producers’ reimbursement of the costs therefor, and (y) all Producers’ Gas delivered through that Reimbursed Connection shall be gathered by Gatherer on the Barnett Gathering System under the terms of this Agreement, except that the prevailing Barnett Fees that apply to such Producers’ Gas shall be discounted by **% until Payout of the Reimbursed Connection occurs. Gatherer shall use good faith efforts to notify Producer no less than 60 Days prior to the date which Gatherer expects Payout of such Reimbursed Connection to occur. From and after Payout of a Reimbursed Connection, the applicable Barnett Fees that apply to Producers’ Gas from a Reimbursed Connection shall be the then prevailing undiscounted Barnett Fees. Producers shall be entitled to use the entire capacity of each Reimbursed Connection.

(2) New Well Connections. When CEMI provides Notice under Section 6(a)(2) above after the end of the Minimum Volume Period, Gatherer shall be responsible for the cost to install the pipe and ancillary equipment from the outlet flange of the meter tube of the Primary Measurement Device to the existing common gas header, including any modifications thereto, on the existing pad for the Producers Wells covered by such Notice but only where Gatherer has not installed a Gatherer’s Receipt Meter on such existing pad. Producers shall be responsible for the cost of connecting (i) such new Producer Wells on pads on a Barnett Gathering System where Gatherer has installed a Gatherer’s Receipt Meter and (ii) new Barnett Delivery Points added to the Barnett Gathering Systems for gas lift operations under Section 11 of this Exhibit A.

(d) Wells Not Operated by Producers. CEMI shall use its good faith efforts to provide Gatherer Notice of Producer Non-Operated Wells to be drilled in the Barnett AMI after September 30, 2009. Gatherer recognizes that such Notice, in some instances, may occur after a

 

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Producer Non-Operated Well is producing. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party information and data regarding such well reasonably requested by the other Party; provided, the aforesaid cooperation rights shall not require Producers to take any action or make any claim against the operator of such well. Gatherer shall have the right, but not the obligation, to connect such Producer Non-Operated Wells to a Barnett Gathering System, at Gatherer’s cost. If Gatherer elects to make such a connection, then Gatherer will Notify CEMI of its determination within 15 Days after receipt of Producers initial Notice and Gatherer shall complete such connection as soon as reasonably practicable. Notwithstanding anything expressed or implied to the contrary, Gatherer’s connection to a Producer Non-Operated Well shall cover all Producers’ Gas from such well and Producers shall have no obligation or liability with respect to any other Gas produced from such well. For Producers’ Gas produced from each Producer Non-Operated Well and received, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered on and from a Barnett Gathering System, Producers will be charged at the then prevailing Barnett Fees for such Producers’ Gas. Gatherer’s failure to Notify Producers within such 15-Day period shall be deemed to constitute an election by Gatherer not to construct the connection. If Gatherer elects not to make such a connection, Gatherer shall provide to Producers a written release of the spacing/drilling unit for such Producer Non-Operated Well. If the aggregate working interest of Producers’ and their Affiliates in a spacing/drilling unit for a Producer Non-Operated Well to be connected to a Barnett Gathering System is less than **%, then Producers may, but shall not have the obligation to, comply with the Notice and connection obligations under this Section 6(d). If Producers elect not to comply with the Notice requirements under this Section 6(d) for such a Producer Non-Operated Well and the Operator of such well is not one of the Total Parties or their Affiliates, Producers may request, and Gatherer shall provide, a written release of the spacing/drilling unit for such Producer Non-Operated Well. Any capital expenditures made by Gatherer to connect Producer Non-Operated Wells to the Barnett Gathering Systems shall not be included in the Barnett Cap Ex, Actual Barnett Cap Ex, or Projected Barnett Cap Ex under Section 3 of this Exhibit A.

(e) Abandonment of Connection. If CEMI requests in a Notice delivered under this Section 6 that Gatherer connect a pad or a well to the Barnett Gathering System and such well or wells are not completed and ready to produce on or before the first Day of the 13th Month following the date of completion of the pad or other facilities for such well or wells, then Producers shall pay Gatherer an amount equal to (i) all direct costs incurred by Gatherer to complete such connection plus (ii) a disconnect fee equal to an amount that would provide Gatherer the Target IRR on the direct costs (for clarification, direct costs would not include overhead or general and administrative expenses) incurred by Gatherer with respect to the installation of such connection. Gatherer will provide CEMI a Notice of abandonment for such pad after the expiration of such period. Payment by Producers will be made 30 Days after receipt of such Notice of abandonment from Gatherer. Producers or their Affiliates, at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such pad or other facilities and related permits, authorizations, and rights of way by providing Notice to Gatherer no later than 30 Days after receipt of such Notice of abandonment, whereupon Gatherer shall assign to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such pad or other facilities and related permits, authorizations, and rights of way, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets.

 

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(f) New Delivery Points. CEMI, on behalf of the Producers, shall furnish Notice to Gatherer of any new Barnett Delivery Point connection desired by Producers, which Notice shall include the location of such Barnett Delivery Point, the projected Gas deliverability to such Barnett Delivery Point from the Barnett Gathering System, and such other information as Gatherer reasonably requests. Gatherer may elect to increase the deliverability of such new Barnett Delivery Point above that requested by Producers. The cost of such increased deliverability shall be borne by Gatherer. As soon as commercially practicable after Gatherer’s receipt of Producers’ Notice, Gatherer shall provide Notice to Producer of (i) the estimated cost to complete such new Barnett Delivery Point in accordance with Producers’ specifications, (ii) any increase in the deliverability of such new Barnett Delivery Point as determined by Gatherer (“Gatherer’s Increased Deliverability”) and Gatherer’s estimated cost of such increase, and (iii) the estimated date of completion of such new Barnett Delivery Point. If CEMI determines to proceed with completion of such new Barnett Delivery Point after receipt of Gatherer’s Notice, CEMI shall Notify Gatherer of such election accompanied by Producers’ agreement to pay the cost to complete such connection (or, if Gatherer has determined to increase deliverability, Producers’ proportionate share of the cost based on the estimated costs submitted by Gatherer). If Producers pay the entire cost of a new Barnett Delivery Point, Producers shall have Priority 1 Service for the deliverability of such new Barnett Delivery Point, and Gatherer shall pay to Producers (or deduct from amounts owed by Producers hereunder) a fee of $** per Mcf for third party Gas delivered at such new Barnett Delivery Point in excess of Gatherer’s Increased Deliverability. All such third party Gas shall have Priority 3 Service level. If, however, Gatherer pays the cost to increase the deliverability of any new Barnett Delivery Point, Producers shall have Priority 1 Service for the deliverability of the new Barnett Delivery Point up to the amount requested by CEMI in its Notice and Gatherer shall have the right to provide Priority 1 Service for third party Gas volumes up to the Gatherer’s Increased Deliverability for such new Barnett Delivery Point. Any capital expenditures made by Gatherer to add Gatherer’s Increased Deliverability to a Barnett Delivery Point shall not be included in the Barnett Cap Ex, Actual Barnett Cap Ex, or Projected Barnett Cap Ex under Section 3 of this Exhibit A.

7. Receipt and Delivery Pressures.

(a) Receipt Point Pressures. Gatherer shall use commercially reasonable efforts to maintain the average monthly inlet pressures at the Barnett Receipt Points described in Schedule A4. Producers represent that the inlet pressures for such Barnett Receipt Points as of September 30, 2009 are within a reasonable tolerance of the pressures reflected in Schedule A4. Producers shall never deliver Gas to a Barnett Gathering System at a pressure that would exceed the maximum allowable operating pressure for such Barnett Gathering System.

(b) Lower Pressure Service. At any time or from time to time, Producers, by providing Notice to Gatherer, may request that the pressure at any of the Barnett Receipt Points listed in Part I of Schedule A4 upstream of an existing mainline compressor station be reduced to the next lowest pressure service shown in Part I of Schedule A2. If (i) adequate space is available on the applicable existing mainline compressor site to install such additional compression equipment, (ii) Gatherer can provide the lower pressure service by installing such

 

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compression equipment, (iii) Gatherer holds or can obtain the permits or other authorizations required to own and operate such compression equipment, and (iv) Gatherer can obtain the necessary electrical service for such compression equipment, then, within 30 Days of receipt of such Notice, Gatherer will provide Notice to Producers of the period of time that would be required for Gatherer to comply with Producers’ request for such lower pressure service. Gatherer shall use commercially reasonable efforts to install the compression equipment necessary to provide service at such Barnett Receipt Point at the requested lower pressure level for the applicable Barnett Fee shown in Schedule A2 within such period of time. If such space is not available or if the installation of additional facilities are required to provide such lower pressure service, then Parties shall enter into good faith discussions to determine the additional fees to be paid to Gatherer by Producers to install such compression equipment. Producers recognize and understand that if Gatherer provides such lower pressure service at a Barnett Receipt Point that the inlet pressures at all related Barnett Receipt Points may not be reduced to the next lower tier.

(c) Increased Pressures. Producers shall have the right to request an increase in the inlet pressure requirement at any Barnett Receipt Point listed in Part I of Schedule A2 by providing Notice to Gatherer. If Producers will deliver increased volumes of Producers’ Gas and MV Mitigation Gas along with such increased pressure service, Gatherer shall implement such increased pressure service as soon as reasonably practicable. If Producers will not deliver increased volumes of Producers’ Gas and MV Mitigation Gas along with such increased pressure service, then Gatherer shall have at least 6 Months from the date of Producers’ Notice to reconfigure its facilities to accommodate such higher pressure service. Producers recognize and understand that if Gatherer provides such higher pressure service at a Barnett Receipt Point that the inlet pressure at all related Barnett Receipt Points may not be increased to the next higher tier.

(d) Frequency of Changes. For a period of 2 Years after Producers have requested, and Gatherer has provided, at a Barnett Receipt Point (i) a lower pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a higher pressure service at such Barnett Receipt Point or (ii) a higher pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a lower pressure service at such Barnett Receipt Point.

(e) Amendment. Any change in the level of service at a Barnett Receipt Point shall be agreed to by Producers and Gatherer through a supplement to Part I of Schedule A4 showing all affected Barnett Receipt Points, the new lower pressure or pressures, and the effective date of such lower pressure service.

(f) Delivery Point Pressures. If the pressures at any Barnett Delivery Point increase as the result of changes by a Barnett Receiving Transporter, Gatherer may raise the pressures at the applicable Barnett Receipt Points by an amount reasonably necessary to permit delivery of Producers’ Gas and MV Mitigation Gas at such Barnett Delivery Point at such higher pressures. The Barnett Fees for all Producers’ Gas and MV Mitigation Gas delivered to such Barnett Receipt Point shall, however, continue to be determined at the lower pressure tier in effect for such Barnett Receipt Point in the prior month. To the extent Producers’ Nominations of Gas to a Barnett Delivery Point or Barnett Delivery Points on any Barnett Gathering System would cause

 

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an increase in the pressure tier on such Barnett Gathering System, Producers shall cooperate in good faith with Gatherer to nominate Gas at other Barnett Delivery Points to avoid such increase in the pressure tier on such Barnett Gathering System.

(g) Delivery. Subject to the foregoing provisions, Producers’ Gas and MV Mitigation Gas shall be delivered to Gatherer at the Barnett Receipt Points at pressures sufficient to effect delivery into Gatherer’s facilities at the Barnett Receipt Points. Delivery pressures at each Barnett Receipt Point shall not exceed the maximum allowable pressure of the Barnett Gathering System at each such Barnett Receipt Point; provided, however, neither Gatherer nor Producers shall be required to compress any Producers Gas at the wellhead in order to effectuate delivery hereunder.

(h) Fees. Subject to Section 7(f), for purposes of determining the Barnett Fees at the Barnett Receipt Points each Month, subject to Section 7(b), the average monthly inlet pressure will be determined at each Barnett Receipt Point, excluding Days in such Month on which no flow was recorded, or on which deliveries were precluded by a Force Majeure Event or maintenance operations conducted by Gatherer under Section 8.7 of the Agreement.

8. Measurement and Testing.

(a) Meters.

(1) Existing Barnett Receipt Points. The Parties recognize that Gatherer does not maintain a pad level custody transfer meter at any of the Barnett Receipt Points on September 30, 2009. Gatherer, at its sole discretion, may elect to install such pad level custody transfer meters at any Barnett Receipt Point.

(2) Producers’ Wellhead Meters. If Gatherer elects not to install a pad level custody transfer meter at a Barnett Receipt Point, the Parties have agreed to use Producers’ Wellhead Meters for custody transfer purposes. If Gatherer uses Producers’ Wellhead Meters for custody transfer purposes, Producers will share with Gatherer, at no cost to Gatherer, the signal and information from the Secondary Measurement Device, either, at Gatherer’s option, directly from the field or from an office location where the signal has been transmitted. Producers shall be responsible for maintenance and repair of such Secondary Measurement Devices. On those drill pads where Gatherer does not install a pad level custody transfer meter, Gatherer shall maintain, calibrate, and operate the Primary Measurement Devices, at Gatherer’s expense.

(3) Gatherer’s Receipt Meters. If Gatherer elects to install a pad level custody transfer meter, Gatherer shall install, at its cost, the custody transfer meters (both Primary and Secondary Measurement Devices and such meters and any new custody transfer meters installed by Gatherer under Section 8(a)(3) below are referred to as “Gatherer’s Receipt Meters”). On those drill pads where Gatherer installs pad level custody transfer meters, Producers shall maintain and operate Producers’ Wellhead Meters, at Producers expense. At the request of Producers, Gatherer will test and calibrate Producers’ meters that are upstream of Gatherer’s Receipt Meters and all such costs incurred by Gatherer to test or calibrate any of Producers’ meters, including Producers’ Wellhead Meters, shall be

 

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promptly reimbursed by Producers. Gatherer, or its designee, shall maintain and operate Gatherer’s Receipt Meters, when installed, and the measuring stations at the Barnett Delivery Points. Producers may install, maintain, and operate, at their own expense, such check measuring equipment as desired and where appropriate. Such equipment shall be installed so as not to interfere with the operation of Gatherer’s or its designee’s measuring equipment. If Gatherer installs a pad level meter, such pad level meter will become the applicable Barnett Receipt Point at such time as the pad level meter is first placed into commercial service and the individual Producers’ Wellhead Meter will thereupon cease to be the applicable Receipt Point. With respect to any such pad level meters installed by Gatherer, Gatherer will share with Producers, at no cost to Producers, the signal and information from the Secondary Measurement Devices, either, at Producers’ option, directly from the field or from an office location where the signal has been transmitted.

(4) Primary Measurement Devices. None of the Primary Measurement Devices for Producers’ Wellhead Meters have been transferred to Gatherer. Producers agree to transfer, or cause to be transferred (free from all liens and encumbrances), to Gatherer the Primary Measurement Devices with respect to wells or pads in which Producers’ and their Affiliates or Producers’ and their Affiliates and the Total Parties owned 100% of the working interest on September 30, 2009 as soon as reasonably practicable after the Effective Date. Upon completion by Gatherer of a Gatherer’s Receipt Meter for custody transfer at an existing pad, Gatherer shall reconvey and transfer to Producers all of Gatherer’s right, title and interest in and to the meter runs that were previously transferred to Gatherer for such Producers’ Wellhead Meter. Except as provided in the preceding sentence, Gatherer shall not have any obligation to reconvey any meter runs to Producers.

(5) New Barnett Receipt Points. For each new drill pad connection, Gatherer shall install a custody transfer meter on the drill pad at such location where Producers connect, or intend to connect, three or more Producer Wells to a Barnett Gathering System at such location. Otherwise, the Parties shall rely on Producers’ Wellhead Meter for custody transfer and measurement purposes hereunder at such location.

(6) Field Telemetry. Producers will share the Field Telemetry signal or data with Gatherer, at Gatherer’s option and at no cost to Gatherer, for those Barnett Receipt Points which use a Producers’ Wellhead Meter for custody transfer purposes. Gatherer will share the Field Telemetry signal or data with Producers, at Producers’ option and at no cost to Producers, for those Barnett Receipt Points which use a Gatherer’s Receipt Meter for custody transfer purposes. If requested, Producers, on the one hand, and Gatherer, on the other hand, shall cause their respective Affiliates to make Field Telemetry available to Gatherer for Gatherer’s Receipt Meters or Producers for Producers’ Wellhead Meters, as applicable, either new or existing. For Gatherer’s Receipt Meters, Producers shall charge Gatherer its actual costs for such service prorated based on the actual capacity used by Gatherer. For Producers’ Wellhead Meters, Gatherer shall charge Producers its actual costs for such service prorated based on the actual capacity used by Producers. Additionally, costs for system upkeep, ongoing maintenance, and repairs of Field Telemetry and associated facilities to Barnett Receipt

 

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Points which use a Producers’ Wellhead Meter (i) will be billed by Producers to Gatherer prorated by the actual capacity used by Gatherer at such times as Producers share Field Telemetry signal or data with Gatherer or (ii) will be billed by Gatherer to Producers prorated by the actual capacity used by Producers at such times as Gatherer shares Field Telemetry signal or data with Producers.

(b) Measurement Practices. Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be constructed, installed, and operated in accordance with the standards in Exhibit D.

9. Quality Specifications.

(a) Producers’ Gas. All Producers’ Gas and MV Mitigation Gas delivered at the Barnett Receipt Points shall conform to the following specifications:

(1) Water: Producers’ Gas and MV Mitigation Gas shall not contain any free water.

(2) Water Vapor: Producers’ Gas and MV Mitigation Gas shall not contain more than 7 pounds of water per 1,000,000 Cubic Feet of Gas. Any Producers’ Gas or MV Mitigation Gas containing water vapor content in excess of 7 pounds of water per 1,000,000 Cubic Feet of Gas is subject to Section 2(b) of this Exhibit A.

(3) Hydrogen Sulfide: Producers’ Gas and MV Mitigation Gas shall not contain more than  1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas at the Receipt Points, as determined by quantitative tests. Any Producers’ Gas or MV Mitigation Gas containing excess hydrogen sulfide is subject to the provisions of Section 2(c) of this Exhibit A.

(4) Total Sulfur: Producers’ Gas and MV Mitigation Gas shall not contain more than 5 grains of total sulfur per 100 Cubic Feet of Gas at the Barnett Receipt Points.

(5) Temperature: Producers’ Gas and MV Mitigation Gas shall not have a temperature less than 40ºF or more than 120 ºF.

(6) Carbon Dioxide: Producers’ Gas and MV Mitigation Gas shall not contain more than 2% by volume of carbon dioxide. Any Producers’ Gas or MV Mitigation Gas containing excess carbon dioxide is subject to the provisions of Section 2(c) of this Exhibit A.

(7) Oxygen: Producers’ Gas and MV Mitigation Gas shall not contain any oxygen.

(8) Nitrogen: Producers’ Gas and MV Mitigation Gas shall not contain more than 3% by volume of nitrogen.

 

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(9) Nonhydrocarbons: Producers’ Gas and MV Mitigation Gas shall not contain more than 4% by volume of total nonhydrocarbons. Nonhydrocarbons shall include, but not be limited to, water, hydrogen sulfide, sulfur, carbon dioxide, oxygen and nitrogen.

(10) Other Constituents: Producers’ Gas and MV Mitigation Gas shall not contain any carbon monoxide, halogens or unsaturated hydrocarbons, and no more than 400 parts per million of hydrogen.

(11) Objectionable Liquids and Solids and Dilution: Producers’ Gas and MV Mitigation Gas shall be free of all objectionable liquids and solids, shall not contain any free hydrocarbon liquids, and shall be commercially free from dust, gums, gum-forming constituents, and other liquids or solid matter which might become separated from Producers’ Gas or MV Mitigation Gas in the course of transportation through pipelines.

(12) Gross Heating Value: Producers’ Gas and MV Mitigation Gas shall not have a Gross Heating Value less than 950 Btu’s per Cubic Foot of Gas or more than 1300 Btu’s per Cubic Foot of Gas.

(13) Hydrocarbon Dewpoint: Producers’ Gas and MV Mitigation Gas shall conform to the dewpoint specifications of the Barnett Receiving Transporters.

(b) Barnett Receiving Transporters. Notwithstanding the Gas specifications above, if a Barnett Receiving Transporter notifies Gatherer or Producers of different or additional quality specifications required at any Barnett Delivery Point that are more stringent than the specifications above, Gatherer will notify Producers of any such different or additional specifications as soon as practicable after being notified of such specifications. Such revised specifications will be considered as the quality specifications for Producers’ Gas and MV Mitigation Gas under this Agreement for as long as required by the Barnett Receiving Transporter.

(c) Failure to Meet Specifications. Notwithstanding anything in this Section 9(c) to the contrary, if Gatherer determines at any time that acceptance of Producers’ Gas or MV Mitigation Gas (even if blended as contemplated below in this Section 9(c)) does not meet any of the quality specifications in Section 9(a) (as revised in accordance with Section 9(b)) is not operationally feasible or would result in a material damage or harm to the applicable Barnett Gathering System, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers Gas or MV Mitigation Gas, as the case may be, until Gatherer no longer believes that there is a risk of material damage or harm to the applicable Barnett Gathering System. If Producers’ Gas or MV Mitigation Gas delivered hereunder fails to meet any of the quality specifications above, Gatherer will blend, where feasible and when permitted by the applicable Barnett Receiving Transporter, such nonconforming Producers’ Gas or MV Mitigation Gas with other Producers’ Gas or MV Mitigation Gas gathered on that Barnett Gathering System to cause such nonconforming Producers’ Gas or MV Mitigation Gas to meet the Gas quality specifications hereunder and of the applicable Barnett Receiving Transporter. Producers shall reimburse

 

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Gatherer for their prorata share of the direct costs incurred by Gatherer to blend such nonconforming Producers’ Gas or MV Mitigation Gas. If Gatherer determines at any time that the continued acceptance of such blended nonconforming Producers’ Gas or MV Mitigation Gas is not operationally feasible or would result in any material damage or harm to the applicable Barnett Gathering System, Gatherer may Notify Producers that it intends to discontinue blending and accepting such nonconforming Producers’ Gas or MV Mitigation Gas. If Gatherer provides such Notice to Producers that it intends not to accept nonconforming Gas or to discontinue blending Producers’ Gas or MV Mitigation Gas, Gatherer will work with Producers to determine the best method of treating such nonconforming Producers’ Gas or MV Mitigation Gas. Within 30 Days of the date on which Gatherer provides Notice to Producers that it will discontinue accepting or blending Producers’ Gas or MV Mitigation Gas as provided above. Gatherer shall prepare and provide to Producers an estimate of the costs to install the equipment and other facilities necessary to treat such nonconforming Producers’ Gas or MV Mitigation Gas on such Barnett Gathering System and a proposed treating fee based on such costs and other relevant factors customarily included in the determination of such a treating fee. The Parties will use good faith efforts to reach an agreement regarding a treating fee within 30 Days following the provision of such information. If such an agreement is reached, then Gatherer (at its cost) shall install and construct such facilities as soon as commercially practicable. Subject to the first sentence of this Section 9(c), during the notification process, the determination of the treating fee and the installation of the facilities, Gatherer shall continue to receive, accept and blend nonconforming Producers’ Gas and MV Mitigation Gas. Notwithstanding the foregoing, if the applicable Barnett Receiving Transporter refuses to accept such blended nonconforming Producers’ Gas or MV Mitigation Gas at any time, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers’ Gas or MV Mitigation Gas for so long as such Barnett Receiving Transporter refuses to accept such nonconforming Producers’ Gas or MV Mitigation Gas.

(d) Acceptance of Nonconforming Gas. Without limiting the rights and obligations of the Parties pursuant to clause (c) immediately above, Gatherer may elect to accept receipt at any Barnett Receipt Point of Producers’ Gas and MV Mitigation Gas that fails to meet any of the quality specifications stated above. Such acceptance by Gatherer shall not be deemed a waiver of Gatherer’s right to refuse to accept non-specification Gas at a subsequent time, provided that Gatherer is in compliance with clause (c) immediately above in so refusing. In addition, if Producers continue to flow any Gas that fails to meet the quality specifications under this Section 9 of Exhibit A, Producers shall be responsible for (i) any fees charged by any Barnett Receiving Transporter; (ii) any costs incurred by Gatherer and agreed to by Producers in order to avoid such fees for such Gas; and (iii) any costs, expenses, damages incurred by Gatherer or assessed to Gatherer by third parties caused by such non-specification Producers’ Gas or MV Mitigation Gas. If Gatherer does not object to non-specification Producers’ Gas or MV Mitigation Gas within ** Days after the date of delivery, then Gatherer will be deemed to have waived its right to be reimbursed under the preceding sentence (but only as to such non-specification Gas volumes). Notwithstanding the foregoing, Producers shall always be responsible for fees charged by a Barnett Receiving Transporter due to non-specification Producers’ Gas or MV Mitigation Gas and will indemnify Gatherer from Claims by a Barnett Receiving Transporter arising from non-specification Producers’ Gas or MV Mitigation Gas, unless such failure is a result of non-performance of Gatherer for services to treat non-conforming Producers’ Gas and MV Mitigation Gas provided as of September 30, 2009 or contracted with Gatherer at a later date.

 

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11. Gas Lift Operations. Producers shall have the right to establish from time to time new delivery points on the Barnett Gathering System to permit redelivery of Producers’ Gas or MV Mitigation Gas gathered on the Barnett Gathering System to Producers or their Affiliates for use in gas lift operations in Producers’ wells on the Barnett Dedicated Properties. Upon receipt of Notice from Producers to create such a delivery point, Gatherer shall install the facilities required to establish such delivery point for gas lift operations as soon as reasonably practicable. Producers shall promptly reimburse Gatherer for all costs incurred by Gatherer to install, operate, maintain, and abandon such Barnett Delivery Point for gas lift operations. Upon completion of gas lift operations at such Barnett Delivery Point, Producers shall have the right to remove and retain, or to request that Gatherer reuse, meters, equipment, and other facilities installed by Gatherer at Producers’ expense for such gas lift operations.

12. Uneconomic Systems. After the end of the Minimum Volume Period, Gatherer shall have the right to declare, acting reasonably, that the operation of all of any Barnett Gathering System is uneconomic (as defined below) by Notifying Producers. Upon receipt of such Notice by Producers, Gatherer and Producers shall negotiate in good faith to reach agreement on additional gathering fees to be paid by Producers for Producers’ Gas and MV Mitigation Gas gathered on such Barnett Gathering System that would cause the operation of that Barnett Gathering System to be economic to Gatherer. If the Parties fail to reach agreement on such additional gathering fees within a reasonable period of time, then Gatherer will have the right, upon no less than 90 Days advance Notice of abandonment to Producers, to abandon and cease operating such Barnett Gathering System, with no further liability to Producers under this Agreement or otherwise with respect to gathering Producers’ Gas or MV Mitigation Gas on such Gathering System. Subject to the Additional Agreement, Producers, at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such Barnett Gathering System by providing Notice to Gatherer no later than 30 Days prior to the date on which Gatherer proposes to abandon such Barnett Gathering System, whereupon Gatherer shall assign to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such Barnett Gathering System and any third party gathering agreements (to the extent assignable at no cost to Gatherer) on such Barnett Gathering System, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets. For purposes of this Section 12 of Exhibit A, a Barnett Gathering System shall be treated as uneconomic at such time as the Operating Cash Flow for that Barnett Gathering System for the 12 Months preceding such determination is negative. For purposes of the preceding sentence, “Operating Cash Flow” is defined as the earnings attributable to such Barnett Gathering System, before deducting interest, taxes, depreciation, and amortization, less normal maintenance capital, as reasonably determined by Gatherer.

13. Capital Reserve. As of September 30, 2009, Gatherer has established a $19,500,000 capital reserve (as the same is reduced pursuant to the following provisions, “Producer Directed Capital Reserve”). At any time during the term of this Agreement, Producers may provide Notice to Gatherer of one or more capital projects that Producers desire to have implemented that involve one or more of the Barnett Gathering Systems in the Barnett AMI and are within the

 

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scope of the services provided by Gatherer under this Agreement, including pipeline infrastructure, installation of treating facilities, and new Barnett Delivery Points (the “Capital Projects”). As soon as reasonably practicable following Gatherer’s receipt of any such Notice, Gatherer shall provide to Producers a suggested method of implementing the Capital Project and Gatherer’s good faith estimate of the total cost thereof. Gatherer shall provide such additional information regarding the proposed implementation and estimated cost of each Capital Project and any incremental operating costs that may be incurred by Gatherer to operate such Capital Project, as may be reasonably requested by Producers. If Producers approve Gatherer’s implementation proposal for a Capital Project and the payment of such incremental operating costs, Gatherer shall use commercially reasonable efforts to commence and complete the installation of such Capital Project; provided, if the estimated cost of such Capital Project (or the total of previous Capital Projects and the current Capital Project) exceeds the Producer Directed Capital Reserve by more than 10%, then Gatherer shall not be obligated to commence such Capital Project unless and until Producers and Gatherer mutually agree upon a satisfactory method of Gatherer recovering such excess amount (the “Excess Amount”). The direct costs incurred and paid by Gatherer in connection with the installation and completion of each Capital Project, including engineering costs (other than Excess Amounts) shall be applied as a reduction of the Producer Directed Capital Reserve, and Excess Amounts shall be handled in the manner mutually agreed upon pursuant to the preceding sentence. For a period of ** years after the completion of each Capital Project, Producers shall have the right to audit the direct costs incurred and paid by Gatherer in respect of such Capital Project, including engineering costs, and Gatherer shall make available records and other data supporting and evidencing such direct costs as may be reasonably requested by Producers.

 

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Exhibit B

MIDCON GATHERING SYSTEMS TERMS AND CONDITIONS

The following terms and conditions shall apply to the gathering of Producers’ Gas and (where applicable) MV Mitigation Gas on the Midcon Gathering Systems.

1. Midcon Dedication.

(a) Producers’ Commitment. Subject only to Producers’ Midcon Reservations, Producers exclusively dedicate and commit to the performance of this Agreement the Midcon Dedicated Properties, represent that the Midcon Dedicated Properties are not otherwise subject to any other gas gathering agreement or other commitment or arrangement that would permit or require Producers’ Gas from the Midcon Dedicated Properties to be gathered on any other gas gathering system, and agree not to deliver any Gas produced from the Midcon Dedicated Properties and owned or controlled by Producers or their Affiliates to any other gas gatherer, gas purchaser, gas marketer, or other Person prior to the Midcon Delivery Points. Producers agree to cause any existing or future Affiliates of Producers to be bound by, and to execute and join as a party, this Agreement. The dedication and commitment made by Producers and their Affiliates under this Agreement is a covenant running with the land.

(b) Producers’ Reservations. Producers reserve the following rights (“Producers’ Midcon Reservations”): (i) to operate wells producing from the Midcon Dedicated Properties as a reasonably prudent operator, (ii) to separate or process Gas prior to delivery at the Midcon Receipt Points so long as such Producers’ Gas and MV Mitigation Gas meets the gas specifications herein after such separation or processing, (iii) to use Gas produced from the Midcon Dedicated Properties for lease operations, and (iv) to pool, communitize, or unitize Producers’ interests in the Midcon Dedicated Properties.

(c) Transfer of Producers’ Interests. Any transfer by Producers or their Affiliates of any of their interests in the Midcon Dedicated Properties shall comply with Article 9 of this Agreement.

(d) Memorandum. Producers shall enter into and deliver to Gatherer, at Gatherer’s request, a fully recordable memorandum of this Agreement, substantially in the form of Exhibit M.

2. Midcon Fees.

(a) Gathering and Compression Fees. As consideration for receiving Producers’ Gas and MV Mitigation Gas at each Midcon Receipt Point each Month, Producers shall pay Gatherer each Month an amount equal to the applicable Midcon Fees (expressed in $/Mcf) shown for each Midcon Gathering System in Schedule B2 applied to the volume of Producers’ Gas and MV Mitigation Gas (net of gas lift volumes) received at the Midcon Receipt Points on such Midcon Gathering System during such Month. In addition to payment of such amounts, Producers shall reimburse Gatherer each Month for Producers’ allocated share of Electric Power Charges on each Midcon Gathering System.

 

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(b) Dehydration Service Fees. Producers’ Gas and MV Mitigation Gas delivered to the Midcon Receipt Points may have a water vapor content that exceeds the quality specification for water vapor content permitted from time to time by one or more of the Midcon Receiving Transporters. In such event, Gatherer will dehydrate, if necessary, Producers’ Gas or MV Mitigation Gas to reduce its water vapor content to 7 pounds per million Cubic Feet. The fee for such dehydration services is included in the Midcon Fees. In addition to the Midcon Fees, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with dehydration services performed under this Section 2(b). Gatherer shall be responsible for the costs incurred in disposing of water removed from Producers’ Gas and MV Mitigation Gas during dehydration. If the quality specification for water content is reduced below 7 pounds per million Cubic Feet by one or more of the Midcon Receiving Transporters, then the Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to reimburse Gatherer for the cost of additional dehydration services to comply with such specifications.

(c) Treating Service Fees. Producers’ Gas and MV Mitigation Gas at the Midcon Receipt Points may have carbon dioxide or hydrogen sulfide content that exceeds the quality specification for carbon dioxide or hydrogen sulfide content required from time to time by one or more of the Midcon Receiving Transporters. In such event, without limiting Gatherer’s rights under Section 8(c) of this Exhibit B, Gatherer will treat, if necessary, Producers’ Gas or MV Mitigation Gas, as applicable, to reduce the carbon dioxide content to 2% and hydrogen sulfide to not more than 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas. The fees for Gatherer providing such treating services are included in the Midcon Fees (unless a separate treating fee is otherwise shown on Schedule B2 for a well) to the extent such services are provided by Gatherer with facilities comprising part of a Midcon Gathering System on September 30, 2009. If additional facilities are required to provide such treating services or if the quality specification for carbon dioxide or hydrogen sulfide of the Midcon Receiving Transporters is reduced below 2% and 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas, then Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to Gatherer to provide such additional treating services. If the Parties are unable to agree upon an additional fee, then Gatherer may refuse to accept receipt of such Producers’ Gas or MV Mitigation Gas for delivery to such Midcon Receiving Transporter. Gatherers’ right to negotiate additional treating fees or right to refuse further deliveries of such Producers’ Gas or MV Mitigation Gas shall apply to each additional reduction in quality specification for carbon dioxide or hydrogen sulfide content of the Midcon Receiving Transporters. In addition to the fees referred to above, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with treating services performed in accordance with this Section 2(c). If Gatherer removes carbon dioxide from Producers’ Gas or MV Mitigation Gas gathered on any Midcon Gathering System, Producers shall have the right (but not the obligation) to keep title to and retain all such carbon dioxide removed from Producers’ Gas or MV Mitigation Gas. If Producers so elect to retain title to such carbon dioxide, then Producers shall be responsible (at their sole risk, cost and expense) to arrange for the taking and delivery of such carbon dioxide at and from each point on the Midcon Gathering System where such carbon dioxide is so removed, and Gatherer shall make such carbon dioxide available for taking at prevailing pressures after treating. Notwithstanding the foregoing, nothing in this Section 2(c) shall require Gatherer to install facilities or incur any capital expense associated with such delivery.

 

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3. Redetermination of Midcon Fees and PRP Fees.

(a) For the period that commences as of July 1, 2009 and ends on June 30, 2019 (such period, the “Midcon/PRP Redetermination Period,” the Parties agree that the Midcon Fees and PRP Fees shall be subject to an annual redetermination to be conducted in accordance with this Section 3 (each such annual redetermination, an “Annual Redetermination”). The Annual Redeterminations shall be conducted as follows: (i) the first Annual Redetermination shall be for the portion of the Year commencing on July 1, 2009 and ending December 31, 2009; (ii) the next nine Annual Redeterminations shall be for the calendar Year commencing on January 1, 2010 and as of January 1 for each of the eight successive calendar Years; (iii) and the final Annual Redetermination shall be for the portion of the Year commencing January 1, 2019 and ending June 30, 2019 (each Year (or portion thereof) for which an Annual Redetermination is to be made is referred to herein as an “Annual Redetermination Period”). Commencing on the first Business Day after each Annual Redetermination Period, the Parties shall (unless Producers and Gatherer mutually agree not to conduct any particular Annual Redetermination), as promptly thereafter as is commercially practicable, enter into discussions and negotiations regarding whether all or any portion of the Midcon Fees and PRP Fees should be adjusted, which discussions and negotiations shall take into account the factors specified below in Section 3(b) of this Exhibit B.

(b) Factors for Redetermination. Gatherer and Producers acknowledge that the purposes for the inclusion by the Parties of the right to redetermine and adjust the Midcon Fees and PRP Fees under this Section 3 of Exhibit B are (i) to mitigate the high degree of uncertainty in forecasting (A) future capital expenditures (including capital expenditures related to rights of way, construction labor, maintenance, connections to or expansions or extensions of, or pipeline integrity costs, of the Midcon Gathering Systems and PRP Gathering Systems (hereinafter referred to as “Midcon and PRP Cap Ex”), (B) future compression expenses (whether capitalized or expensed) (including costs associated with rentals payments, standby fees, mobilization and demobilization, facility construction, environmental testing, pollution control equipment, permitting, acquisition of emissions allowances, maintenance, overhauls, and electricity facilities such as power lines and substations, but excluding electricity costs) (hereinafter referred to as “Midcon and PRP Compression Expense”), (C) the impact (positive or negative) on revenues realized by Gatherer related to Producers’ Gas and MV Mitigation Gas from varying Midcon Fees and PRP Fees (including varying Fees that result from changes in the Gas volume mix across Midcon Gathering Systems and PRP Gathering Systems that have varying system Fees) and (ii) to assure that after giving effect to the “True-Up Payment” (as defined herein) to be made in connection with the final Annual Redetermination and to the annual adjustments to the Midcon Fees and PRP Fees to be made as provided herein, the Midcon Fees and PRP Fees permit the Gatherer to achieve an acceptable return (expressed in terms of the unlevered, pre-income tax IRR to Gatherer) over the Midcon/PRP Redetermination Period on the actual increased or decreased cash flow as compared to cash flow forecasted as of the date of this Agreement as set forth on Schedule B8. The Parties shall as promptly as is commercially practicable on the first Business Day after each Annual Redetermination Period enter into discussions and negotiations to determine whether the Midcon Fees and PRP Fees should be

 

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adjusted, which discussions and negotiations shall take into account (in addition to other relevant factors) that Producers and Gatherer intend, subject to the “Midcon/PRP Redetermination Cap” (as defined below) and giving effect to payment of the True-Up Payment to be made in respect of the final Annual Redetermination Period, that the net present value, discounted to July 1, 2009 at an unlevered, pre-income tax IRR of **% (“Target IRR”), of the “Annual Net Cash Flow Difference,” multiplied by **, shall be equal to zero (0), where the “Annual Net Cash Flow Difference” is (i) for the given Annual Redetermination Period the sum of the following: (A) the Total Cap Ex Difference (as defined below), (B) Estimated Cap Ex Ad Valorem Tax Change (as defined below), (C) Applicable Midcon and PRP Revenue Difference (as defined below), including the surcharge or credit as described below, and (D) the Midcon and PRP Compression Expense Difference (as defined below). For purposes of this Section 3(b), the first Annual Redetermination Period shall be deemed to have commenced on July 1, 2009 (as if this Agreement were in effect on and started as of such date) and shall end on December 31, 2009 and the final Annual Redetermination Period shall begin on January 1, 2019 and end on June 30, 2019. For purposes of adjusting the Midcon Fees and PRP Fees pursuant to this Section 3(b), the Producers and Gatherer shall determine and take into account (in addition to other relevant factors) the following:

(i) the amount of the Midcon and PRP Cap Ex projected as of September 30, 2009 to be incurred from and after July 1, 2009 for each given Annual Redetermination Period in respect of the Midcon Gathering Systems and the PRP Gathering Systems (the “Original Midcon and PRP Cap Ex Projections”) as set forth in the first line under “Capital Expenditures and Ad Valorem” in Schedule B8;

(ii) the amount of Midcon and PRP Cap Ex related to the Midcon Gathering Systems and PRP Gathering Systems actually expended by Gatherer during the Annual Redetermination Period in respect of which the Annual Redetermination is being made (the “Actual Midcon and PRP Cap Ex”);

(iii) for each Annual Redetermination Period, the difference (expressed as a positive or negative number, as applicable) between (A) the amount for such Annual Redetermination Period specified in the Original Midcon and PRP Cap Ex Projections and (B) the Actual Midcon and PRP Cap Ex for such Annual Redetermination Period (the difference for each Annual Redetermination Period, the “Total Cap Ex Difference”);

(iv) for each Annual Redetermination Period, the estimated change (expressed as a positive or negative number, as applicable) in the Midcon and PRP ad valorem tax attributable to the Total Cap Ex Difference for such Annual Redetermination Period, such estimated change to be calculated in accordance with the methodology specified in footnote 1 of Schedule B8 hereto (the difference for each Annual Redetermination Period, the “Estimated Cap Ex Ad Valorem Tax Change”);

(v) the amount of the Midcon and PRP Compression Expense projected as of September 30, 2009 for each of the Annual Redetermination Periods in respect of the Midcon Gathering Systems and PRP Gathering Systems (the “Original Midcon and PRP Compression Expense”), as set forth in the first line item under the caption “Compression Expenses” in Schedule B8;

 

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(vi) the amount of Midcon and PRP Compression Expense actually expended by Gatherer for the Midcon Gathering Systems and PRP Gathering Systems during the Annual Redetermination Period for which such Annual Redetermination is being conducted (the “Actual Midcon and PRP Compression Expense”);

(vii) for each Annual Redetermination Period, the difference (expressed as a positive or negative number, as applicable) between (A) the amount for such Annual Redetermination Period specified in the Original Midcon and PRP Compression Expense and (B) the Actual Midcon and PRP Compression Expense for such Annual Redetermination Period (the difference for each Annual Redetermination Period, the “Midcon and PRP Compression Expense Difference”);

(viii) the revenues projected as of September 30, 2009 to be received by Gatherer from and after July 1, 2009 from Producers’ Gas and MV Mitigation Gas in respect of the Midcon Gathering Systems and PRP Gathering Systems for each of the Annual Redetermination Periods (“Original Midcon and PRP Revenue Projections”), as specified in the line item entitled “Original Midcon and PRP Revenue Projections” under the caption “Revenues from Producers” in Schedule B8;

(ix) the actual revenues realized by Gatherer in respect of the Annual Redetermination Period for which the Annual Redetermination is being made from Producers’ Gas and MV Mitigation Gas in respect to the Midcon Gathering Systems and PRP Gathering Systems (the revenues for each such Annual Redetermination Period, the “Actual Midcon and PRP Revenues”);

(x) for the Annual Redetermination Period, the difference (expressed as a positive or negative number, as applicable) between (A) the Actual Midcon and PRP Revenues for such Annual Redetermination Period and (B) the Original Midcon and PRP Revenue Projections for such Annual Redetermination Period (the amount for each Annual Redetermination Period, the “Applicable Midcon and PRP Revenue Differential”); and

(xi) for the Annual Redetermination to be made in respect of the final Annual Redetermination Period, a “true-up” payment (the “True-Up Payment”) shall be made equal to the sum of the “Ending Cash Flow Differential” (as defined below, expressed as a positive or negative number) for the Annual Redetermination Period immediately preceding the final Annual Redetermination Period and the Annual Net Cash Flow Difference (expressed as a positive or negative number) for the final Annual Redetermination Period. If the sum is a negative number, the True-Up Payment equal to such sum shall be made by Producers to Gatherer in immediately available funds promptly after the amount of such True-Up Payment is determined, or if the sum is a positive number, the True-Up Payment equal to such sum shall be made by Gatherer to Producers in immediately available funds promptly after the amount of such True-Up Payment is determined.

Taking into account the factors described in items (i) through (xi) above, the annual fee adjustment, which shall be expressed as a surcharge (or credit) expressed in $ per Mcf and applied to the then applicable Midcon Fees and PRP Fees (as then escalated and previously

 

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adjusted pursuant to this Section 3(b); such surcharge (or credit) the “Midcon and PRP Fee Adjustment”), if any, to the Midcon Fees and PRP Fees proposed to be made in response to the Midcon/PRP Redetermination Notice, (which adjusted Midcon Fees and PRP Fees, if any, will be effective as specified in Section 3(d) of this Exhibit B), shall be such that, subject to the Midcon/PRP Redetermination Cap (as defined below) and giving effect to payment of the True-Up Payment to be made in respect of the final Annual Redetermination, the net present value, discounted to July 1, 2009 at the Target IRR, of the Annual Net Cash Flow Difference, multiplied by **, shall be equal to zero (0), with the Annual Net Cash Flow Difference to be calculated based on a determination of Increased (or Decreased) Revenues from the Midcon Fee Adjustment and PRP Fee Adjustment for such Annual Redetermination Period. Subject to the Midcon/PRP Redetermination Cap (as defined below), the amount of the annual Midcon Fee Adjustment and PRP Fee Adjustment (which adjustments are referred to herein and in Schedule B8 as a “surcharge” if such adjustment is an increase in the Midcon Fees and PRP Fees, or as a “credit” if such adjustment is a decrease in the Midcon Fees and PRP Fees) for each of the Annual Redetermination Periods (excluding the final Annual Redetermination Period) will be equal to the quotient of (i) the product of (A) the sum of (I) the Ending Cash Flow Differential (as defined below) as of the end of the Annual Redetermination Period immediately preceding the Annual Redetermination Period for which the Annual Redetermination is being made and (II) the Annual Net Cash Flow Difference for the Annual Redetermination Period for which the Annual Redetermination is being made multiplied by (B) **, divided by (ii) 100% of the actual aggregate volume (expressed in Mcf’s) of Producers’ Gas and MV Mitigation Gas received at Midcon Receipt Points and PRP Receipt Points during the preceding the period in which such Annual Redetermination is being made. The term “Ending Cash Flow Differential” for any Annual Redetermination Period is equal the product of (i) the sum the Annual Net Cash Flow Difference as of the end of such Annual Redetermination Period plus the Ending Cash Flow Differential, if any, from the Annual Redetermination Period immediately preceding such Annual Redetermination Period, multiplied by (ii) ** (as illustrated under the caption “Redetermination Calculations (Annual + Final True-Up Payment” in Schedule B8). In making any determination with respect to whether the Midcon Fees and PRP Fees should be adjusted under this Section 3(b), any reduction or increase realized in actual operating or general and administrative expenses (excluding Midcon and PRP Compression Expense) shall be disregarded for purposes of such model determination. Any Midcon Fee Adjustment and PRP Fee Adjustment made under this Section 3(b) of Exhibit B may result in a surcharge or credit in the applicable Midcon Fees and PRP Fees; provided, however, that the annual upward or downward Midcon and PRP Fee Adjustments made under this Section 3(b) of Exhibit B shall not exceed 15% of the Midcon Fees and PRP Fees in effect as of the last Day of the Annual Redetermination Period in respect of which such Midcon and PRP Fee Adjustments were determined (as previously adjusted in accordance with this Section 3 and inclusive of escalation as specified in Schedule B2 for the Midcon Gathering Systems and Schedule C2 for the PRP Gathering Systems; such limitation the “Midcon/PRP Redetermination Cap”). Schedule B8 sets forth an illustrative example of the Midcon/PRP Fee Redetermination methodology assuming the first redetermination is as of January 1, 2010.

(c) Industry Expert. If, within 30 Days after the first Business Day of the period for which any Midcon and PRP Fee Adjustments are to be effective, the Parties have not entered into an amendment to this Agreement reflecting the Parties’ agreement regarding such annual adjustments to the Midcon and PRP Fee Adjustments, then either Party may notify the other of

 

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its request to have an Industry Expert determine adjustments to the applicable Midcon and PRP Fee Adjustments, if any, and the True-Up Payment, if any (the Party to give such a notice, the “Notifying Party”, and the recipient of such a notice, the “Receiving Party”). Upon the receipt of such a request for an Industry Expert determination from the Notifying Party, the Notifying Party and Receiving Party shall confer in good faith for up to 5 Business Days to agree on the selection of an Industry Expert to determine if, taking into account the factors enumerated above in Section 3(b) of this Exhibit B, an adjustment to the Midcon Fees and PRP Fees is appropriate and, with respect to the Annual Redetermination for the final Annual Redetermination Period, the amount of any True-Up Payment that is payable. If the Parties are unable to agree upon the selection of an Industry Expert within such 5 Business Day period, then each of the Notifying Party and Receiving Party will select an Industry Expert and the two firms so selected will select a Person to serve as the Industry Expert. Following such selection of an Industry Expert, each Party shall present to the Industry Expert a written statement of its position on proposed adjustments to the Midcon Fees and PRP Fees (including its methodology for calculating such adjustments) not later than 30 Days after the selection of such Industry Expert. The Industry Expert may, within 30 Days after its receipt of such statements, request such additional information from either or both Parties as the Industry Expert may deem reasonably necessary or desirable for purposes of making its determination. Each Party agrees to promptly provide the Industry Expert with all information so requested of it. The Industry Expert shall make its determination in a manner consistent with Section 3(b) of this Exhibit B above and Schedule B8. The Industry Expert shall be instructed to determine and submit to the Parties its decision regarding (i) adjustments to all or any portion of the Midcon Fees and PRP Fees; provided, however, that any increase or decrease to any Midcon Fees and PRP Fees determined by the Industry Expert shall be subject to the Midcon/PRP Redetermination Cap, and (ii) the amount of any True-Up Payment due in respect of the final Annual Redetermination Period. The decision of the Industry Expert shall be conclusive, binding upon, and non-appealable by the Parties; provided that, the decision of the Industry Expert shall not be binding on the Gatherer unless and until it has received an opinion from its counsel that such Fees as proposed to be adjusted will be treated as qualifying income (as defined in Section 7704(d) of the Internal Revenue Code of 1986, as amended). In making a determination under this Section 3(c) of Exhibit B, an Industry Expert shall be authorized to engage such independent consultants, which may include an independent reservoir engineering firm or engineering firm that is a recognized leader in advising midstream companies on the design and estimated construction costs of gathering systems in the Midcon and PRP regions, provided that each of such consultants must not have a material conflict of interest in relation to Producers and CHK Parent, on the one hand, or Gatherer or its members, on the other hand. The costs and expenses of the Industry Expert and such other consultants shall be shared equally by the Parties.

(d) Effect of Redetermined Fee. Any Midcon Fees and PRP Fees redetermined under this Section 3 of Exhibit B shall apply as of the first day of the period in which the Annual Redetermination is being made, and shall remain in effect until the date as of which the redetermined Fees for the next Annual Redetermination are to be effective.

(e) Excluded Cap Ex, Revenues and Compression Expenses. The amount of Actual Midcon and PRP Cap Ex and Actual Midcon and PRP Compression Expense determined in accordance with this Section 3 shall exclude any capital expended (in the case of Actual Midcon and PRP Cap Ex) or costs paid (in the case of Actual Midcon and PRP Compression Expense)

 

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for additional facilities in accordance with Section 2(b), Section 2(c), Section 5(c), Section 5(d), Section 5(f) or Section 9 of this Exhibit B or Section 2(b), Section 2(c), Section 5(b) or Section 9 of Exhibit C. The amount of revenues used in the calculations pursuant to Section 3(b) above shall exclude (i) any additional fees agreed to by Producers and Gatherer for additional facilities installed by Gatherer pursuant to Section 2(b), Section 2(c), Section 5(c), Section 5(d), Section 5(f) or Section 9 of this Exhibit B or Section 2(b), Section 2(c), Section 5(b) or Section 9 of Exhibit C, (ii) any revenues earned or projected to be earned by Gatherer for services on the Midcon Gathering Systems or PRP Gathering Systems for Gas other than Producers’ Gas and MV Mitigation Gas and (iii) any revenues attributable to Fuel Gas or electricity costs in respect of the Midcon Gathering Systems or PRP Gathering Systems. Any capital expenditures made by Gatherer for facilities that are used to flow Gas other than Producers Gas or MV Mitigation Gas received at the Midcon Receipt Points or PRP Receipt Points shall be allocated based on actual volumes of Producers Gas, MV Mitigation Gas and third party Gas flowing through such facilities with the part thereof allocated to such third party Gas to be excluded from the Actual Midcon and PRP Cap Ex under this Section 3.

(f) Fees After the Final Annual Redetermination Period. After the True-Up Payment has been paid in full, Producers and Gatherer will enter into discussions and negotiations in order to establish Fees for the Midcon Gathering Systems and PRP Gathering Systems that yield Fees (determined on a volume weighted average basis for the Midcon Gathering Systems, on the one hand, and the PRP Gathering Systems, on the other hand) effective as of July 1, 2019 equal to $** per Mcf (subject to escalation as specified in Schedule B2 for the Midcon Gathering Systems and Schedule C2 for the PRP Gathering Systems).

4. Gas Delivery.

(a) Receipt and Delivery. Producers agree to tender, or cause to be tendered, to the Midcon Receipt Points, Producers’ Gas or MV Mitigation Gas, each Day, and Gatherer agrees to accept Producers’ Gas and MV Mitigation Gas at the Midcon Receipt Points and redeliver Producers’ Gas and MV Mitigation Gas to the Midcon Delivery Points, subject to and on the terms provided in this Agreement. Prior to June 30, 2019, if Gatherer does not have sufficient capacity to accept Producers’ Gas and MV Mitigation Gas, Gatherer shall exercise commercially reasonable efforts to construct facilities to accept such excess volumes of Producers’ Gas and MV Mitigation Gas, such construction to be completed as promptly as is commercially reasonable. If after exercising such efforts the facilities have not been constructed or Gatherer determines in good faith that it will not be able to construct such facilities exercising commercially reasonable efforts, Producers may request, and Gatherer shall promptly provide, a written release of the spacing/drilling unit for the wells that would have been served by such facilities. Nominations of Producers’ Gas and MV Mitigation Gas shall be made in accordance with the procedures in Exhibit D.

(b) Equivalent Quantities. Gatherer shall, as nearly as practicable each Day, deliver for Producers’ account Equivalent Quantities of Gas at the Midcon Delivery Points. All receipts and deliveries of Producers’ Gas and MV Mitigation Gas less System Fuel and Losses shall be balanced on a MMBtu basis, and all quantities referred to herein shall be adjusted for the Gross Heating Value thereof.

 

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(c) Equal Receipt and Delivery. The Parties intend that Producers’ Gas and MV Mitigation Gas will be received and delivered hereunder at reasonably uniform rates, and Producers shall not, in any manner, use any Midcon Gathering System for storage or peaking purposes without Gatherer’s prior written approval, which approval may be withheld in Gatherer’s discretion.

(d) Proration. Producers shall, at all times, be holders of Priority 1 Service with respect to all Producers’ Gas and MV Mitigation Gas received by the Midcon Gathering Systems, subject to any obligations of Gatherer under third party gas gathering agreements relating to the Midcon Gathering System in effect on September 30, 2009 under which Gatherer provides a similar level of service. If capacity on a Midcon Gathering System is curtailed or reduced, or capacity is insufficient for the needs of all shippers desiring to use such capacity, the holders of Priority 3 Service will be curtailed first, the holders of Priority 2 Service will be curtailed next, and the holders of Priority 1 Service shall be curtailed last. As among the holders of Priority 1 Service, the capacity available to Priority 1 Service under the preceding sentence shall be allocated among the holders of Priority 1 Service based on the Economic Value of each contract granting such Priority 1 Service, with the contract having the highest Economic Value being the last Gas curtailed. As among the holders of Priority 2 Service, the capacity available to Priority 2 Service (if any) under the first sentence of this paragraph shall be allocated among the holders of such Priority 2 Service based on the percentage derived by dividing the volume of Gas nominated by each holder of Priority 2 Service by the total volume of Gas nominated by all holders of Priority 2 Service, in each case as such nominations exist as of the first of the relevant Month or, if applicable, such other day as such nominations are required to be made. As among holders of Priority 3 Service, the capacity available to Priority 3 Service (if any) under the first sentence of this Section 4(f) of Exhibit B shall be fully interruptible.

(e) Delivery Point Changes. To the extent Producers’ Nominations of Gas to a Midcon Delivery Point or Midcon Delivery Points would not permit Gatherer to accept the all volumes of Producers’ Gas and MV Mitigation Gas on any Midcon Gathering System, Producers shall exercise commercially reasonable efforts to nominate Gas at other Midcon Delivery Points to permit Gatherer to accept all volumes of Producers’ Gas and MV Mitigation Gas on any such Midcon Gathering System.

(f) Information. Each Party will furnish or cause to be furnished to the other Party hereto all data required to accurately account for all Producers’ Gas and MV Mitigation Gas received and delivered hereunder.

(g) Third Party Arrangements. Producers shall make, or cause to be made, all necessary arrangements with other pipelines or third parties at or upstream of the Midcon Receipt Points and at or downstream of the Midcon Delivery Points to effect Gatherer’s receipt and delivery of Producers’ Gas and MV Mitigation Gas. Such arrangements must be coordinated with Gatherer’s Gas Control Department and must, at all times, be acceptable to Gatherer, in its sole discretion.

(h) Allocations. The Midcon Receipt Points and Midcon Delivery Points may be at locations through which other volumes of Gas are being measured. As a result, the measurement of Producers’ Gas and MV Mitigation Gas under this Agreement may involve the allocation of

 

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Gas delivered. Upon the written request from a Party to the other Party, the Party receiving such request will furnish or cause to be furnished to the other Party hereto all data reasonably available to the furnishing Party that is required to account as accurately as reasonably possible for all Gas received and delivered hereunder.

(i) Commingling.

(i) Although Producers shall retain title to Producers’ Gas and MV Mitigation Gas delivered to Gatherer at the Midcon Receipt Points hereunder, Producers’ Gas and MV Mitigation Gas shall constitute part of the supply of Gas from all sources to the Midcon Gathering Systems, and as such Gatherer shall, subject to its obligation to deliver an Equivalent Quantity each Day and to the following provisions of this Section 4(i), have the right to commingle Producers’ Gas and MV Mitigation Gas with Gas of other Persons.

(ii) If (A) a Person other than Producers or their Affiliates delivers Gas to a Midcon Gathering System and (B) with respect to such Midcon Gathering System Producers or their Affiliates have a processing agreement downstream of such Midcon Gathering System with respect to Producers’ Gas and MV Mitigation Gas moved through such Midcon Gathering System, then prior to such Gas being delivered to such Midcon Gathering System, Gatherer shall take (or require the third party producer to take) such actions as may be necessary to determine the Btu content of the Gas stream that would be delivered to such Midcon Gathering System by such Person (the “Third Party Btu Content”). If any such third party Gas has a Third Party Btu Content that is ** Btu’s higher or lower than the average Btu content of Producers’ Gas and MV Mitigation Gas delivered to such Midcon Gathering System based on the most recent Gas quality sample for which Btu content is available (“Applicable Third Party Gas”), then Gatherer shall provide Notice to Producers and the provisions of clause (iii) immediately below shall apply.

(iii) With respect to any Applicable Third Party Gas, Gatherer shall provide Notice to Producers of the Person proposing to move such Gas over the applicable Midcon Gathering System if Gatherer receives the consent of such Person to disclose such information to Producers. For a period of 30 Days after any such Notice by Gatherer, Producers and their Affiliates may pursue the establishment of a marketing arrangement with such Person whereby Producers or their Affiliates purchase such Third Party Gas at the wellhead. If Gatherer is unable to disclose to Producers information about such Person or if Producers are unable to reach an agreement with any such Person proposing to move Third Party Gas over the applicable Midcon Gathering System by the end of such 30-Day period, then promptly following request by Producers, Gatherer and Producers, together or separately, shall enter into discussions and negotiations with the applicable gas processor to effect such changes as may be necessary to eliminate or substantially mitigate any reduction in natural gas liquids that would be allocated to Producers resulting from commingling such Applicable Third Party Gas.

(iv) The provisions of this Section 4(i) shall not apply to volumes of Gas delivered under third party gas gathering agreements in effect on September 30, 2009.

 

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(j) Lost and Unaccounted for Gas. Gatherer will conduct the services required to be performed by Gatherer under this Agreement using practices, methods and acts which are engaged in or which have been approved by a significant portion of the natural gas gathering industry. Producers acknowledge, however, that certain volumetric losses in Producers’ Gas and MV Mitigation Gas will occur even if such services are conducted in accordance with the preceding sentence, and such losses attributable to Lost and Unaccounted for Gas shall be shared and allocated among Producers and other third party shippers on each Midcon Gathering System in the proportion that each party delivers Gas to that Midcon Gathering System. Producers’ allocated share of Lost and Unaccounted for Gas on the Midcon Gathering Systems shall be based on actual losses on the Midcon Gathering Systems and shall not be subject to any minimum or maximum limits.

(k) Fuel Gas. Reductions in volumes of Producers’ Gas and MV Mitigation Gas due to Fuel Gas used for gathering, compression, dehydration, processing, and treating shall be shared and allocated among Producers and other third party shippers on each Midcon Gathering System in the proportion that each shipper delivers Gas to that Midcon Gathering System. Reductions due to Fuel Gas use on each Midcon Gathering System for dehydration and treating shall be shared and allocated among Producers and third party shippers as specified in Sections 2(b) and 2(c) of this Exhibit B.

(l) Drip Liquids. Producers acknowledge that certain reductions in volumes of Producers’ Gas and MV Mitigation Gas will occur due to shrinkage from Drip Liquids in each Midcon Gathering System, and such reductions attributable to Drip Liquids shall be shared and allocated among Producers and other third parties whose Gas is gathered on that Midcon Gathering System in the proportion to the C5+ constituents contained in the Gas delivered by each such shipper to the Midcon Gathering System. Such allocations shall be based on the most recent quality analysis available to Gatherer for such Gas. Gatherer shall provide Notice to Producers from time to time of the quantities of Drip Liquids collected on each Midcon Gathering System and attributable to Producers’ Gas and MV Mitigation Gas. Gatherer (or Gatherer’s agent) will cause such Drip Liquids to be collected and removed from Gatherer’s tanks and sold from time to time. Within a reasonable period of time after any such sale, Gatherer (or Gatherer’s agent) shall remit or credit to Producers their allocated share of the net proceeds received from such sale of Drip Liquids less the actual, reasonable costs and expenses incurred to collect, transport, and sell such Drip Liquids. Drip Liquids shall be measured by the Drip Liquids purchaser.

5. New Connections to Midcon Gathering Systems.

(a) Notice of New Well Connections. CEMI, on behalf of Producers, shall provide Gatherer Notice of the location of, and expected date of first production for, new Producer Wells in the Midcon AMI. Such Notice to Gatherer shall include the projected date of final completion and testing of such well or wells specified in the Notice. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party such other information and data regarding such wells reasonably requested by such Party, including information regarding projected delivery pressures for such wells. Gatherer shall exercise its commercially reasonable efforts to make Producers’ desired connection by the later of (i) the actual date of final completion of such well or wells or (ii) 60 Days after Gatherer’s receipt of such Notice.

 

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(b) Completion of Connections Prior to June 30, 2019.

(1) Certain Costs. Prior to June 30, 2019, when CEMI provides Notice under Section 5(a) of this Exhibit B, Gatherer shall be responsible for the cost to install the pipe and ancillary equipment from the outlet flange of the meter tube of the Primary Measurement Device to the existing common gas header, including any modifications thereto, on the existing pad for the Producers Wells covered by such Notice but only where Gatherer has not installed a Gatherer’s Receipt Meter on such existing pad. Producers shall be responsible for the cost of connecting (i) such new Producer Wells on pads on a Midcon Gathering System where Gatherer has installed a Gatherer’s Receipt Meter and (ii) new Midcon Delivery Points added to the Midcon Gathering Systems for gas lift operations under Section 10 of this Exhibit B.

(2) MAOP Limit. Notwithstanding the foregoing provisions of this Section 6, Gatherer shall not be required to make any connection to any of the Midcon Gathering Systems described in Part II of Schedule B1 if the delivery pressures at such new connection would exceed the maximum allowable operating pressures for such Midcon Gathering System.

(c) Completion of Connections After June 30, 2019. When CEMI provides Notice under Section 5(a) above after June 30, 2019, Gatherer, at its sole discretion, will determine whether the prevailing Midcon Fees at that time will allow it to earn an acceptable return on such connection and whether or not it will make the requested connection.

(1) New Connection. If Gatherer agrees to make such a requested connection, then Gatherer will Notify Producers of its determination within 15 Days after receipt of Producers Notice and Gatherer shall use its commercially reasonable efforts to complete such connection by its Completion Date and Producers will be charged at the then current Midcon Fees for Producers’ Gas delivered through such connection. Gatherer’s failure to Notify Producers shall be deemed to constitute a refusal by Gatherer to construct the requested connection.

(2) Gatherer Declines to Make Connection. If Gatherer declines to make such a requested connection, Gatherer and Producers shall enter into discussions and negotiations to determine the gathering and other fees that would be paid to permit Gatherer to make such new connection. If the Parties reach agreement on such gathering and other fees, then Gatherer shall complete such connection as soon as reasonably practicable and such gathering and other fees shall be the Midcon Fees to be received by Gatherer hereunder for all Producers’ Gas received at the Midcon Receipt Point for that connection and Schedule B2 shall be amended to reflect such revised Midcon Fees.

(3) No Agreement. If the Parties fail to reach agreement within a reasonable period of time on the gathering and other fees with respect to a requested connection, Gatherer shall provide to Producers its estimated costs for such connection and Producers

 

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may elect to (i) if capacity is available, reimburse Gatherer for its costs to construct and complete such connection to a Midcon Gathering System (a “Reimbursed Connection”) or (ii) request and receive a release from the dedication under this Agreement for the spacing/drilling units of the affected wells if Producers reasonably determine that the terms offered for services by a third party gatherer in the Midcon AMI are more favorable than those under this Agreement. Producers shall furnish Notice to Gatherer of Producers’ election under the preceding sentence for each affected connection, and if Producers elect to reimburse Gatherer for the costs of any such connection, then (x) Gatherer shall proceed to commence and complete such connection, subject to Producers’ reimbursement of the costs therefor, and (y) all Producers’ Gas delivered through that Reimbursed Connection shall be gathered by Gatherer on the Midcon Gathering System under the terms of this Agreement, except that the prevailing Midcon Fees that apply to such Producers’ Gas shall be discounted by **% until Payout of the Reimbursed Connection occurs. Gatherer shall use good faith efforts to notify Producer no less than 60 Days prior to the date which Gatherer expects Payout of such Reimbursed Connection to occur. From and after Payout of a Reimbursed Connection, the applicable Midcon Fees that apply to Producers’ Gas from a Reimbursed Connection shall be the then prevailing undiscounted Midcon Fees. Producers shall be entitled to use the entire capacity of each Reimbursed Connection.

(d) Wells Not Operated by Producers. CEMI shall use its good faith efforts to provide Gatherer Notice of Producer Non-Operated Wells to be drilled in the Midcon AMI after September 30, 2009. Gatherer recognizes that such Notice, in some instances, may occur after a Producer Non-Operated Well is producing. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party information and data regarding such well reasonably requested by the other Party; provided, the aforesaid cooperation rights shall not require Producers to take any action or make any claim against the operator of such well. Gatherer shall have the right, but not the obligation, to connect such Producer Non-Operated Wells to a Midcon Gathering System, at Gatherer’s cost. If Gatherer elects to make such a connection, then Gatherer will Notify CEMI of its determination within 15 Days after receipt of Producers initial Notice and Gatherer shall complete such connection as soon as reasonably practicable. Notwithstanding anything expressed or implied to the contrary, Gatherer’s connection to a Producer Non-Operated Well shall cover all Producers’ Gas from such well and Producers shall have no obligation or liability with respect to any other Gas produced from such well. For Producers’ Gas produced from each Producer Non-Operated Well and received, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered on and from a Midcon Gathering System, Producers will be charged at the then current Midcon Fees for such Producers’ Gas. Gatherer’s failure to Notify Producers within such 15-Day period shall be deemed to constitute an election by Gatherer not to construct the connection. If Gatherer elects not to make such a connection, Gatherer shall provide to Producers a written release of the spacing/drilling unit for such Producer Non-Operated Well. If the aggregate working interest of Producers’ and their Affiliates in a spacing/drilling unit for a Producer Non-Operated Well to be connected to a Midcon Gathering System is less than **%, then Producers may, but shall not have the obligation to, comply with the Notice and connection obligations under this Section 5d). If Producers elect not to comply with the Notice requirements under this Section 5(d) for such a Producer Non-Operated Well, Producers may request, and Gatherer shall provide, a written release of the spacing/drilling unit for such Producer

 

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Non-Operated Well. Any capital expenditures made by Gatherer to connect Producer Non-Operated Wells to the Midcon Gathering Systems shall not be included in the Midcon Cap Ex, Actual Midcon Cap Ex, or Projected Midcon Cap Ex under Section 3 of this Exhibit B.

(e) Abandonment of Connection. If CEMI requests in a Notice delivered under this Section 5 that Gatherer connect a pad or a well to the Midcon Gathering System and such well or wells are not completed and ready to produce on or before the first Day of the 13th Month following the date of completion of the pad or other facilities for such well or wells, then Producers shall pay Gatherer an amount equal to (i) all costs incurred by Gatherer to complete such connection plus (ii) a disconnect fee equal to an amount that would provide Gatherer the Target IRR on the direct costs (for clarification, direct costs would not include overhead or general and administrative expenses) incurred by Gatherer with respect to the installation of such connection. Gatherer will provide CEMI a Notice of abandonment for such pad after the expiration of such period. Payment by Producers will be made 30 Days after receipt of such Notice of abandonment from Gatherer. Producers, at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such pad or other facilities and related permits, authorizations, and rights of way by providing Notice to Gatherer no later than 30 Days prior to the date on which Gatherer proposes to abandon such pad, whereupon Gatherer shall assign to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such pad or other facilities and related permits, authorizations, and rights of way, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets.

(f) New Delivery Points. CEMI, on behalf of the Producers, shall furnish Notice to Gatherer of any new Midcon Delivery Point connection desired by Producers, which Notice shall include the location of such Midcon Delivery Point, the projected Gas deliverability to such Midcon Delivery Point from the Midcon Gathering System, and such other information as Gatherer reasonably requests. Gatherer may elect to increase the deliverability of such new Midcon Delivery Point above that requested by Producers. The cost of such increased deliverability shall be borne by Gatherer. As soon as commercially practicable after Gatherer’s receipt of Producers’ Notice, Gatherer shall provide Notice to Producer of (i) the estimated cost to complete such new Midcon Delivery Point in accordance with Producers’ specifications, (ii) any increase in the deliverability of such new Midcon Delivery Point as determined by Gatherer (“Gatherer’s Increased Deliverability”) and Gatherer’s estimated cost of such increase, and (iii) the estimated date of completion of such new Midcon Delivery Point. If CEMI determines to proceed with completion of such new Midcon Delivery Point after receipt of Gatherer’s Notice, CEMI shall Notify Gatherer of such election accompanied by Producers’ agreement to pay the cost to complete such connection (or, if Gatherer has determined to increase deliverability, Producers’ proportionate share of the cost based on the estimated costs submitted by Gatherer). If Producers pay the entire cost of a new Midcon Delivery Point, Producers shall have Priority 1 Service for the deliverability of such new Midcon Delivery Point, and Gatherer shall pay to Producers (or deduct from amounts owed by Producers hereunder) a fee of $** per Mcf for third party Gas delivered at such new Midcon Delivery Point in excess of Gatherer’s Increased Deliverability. All such third party Gas shall have Priority 3 Service level. If, however, Gatherer pays the cost to increase the deliverability of any new Midcon Delivery Point, Producers shall have Priority 1 Service for the deliverability of the new Midcon Delivery Point up to the amount requested by CEMI in its Notice and Gatherer shall have the right to provide

 

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Priority 1 Service for third party Gas volumes up to the Gatherer’s Increased Deliverability for such new Midcon Delivery Point. Any capital expenditures made by Gatherer to add Gatherer’s Increased Deliverability to a Midcon Delivery Point shall not be included in the Midcon Cap Ex, Actual Midcon Cap Ex, or Projected Midcon Cap Ex under Section 3 of this Exhibit B.

(g) Dedication Overlap. If a Producer Well to be connected hereunder is located in the Midcon AMI for two or more Midcon Gathering Systems, then Producers shall elect which of such Midcon Gathering Systems to connect to, and Gatherer shall comply with Producers’ election, for such Producer Well.

6. Receipt and Delivery Pressures.

(a) Receipt Point Pressures. Gatherer shall use commercially reasonable efforts to cause the average monthly inlet pressures at the Midcon Receipt Points described in Schedule B4 not to exceed the pressures specified in Schedule B4. Producers represent that the inlet pressures at the Midcon Receipt Points as of September 30, 2009 are within a reasonable tolerance of the pressures reflected in Schedule B4. If the inlet pressures at any Midcon Receipt Point exceeds the pressures specified in Schedule B4, then the Parties shall work together to identify the actions that may be taken by Gatherer to lower such inlet pressures (including installing additional facilities) and negotiate the fees to be paid by Producers to Gatherer to provide such lower pressures. Producers shall never deliver Gas to a Midcon Gathering System that would exceed the maximum allowable operating pressure for such Midcon Gathering System.

(b) Amendment. Any request for lower pressure service shall be agreed to by Producers and Gatherer through a supplement to Schedule B4 showing all affected Midcon Receipt Points, the new lower pressure or pressures, and the effective date of such lower pressure service.

(c) Increased Pressures. Producers shall have the right to request an increase in the inlet pressure requirement at any Midcon Receipt Point listed in Schedule B4 by providing Notice to Gatherer. If Producers will deliver increased volumes of Producers’ Gas and/or MV Mitigation Gas along with such increased pressure service, Gatherer shall implement such increased pressure service as soon as reasonably practicable, If Producers will not deliver increased volumes of Producers’ Gas and/or MV Mitigation Gas along with such increased pressure service, then Gatherer shall have at least six (6) Months from the date of Producers’ Notice to reconfigure its facilities to accommodate such higher pressure service. Producers recognize and understand that if Gatherer provides such higher pressure service at a Midcon Receipt Point that the inlet pressure at all related Midcon Receipt Points may not be increased to the same pressure so requested by Producers in accordance with the first sentence of this Section 6(c).

(d) Frequency of Changes. For a period of 2 Years after Producers have requested, and Gatherer has provided, at a Midcon Receipt Point (i) a lower pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a higher pressure service at such Midcon Receipt Point or (ii) a higher pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a lower the pressure service at such Midcon Receipt Point.

 

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(e) Change in Delivery Point Pressure. Notwithstanding the foregoing, if the pressures at any Midcon Delivery Point increase as the result of changes by a Midcon Receiving Transporter, Gatherer may raise the pressures at the applicable Midcon Receipt Points by an amount reasonably necessary to permit delivery of Producers’ Gas and MV Mitigation Gas at such Midcon Delivery Point at such higher pressures. To the extent Producers’ Nominations of Gas to a Midcon Delivery Point or Midcon Delivery Points on any Midcon Gathering System would cause an increase in the pressure on such Midcon Gathering System, Producers shall cooperate in good faith with Gatherer to nominate Gas at other Midcon Delivery Points to avoid such increase in the pressure on such Midcon Gathering System.

(f) Delivery. Subject to the foregoing provisions, Producers’ Gas and MV Mitigation Gas shall be delivered to Gatherer at the Midcon Receipt Points at pressures sufficient to effect delivery into Gatherer’s facilities at the Midcon Receipt Points. Delivery pressures at each Midcon Receipt Point shall not exceed the maximum allowable pressure of the Midcon Gathering System at each such Midcon Receipt Point; provided, however, neither Gatherer nor Producers shall be required to compress any Producers’ Gas at the wellhead in order to effectuate delivery hereunder.

7. Measurement.

(a) Meters.

(1) Existing Midcon Receipt Points. The Parties recognize that Gatherer does not maintain a custody transfer meter at all of the Midcon Receipt Points on September 30, 2009. Gatherer, at its sole discretion, may elect to install such pad level custody transfer meters at any Midcon Receipt Point.

(2) Producers’ Wellhead Meters. For wells without a custody transfer meter at a Midcon Receipt Point, the Parties have agreed to use Producers’ Wellhead Meters for custody transfer purposes. If Gatherer uses Producers Wellhead Meters for custody transfer purposes, Producers will share with Gatherer, at no cost to Gatherer, the signal and information from the Secondary Measurement Device, either, at Gatherer’s option, directly from the field or from an office location where the signal has been transmitted. Producers’ shall be responsible for maintenance and repair of such Secondary Measurement Devices. On those drill pads where Gatherer does not install a custody transfer meter, Gatherer shall maintain, calibrate, and operate the Primary Measurement Devices, at Gatherer’s expense.

(3) Gatherer’s Receipt Meters. If Gatherer elects to install a custody transfer meter, Gatherer shall install, at its cost, such custody transfer meters (including both Primary and Secondary Measurement Devices). On those drill pads where Gatherer installs custody transfer meters, Producers shall maintain and operate Producers’ Wellhead Meters, at Producers expense. At the request of Producers, Gatherer will test and calibrate Producers’ meters that are upstream of Gatherer’s Receipt Meters and all such costs incurred by Gatherer to test or calibrate any of Producers’ meters, including Producers’ Wellhead Meters, shall be promptly reimbursed by Producers. Gatherer, or its designee, shall maintain and operate Gatherer’s Receipt Meters, when installed, and the

 

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measuring stations at the Midcon Delivery Points. Producers may install, maintain, and operate, at their own expense, such check measuring equipment as desired and where appropriate. Such equipment shall be installed so as not to interfere with the operation of Gatherer’s or its designee’s measuring equipment. If Gatherer installs a custody transfer meter, such custody transfer meter will become the applicable Midcon Receipt Point at such time as the custody transfer meter is first placed into commercial service and the individual Producers’ Wellhead Meter will thereupon cease to be the applicable Receipt Point.

(4) Primary Measurement Devices. None of the Primary Measurement Devices for Producers’ Wellhead Meters will have been transferred to Gatherer. Producers agree to transfer (free from all liens and encumbrances) to Gatherer the Primary Measurement Devices with respect to wells or pads in which Producers’ and their Affiliates own 100% of the working interest as soon as reasonably practicable after the Effective Date. Upon completion by Gatherer of a Gatherer’s Receipt Meter for custody transfer at an existing pad, Gatherer shall reconvey and transfer to Producers all of Gatherer’s right, title and interest in and to the meter runs that were previously transferred to Gatherer for such Producers’ Wellhead Meter. Except as provided in the preceding sentence, Gatherer shall not have any obligation to reconvey any meter runs to Producers.

(5) New Midcon Receipt Points. For each new drill pad connection, Gatherer shall install a custody transfer meter on the drill pad at such location where Producers connect, or intend to connect, three or more Producer Wells to a Midcon Gathering System at such location. Otherwise, the Parties shall rely on Producers’ Wellhead Meter for custody transfer and measurement purposes hereunder at such location.

(6) Field Telemetry. Producers will share the Field Telemetry signal or data with Gatherer, at Gatherer’s option and at no cost to Gatherer, for those Midcon Receipt Points which use a Producers’ Wellhead Meter for custody transfer purposes. Gatherer will share the Field Telemetry signal or data with Producers, at Producers’ option and at no cost to Producers, for those Midcon Receipt Points which use a Gatherer’s Receipt Meter for custody transfer purposes. If requested, Producers, on the one hand, and Gatherer, on the other hand, shall cause their respective Affiliates to make Field Telemetry available to Gatherer for Gatherer’s Receipt Meters or Producers for Producers’ Wellhead Meters, as applicable, either new or existing. For Gatherer’s Receipt Meters, Producers shall charge Gatherer its actual costs for such service prorated based on the actual capacity used by Gatherer. For Producers’ Wellhead Meters, Gatherer shall charge Producers its actual costs for such service prorated based on the actual capacity used by Producers. Additionally, costs for system upkeep, ongoing maintenance, and repairs (i) will be billed by Producers to Gatherer prorated by the actual capacity used by Gatherer at such times as Producers share Field Telemetry signal or data with Gatherer, or (ii) will be billed by Gatherer to Producers prorated by the actual capacity used by Producers at such times as Gatherer shares Field Telemetry signal or data with Producer.

 

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(b) Measurement Practices. Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be constructed, installed, and operated in accordance with the standards in Exhibit D.

8. Quality Specifications.

(a) Producers’ Gas and MV Mitigation Gas. All Producers’ Gas and MV Mitigation Gas delivered at the Midcon Receipt Points shall conform to the following specifications:

(1) Water: Producers’ Gas and MV Mitigation Gas shall not contain any free water.

(2) Water Vapor: Producers’ Gas and MV Mitigation Gas shall not contain more than 7 pounds of water per 1,000,000 Cubic Feet of Gas. Any Producers’ Gas or MV Mitigation Gas containing water vapor content in excess of 7 pounds of water per 1,000,000 Cubic Feet of Gas is subject to Section 2(b) of this Exhibit B.

(3) Hydrogen Sulfide: Producers’ Gas and MV Mitigation Gas shall not contain more than  1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas at the Receipt Points, as determined by quantitative tests. Any Producers’ Gas or MV Mitigation Gas containing excess hydrogen sulfide is subject to the provisions of Section 2(c) of this Exhibit B.

(4) Total Sulfur: Producers’ Gas and MV Mitigation Gas shall not contain more than 5 grains of total sulfur per 100 Cubic Feet of Gas at the Midcon Receipt Points.

(5) Temperature: Producers’ Gas and MV Mitigation Gas shall not have a temperature less than 40ºF or more than 120 ºF.

(6) Carbon Dioxide: Producers’ Gas and MV Mitigation Gas shall not contain more than 2% by volume of carbon dioxide. Any Producers’ Gas or MV Mitigation Gas containing excess carbon dioxide is subject to the provisions of Section 2(c) of this Exhibit B.

(7) Oxygen: Producers’ Gas and MV Mitigation Gas shall not contain oxygen.

(8) Nitrogen: Producers’ Gas and MV Mitigation Gas shall not contain more than 3% by volume of nitrogen.

(9) Nonhydrocarbons: Producers’ Gas and MV Mitigation Gas shall not contain more than 4% by volume of total nonhydrocarbons. Nonhydrocarbons shall include, but not be limited to, water, hydrogen sulfide, sulfur, carbon dioxide, oxygen and nitrogen.

 

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(10) Other Constituents: Producers’ Gas and MV Mitigation Gas shall not contain any carbon monoxide, halogens or unsaturated hydrocarbons, and no more than 400 parts per million of hydrogen.

(11) Objectionable Liquids and Solids and Dilution: Producers’ Gas and MV Mitigation Gas shall be free of all objectionable liquids and solids, shall not contain any free hydrocarbon liquids, and shall be commercially free from dust, gums, gum-forming constituents, and other liquids or solid matter which might become separated from Producers’ Gas nor MV Mitigation Gas in the course of transportation through pipelines.

(12) Gross Heating Value: Producers’ Gas and MV Mitigation Gas shall not have a Gross Heating Value less than 950 Btu’s per Cubic Foot of Gas or more than 1300 Btu’s per Cubic Foot of Gas.

(13) Hydrocarbon Dewpoint: Producers’ Gas and MV Mitigation Gas shall conform to the dewpoint specifications of the Midcon Receiving Transporters.

(b) Midcon Receiving Transporters. Notwithstanding the Gas specifications above, if a Midcon Receiving Transporter notifies Gatherer or Producers of different or additional quality specifications required at any Midcon Delivery Point that are more stringent than the specifications shown above, Gatherer will notify Producers of any such different or additional specifications as soon as practicable after being notified of such specifications. Such revised specifications will be considered as the quality specifications for Producers’ Gas and MV Mitigation Gas under this Agreement for as long as required by the Midcon Receiving Transporter.

(c) Failure to Meet Specifications. Notwithstanding anything in this Section 8(c) to the contrary, if Gatherer determines at any time that acceptance of Producers’ Gas or MV Mitigation Gas (even if blended as contemplated below in this Section 8(c)) does not meet any of the quality specifications in Section 8(a) (as revised in accordance with Section 8(b)) is not operationally feasible or would result in a material damage or harm to the applicable Midcon Gathering System, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers Gas or MV Mitigation Gas, as the case may be, until Gatherer no longer believes that there is a risk of material damage or harm to the applicable Midcon Gathering System. If Producers’ Gas or MV Mitigation Gas delivered hereunder fails to meet any of the quality specifications above, Gatherer will blend, where feasible and when permitted by the applicable Midcon Receiving Transporter, such nonconforming Producers’ Gas or MV Mitigation Gas with other Producers’ Gas or MV Mitigation Gas gathered on that Midcon Gathering System to cause such nonconforming Producers’ Gas or MV Mitigation Gas to meet the Gas quality specifications hereunder and of the applicable Midcon Receiving Transporter. Producers shall reimburse Gatherer for their prorata share of the direct costs incurred by Gatherer to blend such nonconforming Producers’ Gas or MV Mitigation Gas. If Gatherer determines at any time that the continued acceptance of such blended nonconforming Producers’ Gas or MV Mitigation Gas is not operationally feasible or would result in any material damage or harm to the applicable Midcon Gathering System, Gatherer may Notify Producers that it intends to discontinue blending and accepting such nonconforming Producers’ Gas or MV Mitigation Gas. If Gatherer provides

 

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such Notice to Producers that it intends not to accept nonconforming Gas or to discontinue blending Producers’ Gas or MV Mitigation Gas, Gatherer will work with Producers to determine the best method of treating such nonconforming Producers’ Gas or MV Mitigation Gas. Within 30 Days of the date on which Gatherer provides Notice to Producers that it will discontinue accepting or blending Producers’ Gas or MV Mitigation Gas as provided above, Gatherer shall prepare and provide to Producers’ an estimate of the costs to install equipment or facilities necessary to treat such nonconforming Producers’ Gas or MV Mitigation Gas on such Midcon Gathering System. Gatherer shall prepare and provide to Producers an estimate of the costs to install the equipment and other facilities necessary to treat such nonconforming Producers’ Gas or MV Mitigation Gas on such Midcon Gathering System and a proposed treating fee based on such costs and other relevant factors customarily included in the determination of such a treating fee. The Parties will use good faith efforts to reach an agreement regarding a treating fee within 30 Days following the provision of such information. If such an agreement is reached, then Gatherer (at its cost) shall install and construct such facilities as soon as commercially practicable. Subject to the first sentence of this Section 8(c), during the notification process, the determination of the treating fee and the installation of the facilities, Gatherer shall continue to receive, accept and blend nonconforming Producers’ Gas and MV Mitigation Gas. Notwithstanding the foregoing, if the applicable Midcon Receiving Transporter refuses to accept such blended nonconforming Producers’ Gas or MV Mitigation Gas at any time, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers’ Gas or MV Mitigation Gas for so long as such Midcon Receiving Transporter refuses to accept such nonconforming Producers’ Gas or MV Mitigation Gas.

(d) Acceptance of Nonconforming Gas. Without limiting the rights and obligations of the Parties pursuant to clause (c) immediately above, Gatherer may elect to accept receipt at any Midcon Receipt Point of Producers’ Gas and MV Mitigation Gas that fails to meet any of the quality specifications stated above. Such acceptance by Gatherer shall not be deemed a waiver of Gatherer’s right to refuse to accept non-specification Gas at a subsequent time, provided that Gatherer is in compliance with clause (c) immediately above in so refusing. In addition, if Producers continue to flow any Gas that fails to meet the quality specifications under this Section 8 of Exhibit B, Producers shall be responsible for (i) any fees charged by any Midcon Receiving Transporter; (ii) any costs incurred by Gatherer and agreed to by Producers in order to avoid such fees for such Gas; and (iii) any costs, expenses, damages incurred by Gatherer or assessed to Gatherer by third parties caused by such non-specification Producers’ Gas or MV Mitigation Gas. If Gatherer does not object to non-specification Producers’ Gas and MV Mitigation Gas within ** Days after the date of delivery, then Gatherer will be deemed to have waived its right to be reimbursed under the preceding sentence (but only as to such non-specification Gas volumes). Notwithstanding the foregoing, Producers shall always be responsible for fees charged by a Midcon Receiving Transporter due to non-specification Producers’ Gas or MV Mitigation Gas and will indemnify Gatherer from Claims by a Midcon Receiving Transporter arising from non-specification Producers’ Gas or MV Mitigation Gas.

9. Gas Lift Operations. Producers shall have the right to establish from time to time new delivery points on the Midcon Gathering System to permit redelivery of Producers’ Gas or MV Mitigation Gas gathered on the Midcon Gathering System to Producers or their Affiliates for use in gas lift operations in Producers’ wells on the Midcon Dedicated Properties. Upon receipt of

 

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Notice from Producers to create such a delivery point, Gatherer shall install the facilities required to establish such delivery point for gas lift operations as soon as reasonably practicable. Producers shall promptly reimburse Gatherer for all costs incurred by Gatherer to install, operate, maintain, and abandon such Midcon Delivery Point for gas lift operations. Upon completion of gas lift operations at such Midcon Delivery Point, Producers shall have the right to remove and retain, or to request that Gatherer reuse, meters, equipment, and other facilities installed by Gatherer at Producers’ expense for such gas lift operations.

10. Uneconomic Systems. After June 30, 2019, Gatherer shall have the right to declare, acting reasonably, that the operation of all of any Midcon Gathering System is uneconomic (as defined below) by Notifying Producers. Upon receipt of such Notice by Producers, Gatherer and Producers shall negotiate in good faith to reach agreement on additional gathering fees to be paid by Producers for Producers’ Gas and MV Mitigation Gas gathered on such Midcon Gathering System that would cause the operation of that Midcon Gathering System to be economic to Gatherer. If the Parties fail to reach agreement on such additional gathering fees within a reasonable period of time, then Gatherer will have the right, upon no less than 90 Days advance Notice of abandonment to Producers, to abandon and cease operating such Midcon Gathering System, with no further liability to Producers under this Agreement or otherwise with respect to gathering Producers’ Gas or MV Mitigation Gas on such Gathering System. Producers, at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such Midcon Gathering System by providing Notice to Gatherer no later than 30 Days prior to the date on which Gatherer proposes to abandon such Midcon Gathering System, whereupon Gatherer shall assign to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such Midcon Gathering System and any third party gathering agreements (to the extent assignable at no cost to Gatherer) on such Midcon Gathering System, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets. For purposes of this Section 10 of Exhibit B, a Midcon Gathering System shall be treated as uneconomic at such time as the Operating Cash Flow for that Midcon Gathering System for the 12 Months preceding such determination is negative. For purposes of the preceding sentence, “Operating Cash Flow” is defined as the earnings attributable to such Midcon Gathering System, before deducting interest, taxes, depreciation, and amortization, less normal maintenance capital, as reasonably determined by Gatherer.

 

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Exhibit C

PRP GATHERING SYSTEMS TERMS AND CONDITIONS

The following terms and conditions shall apply to the gathering of Producers’ Gas on the PRP Gathering Systems.

1. PRP Dedication.

(a) Producers’ Commitment. Subject only to Producers’ PRP Reservations, Producers exclusively dedicate and commit to the performance of this Agreement Producers’ Remaining Properties, represent that Producers’ Remaining Properties are not otherwise subject to any other gas gathering agreement or other commitment or arrangement that would permit or require Producers’ Gas from Producers’ Remaining Properties to be gathered on any other gas gathering system, and agree not to deliver any Gas produced from Producers’ Remaining Properties and owned or controlled by Producers or their Affiliates to any other gas gatherer, gas purchaser, gas marketer, or other Person prior to the PRP Delivery Points. Producers agree to cause any existing or future Affiliates of Producers to be bound by, and to execute and join as a party, this Agreement. The dedication and commitment made by Producers and their Affiliates under this Agreement is a covenant running with the land.

(b) Producers’ Reservations. Producers reserve the following rights (“Producers’ PRP Reservations”): (i) to operate wells producing from Producers’ Remaining Properties as a reasonably prudent operator, (ii) to separate or process Gas prior to delivery at the PRP Receipt Points so long as such Producers’ Gas meets the gas specifications herein after such separation or processing, (iii) to use Gas produced from Producers’ Remaining Properties for lease operations, and (iv) to pool, communitize, or unitize Producers’ interests in Producers’ Remaining Properties.

(c) Transfer of Producers’ Interests. Any transfer by Producers or their Affiliates of any of their interests in Producers’ Remaining Properties shall comply with Article 9 of this Agreement.

(d) Memorandum. Producers shall enter into and deliver to Gatherer, at Gatherer’s request, a fully recordable memorandum of this Agreement, substantially in the form of Exhibit M.

2. PRP Fees.

(a) Gathering and Compression Fees. As consideration for receiving Producers’ Gas at each PRP Receipt Point each Month, Producers shall pay Gatherer each Month an amount equal to the applicable PRP Fees (expressed in $/Mcf) shown for each PRP Receipt Point in Schedule C2 applied to the volume of Producers’ Gas (net of gas lift volumes) received at each such PRP Receipt Point during such Month. In addition to payment of such amounts, Producers shall reimburse Gatherer each Month for Producers’ allocated share of Electric Power Charges on each PRP Gathering System.

(b) Dehydration Service Fees. Producers’ Gas delivered to the PRP Receipt Points may have a water vapor content that exceeds the quality specification for water vapor content

 

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permitted from time to time by one or more of the PRP Receiving Transporters. In such event, Gatherer will dehydrate Producers’ Gas to reduce its water vapor content to 7 pounds per million Cubic Feet. The fee for such dehydration services is included in the PRP Fees. In addition to the PRP Fees, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with dehydration services performed under this Section 2(b). Gatherer shall be responsible for the costs incurred in disposing of water removed from Producers’ Gas during dehydration. If the quality specification for water content is reduced below 7 pounds per million Cubic Feet by one or more of the PRP Receiving Transporters, then the Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to reimburse Gatherer for the cost of additional dehydration services to comply with such specifications.

(c) Treating Service Fees. Producers’ Gas at the PRP Receipt Points may have carbon dioxide or hydrogen sulfide content that exceeds the quality specification for carbon dioxide or hydrogen sulfide content required from time to time by one or more of the PRP Receiving Transporters. In such event, without limiting Gatherer’s rights under Section 9(c) of this Exhibit C, Gatherer will treat Producers’ Gas to reduce the carbon dioxide content to 2% and hydrogen sulfide to not more than 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas. The fees for Gatherer providing such treating services are included in the PRP Fees (unless a separate treating fee is otherwise shown on Schedule C2 for a well) to the extent such services are provided by Gatherer with facilities comprising part of a PRP Gathering System on September 30, 2009. If additional facilities are required to provide such treating services or if the quality specification for carbon dioxide or hydrogen sulfide of the PRP Receiving Transporters is reduced below 2% and 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas, then Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to Gatherer to provide such additional treating services. If the Parties are unable to agree upon an additional fee, then Gatherer may refuse to accept receipt of Producers’ Gas for delivery to such PRP Receiving Transporter. Gatherers’ right to negotiate additional treating fees or right to refuse further deliveries of Producers’ Gas shall apply to each additional reduction in quality specification for carbon dioxide or hydrogen sulfide content of the PRP Receiving Transporters. In addition to the fees referred to above, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with treating services performed in accordance with this Section 2(c). If Gatherer removes carbon dioxide from Producers’ Gas gathered on any PRP Gathering System, Producers shall have the right (but not the obligation) to keep title to and retain all carbon dioxide removed from Producers’ Gas. If Producers so elect to retain title to such carbon dioxide, then Producers shall be responsible (at their sole risk, cost and expense) to arrange for the taking and delivery of such carbon dioxide at and from each point on the PRP Gathering System where such carbon dioxide is so removed, and Gatherer shall make such carbon dioxide available for taking at prevailing pressures after treating. Notwithstanding the foregoing, nothing in this Section 2(c) shall require Gatherer to install facilities or incur any capital expense associated with such delivery.

 

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3. [Intentionally Deleted]

4. Gas Delivery.

(a) Receipt and Delivery. Gatherer agrees to accept Producers’ Gas at the PRP Receipt Points and redeliver Producers’ Gas to the PRP Delivery Points, to the extent capacity is available, subject to and on the terms provided in this Agreement. Prior to June 30, 2019, if Gatherer does not have sufficient capacity to accept Producers Gas, Gatherer shall use all commercially reasonable and diligent efforts to construct the necessary facilities. If after the use of such efforts the necessary facilities have not been constructed or Gatherer determines in good faith that it will not be able to construct such facilities using commercially reasonable and diligent efforts, the Producers may request and Gatherer shall provide a written release of the portion of the Producers’ Remaining Properties and wells located thereon that would have been served by such Facilities. Nominations of Producers’ Gas shall be made in accordance with the procedures in Exhibit D.

(b) Equivalent Quantities. Gatherer shall, as nearly as practicable each Day, deliver for Producers’ account Equivalent Quantities of Gas at the PRP Delivery Points. All receipts and deliveries of Producers’ Gas less System Fuel and Losses shall be balanced on a MMBtu basis, and all quantities referred to herein shall be adjusted for the Gross Heating Value thereof.

(c) Equal Receipt and Delivery. The Parties intend that Producers’ Gas will be received and delivered hereunder at reasonably uniform rates, and Producers shall not, in any manner, use any PRP Gathering System for storage or peaking purposes without Gatherer’s prior written approval, which approval may be withheld in Gatherer’s discretion.

(d) Proration. Producers shall, at all times, be holders of Priority 1 Service with respect to all Producers’ Gas received by the PRP Gathering Systems, subject to obligations of Gatherer under gas gathering agreements relating to the PRP Gathering Systems in effect on September 30, 2009 to provide an equivalent level of service. If capacity on a PRP Gathering System is curtailed or reduced, or capacity is insufficient for the needs of all shippers desiring to use such capacity, the holders of Priority 3 Service will be curtailed first, the holders of Priority 2 Service will be curtailed next, and the holders of Priority 1 Service shall be curtailed last. As among the holders of Priority 1 Service, the capacity available to Priority 1 Service under the preceding sentence shall be allocated among the holders of Priority 1 Service based on the Economic Value of each contract granting such Priority 1 Service, with the contract having the highest Economic Value being the last Gas curtailed. As among the holders of Priority 2 Service, the capacity available to Priority 2 Service (if any) under the first sentence of this paragraph shall be allocated among the holders of such Priority 2 Service based on the percentage derived by dividing the volume of Gas nominated by each holder of Priority 2 Service by the total volume of Gas nominated by all holders of Priority 2 Service, in each case as such nominations exist as of the first of the relevant Month or, if applicable, such other day as such nominations are required to be made. As among holders of Priority 3 Service, the capacity available to Priority 3 Service (if any) under the first sentence of this Section 4(d) of Exhibit C shall be fully interruptible.

 

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(e) Information. Each Party will furnish or cause to be furnished to the other Party hereto all data required to accurately account for all Producers’ Gas received and delivered hereunder.

(f) Third Party Arrangements. Producers shall make, or cause to be made, all necessary arrangements with other pipelines or third parties at or upstream of the PRP Receipt Points and at or downstream of the PRP Delivery Points to effect Gatherer’s receipt and delivery of Producers’ Gas. Such arrangements must be coordinated with Gatherer’s Gas Control Department and must, at all times, be acceptable to Gatherer, in its sole discretion.

(g) Allocations. The PRP Receipt Points and PRP Delivery Points may be at locations through which other volumes of Gas are being measured. As a result, the measurement of Producers’ Gas under this Agreement may involve the allocation of Gas delivered. Upon the written request from a Party to the other Party, the Party receiving such request will furnish or cause to be furnished to the other Party hereto all data reasonably available to the furnishing Party that is required to account as accurately as reasonably possible for all Gas received and delivered hereunder.

(h) Commingling.

(i) Although Producers shall retain title to Producers’ Gas delivered to Gatherer at the PRP Receipt Points hereunder, Producers’ Gas shall constitute part of the supply of Gas from all sources to the PRP Gathering Systems, and as such Gatherer shall, subject to its obligation to deliver an Equivalent Quantity each Day and to the following provisions of this Section 4(h), have the right to commingle Producers’ Gas with Gas of other Persons.

(ii) If (A) a Person other than Producers or their Affiliates delivers Gas to a PRP Gathering System and (B) with respect to such PRP Gathering System Producers or their Affiliates have a processing agreement downstream of such PRP Gathering System with respect to Producers’ Gas moved through such system, then prior to such Gas being delivered to such system Gatherer shall take (or require the third party producer to take) such actions as may be necessary to determine the Btu content of the Gas stream that would be delivered to such PRP Gathering System by such Person (the “Third Party Btu Content”) and shall provide such Third Party Btu to Producers. If any such third party Gas has a Third Party Btu Content that is ** Btus higher or lower than the average Btu content of Producers’ Gas delivered to such PRP Gathering System over the most recent 30-Day period for which Btu content information is available (“Applicable Third Party Gas”), then Gatherer shall provide Notice to Producers and the provisions of clause (iii) immediately below shall apply.

(iii) With respect to any Applicable Third Party Gas, Gatherer shall provide Notice to Producers of the Person proposing to move such Gas over the applicable PRP Gathering System if Gatherer receives the consent of such Person to disclose such information to Producers. For a period of 30 Days after any such Notice by Gatherer, Producers and their Affiliates may pursue the establishment of a marketing arrangement with such Person whereby Producers or their Affiliates purchase such Third Party Gas at

 

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the wellhead. If Gatherer is unable to disclose to Producers information about such Person or if Producers are unable to reach an agreement with any such Person proposing to move Third Party Gas over the applicable PRP Gathering System, then promptly following request by Producers, Gatherer and Producers shall enter into discussions and negotiations with the applicable gas processor to effect such changes as may be necessary to eliminate or substantially mitigate any reduction in natural gas liquids resulting from commingling such Applicable Third Party Gas.

(iv) The provisions of this Section 4(h) shall not apply to volumes of Gas delivered under third party gathering agreements in effect on September 30, 2009.

(i) Lost and Unaccounted for Gas. Gatherer will conduct the services required to be performed by Gatherer under this Agreement using practices, methods and acts which are engaged in or which have been approved by a significant portion of the natural gas gathering industry. Producers acknowledge, however, that certain volumetric losses in Producers’ Gas will occur even if such services are conducted in accordance with the preceding sentence, and such losses attributable to Lost and Unaccounted for Gas shall be shared and allocated among Producers and other third party shippers on each PRP Gathering System in the proportion that each party delivers Gas to that PRP Gathering System. Producers’ allocated share of Lost and Unaccounted for Gas on the PRP Gathering Systems shall be based actual losses on the PRP Gathering Systems and shall not be subject to any minimum or maximum limits.

(j) Fuel Gas. Reductions in volumes of Producers’ Gas due to Fuel Gas used for gathering, compression, dehydration, processing, and treating shall be shared and allocated among Producers and other third party shippers on each PRP Gathering System in the proportion that each shipper delivers Gas to that PRP Gathering System. Reductions due to Fuel Gas use on each PRP Gathering System for dehydration shall be shared and allocated among Producers and third party shippers as specified in Sections 2(b) and 2(c) of this Exhibit C.

(k) Drip Liquids. Producers acknowledge that certain reductions in volumes of Producers’ Gas will occur due to shrinkage from Drip Liquids in each PRP Gathering System, and such reductions attributable to Drip Liquids shall be shared and allocated among Producers and other third parties whose Gas is gathered on that PRP Gathering System in the proportion to the C5+ constituents contained in the Gas delivered by each such shipper to the PRP Gathering System. Such allocations shall be based on the most recent quality analysis available to Gatherer for such Gas. Gatherer shall provide Notice to Producers from time to time of the quantities of Drip Liquids collected on each PRP Gathering System and attributable to Producers’ Gas. Gatherer (or Gatherer’s agent) will cause such Drip Liquids to be collected and removed from Gatherer’s tanks and sold from time to time. Within a reasonable period of time after any such sale, Gatherer (or Gatherer’s agent) shall remit or credit to Producers their allocated share of the net proceeds received from such sale of Drip Liquids less the actual, reasonable costs and expenses incurred to collect, transport, and sell such Drip Liquids. Drip Liquids shall be measured by the Drip Liquids purchaser.

5. New Receipt and Delivery Points.

(a) New Receipt Points. CEMI, on behalf of the Producers, shall furnish Notice to

 

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Gatherer of any new well connection desired by Producers to the PRP Gathering Systems, which Notice shall include the location of such new well connection, the projected Gas deliverability to the PRP Gathering System, and such other information as Gatherer reasonably requests. Upon receipt of such Notice, Gatherer and Producers shall enter into discussions and negotiations to determine the gathering and other fees that would be paid to permit Gatherer to make such new connection. If the Parties reach agreement on such gathering and other fees, then Gatherer shall complete such connection as soon as reasonably practicable and such gathering and other fees shall be the PRP Fees to be received by Gatherer hereunder for all Producers’ Gas received at the PRP Receipt Point for that connection and Schedule C2 shall be amended to reflect such revised PRP Fees.

(b) New Delivery Points. CEMI, on behalf of the Producers, shall furnish Notice to Gatherer of any new PRP Delivery Point connection desired by Producers, which Notice shall include the location of such PRP Delivery Point, the projected Gas deliverability to such PRP Delivery Point from the PRP Gathering System, and such other information as Gatherer reasonably requests. Gatherer may elect to increase the deliverability of such new PRP Delivery Point above that requested by Producers. The cost of such increased deliverability shall be borne by Gatherer. As soon as commercially practicable after Gatherer’s receipt of Producers’ Notice, Gatherer shall provide Notice to Producer of (i) the estimated cost to complete such new PRP Delivery Point in accordance with Producers’ specifications, (ii) any increase in the deliverability of such new PRP Delivery Point as determined by Gatherer (“Gatherer’s Increased Deliverability”) and Gatherer’s estimated cost of such increase, and (iii) the estimated date of completion of such new PRP Delivery Point. If CEMI determines to proceed with completion of such new PRP Delivery Point after receipt of Gatherer’s Notice, CEMI shall Notify Gatherer of such election accompanied by Producers’ agreement to pay the cost to complete such connection (or, if Gatherer has determined to increase deliverability, Producers’ proportionate share of the cost based on the estimated costs submitted by Gatherer). If Producers pay the entire cost of a new PRP Delivery Point, Producers shall have Priority 1 Service for the deliverability of such new PRP Delivery Point, and Gatherer shall pay to Producers (or deduct from amounts owed by Producers hereunder) a fee of $** per Mcf for third party Gas delivered at such new PRP Delivery Point in excess of Gatherer’s Increased Deliverability. All such third party Gas shall have Priority 3 Service level. If, however, Gatherer pays the cost to increase the deliverability of any new PRP Delivery Point, Producers shall have Priority 1 Service for the deliverability of the new PRP Delivery Point up to the amount requested by CEMI in its Notice and Gatherer shall have the right to provide Priority 1 Service for third party Gas volumes up to the Gatherer’s Increased Deliverability for such new PRP Delivery Point.

6. Receipt and Delivery Pressures.

(a) Receipt Point Pressures. Gatherer shall endeavor to cause the average monthly inlet pressures at the PRP Receipt Points described in Schedule C4 not to exceed the pressures specified in Schedule C4. Producers represent that the inlet pressures for such PRP Receipt Points as of September 30, 2009 are within a reasonable tolerance of the pressures reflected in Schedule C4. If the inlet pressures at any PRP Receipt Point exceeds the pressures specified in Schedule C4, then the Parties shall work together to identify the actions that may be taken by Gatherer to lower such inlet pressures (including installing additional facilities) and to negotiate the additional fees to be paid by Producers to Gatherer to provide such lower pressures.

 

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(b) Amendment. Any request for lower pressure service shall be agreed to by Producers and Gatherer through a supplement to Schedule C2 showing all affected PRP Receipt Points, the new lower pressure or pressures, and the effective date of such lower pressure service.

(c) Increased Pressures. Producers shall have the right to request an increase in the inlet pressure requirement at any PRP Receipt Point listed in Schedule C2 by providing Notice to Gatherer. If Producers will deliver increased volumes of Producers’ Gas along with such increased pressure service, Gatherer shall implement such increased pressure service as soon as reasonably practicable, If Producers will not deliver increased volumes of Producers’ Gas along with such increased pressure service, then Gatherer shall have at least six (6) Months from the date of Producers’ Notice to reconfigure its facilities to accommodate such higher pressure service.

(d) Frequency of Changes. For a period of 2 Years after Producers have requested, and Gatherer has provided, at a PRP Receipt Point (i) a lower pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a higher pressure service at such PRP Receipt Point or (ii) a higher pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a lower the pressure service at such PRP Receipt Point.

(e) Change in Delivery Point Pressure. Notwithstanding the foregoing, if the pressures at any PRP Delivery Point increase as the result of changes by a PRP Receiving Transporter, Gatherer may raise the pressures at the applicable PRP Receipt Points by an amount reasonably necessary to permit delivery of Producers’ Gas at such PRP Delivery Point at such higher pressures. To the extent Producers’ Nominations of Gas to a PRP Delivery Point or PRP Delivery Points on any PRP Gathering System would cause an increase in the pressure on such PRP Gathering System, Producers shall cooperate in good faith with Gatherer to nominate Gas at other PRP Delivery Points to avoid such increase in the pressure on such PRP Gathering System.

(f) Delivery. Subject to the foregoing provisions, Producers’ Gas shall be delivered to Gatherer at the PRP Receipt Points at pressures sufficient to effect delivery into Gatherer’s facilities at the PRP Receipt Points. Delivery pressures at each PRP Receipt Point shall not exceed the maximum allowable pressure of the PRP Gathering System at each such PRP Receipt Point; provided, however, neither Gatherer nor Producers shall be required to compress any Producers’ Gas at the wellhead in order to effectuate delivery hereunder.

7. Measurement and Testing.

(a) Meters.

(1) Existing PRP Receipt Points. The Parties recognize that Gatherer does not maintain a custody transfer meter at all of the PRP Receipt Points on September 30, 2009. Gatherer, at its sole discretion, may elect to install such well level custody transfer meters at any PRP Receipt Point.

(2) Producers’ Wellhead Meters. For wells without a custody transfer meter at a PRP Receipt Point, the Parties have agreed to use Producers’ Wellhead Meters for custody transfer purposes. If Gatherer uses Producers Wellhead Meters for custody

 

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transfer purposes, Producers will share with Gatherer, at no cost to Gatherer, the signal and information from the Secondary Measurement Device, either, at Gatherer’s option, directly from the field or from an office location where the signal has been transmitted. Producers shall be responsible for maintenance and repair of such Secondary Measurement Devices. On those drill pads where Gatherer does not install a custody transfer meter, Gatherer shall maintain, calibrate, and operate the Primary Measurement Devices, at Gatherer’s expense.

(3) Gatherer’s Receipt Meters. If Gatherer elects to install a custody transfer meter, Gatherer shall install, at its cost, such custody transfer meters (including Primary and Secondary Measurement Devices). On those drill pads where Gatherer installs custody transfer meters, Producers shall maintain and operate Producers’ Wellhead Meters, at Producers expense. At the request of Producers, Gatherer will test and calibrate Producers’ meters that are upstream of Gatherer’s Receipt Meters and all such costs incurred by Gatherer to test or calibrate any of Producers’ meters, including Producers’ Wellhead Meters, shall be promptly reimbursed by Producers. Gatherer, or its designee, shall maintain and operate Gatherer’s Receipt Meters, when installed, and the measuring stations at the PRP Delivery Points. Producers may install, maintain, and operate, at their own expense, such check measuring equipment as desired and where appropriate. Such equipment shall be installed so as not to interfere with the operation of Gatherer’s or its designee’s measuring equipment. If Gatherer installs a custody transfer meter, such custody transfer meter will become the applicable PRP Receipt Point at such time as the custody transfer meter is first placed into commercial service and the individual Producers’ Wellhead Meter will thereupon cease to be the applicable Receipt Point. With respect to any such custody transfer meter installed by Gatherer, Gatherer will share with Producers, at no cost to Producers, the signal and information from the Secondary Measurement Devices, either, at Producers’ option, directly from the field or from an office location where the signal has been transmitted.

(4) Primary Measurement Devices. None of the Primary Measurement Devices for Producers’ Wellhead Meters will have been transferred to Gatherer. Producers agree to transfer (free from all liens and encumbrances) to Gatherer the Primary Measurement Devices with respect to wells or pads in which Producers’ and their Affiliates owned 100% of the working interest as soon as reasonably practicable after the Effective Date. Upon completion by Gatherer of a Gatherer’s Receipt Meter for custody transfer at an existing pad, Gatherer shall reconvey and transfer to Producers all of Gatherer’s right, title and interest in and to the meter runs that were previously transferred to Gatherer for such Producers’ Wellhead Meter. Except as provided in the preceding sentence, Gatherer shall not have any obligation to reconvey any meter runs to Producers.

(5) New PRP Receipt Points. For each new drill pad connection, Gatherer shall install a custody transfer meter on the drill pad at such location where Producers connect, or intend to connect, three or more Producer Wells to a PRP Gathering System at such location. Otherwise, the Parties shall rely on Producers’ Wellhead Meter for custody transfer and measurement purposes hereunder at such location.

 

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(6) Field Telemetry. Producers will share the Field Telemetry signal or data with Gatherer, at Gatherer’s option and at no cost to Gatherer, for those PRP Receipt Points which use a Producers’ Wellhead Meter for custody transfer purposes. Gatherer will share the Field Telemetry signal or data with Producers, at Producers’ option and at no cost to Producers, for those PRP Receipt Points which use a Gatherer’s Receipt Meter for custody transfer purposes. If requested, Producers, on the one hand, and Gatherer, on the other hand shall cause their respective Affiliates to make Field Telemetry available to Gatherer for Gatherer’s Receipt Meters or Producers for Producers’ Wellhead Meters, as applicable, either new or existing. For Gatherer’s Receipt Meters, Producers shall charge Gatherer its actual costs for such service prorated based on the actual capacity used by Gatherer. For Producers’ Wellhead Meters, Gatherer shall charge Producers its actual costs for such service prorated based on the actual capacity used by Producers. Additionally, costs for system upkeep, ongoing maintenance, and repairs of Field Telemetry and associated facilities to PRP Receipt Points which use a Producers’ Wellhead Meter (i) will be billed by Producers to Gatherer prorated by the actual capacity used by Gatherer at such times as Producers share Field Telemetry signal or data with Gatherer or (ii) will be billed by Gatherer to Producers prorated by the actual capacity used by Producers at such times as Gatherer shares Field Telemetry signal or data with Producer.

(b) Measurement Practices. Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be constructed, installed, and operated in accordance with the standards in Exhibit D.

8. Quality Specifications.

(a) Producers’ Gas. All Producers’ Gas delivered at the PRP Receipt Points shall conform to the following specifications:

(1) Water: Producers’ Gas shall not contain any free water.

(2) Water Vapor: Producers’ Gas shall not contain more than 7 pounds of water per 1,000,000 Cubic Feet of Gas. Any Producers’ Gas containing water vapor content in excess of 7 pounds of water per 1,000,000 Cubic Feet of Gas is subject to Section 2(b) of this Exhibit C.

(3) Hydrogen Sulfide: Producers’ Gas shall not contain more than  1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas at the Receipt Points, as determined by quantitative tests. Any Producers’ Gas containing excess hydrogen sulfide is subject to the provisions of Section 2(c) of this Exhibit C.

(4) Total Sulfur: Producers’ Gas shall not contain more than 5 grains of total sulfur per 100 Cubic Feet of Gas at the PRP Receipt Points.

(5) Temperature: Producers’ Gas shall not have a temperature less than 40ºF or more than 120 ºF.

 

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(6) Carbon Dioxide: Producers’ Gas shall not contain more than 2% by volume of carbon dioxide. Any Producers’ Gas containing excess carbon dioxide is subject to the provisions of Section 2(c) of this Exhibit C.

(7) Oxygen: Producers’ Gas shall not contain any oxygen.

(8) Nitrogen: Producers’ Gas shall not contain more than 3% by volume of nitrogen.

(9) Nonhydrocarbons: Producers’ Gas shall not contain more than 4% by volume of total nonhydrocarbons. Nonhydrocarbons shall include, but not be limited to, water, hydrogen sulfide, sulfur, carbon dioxide, oxygen and nitrogen.

(10) Other Constituents: Producers’ Gas shall not contain any carbon monoxide, halogens or unsaturated hydrocarbons, and no more than 400 parts per million of hydrogen.

(11) Objectionable Liquids and Solids and Dilution: Producers’ Gas shall be free of all objectionable liquids and solids, shall not contain any free hydrocarbon liquids, and shall be commercially free from dust, gums, gum-forming constituents, and other liquids or solid matter which might become separated from Producers’ Gas in the course of transportation through pipelines.

(12) Gross Heating Value: Producers’ Gas shall not have a Gross Heating Value less than 950 Btu’s per Cubic Foot of Gas or more than 1300 Btu’s per Cubic Foot of Gas.

(13) Hydrocarbon Dewpoint: Producers’ Gas shall conform to the dewpoint specifications of the PRP Receiving Transporters.

(b) PRP Receiving Transporters. Notwithstanding the Gas specifications above, if a PRP Receiving Transporter notifies Gatherer or Producers of different or additional quality specifications required at any PRP Delivery Point that are more stringent than the specifications shown above, Gatherer will notify Producers of any such different or additional specifications as soon as practicable after being notified of such specifications. Such revised specifications will be considered as the quality specifications for Producers’ Gas under this Agreement for as long as required by the PRP Receiving Transporter.

(c) Failure to Meet Specifications. Notwithstanding anything in this Section 8(c) to the contrary, if Gatherer determines at any time that acceptance of Producers’ Gas (even if blended as contemplated below in this Section 8(c)) does not meet any of the quality specifications in Section 8(a) (as revised in accordance with Section 8(b)) is not operationally feasible or would result in a material damage or harm to the applicable PRP Gathering System, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers Gas, as the case may be, until Gatherer no longer believes that there is a risk of material damage or harm to the applicable PRP Gathering System. If Producers’ Gas delivered hereunder fails to meet any of the quality specifications above, Gatherer will blend, where feasible and when permitted by the applicable

 

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PRP Receiving Transporter, such nonconforming Producers’ Gas with other Producers’ Gas gathered on that PRP Gathering System to cause such nonconforming Producers’ Gas to meet the Gas quality specifications hereunder and of the applicable PRP Receiving Transporter. Producers shall reimburse Gatherer for their prorata share of the direct costs incurred by Gatherer to blend such nonconforming Producers’ Gas. If Gatherer determines at any time that the continued acceptance of such blended nonconforming Producers’ Gas is not operationally feasible or would result in any material damage or harm to the applicable PRP Gathering System, Gatherer may Notify Producers that it intends to discontinue blending and accepting such nonconforming Producers’ Gas. If Gatherer provides such Notice to Producers that it intends not to accept nonconforming Gas or to discontinue blending Producers’ Gas, Gatherer will work with Producers to determine the best method of treating such nonconforming Producers’ Gas. Within 30 Days of the date on which Gatherer provides Notice to Producers that it will discontinue accepting or blending Producers’ Gas as provided above, Gatherer shall prepare and provide to Producers an estimate of the costs to install equipment or facilities necessary to treat such nonconforming Producers’ Gas on such PRP Gathering System. Gatherer shall prepare and provide to Producers an estimate of the costs to install the equipment and other facilities necessary to treat such nonconforming Producers’ Gas on such PRP Gathering System and a proposed treating fee based on such costs and other relevant factors customarily included in the determination of such a treating fee. The Parties will use good faith efforts to reach an agreement regarding a treating fee within 30 Days following the provision of such information. If such an agreement is reached, then Gatherer (at its cost) shall install and construct such facilities as soon as commercially practicable. Subject to the first sentence of this Section 8(c), during the notification process, the determination of the treating fee and the installation of the facilities, Gatherer shall continue to receive, accept and blend nonconforming Producers’ Gas. Notwithstanding the foregoing, if the applicable PRP Receiving Transporter refuses to accept such blended nonconforming Producers’ Gas at any time, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers’ Gas for so long as such PRP Receiving Transporter refuses to accept such nonconforming Producers’ Gas.

(d) Acceptance of Nonconforming Gas. Without limiting the rights and obligations of the Parties pursuant to clause (c) immediately above, Gatherer may elect to accept receipt at any PRP Receipt Point of Producers’ Gas that fails to meet any of the quality specifications stated above. Such acceptance by Gatherer shall not be deemed a waiver of Gatherer’s right to refuse to accept non-specification Gas at a subsequent time, provided that Gatherer is in compliance with clause (c) immediately above in so refusing. In addition, if Producers continue to flow any Gas that fails to meet the quality specifications under this Section 9 of Exhibit C, Producers shall be responsible for (i) any fees charged by any PRP Receiving Transporter; (ii) any costs incurred by Gatherer and agreed to by Producers in order to avoid such fees for such Gas; and (iii) any costs, expenses, damages incurred by Gatherer or assessed to Gatherer by third parties caused by such non-specification Producers’ Gas. If Gatherer does not object to non-specification Producers’ Gas within ** Days after the date of delivery, then Gatherer will be deemed to have waived its right to be reimbursed under the preceding sentence (but only as to such non-specification Gas volumes). Notwithstanding the foregoing, Producers shall always be responsible for fees charged by a PRP Receiving Transporter due to non-specification Producers’ Gas and will indemnify Gatherer from Claims by a PRP Receiving Transporter arising from non-specification Producers’ Gas.

 

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9. Gas Lift Operations. Producers shall have the right to establish from time to time new delivery points on the PRP Gathering System to permit redelivery of Producers’ Gas gathered on the PRP Gathering System to Producers or their Affiliates for use in gas lift operations in Producers’ wells on Producers’ Remaining Properties. Upon receipt of Notice from Producers to create such a delivery point, Gatherer shall install the facilities required to establish such delivery point for gas lift operations as soon as reasonably practicable. Producers shall promptly reimburse Gatherer for all costs incurred by Gatherer to install, operate, maintain, and abandon such PRP Delivery Point for gas lift operations. Upon completion of gas lift operations at such PRP Delivery Point, Producers shall have the right to remove and retain, or to request that Gatherer reuse, meters, equipment, and other facilities installed by Gatherer at Producers’ expense for such gas lift operations.

10. Uneconomic Systems. After June 30, 2019, Gatherer shall have the right to declare, acting reasonably, that the operation of all of any PRP Gathering System is uneconomic (as defined below) by Notifying Producers. Upon receipt of such Notice by Producers, Gatherer and Producers shall negotiate in good faith to reach agreement on additional gathering fees to be paid by Producers for Producers’ Gas gathered on such PRP Gathering System that would cause the operation of that PRP Gathering System to be economic to Gatherer. If the Parties fail to reach agreement on such additional gathering fees within a reasonable period of time, then Gatherer will have the right, upon no less than 90 Days advance Notice of abandonment to Producers, to abandon and cease operating such PRP Gathering System, with no further liability to Producers under this Agreement or otherwise with respect to gathering Producers’ Gas on such Gathering System. Producers, at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such PRP Gathering System by providing Notice to Gatherer no later than 30 Days prior to the date on which Gatherer proposes to abandon such PRP Gathering System, whereupon Gatherer shall assign to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such PRP Gathering System and any third party gathering agreements (to the extent assignable at no cost to Gatherer) on such PRP Gathering System, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets. For purposes of this Section 10 of Exhibit C, a PRP Gathering System shall be treated as uneconomic at such time as the Operating Cash Flow for that PRP Gathering System for the 12 Months preceding such determination is negative. For purposes of the preceding sentence, “Operating Cash Flow” is defined as the earnings attributable to such PRP Gathering System, before deducting interest, taxes, depreciation, and amortization, less normal maintenance capital, as reasonably determined by Gatherer.

 

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Exhibit D

Nomination Procedures and Measurement Practices

1. Nomination Procedures. “Nominations” or “Nominate” means a request submitted by Producers to Gatherer for the prospective gathering of specific volumes of Producers’ Gas and/or MV Mitigation Gas on a Gathering System. The nomination procedure for each Gathering System is as follows:

(a) First-of-the-Month Nominations. Gatherer shall advise Producers of the estimated percentage of Producers’ Gas and/or MV Mitigation Gas to be consumed as System Fuel and Losses on each Gathering System for the next Month. Producers shall submit in writing to Gatherer, by facsimile or email, its total estimated volumes, in Mcf’s per Day and MMBtu’s per Day, to be delivered to Gatherer at each Receipt Point for redelivery by Gatherer at the Delivery Points on such Gathering System, less System Fuel and Losses, during the then subsequent Month by 11:30 A.M. (CPT) on the first Business Day prior to the earliest deadline for first-of-the-Month nominations of the Receiving Transporters. After the deadline set forth herein, Gatherer shall accept nominations from Producers for first-of-the-Month deliveries subject to Gatherer’s ability, through reasonable efforts, to notify the applicable Receiving Transporter of such untimely nomination and such Receiving Transporter’s confirmation of such untimely nomination.

(b) Changes to First-of-the-Month Nominations. Producers shall submit changes to its first-of-the-month nominations in writing to Gatherer, by facsimile or email, as set forth in Section 1(a) above, no later than 11:30 a.m. (CPT) one Business Day prior to the scheduled Day of flow. Subject to acceptance and confirmation by the Receiving Transporter, such revised nominations shall be effective for the remainder of the Month unless later changes are made in accordance with this Exhibit D. After this deadline, Gatherer shall accept such nomination changes from the Producers, subject to Gatherer’s ability, through reasonable efforts, to notify the applicable Receiving Transporter of such untimely nomination and such Receiving Transporter’s confirmation of such untimely nomination.

(c) Nomination Confirmations. Upon receipt of Producers’ timely nomination, Gatherer shall review said nomination and promptly notify Producers should a discrepancy exist between Producers’ nominated volumes and volumes confirmed by the Receiving Transporters for Producers at the applicable Delivery Points. If it is determined that Producers are responsible for the discrepancy, it shall be the Producers’ responsibility to correct the discrepancy and timely re-nominate the corrected volumes. If the discrepancy is not resolved, the “corrected volumes” will be considered the lesser of the volume nominated by Producers at the applicable Delivery Points or the volume confirmed by the Receiving Transporters. Gatherer shall notify Producers in writing, by facsimile or email, of the confirmed nomination on the Gathering System for first-of-the-Month nominations or changes thereto. Gatherer shall not be obligated to provide service hereunder on any Day that Producers do not nominate under the procedures herein or of the Receiving Transporters. Any waiver by Gatherer of the provisions of this Section 1(c) shall not constitute a waiver of Gatherer’s future rights under this Section 1.

(d) Producers’ Obligation to Maintain Balance. Producers shall manage receipts and deliveries of Producers’ Gas and MV Mitigation Gas and, if necessary, make adjustments to


maintain a balance of receipts and deliveries. Producers shall manage receipts and deliveries so that the Imbalance shall be kept as near zero as practicable. “Imbalance” shall be defined as the difference between the quantity (expressed in MMBtu’s) of Producers’ Gas and MV Mitigation Gas received at the Receipt Points on a Gathering System on any Day, after deducting Producers’ allocated share of System Fuel and Losses, and the quantity (expressed in MMBtu’s) of Producers’ Gas and MV Mitigation Gas delivered to the Delivery Points on such Gathering System on such Day.

(e) Gatherer’s Right to Minimize Variances and to Balance. Unless agreed between the Parties, Gatherer shall not be required to receive quantities from Producers in excess of the quantities of Producers’ Gas and MV Mitigation Gas the Receiving Transporters will accept at the Delivery Points on a concurrent basis. Gatherer shall have the right, in its sole discretion, to amend receipts or deliveries of Producers’ Gas and/or MV Mitigation Gas 24 hours after Notice to Producers if Producers fail to provide evidence to Gatherer’s satisfaction that within such 24 hour period it has commenced a good faith effort to eliminate any existing Imbalance within a reasonable time.

(f) Imbalance Resolution. Gatherer and Producers shall keep accurate records of the quantities of Producers’ Gas and MV Mitigation Gas nominated, confirmed, allocated, and redelivered from the Receipt Points to the Delivery Points and any Imbalance related thereto. Monthly imbalances shall be added/subtracted to/from the cumulative imbalance from the previous Month and the newly calculated Imbalance position will be considered in the subsequent months’ nominations to bring said Imbalance position as close to zero as practicable.

(g) Receipt Allocations. If Producers’ Gas or MV Mitigation Gas is commingled with other gas at a Receipt Point, the allocation of Gas at each Receipt Point shall be based upon each Producers’ marketing percentage as defined by the operator of that Receipt Point.

(h) Curtailment Procedures. If Gatherer determines on any Day that for any reason whatsoever, including Force Majeure Events and periods of normal and routine maintenance, that confirmed nominations exceed the Gathering System’s available capacity at any area or point, Gatherer shall, without liability to Producers, curtail or interrupt deliveries of all Gas in such area or point as provided in the Agreement, determined by confirmed nominations for all Gas gathered in such area or point. In instances where gathering of Producers’ Gas and/or MV Mitigation Gas is interrupted and Gatherer has provided Producers Notice thereof, Producers shall notify the applicable Receiving Transporters of any modification to the confirmed nominations at the applicable Delivery Points. In the event of a curtailment described herein, the applicable Fees shall apply only to Producers’ Gas and MV Mitigation Gas received by Gatherer at the affected Receipt Points (expressed in Mcf’s).

(i) Operational Control. Gatherer shall retain full operational control of the Gathering Systems and shall at all times be entitled to schedule deliveries and to operate its facilities in a manner which, in Gatherer’s judgment, is consistent with the obligations and operating conditions, inclusive of normal and routine maintenance, as may exist from time to time on the Gathering Systems or which will allow Gatherer to optimize the use of the Gathering Systems consistent with the terms of this Agreement. Gatherer’s performance shall be excused, in full or in part, during periods of Force Majeure Events and normal and routine maintenance.

 

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(j) Coordination with Receiving Transporters. The Parties recognize that Gatherer must coordinate its actions with those of the Receiving Transporters. Accordingly, upon 30 Days Notice to Producers, Gatherer may modify provisions of this Agreement to implement standards promulgated by the National Association of Energy Standards Board adopted by any Receiving Transporter as it relates to a Gathering System or to otherwise coordinate the provisions of this Agreement with the operating conditions, rules, or tariffs of the Receiving Transporters.

2. Meters.

(a) Practices. All Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be constructed, installed, and operated in accordance with the following standards depending on the type of meters used.

(1) Orifice Meters - In accordance with ANSI/API 14.3.2 (American Gas Association Report No. 3), Orifice Metering of Natural Gas and Other Hydrocarbon Fluids, Fourth Edition, dated April 2000, and any subsequent amendments, revisions or modifications thereof and shall include the use of flange connections.

(2) Positive Meters - In accordance with the American Gas Association Measurement Committee Report No. 6 (American Gas Association Report No. 6) dated January 1971, and any subsequent amendments, revisions or modifications thereof.

(3) Turbine Meters - In accordance with the American Gas Association Measurement Committee Report No. 7 (American Gas Association Report No. 7), First Revision, dated November 1984, and any subsequent amendments, revisions or modifications thereof.

(4) Electronic Transducers and Flow Computers - in accordance with the applicable standards of the American Petroleum Institute, including but not limited to API No. 21.1, and any subsequent amendments, revisions, or modification thereof.

(5) Ultrasonic Meters - In accordance with the American Gas Association Measurement Committee Report No. 9 (American Gas Association Report No. 9), dated June 1998, and any subsequent amendments, revisions or modifications thereof.

(6) Coriolis Meters - In accordance with American Gas Association Report No. 11, and any subsequent amendments, revisions, or modifications, thereof.

Notwithstanding anything contained in this Exhibit to the contrary, Gatherer shall not be required to replace or make any alterations to its measuring equipment as a result of any subsequent amendments, revisions, or modifications of the American Gas Association Reports cited in Subparagraphs (1) through (6) of this Section 2(a), unless the Parties mutually agree to such replacement or alteration.

(b) Testing. Gatherer shall give reasonable Notice to Producers of any cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting of Gatherer’s Receipt Meters or Producer’s Wellhead Meters or the measuring equipment at the Delivery Points to permit

 

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Producers to have a representative present. The official charts (recordings) from the measuring equipment shall remain the property of Gatherer. Upon request, Gatherer will submit its records and charts, together with calculations therefrom, to Producers for inspection and verification, subject to return to Gatherer or its designee within 30 Days after receipt thereof.

(c) Accuracy of Meters. All Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be verified (and calibrated) at the following intervals: (i) if the deliveries of Gas through the meter average less than 100 Mcf/d, at least once each Year, (ii) if the deliveries of Gas through the meter average between 100 Mcf/d and 500 Mcf/d, at least once each 6 Months, (iii) if the deliveries of Gas through the meter average between 500 Mcf/d and 5,000 Mcf/d, at least once each 3 Months, (iv) if the deliveries of Gas through the meter average more than 5,000 Mcf/d, at least 12 times per Year with no longer than 45 Days between each meter verification and calibration. Meters located on land managed by the Bureau of Land Management will be verified at least once each calendar quarter by Gatherer. If, upon any test, the measuring equipment is found to be inaccurate by 2% or less, previous readings of such equipment will be considered correct in computing the deliveries of Producers’ Gas and MV Mitigation Gas hereunder, but such equipment shall immediately be adjusted to record accurately. If, upon any test, the measuring equipment is found to be inaccurate by more than 2% of the average flow rate since the last test, then any previous recordings of such equipment shall be corrected to zero (0) error for any period which is known definitely or agreed upon, using the procedure set forth in Section 1(d) below. If such period is not known or agreed upon, such correction shall be made for a period covering 1/2 of the time elapsed since the date of the latest test, but not to exceed 16 Days when the equipment is tested every Month and not to exceed 45 Days when the equipment is tested every 3 months. If Producers desire a special test of any measuring equipment, then at least 72 hours advance Notice shall be given to Gatherer by Producers, and both Parties shall cooperate to secure a prompt test of the accuracy of such equipment. If the measuring equipment so tested is found to be inaccurate by 2% or less, Gatherer shall have the right to bill Producers for the costs incurred due to such special test, including any labor and transportation costs and Producers shall pay such costs promptly upon invoice thereof.

(d) Adjustments. If, for any reason, any measurement equipment is out of adjustment, out of service, or out of repair and the total calculated hourly flow rate through each meter run is found to be in error by an amount of the magnitude described in Section 2(c), the total quantity of Producers’ Gas and MV Mitigation Gas delivered shall be redetermined in accordance with the first of the following methods which is feasible:

(1) by using the registration of any check meters, if installed and accurately registering (subject to testing as described in Section 2(c)), or

(2) where parallel multiple meter runs exist, by calculation using the registration of such parallel meter runs; provided that they are measuring Producers’ Gas and MV Mitigation Gas from upstream headers in common with the faulty metering equipment, are not controlled by separate regulators, and are accurately registering; or

(3) by correcting the error by rereading of the official charts, or by straightforward application of a correcting factor to the quantities recorded for the period (if the net percentage of error is ascertainable by calibration, tests or mathematical calculation); or

 

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(4) by estimating the quantity, based upon deliveries made during periods of similar conditions when the meter was registering accurately.

(e) Meter Records Retention. Gatherer shall retain and preserve for a period of at least 6 years all test data, charts, and other similar records.

(f) Nonuse of Receipt Point. If Producers have failed to nominate Producers’ Gas or MV Mitigation Gas for delivery at a Receipt Point for 3 consecutive Months, Gatherer shall have the right, at any time thereafter, to Notify Producers of such nonuse. Upon receipt of such nonuse Notice, Producers shall promptly provide Notice to Gatherer whether they intend to resume deliveries of Producers’ Gas or MV Mitigation Gas at such Receipt Point and the date by which such deliveries will resume. If Producers fail to provide such Notice or Notify Gatherer that they do not intend to resume deliveries of Producers’ Gas or MV Mitigation Gas at such Receipt Point, then Gatherer will have the right to disconnect the pad level custody transfer meter at such Receipt Point (or, if Gatherer has not installed a pad level custody meter at such Receipt Point, to disconnect Producers’ Wellhead Meter at such Receipt Point).

(g) Performance by Producers. Gatherer shall have the right to request that Producers or its designee(s) provide the services necessary to read, test, calibrate, and adjust Producers’ Wellhead Meters and Gatherer’s Receipt Meters on behalf Gatherer hereunder. Upon Notice by Gatherer to Producers to perform such services for any of Producers’ Wellhead Meters or Gatherer’s Receipt Meters, Producers or its designee(s) shall commence performing such services as soon as reasonably practicable. Such services shall be performed by Producers or its designee(s) for Gatherer at a reasonable allocated cost for the actual, recorded time spent by the employees of Producers or its designee(s) performing such services.

(h) Pulsation. If Gas pulsation problems occur upstream of the Barnett Receipt Points, Producers, or their designee, shall take the reasonable and customary industry adopted steps necessary to mitigate such pulsation. If Gas pulsation occurs downstream of the Barnett Receipt Points, Gatherer, or its designee, shall take the reasonable and customary industry adopted steps necessary to mitigate such pulsation.

3. Measurement Specifications.

(a) Units. The unit of volume for measurement shall be one (1) Cubic Foot. Such measured volumes shall be multiplied by their Gross Heating Value per Cubic Foot and divided by 1,000,000 to determine MMBtu’s delivered hereunder.

(b) Temperature. The temperature of Producers’ Gas and MV Mitigation Gas shall be determined by a recording thermometer installed so that it may record the temperature of Producers’ Gas and MV Mitigation Gas flowing through the meters, or such other means of recording temperature as may be mutually agreed upon by the Parties. The average of the record to the nearest one degree Fahrenheit (1°F), obtained while Producers’ Gas and MV Mitigation Gas is being delivered, shall be the applicable flowing Gas temperature for the period under consideration.

 

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(c) Specific Gravity. The specific gravity of Producers’ Gas and MV Mitigation Gas shall be determined by a recording gravitometer or chromatographic device installed and located at a suitable point to record representative specific gravity of Gas being metered or, at Gatherer’s option, by spot samples or continuous sampling using standard type gravity methods. If a recording gravitometer or chromatographic device is used, the gravity to the nearest one-thousandth (0.001) obtained while Producers’ Gas and MV Mitigation Gas is being delivered shall be the specific gravity of the Gas used for the recording period. If the spot sample or continuous sampling method is used, the gravity shall be determined to the nearest one-thousandth (0.001). Spot sampling shall be determined at the same frequency as Gross Heating Value is determined pursuant to Section 3(f), below. The result should be applied during such Month for the determination of Producers’ Gas and MV Mitigation Gas volumes delivered.

(d) Supercompressibility. Adjustments to measured Gas volumes for the effects of supercompressibility shall be made in accordance with accepted American Gas Association standards. Gatherer shall obtain appropriate carbon dioxide and nitrogen mole fraction values for Producers’ Gas and MV Mitigation Gas delivered as may be required to compute such adjustments in accordance with standard testing procedures. At Gatherer’s option, equations for the calculation of supercompressibility may be taken from either the American Gas Association Manual for the Determination of Supercompressibility Factors for Natural Gas, dated December, 1962 (also known as the “NX-19 Manual”) or the American Gas Association Report No. 8, dated December 1985, Compressibility and Supercompressibility for Natural Gas and Other Hydrocarbon Gases, latest revision.

(e) Pressure. For purposes of measurement and meter calibration, the atmospheric pressure for each of the Receipt Points and Delivery Points shall be assumed to be the pressure value determined by Gatherer, or its designee, for the county elevation in which such point is located under generally accepted industry practices irrespective of the actual atmospheric pressure at such points from time to time. For the purposes herein, such atmospheric pressure will be assumed to be 14.65 pounds per square inch absolute.

(f) Gross Heating Value. The Gross Heating Value of the Gas delivered at the Receipt Points and Delivery Points shall be determined using the following schedule: (i) if the deliveries of Gas through the meter average less than 100 Mcf/d, at least once each Year, (ii) if the deliveries of Gas through the meter average between 100 Mcf/d and 500 Mcf/d, at least once each 6 Months, (iii) if the deliveries of Gas through the meter average between 500 Mcf/d and 5,000 Mcf/d, at least once each 3 Months, (iv) if the deliveries of Gas through the meter average more than 5,000 Mcf/d, at least 12 times per Year with no longer than 45 Days between each test, by means of some approved method of general use in the Gas industry.

(g) Quality Specifications. Determination of the Gross Heating Value, relative density and compressibility at the Receipt Points and Delivery Points will be made using the following standards (as amended from time to time by the relevant professional association):

(1) Gas Processors Association (GPA) 2166 - Obtaining Natural Gas Samples for Analysis of Gas.

 

6


(2) Gas Processors Association (GPA) 2261 – Analysis for Natural Gas and Similar Gaseous Mixtures by Gas Chromatography.

(3) Gas Processors Association (GPA) 2145 – Physical Constants for paraffin Hydrocarbons and Other Components of Natural Gas.

(4) Gas Processors Association (GPA) 2172 – Calculation of Gross Heating Value, Relative Density, and Compressibility of Natural Gas Mixtures from Compositional Analysis.

(h) Other Contaminants. Other tests to determine water content, sulfur, hydrogen sulfide, inert gases, and other impurities in Producers’ Gas and MV Mitigation Gas shall be conducted whenever requested by either Party and shall be conducted in accordance with standard industry testing procedures.

(i) New Test Methods. If a new method or technique is developed with respect to Gas measurement or the determination of the factors used in such Gas measurement, then such new method or technique may be substituted for a method set forth in this Section 3 when such methods or techniques are in accordance with the currently accepted standards of the American Gas Association if mutually agreed to by the Parties.

 

7


Exhibit E

ADDRESSES FOR NOTICE

 

If to Chesapeake Midstream Partners, L.L.C., to:

 

Chesapeake Midstream Partners, L.L.C.

 

777 NW Grand Boulevard

 

Oklahoma City, Oklahoma 73118

 

Attn: J. Mike Stice

 

Fax: (405) 849-6134

 

With a copy to:

 

Global Infrastructure Management, LLC

 

12 East 49th Street

 

38th Floor

 

New York, New York 10017

 

Attn: Salim Samaha

 

Fax: (646) 282-1599

 

If to Chesapeake Energy Marketing, Inc., Chesapeake Exploration, L.L.C., Chesapeake Louisana L.P. or DD JET, L.L.C., to:

 

Chesapeake Energy Marketing, Inc.

     

6100 North Western Avenue

       

Oklahoma City, Oklahoma 73118

       

Attention:

  James C. Johnson        

Telecopy:

  (405) 849-9163        

and

         

Attention:

  Mark C. Edge        

Telecopy:

  (405) 849-9239        


Exhibit F: Payout Calculation

($ thousands)   Jun-2020     2021     2022     2023
(Pre-Payout)
    2023
(Post-Payout)
    2024     2025  

Illustrative Producers’ Gas Volume From a New Pad Connection (Mcf) (1)

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

% of Annual Producers’ Gas Volume Attributable to Payout (Until Target IRR Achieved)

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

Producers’ Gas Volume Attributable to Payout

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

Barnett Fees ($ / Mcf) (2)

    $ **      $ **      $ **      $ **      $ **      $ **   

Escalation Factor

      2.0     2.0     2.0     2.0     2.0     2.0

Discount on Barnett Fees (%)

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

Discount on Barnett Fees ($ / Mcf)

    $ **      $ **      $ **      $ **      $ **      $ **   
                                                 

Value of Discount to Producers ($ 000s)

    $ **      $ **      $ **      $ **      $ **      $ **   
                                                 

Unlevered Cash Flows ($ 000s) (3)

  $ **      $ **      $ **      $ **      $ **      $ **      $ **   

Target IRR (4)

    **            
                                                       

Barnett Fees to Gatherer

    $ **      $ **      $ **      $ **      $ **      $ **   
                                                 

 

(1) Illustrative New Pad Connection assuming 3 wells drilled and production per well based on the Barnett Type Curve.
(2) Assumes ** psig Receipt Point pressure; Barnett Fees of $** / Mcf in 2009 escalated at **% per year to 2021 (post-Minimum Volume Period).
(3) Assumes $** million capital cost for illustrative New Pad Connection.
(4) Represents the unlevered pre-income tax rate of return on cash flows to Producers, calculated using Microsoft Excel’s XIRR formula.


Exhibit G

[Intentionally Deleted]


Exhibit H

GATHERING SYSTEM OWNER ACKNOWLEDGMENT

THIS GATHERING SYSTEM OWNER ACKNOWLEDGMENT (this “Acknowledgment”) is entered into as of             , by             , a             , (“Acquirer”), and Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”). As indicated in Section 3 below, Chesapeake Energy Marketing, Inc., Chesapeake Operating, Inc., Chesapeake Exploration L.L.C., Chesapeake Louisiana L.P., and DDJET Limited, L.L.P., (collectively the “Producers”) and their Affiliates are third party beneficiaries under this Acknowledgment.

Recitals

Gatherer and Producers are parties to that certain Gas Gathering Agreement, dated January 25, 2010 but effective as of February 1, 2010 (the “GGA”). This Acknowledgment is entered into by Gatherer and Acquirer pursuant to Section          of the GGA. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the GGA.

NOW THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Acquirer and Gatherer agree as follows:

1. Acquired System. As of             , Acquirer has acquired from Gatherer the natural gas gathering system or interest in a natural gas gathering system described in Exhibit A hereto (the “Acquired System”).

2. Acknowledgments and Agreements. Gatherer and Acquirer (i) acknowledge that Gatherer has provided to Acquirer a copy of the GGA (excluding the exhibits and schedules thereto that do not relate to the Acquired System); (ii) acknowledge that the term of the GGA commenced on September 30, 2009 and, unless terminated sooner in accordance with its terms, continues in effect through September 30, 2029 (the “Primary Term”) and continues in effect from 12-month period to 12-month period thereafter, unless terminated by Producers or Gatherer upon notice to the other no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable; (iii) acknowledge that the Acquired System is a part of a Gathering System; (iv) acknowledge Producers’ rights to have Producers’ Gas connected to, received by, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered to Producers on and over the Gathering System, on and subject to the terms and conditions provided in the GGA; and (v) agree that Producers, the successors and permitted assigns of Producers under the GGA, and any Persons who acquire any interest in the Dedicated Barnett Properties and enter into a separate gas gathering agreement pursuant to Section 9.3(a) of the GGA covering any part of the Acquired System (collectively, the “Producer Parties”) shall have the rights referenced in clause (iv) above in respect of the Acquired System. Acquirer agrees that if Acquirer sells, transfers or otherwise disposes of an interest in or all or any part of the Acquired System during the term of the GGA, Acquirer shall execute (and shall cause the Person acquiring such interest or part to execute) an acknowledgment substantially in the same form and content as this Acknowledgment and otherwise acceptable to Producers, acting reasonably.

 

1


3. No Assumption. Without limiting Acquirer’s acknowledgments, agreements and obligations pursuant to Section 2, the execution by Acquirer of this Acknowledgment shall not constitute any assumption by Acquirer of any of Gatherer’s liabilities or obligations under the GGA, nor shall it serve to make Acquirer a party to, or give Acquirer any rights (as a third party beneficiary or otherwise) under, the GGA.

4. Beneficiaries. Producer Parties are expressly intended by Acquirer and Gatherer to be third party beneficiaries of the acknowledgments and agreements set forth in this Acknowledgment. Any one or more of the Producer Parties shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of Gatherer. Likewise, Gatherer shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of the Producer Parties.

5. No Amendment to GGA. Nothing contained in this Acknowledgment shall be deemed to modify, amend, alter, limit or otherwise change any of the provisions of the GGA itself or the rights or obligations of Gatherer or Producers thereunder.

6. Counterparts. This Acknowledgment may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same document. To facilitate recordation, there may be omitted from the exhibits to this Acknowledgment in certain counterparts descriptions of assets located in recording jurisdictions other than the jurisdiction (county, parish, state, Indian or federal agency) in which the particular counterpart is to be filed or recorded.

7. Governing Law. This Acknowledgment shall be construed, enforced and interpreted according to the laws of the State of Texas, without regard to the conflicts of laws rules thereof.

8. Amendment. This Acknowledgment shall not be amended or modified except pursuant to a written instrument executed by Gatherer and Acquirer and consented to in writing by the Producer Parties.

[Signature page follows]

 

2


IN WITNESS WHEREOF, the undersigned have executed this Acknowledgment as of the day first above written.

 

ACQUIRER:
[ACQUIRER]

By:

 

 

[Name]  
[Title]  

GATHERER:

CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.

By:

 

 

[Name]  
[Title]  

[Add appropriate state acknowledgment forms for notaries public]

Signature Page to Gathering System Owner Acknowledgment


EXHIBIT A

Acquired System

[See attached.]

Exhibit A to Gathering System Owner Acknowledgment


Exhibit I

DEDICATED PROPERTIES OWNER ACKNOWLEDGMENT

THIS DEDICATED PROPERTIES OWNER ACKNOWLEDGMENT (this “Acknowledgment”) is entered into as of             , by             , a             , (“Acquirer”), and [insert name of seller/transferor of the Acquired Interests described on Exhibit A] (the “Producer”). As indicated in Section 3 below, Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”) and its Affiliates are third party beneficiaries under this Acknowledgment.

Recitals

Gatherer, Producer and certain Affiliates of Producer are parties to a Gas Gathering Agreement, dated January 25, 2010 but effective as of February 1, 2010 (the “GGA”). This Acknowledgment is made by Acquirer pursuant to Section 9.3(a) of the GGA. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the GGA.

NOW THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Acquirer and Producer agree as follows:

1. Acquired Interests. As of             , Acquirer has acquired from Producer the interest in the oil and gas leases and properties described in Exhibit A hereto (the “Acquired Interests”).

2. Acknowledgments and Agreement. Producer and Acquirer (i) acknowledge that Producer has provided to Acquirer a copy of the GGA (excluding the exhibits and schedules thereto that do not relate to the Acquired Interests); (ii) acknowledge that the term of the GGA commenced on September 30, 2009 and, unless terminated sooner in accordance with its terms, continues in effect through September 30, 2029 (the “Primary Term”) and continues in effect from 12-month period to 12-month period thereafter, unless terminated by Producer or Gatherer upon notice to the other no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable; (iii) acknowledge that the Acquired Interests are a part of the [Insert whichever of the following is applicable: [Barnett Dedicated Properties][Midcon Dedicated Properties][Producers’ Remaining Properties]] and are exclusively dedicated and committed to the performance of the Agreement; (iv) acknowledge that Gas produced from the Acquired Interests and owned or controlled by Acquirer or its Affiliates shall not be gathered on any other gas gathering system or delivered to any other gas gatherer, gas purchaser, gas marketer, or other Person prior to the [Insert whichever of the following terms is applicable: [Barnett Delivery Points][Midcon Delivery Points][PRP Delivery Points]], in each case on and subject to the terms and conditions provided in the GGA; and (v) agree that Gatherer, the successors and permitted assigns of Gatherer under the GGA, and any Persons who acquire any interest in the [Barnett] Gathering System and enter into a separate gas gathering agreement pursuant to Section          of the GGA covering any part of the Acquired Interests (collectively, the “Gatherer Parties”) shall have the dedication rights referenced in clause (iv) above in respect


of the Acquired Interests. Acquirer agrees that if Acquirer sells, transfers or otherwise disposes of an interest in or all or any part of the Acquired Interests during the term of the GGA, Acquirer shall execute (and shall cause the Person acquiring such interest or part to execute) an acknowledgment substantially in the same form and content as this Acknowledgment and otherwise acceptable to Gatherer, acting reasonably.

3. No Assumption. Without limiting Acquirer’s acknowledgments, agreements and obligations pursuant to Section 2, the execution by Acquirer of this Acknowledgment shall not constitute any assumption by Acquirer of any of Producers’ liabilities or obligations under the GGA, nor shall it serve to make Acquirer a party to, or give Acquirer any rights (as a third party beneficiary or otherwise) under, the GGA.

4. Beneficiaries. Gatherer Parties are expressly intended by Acquirer and Producer to be third party beneficiaries of the acknowledgments and agreements set forth in this Acknowledgment. Any one or more of the Gatherer Parties shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of Producer. Likewise, any one or more of Producers shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of the Gatherer Parties.

5. No Amendment to GGA. Nothing contained in this Acknowledgment shall be deemed to modify, amend, alter, limit or otherwise change any of the provisions of the GGA itself or the rights or obligations of Gatherer or Producers thereunder.

6. Counterparts. This Acknowledgment may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same document. To facilitate recordation, there may be omitted from the exhibits to this Acknowledgment in certain counterparts descriptions of assets located in recording jurisdictions other than the jurisdiction (county, parish, state, Indian or federal agency) in which the particular counterpart is to be filed or recorded.

7. Governing Law. This Acknowledgment shall be construed, enforced and interpreted according to the laws of the State of Texas, without regard to the conflicts of laws rules thereof.

8. Amendment. This Acknowledgment shall not be amended or modified except pursuant to a written instrument executed by Producer and Acquirer and consented to in writing by the Gatherer Parties.

[Signature page follows]

 

2


IN WITNESS WHEREOF, the undersigned have executed this Acknowledgment as of the day first above written.

 

ACQUIRER:
[ACQUIRER]
By:    
[Name]  
[Title]  

 

PRODUCER:

[insert name of seller/transferor of the Acquired

Interests described on Exhibit A]

By:    

[Name]

 

[Title]

 

[Add appropriate state acknowledgment forms for notaries public]

Signature Page to Dedicated Properties Owner Acknowledgment


EXHIBIT A

Acquired Interests

[See attached.]

Exhibit A to Dedicated Properties Owner Acknowledgment


Exhibit J

Existing Processing Agreements

 

1. Processing Letter Agreement between Chesapeake Energy Marketing, Inc., a Delaware corporation, and Texas Midstream Gas Services, L.L.C., an Oklahoma limited liability company, dated June 1, 2009, with respect to the North Zulch Gathering System.

 

2. Processing Letter Agreement between Chesapeake Energy Marketing, Inc., a Delaware corporation, and Chesapeake Midstream Gas Services, L.L.C., an Oklahoma limited liability company, dated June 1, 2009, with respect to the Daube Ranch Gathering System.

 

3. Processing Letter Agreement between Chesapeake Energy Marketing, Inc., a Delaware corporation, and Texas Midstream Gas Services, L.L.C., an Oklahoma limited liability company, dated June 1, 2009, with respect to the Douglas Gathering System.

 

4. Processing Letter Agreement between Chesapeake Energy Marketing, Inc., a Delaware corporation, and Texas Midstream Gas Services, L.L.C., an Oklahoma limited liability company, dated June 1, 2009, with respect to the Johnson State Gathering System.


Exhibit K

[Intentionally Deleted]


Exhibit L

OIL AND GAS LEASE PARTIAL ASSIGNMENT

KNOW ALL MEN BY THESE PRESENTS:

THIS OIL AND GAS LEASE PARTIAL ASSIGNMENT (this “Assignment”), made and entered this          day of             ,         , by and between [name of Chesapeake entity], a             , hereinafter referred to as Assignor, and [name of Gatherer entity], a             , hereinafter referred to as “Assignee.”

RECITALS

Assignor is a party of those certain oil and gas leases and/or farmout agreements, right of way agreements, pooling orders and other instruments described on Annex 1 to this Assignment (collectively, the “Leases”). The Leases cover and include the drilling and spacing unit described as [insert description of the Unit] (the “Unit”).

The Leases grant Assignor the right to construct, operate and maintain pipelines for the purpose of transporting hydrocarbons from the premises covered by the Leases or lands pooled therewith.

NOW, THEREFORE, for the consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, and subject to the following terms, Assignor does hereby grant, convey, assign and transfer unto Assignee on a non-exclusive basis, without representation or warranty of title, either express or implied, part of the rights granted to Assignor as Lessee under the Leases to construct, operate and maintain pipelines to and from the [name of well] located in the Unit together with rights of ingress and egress to the premises covered by the Leases and all other necessary rights and purposes incident to construction, operation and maintenance of pipelines (the “Assigned Non-Exclusive Rights”). Assignor reserves the right to exercise itself or to assign to other parties the rights granted to Assignor under the Lease to construct pipelines and also reserves all other rights, obligations and benefits under the Leases not expressly assigned herein.


Assignee agrees to comply with any and all terms, conditions and restrictions contained in the Leases relating to the exercise of the Assigned Non-Exclusive Rights especially those concerning use of the surface for laying pipelines and conducting related operations.

This Assignment is executed on the date first referenced above.

 

ASSIGNOR

[Name of Chesapeake entity]

By:    
Name:  
Title:  
ASSIGNEE
[Name of Gatherer entity]
By:    
Name:  
Title:  

[Insert forms of applicable State acknowledgements]


Annex 1 to Partial Assignment of Oil and Gas Leases

[insert description of oil and gas leases, farmout agreements, right of way agreements, pooling orders and other instruments constituting the Leases]


Exhibit M

MEMORANDUM OF GAS GATHERING AGREEMENT

THIS MEMORANDUM OF GAS GATHERING AGREEMENT (this “Memorandum”) is made and entered into as of [            ], 2010 (the “Effective Date”), by and among (i) Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”), (ii) Chesapeake Energy Marketing, Inc., a Delaware corporation (“CEMI”), (iii) Chesapeake Operating, Inc., an Oklahoma corporation (“COI”), (iv) Chesapeake Exploration L.L.C., an Oklahoma limited liability company (“CELLC”), (v) Chesapeake Louisiana L.P., an Oklahoma limited partnership (“CLLP”) and (vi) DDJET Limited LLP, a Texas limited liability company (“DDJET” and, together with CELLC and CLLP, the “CHK Producers”). CEMI, COI and the CHK Producers are referred to herein collectively as the “Producers.” Gatherer and Producers are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals

Gatherer and Producers entered into that certain Gas Gathering Agreement (the “Agreement”) dated of even date herewith.

The Parties desire to file this Memorandum in the applicable real property records to give notice of the existence of the Agreement and certain provisions contained therein.

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

1. Certain Terms. The following terms shall have the meanings indicated below:

 

  (A) Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person, whether by contract, voting power, or otherwise. For purposes of this definition, Gatherer shall not be considered an Affiliate of any of Producers or any of their other Affiliates and Producers and their Affiliates (other than Gatherer) shall not be considered an Affiliate of Gatherer.

 

  (B) Barnett AMI” means the geographic area described in Exhibit A hereto.

 

  (C)

Barnett Dedicated Properties” means all interests of Producers and their Affiliates (and their successors and assigns) in oil, gas, and/or mineral leases covering lands located within the Barnett AMI, whether now owned or hereafter acquired, and all Gas produced or delivered therefrom or attributable thereto, and all interests of Producers or their Affiliates (and their successors and assigns) in all oil or gas wells, whether now existing or drilled hereafter, on, or completed on, lands covered by any such oil, gas, and/or mineral lease or on other lands within the Barnett AMI, including the wells described in Part I of Exhibit B, but excluding (i) any oil, gas and/or mineral leases purchased by Producers or their

 

1


 

Affiliates after the Effective Date that are subject to a dedication to a gas gathering system or agreement (other than the Barnett Gathering System) that was in effect prior to (and was not entered into in connection with or as part of) such acquisition (but only to the extent of such dedication), (ii) the properties described in Part II of Exhibit B and (iii) any other non-material properties dedicated by Producers as of the Effective Date to a gathering system owned and operated by a Person not an Affiliate of Producers (other than Gatherer), not to exceed 3,000 net mineral acres.

 

  (D) Barnett Delivery Points” means (i) the points identified in Schedule A3 to the Agreement at which Gas is delivered to a Barnett Receiving Transporter by Gatherer, (ii) any additional delivery points that, from time to time, are added at the request of Producers (at Producers’ expense) to the Barnett Gathering Systems after the Effective Date to permit delivery of Gas to the same or other Barnett Receiving Transporters, as provided in Section 6(f) of Exhibit A to the Agreement and (iii) any additional delivery points added to the Barnett Gathering Systems for gas lift operations at Producer’s request and expense, as provided in Section 6(b)(2) or Section 11 of Exhibit A to the Agreement.

 

  (E) Barnett Gathering System” means each of the discrete gas gathering systems described in Exhibit C, together with any modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time, to each such gathering system.

 

  (F) Barnett Receiving Transporters” means the intrastate or interstate pipeline companies, gathering companies, local distribution companies, or end-users taking delivery or custody of Producers’ Gas and MV Mitigation Gas at, or immediately downstream of, a Barnett Delivery Point.

 

  (G) Control” (and the correlative terms “controlling,” “controlled by,” and “under common control with”) means as to any entity the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the Securities Exchange Act of 1934, as amended) of the power or authority, through ownership of voting securities, by contract, or otherwise, to control or direct the management and policies of the entity. Notwithstanding anything herein to the contrary, other than with respect to the term “Affiliates” as used in the definition of “Producers’ Gas”, the term “Control” and its correlative terms shall not apply to the definition of “Producers’ Gas”.

 

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

 

  (I)

Producers’ Barnett Reservations” means Producers’ rights to (i) operate wells producing from the Barnett Dedicated Properties as a reasonably prudent operator, (ii) separate or process Gas prior to delivery at the Barnett Receipt Points so long as such Producers’ Gas meets the gas specifications set forth in the

 

2


 

Agreement after such separation or processing, (iii) use Gas produced from the Barnett Dedicated Properties for lease operations, and (iv) pool, communitize, or unitize Producers’ interests in the Barnett Dedicated Properties.

2. Notice. Notice is hereby given of the existence of the Agreement and all of its terms, provisions, covenants and conditions to the same extent as if the Agreement was fully set forth herein. Certain provisions of the Agreement are summarized in Sections 3 through 6 below.

3. Term. The term of the Agreement commenced on September 30, 2009 and, unless terminated sooner in accordance with its terms, continues in effect through September 30, 2029 (the “Primary Term”) and continues in effect from 12-month period to 12-month period thereafter, unless terminated by either Party upon notice to the other Party no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable.

4. Dedication. Subject to the terms and conditions of the Agreement, including, without limitation, those relating to Producers’ Barnett Reservations, Producers have (i) exclusively dedicated and committed to the performance of the Agreement the Barnett Dedicated Properties, (ii) agreed not to deliver any Gas produced from the Barnett Dedicated Properties and owned or controlled by Producers or their Affiliates to any other gas gatherer prior to the Barnett Delivery Points, and (iii) agreed to cause any existing or future Affiliates of Producers to be bound by, and to execute and join as a party, the Agreement.

5. Gathering Services. Gatherer has agreed to connect, receive, gather, compress, dehydrate, treat, and process, as applicable, and redeliver, any Gas produced from the Barnett Dedicated Properties and owned or controlled by Producers or their Affiliates, on the Barnett Gathering System, for the fees and on and subject to the terms and conditions provided in the Agreement.

6. Covenant Running with the Land. The dedication and commitment made by Producers and their Affiliates referenced in Section 1 above is a covenant running with the land. Any transfer by Producers or their Affiliates of any of Producers’ interests in the Barnett Dedicated Properties shall comply with Article 9 of the Agreement.

7. No Amendment to Agreement. This Memorandum is executed and recorded solely for the purpose of giving notice of the Agreement and of certain of the terms set forth therein. Nothing contained in this Memorandum shall be deemed to modify, amend, alter, limit or otherwise change any of the provisions of the Agreement itself or the rights or obligations of the Parties thereunder. In the event of any conflict between the terms of the Agreement and the terms of this Memorandum, the terms of the Agreement shall control.

 

3


8. Contact Information. The contact information of the Parties is as follows:

 

Gatherer:

  

Chesapeake Midstream Partners, L.L.C.

  

777 NW Grand Boulevard

  

Oklahoma City, Oklahoma 73118

  

Attn: J. Mike Stice

  

Fax: (405) 849-6134

  

With a copy to:

  

Global Infrastructure Management, LLC

  

12 East 49th Street

  

38th Floor

  

New York, New York 10017

  

Attn: Salim Samaha

  

Fax: (646) 282-1599

  

Producers:

  

Chesapeake Energy Marketing, Inc.

  

6100 North Western Avenue

  

Oklahoma City, Oklahoma 73118

  

Attention:

  James C. Johnson               

Telecopy:

  (405) 849-9163               

and

                

Attention:

  Mark C. Edge               

Telecopy:

  (405) 849-9239               

9. Counterparts. This Memorandum may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same document. To facilitate recordation, there may be omitted from the exhibits to this Memorandum in certain counterparts descriptions of assets located in recording jurisdictions other than the jurisdiction (county, parish, state, Indian or federal agency) in which the particular counterpart is to be filed or recorded.

IN WITNESS WHEREOF, this Memorandum has been signed by or on behalf of each of the Parties as of the Effective Date.

 

GATHERER:
CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.
By:  

 

[Name]  
[Title]  

 

4


CEMI:
CHESAPEAKE ENERGY MARKETING, INC.
By:  

 

[Name]  
[Title]  
COI:
CHESAPEAKE OPERATING, INC.
By:  

 

[Name]  
[Title]  

 

CHK PRODUCERS:
CHESAPEAKE EXPLORATION, L.L.C.
By:  

 

[Name]  
[Title]  
CHESAPEAKE LOUISIANA, L.P.
By: CHESAPEAKE OPERATING, INC.

            Its General Partner

By:  

 

[Name]  
[Title]  

 

DDJET LIMITED, LLP
By:  

 

[Name]  
[Title]  

 

5


STATE OF         

  §
  §

COUNTY OF         

  §

The foregoing instrument was acknowledged before me by [name], the [title] of [entity, type, jurisdiction], on behalf of said [type], this [date], 2009.

 

Notary Public in and for:

 

 

STATE OF         

  §
  §

COUNTY OF         

  §

The foregoing instrument was acknowledged before me by [name], the [title] of [entity, type, jurisdiction], on behalf of said [type], this [date], 2009.

 

Notary Public in and for:

 

 

STATE OF         

  §
  §

COUNTY OF         

  §

The foregoing instrument was acknowledged before me by [name], the [title] of [entity, type, jurisdiction], on behalf of said [type], this [date], 2009.

 

Notary Public in and for:

 

Acknowledgment Page to Memorandum of Gas Gathering Agreement

 

1


STATE OF         

  §
  §

COUNTY OF         

  §

The foregoing instrument was acknowledged before me by [name], the [title] of [entity, type, jurisdiction], on behalf of said [type], this [date], 2009.

 

Notary Public in and for:

 

 

STATE OF         

  §
  §

COUNTY OF         

  §

The foregoing instrument was acknowledged before me by [name], the [title] of [entity, type, jurisdiction], on behalf of said [type], this [date], 2009.

 

Notary Public in and for:

 

Attachments:

Exhibit A – Barnett AMI

Exhibit B – Barnett Dedicated Wells

Exhibit C – Barnett Gathering System

Acknowledgment Page to Memorandum of Gas Gathering Agreement

 

2


Schedule A1

Barnett Gathering Systems

 

GGS Name

  

CMP Area

  

Location /
County

  

Location /
State

   Active
Constructed
Pipe
Length in Miles
   Constructed
Pipe Not in
Service
Length in
Miles
   # ROW
Agreements
   # ROW
Related
Permits

Barnett Central GGS

   Barnett Central    Johnson    TX    163.47       650    137

Barnett North GGS

   Barnett Arc Park    Tarrant    TX    142.3    63.95    322    102

Barnett South GGS

   Barnett Cleburne    Johnson    TX    301.95    1.65    127    119

Covington GGS

   Barnett Cleburne    Johnson    TX    1.01       4    1

Forsberg GGS

   Barnett Cleburne    Johnson    TX    1.7       5    1

Freedom 1 GGS

   Barnett Cleburne    Johnson    TX    proposed pipe       0    0

Lewisville GGS

   Barnett Arc Park    Tarrant    TX    3.92         

Little Hoss GGS

   Barnett Cleburne    Johnson    TX    23.99       6    3

Mary's Creek GGS

   Barnett Arc Park    Tarrant    TX    6.93       23    4

Paloma GGS

   Barnett Cleburne    Johnson    TX    1.01       10    2

Peregrine Loop 2 and 4 GGS

   Barnett Cleburne    Johnson    TX          9    0

Peregrine Loop 3 GGS

   Barnett Cleburne    Johnson    TX    0.36       4    0

Peregrine Loop 5 GGS

   Barnett Cleburne    Johnson    TX    1.11       4    0

Peregrine Loop 6 GGS

   Barnett Cleburne    Johnson    TX    4.68       19    0

Peregrine Loop 7 GGS

   Barnett Cleburne    Johnson    TX    2.92       11    4

Tarrant West GGS

   Barnett Arc Park    Tarrant    TX    6.18       10    0

DFW Gathering System (see map attached to this Schedule A1)


SCHEDULE A2

BARNETT FEES

 

1. Producers shall pay Gatherer the amount specified in the table below as consideration for receiving Producers’ Gas and MV Mitigation Gas at each Receipt Point on the Barnett Gathering System (excluding the DFW Area and the fixed fees areas described in this Schedule A2) each month and providing the applicable level of gathering services provided:

 

Receipt Point Pressures

   Deemed Stages  of
Compression1
  Fee2
($/
Mcf)
 

Less than ** psig

   **   $ *

** to ** psig

   **   $ *

** to ** psig

   **   $ *

** to ** psig

   **   $ *

Greater than or equal to ** psig

   **   $ *

 

2. Producers shall pay Gatherer a Fee of $** per Mcf as consideration for receiving Producers’ Gas and MV Mitigation Gas at each Receipt Point in the DFW Area and providing the gathering services contemplated in the Agreement. The Fee specified in this Section 2 of this Schedule A2 will be escalated as of January 1 of each Year to equal the product of (i) the Fee in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011.

 

1

For the avoidance of doubt, the data in this column is applicable only to fuel cap calculations.

2

The Fees specified in this table will be escalated effective as of January 1 of each Year to equal the product of (i) the Fee in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011; provided, as to the Barnett Central GGS, the escalation of the fees will also be made in accordance with Section 4 of this Schedule A2.

 

1


3. Producers shall pay Gatherer the amount specified in the table below as consideration for receiving Producers’ Gas and MV Mitigation Gas in the areas described in such table each month and providing the applicable level of gathering services provided:

 

CMP Gas Gathering System

   Fee3
($/
Mcf)
    Cost4
($/
Mcf)
    CMP
Net  Proceeds
($/Mcf)
 

Forsberg

   $ *     *   $ *

Covington

   $ *     *   $ *

Mary’s Creek

   $ *   $ *   $ *

Peregrine Loop 2/4

   $ *     *   $ *

Peregrine Loop 3

   $ *     *   $ *

Peregrine Loop 5

   $ *   $ *   $ *

Peregrine Loop 6

   $ *   $ *   $ *

Peregrine Loop 7

   $ *     *   $ *

West Tarrant

   $ *     *   $ *

Chip Shot (Barnett South)

   $ *   $ *   $ *

 

3

The Fees specified in this table will be escalated effective as of January 1 of each Year to equal the product of (i) the Fee in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011.

4

The costs specified in this table will be escalated effective as of January 1 of each Year to equal the product of (i) the cost in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011.

 

2


4. Barnett Central Gathering System. The following terms shall apply to the calculation of the Barnett Fees on the Barnett Central Gathering System.

(a) Gatherer shall invoice Producers for Producers’ Gas and MV Mitigation Gas received each Month at the Barnett Receipt Points on the Barnett Central Gathering System based on the Barnett Fees shown in Section 1 above

(b) The following delivery points on the Barnett Central Gathering System are covered by the ** Agreement dated September 1, 2007, between CEMI and ** (“**”), as amended (the “** Agreement”) are identified below, and such delivery points (together with any other mutually agreeable future delivery points on the Barnett Central Gathering that the Parties designate as such) shall be referred to herein as the “Barnett Central ** Delivery Points”:

 

Delivery Point

   Meter Number

**

   **

**

   **

**

   **

**

   **

(c) If (i) ** curtails or suspends services at the Barnett Central ** Delivery Points, including the occurrence of a force majeure event or similar interruption affecting **, (ii) Producers or the Total Parties reduce the contracted volumes of Gas or actual volumes of Gas delivered under the ** Agreement, or (iii) the pressures at any Barnett Central ** Delivery Point increase as the result of changes by ** in any Month and (as to each of clause (i), (ii) and (iii) preceding) any such event (or combination of such events) causes or results in a change in the distribution of the volume weighted average monthly Barnett Fee pressure tiers in Section 1 above for the Barnett Receipt Points on the Barnett Central Gathering System resulting in lower revenues to Gatherer from such Barnett Receipt Points for such Month, then such event is referred to herein as a “** Event.”

(d) During any Month when a ** Event occurs or is in effect, the Barnett Fees for each Barnett Receipt Point on the Barnett Central Gathering System for such Month shall be calculated using the Barnett Fee pressure tier that applied to such Barnett Receipt Point during the most recent Month preceding such ** Event in which a ** Event did not occur.

(e) The provisions of this Section 4 of Schedule A2 shall apply to any replacements of the ** Agreement, whether with **, its successors, or other Person providing low pressure service.

 

3


(f) An illustrative calculation of the volume weighted average monthly Barnett Fee pressure tiers under clause (c) above is shown below.

 

4


Month Before ** Event   

Tier

   CMP Pressure   Monthly
MMCF
    Monthly
MMCF
(%)
    Applicable
Tariff

($/MCF)
    WA Fee
($/MCF)
 

1

   <[**]   [**   [** ]%    $ [**   $ [**

2

     [**]   [**   [** ]%    $ [**   $ [**

3

     [**]   [**   [** ]%    $ [**   $ [**

4

     [**]   [**   [** ]%    $ [**   $ [**

5

   >[**]   [**   [** ]%    $ [**   $ [**
                        
     [**   [** ]%      $ [**

 

Month of ** Event   

Tier

   CMP Pressure   Monthly
MMCF
    Monthly
MMCF
(%)
    Applicable
Tariff

($/MCF)
    WA Fee
($/MCF)
 

1

   <[**]   [**   [** ]%    $ [**   $ [**

2

     [**]   [**   [** ]%    $ [**   $ [**

3

     [**]   [**   [** ]%    $ [**   $ [**

4

     [**]   [**   [** ]%    $ [**   $ [**

5

   >[**]   [**   [** ]%    $ [**   $ [**
                        
     [**   [** ]%      $ [**

 

Month of ** Event - Application of Additional Fee   

Tier

   CMP Pressure   Monthly
MMCF
    Monthly
MMCF
(%)
    Applicable
Tariff

($/MCF)
    WA Fee
($/MCF)
 

1

   <[**]   [**   [** ]%    $ [**   $ [**

2

     [**]   [**   [** ]%    $ [**   $ [**

3

     [**]   [**   [** ]%    $ [**   $ [**

4

     [**]   [**   [** ]%    $ [**   $ [**

5

   >[**]   [**   [** ]%    $ [**   $ [**
                        
     [**   [** ]%      $ [**

 

Note: Illustrative example only to show application of additional fee.

Step 1

  -  

Calculate the volume operating in each tier each month.

Step 2

  -  

Convert volumes into a percentage operating within each tier - MMCF %.

Step 3

  -  

Occurrence of a “** Event”.

Step 4

  -  

Compare the percentages (MMCF %) before the occurrence of a “** Event” with those after the event.

Step 5

  -  

Calculate revenue impairment to gatherer by multiplying MMCF % by appropriate Fees in both months.

Step 6

  -   If revenue impairment is confirmed, the weighted average Fee will be adjusted to the Fee for the most recent Month preceding such ** Event in which a ** Event did not occur.

Step 7

  -  

The difference in the weighted average Fee will be applied to each tier.

 

5


Schedule A3**

[Barnett Delivery Points]

 

 

** One (1) page omitted pursuant to confidential treatment request


Schedule A4, Part I**

[Barnett Dedicated Wells, Receipt Points and Pressures]

 

 

** 11 pages omitted pursuant to confidential treatment request


Schedule A4, Part II**

[Excluded Wells]

 

 

** One (1) page omitted pursuant to confidential treatment request


Schedule A5, Part I**

[Barnett AMI Abstracts]

 

 

** 72 pages omitted pursuant to confidential treatment request


Schedule A6: Barnett Maximum Daily Quantity

 

Barnett Gathering System

  

Barnett Maximum Daily

Quantity (Mcf / D)

 

Barnett North GGS

   *

Barnett Central GGS

   *

Barnett South GGS

   *

DFW GGS

   *

Little Hoss GGS

   *

Mary’s Creek GGS

   *

Paloma GGS

   *

Peregrine Loop 2 and 4 GGS

   *

Peregrine Loop 3 GGS

   *

Peregrine Loop 5 GGS

   *

Peregrine Loop 6 GGS

   *

Peregrine Loop 7 GGS

   *

Tarrant West GGS

   *

Covington GGS

   *

Forsberg GGS

   *

Freedom 1 GGS

   *

Lewisville GGS

   *

 

(1) MAOP is maximum allowable operating pressure. Without limiting the other terms of this Agreement, Gatherer shall not be required to make any connection to any of these Barnett Gathering Systems if the delivery pressures at such would exceed the maximum allowable operating pressures for such Barnett Gathering System. Neither Gatherer nor Producers shall be required to compress any Producers Gas or MV Mitigation Gas at the wellhead in order to effectuate delivery.


Schedule A7: Barnett Annual Minimum Volume

 

(in MCF)

Minimum Volume Period

   Barnett Annual
Minimum Volume

2010

   335,497,753

2011

   312,963,027

2012

   324,908,394

2013

   338,282,308

2014

   351,265,098

2015

   364,823,104

2016

   374,102,233

2017

   381,558,697

2018

   384,806,946

H1 2019

   180,999,151


Illustrative Fee Redetermination (January 1, 2012)

($ in millions, except as otherwise indicated)

 

        Minimum Volume Period        
        H2 2009     2010   2011        2012   2013   2014   2015   2016   2017   2018   H1 2019        LTM
H1
2020
  Capital Expenditures and Ad Valorem                                
  Original Barnett Cap Ex Projections   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
**%   Actual Barnett Cap Ex   $ ***      $ **   $ **                          
  Revised Projected Barnett Cap Ex             $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
   
  Total Cap Ex Difference   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
   
  Cumulative Capex Difference   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
  Accumulated Depreciation on Cap Ex Difference     **        **     **         **     **     **     **     **     **     **     **         **
                                                                                   
  Net Value of Cap Ex Difference   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
   
**%   Estimated Cap Ex Ad Valorem Tax Change (1)   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
   
  Revenues from Producers                                
  Original Barnett Revenue Projections   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      
   
**%   Actual Barnett Volumes (Mcf)     **        **                            
  Revised Projected Barnett Volumes (Mcf)         **         **     **     **     **     **     **     **     **         **
  Barnett Fees ($/Mcf)   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **         **
                                                                               
  Actual Barnett Revenues   $ **      $ **   $ **                          
  Revised Projected Barnett Revenues       $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      
   
  Applicable Barnett Revenues Differential   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      
   
  Barnett Compression Expenses                                
  Original Barnett Compression Projections   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
**%   Actual Barnett Compression Expense   $ **      $ **   $ **                          
  Revised Projected Barnett Compression Expense             $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
                                                                                   
  Barnett Compression Expense Difference   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
   
  IRR Calculation for Barnett Fee Redetermination                                
  Total Cap Ex Difference   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      
  Estimated Cap Ex Ad Valorem Tax Change (1)     **        **     **         **     **     **     **     **     **     **     **      
  Applicable Barnett Revenues Differential     **        **     **         **     **     **     **     **     **     **     **      
  Barnett Compression Expense Difference     **        **     **         **     **     **     **     **     **     **     **      
  Increased or (Decreased) Revenues from Barnett Fee Adjustment               **     **     **     **     **     **     **     **      
  Terminal Value                                   **
                                                                                   
  Annual Net Cash Flow Difference   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
   
  IRR (H2 2009 to 2020)     **                              
  NPV (Target IRR of **%)   $ **                                 
   
  Barnett Fee Adjustment Required to Achieve Target IRR                                
  Revised Projected Barnett Volumes (Mcf)               **     **     **     **     **     **     **     **         **
$**   Barnett Fee Adjustment             $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
                                                                     
  Increased or (Decreased) Revenues from Barnett Fee Adjustment             $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **       $ **
  Barnett Compression Expense Difference                                   **
  Estimated Cap Ex Ad Valorem Tax Change (1)                                   **
                                     
  Increased or (Decreased) Revenues from Barnett Fee Adjustment (net of Barnett Compression Expense Difference and Estimated Cap Ex Ad Valorem Tax Change)       $ **
   
  Terminal Value of Barnett Fee Adjustment     **                                 
  Terminal Value Multiple       **                              
   
  Weighted Average Barnett Fees (Original Projections)   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      
27.5%   Maximum Weighted Average Barnett Fees (after Redetermination)   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      
  Barnett Redetermination Cap   $ **      $ **   $ **       $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **      

 

(1) For simplicity, the Estimated Cap Ex Ad Valorem Tax Change is calculated based upon the differences between (A) the Actual Barnett Capex and Projected Barnett Cap Ex and (B) the Original Barnett Cap Ex Projections, to be calculated based on **% of the cumulative difference in any given year in such capital expenditures and calculating accumulated depreciation using 20-year straight line method.

 

Illustrative Depreciation Schedule - 20 Year Straight Line

Incremental Capex Above Schedule Capex                         
H2 2009    $**   $**   $**   $**   $**   $**   $**   $**   $**  
$**
  $**   $**
2010      $**   $**   $**   $**   $**   $**   $**   $**   $**   $**   $**
2011        $**   $**   $**   $**   $**   $**   $**   $**   $**   $**
2012          $**   $**   $**   $**   $**   $**   $**   $**   $**
2013            $**   $**   $**   $**   $**   $**   $**   $**
2014              $**   $**   $**   $**   $**   $**   $**
2015                $**   $**   $**   $**   $**   $**
2016                  $**   $**   $**   $**   $**
2017                    $**   $**   $**   $**
2018                      $**   $**   $**
H1 2019                        $**   $**
                                              
Total Annual Depreciation    $**   $**   $**   $**   $**   $**   $**   $**   $**   $**   $**  
Accumulated Depreciation    $**   $**   $**   $**   $**   $**   $**   $**   $**   $**   $**  


Schedule A9: Minimum Volume Commitment Example

 

($ thousands)   7/09 - 12/09     2010     2011     2012     2013     2014     2015     2016     2017     2018     1/19 - 6/19  

Barnett Annual Gathered Volume (Mcf)

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

Barnett Annual Minimum Volume (Mcf)

    **        397,671,878        401,234,650        416,549,223        433,695,266        450,339,869        467,721,928        479,618,248        489,177,817        493,342,239        232,050,194   
                                                                                       

Difference

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

Illustrative Adjustments:

                     

A- Year 1 Deficit Volume Carried Forward

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

B - Annual Barnett Excess Volume

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

C - Barnett Delayed Connection Volume

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

D - Force Majeure Volume

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

E - Maintenance Suspension Volume

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

Illustrative Adjusted Barnett Annual Minimum Volume (Mcf)

    *     *     *     *     *     *     *     *     *     *     *

Barnett Fees ($ / Mcf)

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *

Illustrative Payments:(1)

                     

Monthly Invoiced Amount

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *

True Up Payment

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *
                                                                                       

Illustrative Total Payments(1)

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *

 

(1) Illustrative payments, which does not reflect total charges under the GGA, e.g., does not include electric and other charges.

Description of Illustrative Adjustments:

A - Assumes a **% volume shortfall relative to the Barnett Annual Minimum Volume Commitment in 2009.
B - Assumes Producers’ Gas exceeds Barnett Annual Minimum Volume Commitment by **% in 2015.
C - Barnett Delayed Connection Volume; annual adjustments based on volume shift as per the Barnett Type Curve. Example illustratively assumes 10 wells delayed for a period of three months in 2011 (July 1 to October 1); see example volume adjustment for one well below.
D - Force Majeure Volume; annual adjustments based on volume shift as per the Barnett Type Curve under same methodology as Barnett Delayed Connection Volume.
E - Maintenance Suspension Volume;adjustments may result only in a decrease in Adjusted Barnett Annual Minimum Volume

Note: Upon any termination of Gatherer’s agency designation or the O&M Terms under 12.14, the Adjusted Barnett Annual Minimum Volume would be adjusted pursuant to Section 4(d) of Exhibit A. Adjusted Barnett Annual Minimum Volume may be increased in the last year for any MVC Additional Volume Wells Amount under 5(b)(6).

Illustrative Barnett Delayed Connection Volume (1 well example)

 

     7/09 - 12/09     2010     2011     2012     2013     2014     2015     2016     2017     2018     1/19 - 6/19     Total  

Illustrative Volume Shift (Mcf):(1)

                        

Illustrative Volume - Target Completion Date (7/1/2011)

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

Illustrative Volume - Delayed Connection (10/1/2011)

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

Illustrative Impact on Adjusted Barnett Annual Minimum Volume

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

 

(1) Volume based on well production profile as per the Barnett Type Curve. Example illustratively assumes 1 well delayed from a target Completion Date of 7/1/2011 by three months to 10/1/2011.

Methodology For Volume Increases / Decreases

Methodology applied to any Barnett Delayed Connection Volume and Force Majeure Volume

(1) In the event of a Barnett Delayed Connection, Adjusted Barnett Annual Minimum Volume decreased during period of delay based on Barnett Type Curve. Adjustment based on Barnett Type Curve to include period from target Completion Date to end of Minimum Volume Period.

(2) Upon actual connection, Adjusted Barnett Annual Minimum Volume increased based on Barnett Type Curve. Adjustment based on Barnett Type Curve to include period from actual connection to end of Minimum Volume Period.

(3) In each year, net impact of (1) and (2) above is increase / decrease to Adjusted Barnett Annual Minimum Volume. At end of Minimum Volume Period, any remaining volume attributable to the Barnett Annual Minimum Volume over the Minimum Volume Period is accumulated in the final period of the Minimum Volume Period. In no event should total volume adjustments reduce the nominal Barnett Minimum Volume.


Schedule A10**

[Barnett Type Curve]

 

 

** Four (4) pages omitted pursuant to confidential treatment request


Schedule A11**

[Barnett Unconnected Wells]

 

 

** 86 pages omitted pursuant to confidential treatment request


SCHEDULE B-1 MIDCON GATHERING SYSTEMS

 

GGS Name

 

CMP Area

  Primary
Location /
County
  Primary
Location  /
State
  Standard
System
Gathering
Rate
  Standard
System
Compression
Rate
  Standard
System
Treating Rate
    Active
Constructed
Pipe
Length in Miles
  Constructed
Pipe Not in
Service
Length in Miles
  # ROW
Agreements
  # ROW
Related
Permits

AB Witt GGS

  Anadarko   Roger Mills   OK   $ **   $ **   $   **    7.49     24   8

Aledo GGS & Plant

  Anadarko   Custer   OK   $ **   $ **     8.12   0.83   24   2

Allison Britt GGS

 

Northern

Mid-Continent

  Wheeler   TX   $ **   $ **   $   **    61.89     135   38

Barsola GGS

  East Texas   Cherokee   TX   $ **   $ **   $        **    16.21     40   3

Bays GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $        **    0.48     2   0

Camp Houston GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $   **    30.5     81   3

Carlson GGS

  Northwest Oklahoma   Woods   OK   $ **   $       **   $   **    6.78     11   0

Carmen Oakdale GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $   **    0.48     3   0

Cedardale GGS

  Northwest Oklahoma   Woodward   OK   $ **   $ **   $   **    8.17     9   0

Chockie GGS

  Arkoma   Atoka   OK   $ **   $ **   $   **    21.6   1.92   72   0

Colony Wash GGS

  Anadarko   Washita   OK   $ **   $ **   $   **    133.54     251   2

Concrete GGS

  Southern Oklahoma   Caddo   OK   $ **   $ **   $   **    7.74     49   5

Cordell GGS

  Anadarko   Washita   OK   $ **   $ **   $   **    12.07     60   0

Decker Switch GGS

  East Texas   Houston   TX   $ **   $ **   $   **    28.8     94   7

Dixie GGS

  Northwest Oklahoma   Woodward   OK   $ **   $ **   $   **    74.87     230   0

Dyer GGS

  Southern Oklahoma   Stephens   OK   $ **   $ **   $   **    66.73     290   31

Gray Rider GGS

  Permian South   Reeves   TX   $ **   $ **   $   **    11.65     6   0

Guadalupe GGS

  Permian South   Culberson   TX   $ **   $ **   $   **    49.73     32   1

Haley GGS

  Permian South   Loving   TX   $ **   $ **   $   **    0.39     1   0

Helena Hunton

  Northwest Oklahoma   Alfalfa   OK   $ **   $ **   $   **    10.16     23   0

Hull GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $   **    62.24     29   0

Kovar GGS

  Southern Oklahoma   Stephens   OK   $ **   $ **   $   **    35.31     157   43

Little Sahara GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $   **    23.44   1.26   73   6

Mayfield Plant & Mayfield Sour GGS

  Anadarko   Beckham   OK         4.15     43   0

Mayfield Sapient GGS

  Anadarko   Beckham   OK   $ **   $ **   $   **    7.06     23   0

Mayfield Sweet GGS

  Anadarko   Beckham   OK   $ **   $ **   $   **    13.93   3.64   43   0

Miles GGS

 

Northern

Mid-Continent

  Wheeler   TX   $       **   $ **   $   **    3.38     16   0

Mitchell GGS

  Permian South   Winkler   TX   $ **   $ **     15.75     24   1

North Alva GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $   **    100.83     265   2

North Sayre GGS

  Anadarko   Beckham   OK   $ **   $ **   $   **    24.98   0.26   93   1

Prentiss GGS

  Anadarko   Beckham   OK   $ **   $ **   $   **    36.7     122   32

Quail GGS

  Permian North   Martin   TX   $ **   $ **   $   **    32.52     33   0

Sand Springs GGS

  Permian South   Reeves   TX   $ **   $ **   $   **    34.53     46   0

South Fork Creek GGS

  Anadarko   Washita   OK   $ **   $ **   $   **    5.08     11   1

Springer GGS

  Southern Oklahoma   Carter   OK   $ **   $ **   $   **    14.98     38   1

Stiles Ranch GGS

 

Northern

Mid-Continent

  Wheeler   TX   $ **   $ **   $   **    86.21     249   15

SW Yellowstone GGS

  Northwest Oklahoma   Woods   OK   $ **   $ **   $   **    21.01     51   0

Tidemark GGS

  Northwest Oklahoma   Woodward   OK   $ **   $ **   $   **    2.7     0   0

University GGS

  Permian South   Loving   TX   $ **   $ **   $   **    49.56     59   4

West Toyah GGS

  Permian South   Reeves   TX   $ **   $ **   $   **    67.71     126   0


Schedule B2**

[Midcon Fees]

 

 

** 79 pages omitted pursuant to confidential treatment request


Schedule B3**

[Midcon Delivery Points]

 

 

** Two (2) pages omitted pursuant to confidential treatment request


Schedule B4**

[Midcon Dedicated Wells, Receipt Points and Pressures]

 

 

** 79 pages omitted pursuant to confidential treatment request


Schedule B5**

[Midcon AMI]

 

 

** 43 pages omitted pursuant to confidential treatment request


Schedule B6

[Intentionally Deleted]


Schedule B7

[Intentionally Deleted]


Schedule B-8

Illustrative Fee Redetermination

($ in millions, except as otherwise indicated)

 

                                                     Year
Thereafter
         H2 2009   2010   2011   2012   2013   2014   2015   2016   2017   2018   H1
2019
   
   Revenues from Producers                        
   Midcon Annual Minimum Volumes (Mcf)     **     **     **     **     **     **     **     **     **     **     **  
   PRP Annual Minimum Volumes (Mcf)     **     **     **     **     **     **     **     **     **     **     **  
                                                                      
   Midcon and PRP Annual Minimum Volumes (Mcf)     **     **     **     **     **     **     **     **     **     **     **  

**%

  

Original Midcon and PRP

Fee Projections ($/Mcf)

  $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **
   Original Midcon and PRP Revenue Projections   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  

**%

   Actual Midcon Volumes (Mcf)     **     **     **     **     **     **     **     **     **     **     **  

**%

   Actual PRP Volumes (Mcf)     **     **     **     **     **     **     **     **     **     **     **  
                                                                      
   Actual Midcon and PRP Volumes (Mcf)     **     **  

 

**

    **     **     **     **     **     **     **     **  
   Actual Midcon and PRP Fees ($/Mcf)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **
   Surcharge (Credit) ($/Mcf)     $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **
                                                                          

**%

   Actual Midcon and PRP Fees ($/Mcf)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **
                                                                          
   Actual Midcon and PRP Revenue Before Surcharge/Credit   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Surcharge (Credit) Realized in Period     $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Actual Midcon and PRP Revenue (Including Surcharge/Credit)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Original Midcon and PRP Revenue Projections   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Actual Midcon and PRP Revenue (Including Surcharge/Credit)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Applicable Midcon and PRP Revenue Difference (Including Surcharge/Credit)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Compression Expenses                        
   Original Midcon and PRP Compression Expense   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  

**%

   Actual Midcon and PRP Compression Expense   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Midcon and PRP Compression Expense Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Capital Expenditures and Ad Valorem                        
   Original Midcon and PRP Cap Ex Projections   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  

**%

   Actual Midcon and PRP Cap Ex   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Total Cap Ex Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ *   $ *   $ *   $ *   $ **  
   Cumulative Capex Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Accumulated Depreciation on Cap Ex Difference     **     **     **     **     **     **     **     **     **     **     **  
                                                                      
   Net Value of Cap Ex Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  

**%

   Estimated Cap Ex Ad Valorem Tax Change (1)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Redetermination Calculations (Annual + Final True-Up Payment)                        
   Applicable Midcon and PRP Revenue Difference (Including Surcharge/Credit)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Midcon and PRP Compression Expense Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Estimated Cap Ex Ad Valorem Tax Change (1)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Total Cap Ex Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Annual Net Cash Flow Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Beginning Cash Flow Differential   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Annual Net Cash Flow Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   True-up Payment by Producers (to Producers)                       $ **  
                                                                      

**%

   Ending Cash Flow Differential (Including Gross-Up for Target IRR)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Surcharge (Credit) Calculation                        
   Ending Cash Flow Differential (Including Gross-Up for Target IRR)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  

**%

   ÷ Actual Volume Used for Surcharge (Credit) Calculation (2)     **     **     **     **     **     **     **     **     **     **     **  
                                                                      
   Surcharge (Credit) Needed ($/Mcf)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  

**%

   Max Incremental Fee Change Allowed Each Year (**% Annual Cap) ($/Mcf) (3)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   Surcharge (Credit) Applied in Each Year ($/Mcf)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                      
   ÷ Actual Volume Used for Surcharge (Credit) Calculation (2)       **     **     **     **     **     **     **     **     **     **  
   Surcharge (Credit) Applied to Current Year ($/Mcf)     $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                                                                  
   Surcharge (Credit) Realized in Period     $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
                              
   True-up Payment by Producers (to Producers)                       $ **  
                              
   NPV Calculation                        
   Applicable Midcon and PRP Revenue Difference (Including Surcharge/Credit)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Midcon and PRP Compression Expense Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Estimated Cap Ex Ad Valorem Tax Change (1)   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   Total Cap Ex Difference   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **   $ **  
   True-up Payment by Producers (to Producers)                       $ **  
                                                                      
  

Annual Net Cash Flow Difference (+) True-Up Payment

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

  $

 

**

 

 
   NPV Calculation   $ **       Target IRR           **%              

 

(1) For simplicity, the Estimated Cap Ex Ad Valorem Tax Change is calculated based upon the differences between (A) the Actual Midcon and PRP Cap Ex and Projected Midcon and PRP Cap Ex and (B) the Original Midcon and PRP Cap Ex Projections, to be calculated based on *% of the cumulative difference in any given year in such capital expenditures and calculating accumulated depreciation using 20-year straight line method.
(2) **% of last year’s Actual Volume used for Surcharge (Credit) calculation.
(3) **% multiplied by ‘Actual Midcon and PRP Fees on a $/Mcf basis (including surcharge)’; applied to the following year volumes.


Schedule C1**

[PRP Gathering Systems]

 

 

** Four (4) pages omitted pursuant to confidential treatment request


Schedule C2**

[PRP Fees]

 

 

** Nine (9) pages omitted pursuant to confidential treatment request


Schedule C3**

[PRP Receipt Points and Pressures]

 

 

** Nine (9) pages omitted pursuant to confidential treatment request


Schedule C4

[Intentionally Deleted]


Schedule C6**

[PRP Delivery Points]

 

 

** Three (3) pages omitted pursuant to confidential treatment request
EX-10.3 4 dex103.htm TOTAL GAS GATHERING AGREEMENT Total Gas Gathering Agreement

Exhibit 10.3

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

BARNETT GAS GATHERING AGREEMENT

THIS BARNETT GAS GATHERING AGREEMENT (this “Agreement”), executed on January 25, 2010, but effective as of February 1, 2010 (the “Effective Date”), is by and among (i) Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”), (ii) Total Gas & Power North America, Inc., a Delaware corporation (“TGPNA”), and (iii) Total E&P USA, Inc., a Delaware corporation (“TEPUSA” and together with TGPNA, “Producers”). Gatherer and Producers are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals:

A. Gatherer owns and operates natural gas gathering systems and related facilities in Texas.

B. TEPUSA has acquired the oil, gas and/or mineral leases (or interests therein) and other interests and properties described in Schedule 10 (the “Acquired Properties”). TEPUSA has agreed to sell to TGPNA, and TGPNA has agreed to purchase, all of TEPUSA’s entitlement to Gas produced from the Acquired Properties.

C. Producers now desire to deliver natural gas for gathering, compression, dehydration, treating, and processing, as applicable, on Gatherer’s gathering systems, and Gatherer desires to provide gathering, compression, dehydration, treating and processing services, as applicable, for such gas, on the terms and subject to the conditions in this Agreement.

Agreements:

NOW, THEREFORE, for good and valuable consideration, Gatherer and Producers agree as follows:

Article 1

Definitions

1.1 Defined Terms. The following capitalized terms used in this Agreement and the attached exhibits and schedules shall have the meanings set forth below:

Acceptable Letter of Credit” means one or more direct-pay, irrevocable, standby letters of credit from a major U.S. commercial bank or a foreign bank with a U.S. branch


office in either case having a credit rating of at least “A-” (or its equivalent successor rating) from Standard & Poor’s Corporation or “A3” (or its equivalent successor rating) from Moody’s Investor Services, Inc.

Acceptable Third Party Guaranty” means (i) a guaranty agreement in form and content acceptable to Gatherer (which acceptance shall not be unreasonably withheld) and (ii) executed by a Person other than Producers who has an Applicable Rating or who is otherwise acceptable to Gatherer (which acceptance shall not be unreasonably withheld).

Acquired Properties” is defined in the recitals.

Additional Agreement” means that certain Agreement by and among Gatherer, Producers and the CHK Parties, dated as of February 1, 2010, as amended.

Adequate Assurance of Performance” is defined in Section 7.7.

Adjusted Barnett Annual Minimum Volume” is defined in Section 4(d) of Exhibit A.

Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person, whether by contract, voting power, or otherwise. For purposes of this definition, Gatherer shall not be considered an Affiliate of any of the CHK Parties or any of their Affiliates and the CHK Parties and their Affiliates (other than Gatherer) shall not be considered an Affiliate of Gatherer.

Agreement” is defined in the preamble.

Annual Barnett Gathered Volumes” means, for each Year in the Minimum Volume Period, the sum of (i) the volume (in Mcf’s) of Producers’ Gas delivered to the Barnett Gathering Systems in such Year and (ii) the volume (in Mcf’s) of MV Mitigation Gas delivered to the Barnett Gathering Systems in such Year.

Annual Barnett Excess Volumes” means, for each Year in the Minimum Volume Period, the amount, if any, by which (i) the volume (in Mcf’s) of Producers’ Gas delivered to the Barnett Gathering Systems in such Year exceeds (ii) the Adjusted Barnett Annual Minimum Volume for such Year.

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

Applicable Rating” means a senior, unsecured rating of at least “**” (or the then equivalent) from Standards & Poor’s Rating Service and of “**” (or the then equivalent) by the rating service of Moody’s Investors Services, Inc., or an equivalent rating from any other NRSRO.

Assumed Obligations” is defined in Section 9.1(d).

 

2


Attached Facilities” is defined in Section 2.4.

Barnett Annual Minimum Volume” means, for each Year in the Minimum Volume Period, the volume (expressed in Mcf’s) of Producers’ Gas shown in Schedule 7 for such Year.

Barnett AMI” means the geographic area described in Schedule 5.

Barnett Dedicated Properties” means the Acquired Properties and all other interests of Producers and their Affiliates (and their successors and assigns) in oil, gas, and/or mineral leases covering lands located within the Barnett AMI, whether now owned or hereafter acquired, and all Gas produced or delivered therefrom or attributable thereto, and all interests of Producers or their Affiliates (and their successors and assigns) in all oil or gas wells, whether now existing or drilled hereafter, on, or completed on, lands covered by any such oil, gas, and/or mineral lease or on other lands within the Barnett AMI, including the wells described in Part I of Schedule 4, but excluding (i) any oil, gas and/or mineral leases purchased by Producers or their Affiliates after the Effective Date that are subject to a dedication to a gas gathering system or agreement (other than the Barnett Gathering Systems) that was in effect prior to (and was not entered into in connection with or as part of) such acquisition (but only to the extent of such dedication), (ii) the properties described in Part II of Schedule 4, and (iii) any other non-material properties dedicated by Producers as of the Effective Date to a gathering system owned and operated by a Person not an Affiliate of either Producer, not to exceed ** net mineral acres.

Barnett Delayed Connections” is defined in Section 6(b)(1) of Exhibit A.

Barnett Delivery Points” means (i) the points identified in Schedule 3 at which Gas is delivered to a Barnett Receiving Transporter by Gatherer, (ii) any additional delivery points that, from time to time, are added at the request of Producers (at Producers’ expense) to the Barnett Gathering Systems after the Effective Date to permit delivery of Gas to the same or other Barnett Receiving Transporters, as provided in Section 6(f) of Exhibit A, and (iii) any additional delivery points added to the Barnett Gathering Systems for gas lift operations at Producers’ request and expense, as provided in Section 6(b)(2) or Section 11 of Exhibit A.

Barnett Fees” means the gathering and other fees (in $/Mcf) shown for each Barnett Gathering System in Schedule 2 and the other charges specified in Exhibit A, as such fees and charges may be redetermined in a Redetermination.

Barnett Gathering System” means each of the discrete gas gathering systems described in Schedule 1, together with any modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time, to each such gathering system.

Barnett Gathering Systems” means, collectively, all of the Barnett Gathering Systems.

 

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Barnett Maximum Daily Quantity” means, for each of the Barnett Gathering Systems shown in Schedule 6, the maximum volume of Producers’ Gas and MV Mitigation Gas (each expressed in Mcf’s) that Gatherer is obligated to receive on any Day on each such Barnett Gathering System.

Barnett Receipt Points” means (i) the receipt points described in Schedule 4 and (ii) any new receipt points that may, from time to time, be added by Gatherer to the Barnett Gathering Systems after the Effective Date to permit Producers to deliver Gas to the Barnett Gathering Systems.

Barnett Receiving Transporters” means the intrastate or interstate pipeline companies, gathering companies, local distribution companies, or end-users taking delivery or custody of Producers’ Gas and MV Mitigation Gas at, or immediately downstream of, a Barnett Delivery Point.

Base Pressure” means a constant pressure (expressed in pounds per square inch absolute) determined in accordance with the following table:

 

Area in which Gas is produced

   Base Pressure
(in pounds per square
inch absolute)

MMS or BLM Properties

   14.73

Texas

   14.65

Btu” means the amount of heat energy needed to raise the temperature of one avoirdupois pound of water from 58.5 degrees Fahrenheit to 59.5 degrees Fahrenheit at the applicable Base Pressure.

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

Change of Control” means as to any Producer an event that causes such Producer to cease to be Controlled by its Parent; provided that an event that causes such Parent to be Controlled by another Person shall not constitute a Change of Control.

CHK Agreement” means (i) the Amended and Restated Gas Gathering Agreement, dated as of January 25, but effective as of February 1, 2010, by and among Chesapeake Midstream Partners, L.L.C., Chesapeake Energy Marketing Inc., Chesapeake Operating, Inc., Chesapeake Exploration L.L.C., Chesapeake Louisiana L.P. and DDJET Limited LLP, as amended, and (ii) if the agreement described in clause (i) is terminated prior to this Agreement, then “CHK Agreement” means the agreement described in clause (i) as it was in effect immediately prior to such termination.

CHK Parties” means the parties to the CHK Agreement other than Gatherer.

 

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Claims” means all claims, losses, liabilities, damages, fines, penalties, costs, or expenses, including reasonable attorneys’ fees and court costs.

Control” (and the correlative terms “controlling,” “controlled by,” and “under common control with”) means as to any entity the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the Securities Exchange Act of 1934, as amended) of the power or authority, through ownership of voting securities, by contract, or otherwise, to control or direct the management and policies of the entity. Notwithstanding anything herein to the contrary, other than with respect to the term “Affiliates” as used in the definition of “Producers’ Gas”, the term “Control” and its correlative terms shall not apply to the definition of “Producers’ Gas.”

CPT” means the prevailing local time in the Central time zone.

Cubic Foot” means a volume of Gas occupying a space of one cubic foot at a temperature of 60°F and at the applicable Base Pressure.

Day” means the 24-hour period beginning at 9:00 a.m., CPT, on one calendar day and ending at 9:00 a.m., CPT, on the following calendar day.

Dedicated Properties Owner Acknowledgment Agreement” is defined in Section 9.3(a).

DFW Gathering System” means the gathering system described as the “DFW Gathering System” on Schedule 1.

DFW PDP Volumes” is defined in the CHK Agreement.

Drip Liquids” means all distillates, condensate, and other hydrocarbon liquids that are collected by Gatherer between the Barnett Receipt Points and the Barnett Delivery Points on a Barnett Gathering System, including all distillates, condensate, and other hydrocarbons allocated to Producers’ Gas under Third Party Gathering Agreements.

Economic Value” means, as to any contract, the reasonably projected gross revenue payable under such contract over the term of such contract (including any part of such term that may have expired prior to the date of determination of such projected gross revenue).

Effective Date” is defined in the preamble.

Electric Power Charge” means, on any Barnett Gathering System, the actual cost charged to Gatherer, or incurred by Gatherer, for electric power consumed in the operation of compression equipment used to provide services for Producers’ Gas and MV Mitigation Gas hereunder.

Equivalent Quantity” means, on any Day on a Barnett Gathering System, a quantity of Gas (in MMBtu’s) that is thermally equivalent to the quantity of Producers’

 

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Gas and MV Mitigation Gas received from Producers at the Barnett Receipt Points on that Barnett Gathering System on that Day less Producers’ allocated share of System Fuel and Losses on that Barnett Gathering System.

Excess Suspension Days” is defined in Section 8.7.

FERC” means the Federal Energy Regulatory Commission or any successor Governmental Authority thereto under the Natural Gas Act.

Field Telemetry” means the communication network, including radios, antennas, towers, associated landlines, and networking equipment, used to transmit and receive data between field sites and the SCADA software.

Force Majeure Event” is defined in Section 8.2.

Force Majeure Volumes” is defined in Section 8.6.

Fuel Gas” means Gas (whether measured or estimated) used by Gatherer to operate compressors, dehydrators, treaters, and related equipment and facilities on, or to vent, relieve, or blowdown equipment and facilities of, the Barnett Gathering Systems, including any Fuel Gas passed through to Gatherer under Third Party Gathering Agreements.

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

Gatherer” is defined in the preamble.

Gathering System Owner Acknowledgment Agreement” is defined in Section 9.2(a).

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.

Greenhouse Gas Credits” is defined in Section 10.2.

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 60°F, and at a reference pressure equal to 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. The Gross Heating Value so determined shall be corrected assuming saturation at flowing conditions, expressed in Btu per Cubic Foot and reported at the applicable Base Pressure; provided, however, that if the water vapor content of the Gas delivered is 7 pounds or less per one million (1,000,000) Cubic Feet, the Gas shall be assumed to be dry. The Btu’s contained in hydrogen sulfide or other non-hydrocarbon components will be excluded in any calculation of the number of Btu’s contained in Gas under this Agreement.

 

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Lost and Unaccounted for Gas” means the losses in Gas quantities (expressed in Btu’s) that occur on a Barnett Gathering System, other than Gas used for Fuel Gas and shrinkage due to Drip Liquids, including any such losses (expressed in Btu’s) passed through to Gatherer under any Third Party Gathering Agreement.

Maintenance Suspension Volumes” is defined in Section 8.7.

Mcf” means one thousand Cubic Feet of Gas.

Mcf/d” means Mcf’s per Day.

Minimum Volume Period” means with respect to the Barnett Annual Minimum Volume, the period beginning on the Effective Date and ending on the earlier to occur of (a) June 30, 2019 and (b) the last Day of the Month in which Producers have delivered, or if not delivered, paid for under Section 4(b) of Exhibit A, Annual Barnett Gathered Volumes equal to the Total Barnett Annual Minimum Volumes.

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

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.

MV Mitigation Gas” means, for any Year, the volume (expressed in Mcf’s) of Gas delivered to a Barnett Gathering System by or on behalf of Producers that satisfies the following: (i) such Gas is not Producers’ Gas; (ii) such Gas is produced from a well in which none of the Producers or their Affiliates owns any interest, and where the connection of such well to such Barnett Gathering System was made by Producers at no cost to Gatherer, and (iii) such Gas is to be delivered during the Minimum Volume Period to meet, but not exceed, the Adjusted Barnett Annual Minimum Volume in any Year.

Notice” is defined in Section 11.2.

NRSRO” means any credit rating agency that has been approved as a Nationally Recognized Statistical Rating Organization by the U.S. Securities and Exchange Commission.

Oil and Gas Lease” is defined in Section 12.12(a).

Oil and Gas Lease Partial Assignment” is defined in Section 12.12(c).

Operator” means the Person for any well who (i) has been designated as the operator under the applicable operating agreement or other similar contract for such well or (ii) has submitted a filing or notice with the applicable Governmental Authority having jurisdiction over such well designating any Producer or any of its Affiliates as operator of such well.

 

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Parent” means Total Holdings USA, Inc.

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

** Agreement” has the meaning provided in the Additional Agreement.

Payout” means, for a Reimbursed Connection constructed to a Barnett Gathering System pursuant to Section 6(c)(1)(C) of Exhibit A, the first Day of the Month following the date on which the aggregate discount on the Barnett Fees paid by Producers hereunder for Producers’ Gas gathered through such Reimbursed Connection equals the sum of the capital costs incurred by Producers to construct the pipeline, equipment and other facilities comprising such connection plus an amount equivalent to an internal rate of return on such capital costs using the Target IRR. An example of Payout is attached as Exhibit D.

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 Measurement Device” means the meter body (which may consist of an orifice meter, positive meter, turbine meter, ultrasonic meter, v-cone, or coriolis meter), tube, orifice plate, connected pipe and fittings used in the measurement of Gas flow.

Primary Term” is defined in Section 2.1.

Prime Rate” is defined in Section 7.4.

Priority 1 Service” is the highest level of service for each of gathering, compression, dehydration and treating on a Barnett Gathering System.

Priority 2 Service” is the level of service for each of gathering, compression, dehydration and treating on a Barnett Gathering System that is secondary only to Priority 1 Service on that Barnett Gathering System.

Priority 3 Service” is fully interruptible service for each of gathering, compression, dehydration and treating on a Barnett Gathering System, and is subordinate to both Priority 1 Service and Priority 2 Service.

Producers” is defined in the preamble.

Producers’ Gas” means all Gas owned or controlled by Producers or their Affiliates and produced from or otherwise attributable to the Barnett Dedicated Properties. As used in this definition and except as otherwise provided in the following sentence, the phrase “controlled by” refers to Gas owned by Persons other than Producers or their Affiliates and produced from Producer Wells in the Barnett AMI during the

 

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period that one or more of Producers or their Affiliates has the contractual right (pursuant to a marketing, agency, operating, unit or similar agreement) to market such Gas; and if for any reason the contractual right of Producers or their Affiliates to market any such Gas (the “subject Gas”) terminates or expires, then the subject Gas shall cease to constitute Producers’ Gas upon such termination or expiration. The phrase “controlled by” does not refer to, and Producers’ Gas does not include, Gas owned by Persons other than Producers or their Affiliates and produced from Producer Non-Operated Wells, except that if (i) due to a default by the CHK Parties under the CHK Agreement or otherwise Gatherer does not receive and gather Gas of the CHK Parties under the CHK Agreement, (ii) such Gas becomes controlled by Producers under a marketing, agency, operating, unit, or similar arrangement, and (iii) such Gas is received by Gatherer at the Barnett Receipt Points, then such Gas shall be deemed to be Producers’ Gas under this Agreement.

Producer Non-Operated Well” means any well or wells in which any of the Producers or their Affiliates owns or holds a working interest that is not a Producer Well.

Producer Well” means any well for which any of the Producers or their Affiliates is Operator.

Producers’ Wellhead Meters” means the Primary and Secondary Measurement Devices installed on the applicable wells.

Secondary Measurement Device” means the pressure and temperature transducers, the flow computer, power equipment (or solar panels and batteries), and communication devices used to measure the temperature and pressure on the Primary Measurement Device, calculate gas flow, and to communicate the results to a Field Telemetry network.

Separate GGA” means a Gas Gathering Agreement substantially in the form of this Agreement and (in connection with a transfer by Producers) approved by Gatherer, acting reasonably, and (in connection with a transfer by Gatherer) approved by Producers, acting reasonably.

Separate GGA Gatherer Obligations” is defined in Section 9.5(a).

Separate GGA Producer Obligations” is defined in Section 9.5(c).

Subject Well” is defined in Section 12.12(b).

Surface Estate” is defined in Section 12.12(a).

Surface Estate Owner” is defined in Section 12.12(a).

System Fuel and Losses” means, with respect to a Barnett Gathering System, the sum of: (i) all Fuel Gas used on the Barnett Gathering System; (ii) all Lost and Unaccounted for Gas on the Barnett Gathering System; (iii) all shrinkage due to Drip Liquids on the Barnett Gathering System; and (iv) all allocations under Third Party Gathering Agreements for Fuel Gas, Lost and Unaccounted For Gas, and shrinkage due to Drip Liquids, in each case, whether estimated or measured.

 

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Target IRR” means an unlevered, pre-income tax rate of **%.

TEPUSA” is defined in the recitals.

TGPNA” is defined in the recitals.

Third Party Gathering Agreements” means agreements and contracts between third parties and Gatherer under which Gatherer uses third party pipelines and other facilities to provide gathering services hereunder.

Total Barnett Annual Minimum Volume” is defined in Schedule 7.

Year” means, unless the context provides otherwise, the period of time from and after January 1 of a calendar year through December 31 of the same calendar year.

1.2 Other Defined Terms. In addition to the terms defined in Section 1.1, the following terms are used in this Agreement and the attached exhibits and schedules and are defined in the exhibits and schedules of this Agreement as shown below.

 

Defined Term

  

Section and Exhibits

Additional Volume

  

Section 5(b)(6) of Exhibit A

Additional Volume Wells

  

Section 5(b)(6) of Exhibit A

Applicable Third Party Gas

  

Section 5(i)(ii) of Exhibit A

Average Barnett Fee

  

Section 4(b) of Exhibit A

Barnett Central ** Delivery Points

  

Section 4(b) of Schedule 2

Barnett North

  

[            ]

Completion Date

  

Section 6(b)(1) of Exhibit A

Gatherer’s Increased Deliverability

  

Section 6(f) of Exhibit A

Gatherer’s Receipt Meters

  

Section 8(a)(1) of Exhibit A

Imbalancing

  

Section 5(e) of Exhibit A

MVC Additional Volume Wells Amount

  

Section 5(b)(6) of Exhibit A

Nominate

  

Section 5(c) of Exhibit A

OBA

  

Section 5(f)(3) of Exhibit A

Operating Cash Flow

  

Section 12 of Exhibit A

Pad Notice

  

Section 6(b)(1) of Exhibit A

**

  

Section 4(b) of Schedule 2

** Agreement

  

Section 4(b) of Schedule 2

** Event

  

Section 4(c) of Schedule 2

Producers’ Barnett Reservations

  

Section 1(b) of Exhibit A

Producers’ Wellhead Meters

  

Section 8(a)(3) of Exhibit A

Projected Additional Volume Wells Amount

  

Section 5(b)(6) of Exhibit A

Redetermination

  

Section 3(a) of Exhibit A

Reimbursed Connection

  

Section 6(c)(1)(C) of Exhibit A

Third Party Btu Content

  

Section 5(i)(ii) of Exhibit A

 

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1.3 Attachments. Each exhibit, schedule, or other attachment to this Agreement is a part of this Agreement and incorporated herein for all purposes. When the term “Agreement” is used herein, it means this Agreement and all of the exhibits, schedules, and other attachments hereto. A list of the exhibits, schedules, and other attachments to this Agreement is attached behind the signature page.

Article 2

Term

2.1 Term. Unless terminated sooner as provided below, the term of this Agreement shall commence on the Effective Date and continue in effect through September 30, 2029 (the “Primary Term”) and shall continue for successive 12-month periods thereafter, unless terminated by either Party upon Notice to the other Party no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable.

2.2 Termination. This Agreement may be terminated as follows:

(i) by Gatherer if (A) Producers fail to perform any of their material obligations under this Agreement and (B) such failure is not (x) excused by a Force Majeure Event under Article 8 or (y) cured by Producers within 60 Days after Notice thereof by Gatherer to Producers, or if such failure can not be cured within such 60-Day period, Producers have not commenced remedial action to cure such failure (and continued to diligently and timely pursue the completion of such remedial action); or

(ii) by Producers if (A) Gatherer fails to perform any of its material obligations under this Agreement and (B) such failure is not (x) excused by a Force Majeure Event under Article 8 or (y) cured by Gatherer within 60 Days after Notice thereof by Producers to Gatherer, or if such failure can not be cured within such 60-Day period, Gatherer has not commenced remedial action to cure such failure (and continued to diligently and timely pursue the completion of such remedial action); provided that if such failure by Gatherer relates to only one or more of the facilities or gathering systems included in the Barnett Gathering System (and not the entire Barnett Gathering Systems), Producers may terminate this Agreement only to the extent it relates to such facilities or gathering systems; Producers’ obligations in respect of the Barnett Annual Minimum Volume will be reduced accordingly; and any appropriate changes to the redetermination of the Barnett Fees pursuant to the CHK Agreement and the Additional Agreement shall be made to reflect such system or facilities ceasing to be covered by this Agreement; or

(iii) by Gatherer if Producers fail to pay any undisputed amount when due under this Agreement if such failure is not remedied within 15 Business Days after Notice of such failure is given by Gatherer to Producers; or

 

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(iv) by Gatherer by Notice to Producers if Producers’ Parent takes or suffers any of the actions set forth in Section 2.2(v) below as applied to Producers’ Parent; or

(v) by Gatherer by Notice to Producers if a Producer (1) makes an assignment or any general arrangement for the benefit of creditors, (2) files a petition or otherwise commences, authorizes, or acquiesces in the commencement of a proceeding or cause under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against them, or (3) otherwise becomes bankrupt or insolvent (however evidenced).

2.3 Damages for Early Termination. If a Party terminates this Agreement under Section 2.2 above, then such Party may pursue any and all remedies at law or in equity for its Claims resulting from such termination subject to Section 6.3.

2.4 Acknowledgement.

(i) Notwithstanding anything to the contrary expressed or implied, the deemed consent of Producers described in the following clause (ii) shall be limited to the ownership interests of Producers and their Affiliates in the Attached Facilities and such consent shall not apply to or bind the ownership interest of any other Person (or such other Person) in the Attached Facilities.

(ii) If this Agreement is terminated by Gatherer under Section 2.2 or Gatherer disconnects a Barnett Receipt Point from a Barnett Gathering System in accordance with the terms of this Agreement, Producers’ execution of this Agreement shall be deemed a consent by Producers to the disconnection by Gatherer under Section 3.73 of the Texas Administration Code of the applicable Barnett Gathering System from any facilities in which one or more Producers or their Affiliates holds an ownership interest therein (in the case of the termination of this Agreement) or of any facilities at a Barnett Receipt Point in which one or more Producers or their Affiliates holds an ownership interest therein (in the case of the disconnection of a Barnett Receipt Point), as applicable (the “Attached Facilities), if and to the extent such rule is ever interpreted to govern transactions of the type evidenced hereby, and to the disconnection of any other Attached Facilities under any corresponding or similar Applicable Law of any state in which a Barnett Gathering System is located.

Article 3

Services Provided by Gatherer

Producers agree to deliver, and Gatherer agrees to connect, receive, gather, compress, dehydrate, treat, and process, as applicable, and redeliver, Producers’ Gas and MV Mitigation Gas, on the Barnett Gathering Systems, for the Barnett Fees and on and subject to the terms and conditions provided in this Agreement.

 

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Article 4

Fees

4.1 Fees. As consideration for Gatherer providing the services contemplated in Article 3, Producers shall pay Gatherer the Barnett Fees each Month for the volumes of Producers’ Gas and MV Mitigation Gas delivered to the Barnett Receipt Points in each such Month.

4.2 Escalation of Fees. Each of the Barnett Fees shall be escalated effective as of January 1 of each Year as stipulated in Schedule 2.

4.3 Payment. Payment of the Barnett Fees shall be made in accordance with the procedures set forth in Article 7.

Article 5

Taxes and Warranties Regarding Title and Producers’ Gas

5.1 Taxes. Producers shall pay or cause to be paid, and agree to indemnify and hold harmless Gatherer and its Affiliates from and against 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 Producers’ Gas and MV Mitigation Gas and the handling thereof prior to receipt thereof by Gatherer at the Barnett Receipt Points. Subject to Section 10.2, Gatherer shall pay or cause to be paid all taxes and assessments, if any, imposed upon Gatherer for the activity of gathering of Producers’ Gas and MV Mitigation Gas after receipt at the Barnett Receipt Points and prior to redelivery thereof by Gatherer at the Barnett Delivery Points.

5.2 Warranties.

(a) Title. Producers warrant to Gatherer (i) with respect to Producers’ Gas and MV Mitigation Gas owned by Producers, that Producers have good title to Producers’ Gas and MV Mitigation Gas delivered to the Barnett Receipt Points and the full right, power and authority to cause such Producers’ Gas and MV Mitigation Gas to be delivered to the Barnett Receipt Points and gathered, treated, dehydrated and otherwise handled by Gatherer as provided in this Agreement, and to direct Gatherer to deliver such Producers’ Gas and MV Mitigation Gas to the Barnett Delivery Points as provided in this Agreement, and (ii) with respect to Producers’ Gas and MV Mitigation Gas controlled by Producers, that it has the full right, power, and authority to cause such Producers’ Gas and MV Mitigation Gas to be delivered to the Barnett Receipt Points and gathered, treated, dehydrated, and otherwise handled by Gatherer as provided in this Agreement and to direct Gatherer to deliver such Producers’ Gas and MV Mitigation Gas to the Barnett Delivery Points as provided in this Agreement. Producers shall indemnify, defend, and hold harmless Gatherer from and against all Claims (i) asserted by owners of royalty, overriding royalty, or working interests or any other purported owners of interests or rights in Producers’ Gas and MV Mitigation Gas or (ii) asserted by Persons from whom Producers purchased or otherwise acquired Producers’ Gas and MV Mitigation Gas prior to the Barnett Receipt Points, including co-working interest owners and overriding royalty owners whose Gas is delivered by Producers to Gatherer hereunder.

 

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(b) Intrastate Gas Only. Producers warrant to Gatherer that (i) the delivery of Producers’ Gas and MV Mitigation Gas at one or more Barnett Receipt Points hereunder will not subject any of the Barnett Gathering Systems or any portion thereof to regulation by FERC as (x) a natural gas company under the Natural Gas Act or (y) a Section 311 transporter under the Natural Gas Policy Act of 1978 and (ii) with the possible exception of Gas purchased solely for gas lift purposes, none of Producers’ Gas and MV Mitigation Gas delivered at one or more Barnett Receipt Points is Gas that has been transported by a natural gas company, as defined in the Natural Gas Act, or by a Section 311 transporter under the Natural Gas Policy Act of 1978, at any point prior to such delivery.

(c) Indemnity. Producers agree to indemnify and hold harmless Gatherer and its Affiliates from and against any breach of Producers’ warranties in this Section 5.2.

5.3 Other Warranties. EXCEPT AS SET FORTH IN THIS ARTICLE 5 AND THE OTHER PROVISIONS OF THIS AGREEMENT AND THE EXHIBITS, SCHEDULES, AND OTHER ATTACHMENTS, 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 AND REDELIVERED HEREUNDER.

Article 6

Control, Possession, and Waiver

6.1 Control and Possession. As between the Parties, Producers shall be deemed to be in exclusive control and possession of Producers’ Gas and MV Mitigation Gas delivered hereunder and responsible for any damage or injury caused thereby prior to the time Producers’ Gas and MV Mitigation Gas shall have been delivered to Gatherer at the Barnett Receipt Points and at and after Producers’ Gas and MV Mitigation Gas is redelivered to or on behalf of Producers at the Barnett Delivery Points. At and after delivery of Producers’ Gas and MV Mitigation Gas to Gatherer at the Barnett Receipt Points, Gatherer 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 Producers at the Barnett Delivery Points.

6.2 Indemnity. Producers agree to indemnify, defend, and hold harmless Gatherer and its Affiliates from any and all Claims arising from or out of (i) bodily injury or property damage attributable to Producers’ Gas or MV Mitigation Gas when Producers shall be deemed to be in control and possession of Producers’ Gas or MV Mitigation Gas as provided in Section 6.1 and (ii) the delivery by Producers of Producers’ Gas or MV Mitigation Gas that does not meet the quality specifications in this Agreement. Except to the extent a Claim (or Claims) is covered by the indemnity in the preceding sentence, Gatherer agrees to indemnify, defend, and hold harmless Producers and their Affiliates from all Claims arising from or out of bodily injury or property damage attributable to Producers’ Gas and MV Mitigation Gas when Gatherer shall be deemed to be in control and possession of Producers’ Gas and MV Mitigation Gas as provided in Section 6.1. In addition, Gatherer agrees to indemnify, defend, and hold harmless Producers and their Affiliates from all Claims asserted by Surface Estate Owners arising out of Gatherer’s use of the easements and rights of way that are assigned to Gatherer from time to time pursuant to Section 12.12. THE INDEMNITIES SET FORTH IN THIS SECTION 6.2 ARE TO BE

 

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CONSTRUED 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.

6.3 Waiver of Damages. A PARTY’S LIABILITY UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES 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, ALL OF THE SAME BEING HEREBY EXPRESSLY WAIVED AND NEGATED. 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. The waiver in this Section 6.3 shall not limit or otherwise affect Producers’ and Gatherer’s rights and obligations under Section 10.2.

Article 7

Billing and Payments

7.1 Billing. As soon as practicable each Month, Gatherer shall invoice Producers in electronic format for services provided hereunder in the preceding Month and provide a statement setting forth (i) the volumes and quantities (expressed in Mcf’s and MMBtu’s) of Producers’ Gas and MV Mitigation Gas received at each Barnett Receipt Point and redelivered to each Barnett Delivery Point and the volumes and quantities of System Fuel and Losses, if measured or ascertainable by Gatherer, (ii) the Barnett Fees for such Producers’ Gas and MV Mitigation Gas, (iii) any adjustments for prior periods, and (iv) all amounts due by Producers hereunder. If actual measurements of volumes of Producers’ Gas or MV Mitigation Gas are not available by the 15th Day of the Month following the Month of receipt by Gatherer, then, on or after such 15th Day (or if such Day is not a Business Day, on or after the next Business Day), Gatherer may prepare and submit its invoice based on Gatherer’s good faith estimate of the volumes of Producers’ Gas and MV Mitigation Gas received in such Month. If Gatherer submits an invoice based on estimated volumes, Gatherer shall prepare and submit to Producers an invoice based on actual measurements on or before the close of business, CPT, of the 45th Day (or if such 45th Day is not a Business Day, on the following Business Day) after the applicable Month of delivery of Producers’ Gas or MV Mitigation Gas. Gatherer’s invoices shall include information reasonably sufficient to explain and support any estimates and charges reflected therein, the reconciliation of any estimates made in a prior Month to any actual measurements,

 

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and any adjustments to prior period volumes and quantities. Gatherer will use its commercially reasonable efforts to take such actions as may be appropriate to permit Gatherer by June 30, 2011 to submit invoices for actual volumes of Producers’ Gas and MV Mitigation Gas received, gathered, and handled hereunder not later than the close of business, CPT, on the 15th day of the Month following the Month of delivery of Producers’ Gas or MV Mitigation Gas.

7.2 Payment. Producers shall remit to Gatherer the amount due under Section 7.1, by wire transfer by the 25th Day of each Month or 10 Days from the date of receipt of Gatherer’s electronic invoice, whichever is later. If such due date is not a Business Day, payment is due on the next Business Day following such date.

7.3 Dispute. If Producers, in good faith, dispute the amount of any invoice of Gatherer that is based on actual measurements (not estimated volumes) or any part thereof, Producers will pay Gatherer such amount, if any, that is not in dispute and shall provide Gatherer Notice, no later than within 30 Days after the date that payment of such invoice would be due under Section 7.2, of the disputed amount accompanied by supporting documentation acceptable in industry practice to support the disputed amount. 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 Agreement. If Notice of a disputed invoice is not furnished to Gatherer by the date above, Producers shall be deemed to have waived the right to dispute such invoice, subject to Producers’ rights under Section 7.5 below.

7.4 Late Payments. If Producers fail to pay the amount of any invoice rendered by Gatherer hereunder when such amount is due, interest thereon shall accrue from, but excluding, the due date to and including the date payment thereof is actually made at the lesser of the Prime Rate plus **%, computed on an annualized basis and compounded Monthly, or the maximum rate of interest permitted by Applicable Law, not to exceed the maximum legal rate. “Prime Rate” means the prime rate on corporate loans at large U.S. money center commercial banks as set forth in The Wall Street Journal “Money Rates” table under the Heading “Prime Rate,” or any successor thereto, on the first date of publication for the Month in which payment is due. Gatherer shall render a late payment charge invoice and Producers shall make payment upon receipt of such invoice.

7.5 Audit. Each Party or its designated representatives 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 (including electronic measurement data, meter charts or records and other similar information supporting relevant calculations), and telephone recordings of the other Party and its Affiliates to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under this Agreement. This right to examine, audit, and to obtain copies shall not be available with respect to information not directly relevant to transactions under this Agreement. All invoices and billings, adjusted as contemplated in accordance with the second sentence of Section 7.1, shall be conclusively presumed final and accurate and all associated claims for underpayments or overpayments shall be deemed waived unless such invoices or billings are objected to in writing, with adequate explanation and/or documentation, within two Years after the Month of Gas delivery. Any retroactive adjustment made in response to information furnished under an audit under this Section 7.5 shall be paid in full by the Party owing payment within 30 Days of Notice and substantiation of such inaccuracy.

 

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7.6 Minor Adjustments. No adjustments, retroactive or prospective, shall be made to volumes for prior periods, whether the result of volume allocation errors or any other reason other than meter calibration error, that involve changes that would be less than 100 Mcf’s per Month.

7.7 Financial Responsibility. If (i) Producers fail to pay according to the provisions hereof and such failure continues for a period of 5 Business Days after Notice of such failure is provided to Producers or (ii) Gatherer has reasonable grounds for insecurity regarding the performance by Producers of any obligation under this Agreement, then Gatherer, by Notice to Producers, may, singularly or in combination with any other rights it may have, demand Adequate Assurance of Performance by Producers. “Adequate Assurance of Performance” means, at the option of Producers, (x) advance payment in cash by Producers to Gatherer for services to be provided under this Agreement in the following Month, (y) delivery to Gatherer by Producers of an Acceptable Letter of Credit in an amount equal to not less than the aggregate proceeds due from Producers under Section 7.2 for the prior 2 Month period, or (z) delivery to Gatherer by Producers of an Acceptable Third Party Guaranty. If Gatherer reasonably believes Producers will not deliver the Barnett Annual Minimum Volume for the Barnett Gathering Systems in such Year, Gatherer may require that any advance payment in cash by Producers to Gatherer be in an amount up to the aggregate proceeds due from Producers under Section 7.2 for the prior 2 Month period and that any Acceptable Letter of Credit be in an amount up to the aggregate proceeds paid by Producers under Section 7.2 for the prior 3 Month period. If Producers fail to provide Adequate Assurance of Performance to Gatherer within 48 hours of Gatherer’s Notice or if Producers or Producers’ Parent suffer any of the actions set forth in Section 2.2(v), then Gatherer shall have the right to suspend or reduce all services under this Agreement without prior Notice and without limiting any other rights or remedies available to it under this Agreement or otherwise. If Gatherer exercises the right to suspend or reduce services under this Section 7.7, then Producers shall not be entitled to take, or cause to be taken, any action hereunder or otherwise against Gatherer for such suspension or reduction. Failure of Gatherer to exercise its right to suspend or reduce service as provided in this Section 7.7 shall not constitute a waiver by Gatherer of any rights or remedies Gatherer may have under this Agreement, Applicable Law, or otherwise.

Article 8

Force Majeure

8.1 Non-Performance. If a Party is rendered unable, wholly or in part, by reason of a Force Majeure Event to perform its obligations under this Agreement, other than Producers’ obligations to make payments when due hereunder, then such Party’s obligations shall be suspended to the extent affected by the Force Majeure Event.

8.2 Definition. “Force Majeure Event” means any cause or event not reasonably within the control of the Party whose performance is sought to be excused thereby including the following causes and events (to the extent such causes and events are not reasonably within the control of the Party claiming suspension): acts of God, strikes, lockouts, or other industrial

 

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disputes or disturbances, acts of the public enemy, wars, blockades, insurrections, civil disturbances and riots, epidemics, landslides, lightning, earthquakes, fires, tornadoes, hurricanes, storms, floods, washouts and warnings for any of the foregoing which may necessitate the precautionary shut-down of wells, plants, pipelines, gathering systems, or other related facilities; arrests, orders, requests, directives, restraints and requirements of governments and government agencies and people, either federal or state, civil and military; any application of government conservation or curtailment rules and regulations; explosions, sabotage, breakage or accidents to equipment, machinery, gathering systems, plants, facilities or lines of pipe; outages (shutdown) for the making of repairs, alterations, relocations or inspections to lines of pipe, gathering systems, plants or equipment; inability to secure labor or materials, freezing of wells or lines of pipe, partial or entire failure of wells or lines of pipe, partial or entire failure of gas supply, electric power shortages, necessity for compliance with any court order, or any law, statute, ordinance, regulation or order promulgated by a Governmental Authority having or asserting jurisdiction, inclement weather that necessitates extraordinary measures and expense to construct facilities or maintain operations, or any other causes, whether of the kind enumerated herein or otherwise, not reasonably within the control of the Party claiming suspension. Such term shall likewise include, in those instances where either Party 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 to acquire, or delays on the part of such Party in acquiring, at reasonable cost and after the exercise of reasonable diligence, such servitudes, rights-of-way, grants, permits or licenses, and 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 Authority 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. “Force Majeure Event” also includes any event of force majeure or other interruption occurring with respect to the facilities or services of either Party’s Affiliates or third party service providers providing a service or providing any equipment, goods, supplies, or other services or items necessary to the performance of such Party’s obligations hereunder, including the occurrence of an event of force majeure event under a Third Party Gathering Agreement.

8.3 Excluded Events. “Force Majeure Event” specifically excludes the following occurrences or events: the loss, interruption, or curtailment of interruptible transportation on any Barnett Receiving Transporter necessary to take delivery of Producers’ Gas and MV Mitigation Gas at any Barnett Delivery Point, unless and only to the extent the same event also curtails firm transportation at the same Barnett Delivery Point; increases or decreases in Gas supply, allocation or reallocation of production by well operators; loss of markets; loss of supply; and failure of specific, individual wells or appurtenant facilities in the absence of a Force Majeure Event broadly affecting other wells in the same geographic area. Price changes due to market conditions with respect to the purchase or sale of Gas gathered hereunder or economics associated with the delivery, connection, receipt, gathering, compression, dehydration, treatment, processing or redelivery of Gas quantities hereunder shall not constitute Force Majeure Events. In addition, the non-availability or lack of funds or failure to pay money when due shall not constitute Force Majeure Events.

 

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8.4 Strikes. The settlement of strikes or lockouts shall be entirely within the discretion of the Party having the difficulty, and any obligation hereunder to remedy a Force Majeure Event 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 sole discretion of the Party having the difficulty.

8.5 Notice. The Party whose performance is affected by a Force Majeure Event must provide Notice to the other Party. Initial Notice may be given orally, but written Notice with reasonably full particulars of the Force Majeure Event is required as soon as reasonably possible after the occurrence of the Force Majeure Event. The Party affected by a Force Majeure Event shall use reasonable commercial efforts to (i) remedy and (ii) mitigate the effects of the Force Majeure Event.

8.6 Force Majeure Credit. If, during the Minimum Volume Period, Producers are unable to deliver volumes of Producers’ Gas and MV Mitigation Gas to a Barnett Gathering System due to a Force Majeure Event affecting Gatherer, then the volume (expressed in Mcf’s) of Producers’ Gas and MV Mitigation Gas (the “Force Majeure Volumes”) that Producers were prevented from delivering to the affected Barnett Gathering System due to such Force Majeure Event affecting Gatherer shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A for the same Year in which such Force Majeure Event occurs. The term “Force Majeure Volumes” does not, however, include any volumes of Producers’ Gas attributable to, or that could be delivered from, Barnett Delayed Connections (including any connection with respect to which Gatherer has furnished to Producers a Pad Notice in accordance with Section 6(b)(1) of Exhibit A), which are addressed in Section 6 of Exhibit A.

8.7 Maintenance and Other Operations. Gatherer may suspend its performance hereunder to the extent required to make necessary or reasonably desirable inspections, alterations, or repairs (not required as the result of the occurrence of a Force Majeure Event) to any part of a Barnett Gathering System and to make any required relocations or modifications of pipelines and other equipment and facilities comprising part of a Barnett Gathering System. Gatherer shall give Producers 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 Producers will not be affected. If, during the Minimum Volume Period, Gatherer suspends such performance with respect to any segment in excess of ** total Days in any Month (such excess Days, the “Excess Suspension Days”), then the volume (expressed in Mcf’s) of Producers’ Gas and MV Mitigation Gas (the “Maintenance Suspension Volumes”) that corresponds to the product of (i) the Excess Suspension Days multiplied by (ii) the average daily deliveries of Producers’ Gas and MV Mitigation Gas on the affected Barnett Gathering System for the 30-Day period immediately prior to the first Day in the Month in which suspension occurred (excluding any Day during such 30-Day period when no Producers’ Gas and MV Mitigation Gas is delivered to such Barnett Gathering System or the delivery of Producers’ Gas or MV Mitigation Gas to such Barnett Gathering System is affected by any maintenance downtime) but less the volumes of Producers’ Gas and MV Mitigation Gas actually received on the affected Barnett Gathering System on the Excess Suspension Day shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A for the same Year in which such suspension occurs.

 

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Article 9

Assignment

9.1 General.

(a) Restriction on Assignment. Except as provided in this Article 9, neither Party shall assign any of its rights, or delegate any of its obligations, under this Agreement (including by operation of law) without the prior written consent of the other Party, such consent not to be unreasonably withheld or delayed. For purposes of this Section 9.1, a Change of Control with respect to a Producer shall be considered an assignment of this Agreement by such Producer.

(b) Permitted Assignments. No assignment of this Agreement shall be made by Producers, except (i) to a Person that is acquiring an interest in or all or part of the Dedicated Properties contemporaneous with such assignment and (ii) with the prior written consent of Gatherer. No assignment of this Agreement shall be made by Gatherer, except (A) to a Person that is acquiring an interest in or all or a part of a Barnett Gathering System contemporaneous with such assignment and (B) with the prior written consent of Producers. Notwithstanding the foregoing, each Party may assign its rights under this Agreement to an Affiliate of such Party without the consent of the other Party and each Party may pledge this Agreement (or pledge any of its rights under this Agreement including the right to receive payments due hereunder) to secure any credit facility or indebtedness of such Party or its Affiliates without the consent of the other Party and may assign any of its rights, or delegate any of its obligations, under this Agreement to one or more of its Affiliates without the consent of the other Party; provided, no such assignment or pledge shall relieve the assignor Party from any of its obligations hereunder.

(c) Partial Assignments in Minimum Volume Period. If in connection with any permitted assignment under Section 9.1(b) that would occur during the Minimum Volume Period less than all of the Gatherer’s rights and obligations under this Agreement are proposed to be assigned, or less than all of Producers’ rights and obligations under this Agreement are proposed to be assigned, as applicable, then the Party whose consent is required shall have the right to consider and approve (in addition to other relevant matters) the manner in which redetermination of Barnett Fees, well connect obligations, natural gas minimum volume throughput commitment, maximum daily natural gas quantity limitations and similar matters are proposed to be retained by the assignor Party, to be assumed by the proposed assignee, or to be otherwise allocated among the assignor Party and the assignee.

(d) Assumed Obligations. Any permitted assignee of either Party’s rights and obligations under this Agreement shall assume and be responsible for the payment and performance of the assignor Party’s rights and obligations under this Agreement that are required to be paid or performed after the effective date of such assignment (the “Assumed Obligations”), the assignor Party shall remain liable for the obligations required to be paid and performed under this Agreement prior to the effective date of such assignment, the assignor Party shall be liable for the Assumed Obligations unless the assignor Party is released from such Assumed Obligations under Section 9.5, and the assignor Party and the permitted assignee shall be co-obligors as to the Assumed Obligations unless the assignor Party is released from such Assumed Obligations under Section 9.5.

 

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9.2 Sale of Barnett Gathering System.

(a) Transfer by Gatherer. If Gatherer sells, transfers, or otherwise disposes of an interest in all or any part of a Barnett Gathering System and no assignment of rights and obligations under this Agreement occurs under Section 9.1, Gatherer shall cause the acquiring Person to either (i) enter into an agreement with Producers, substantially in the form attached as Exhibit E (a “Gathering System Owner Acknowledgement Agreement”) whereby such Person acknowledges Producers’ rights to have Producers’ Gas connected to, received by, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered to Producers on and over the Barnett Gathering System in accordance with the terms of this Agreement or (ii) enter into a Separate GGA with Producers with respect to the part of the Barnett Gathering System acquired by such Person. Neither the entry into a Barnett Gathering System Owner Acknowledgment Agreement or a Separate GGA shall constitute an assignment for purposes of Section 9.1.

(b) Continued Performance by Gatherer. With respect to each Barnett Gathering System Owner Acknowledgement Agreement, Gatherer shall continue to be obligated to perform its obligations under this Agreement as if the sale, transfer, or other disposition of the interest in or part of the Barnett Gathering System acquired by the Person who is a party to such Barnett Gathering System Owner Acknowledgement Agreement had not occurred.

(c) Separate GGA. With respect to each Separate GGA referenced in this Section 9.2, unless released under Section 9.5(a), (i) Gatherer shall continue to be obligated to perform and pay its obligations under this Agreement as if the sale, transfer, or other disposition of the interest in or part of the Barnett Gathering System acquired by the Person who is a party to such Separate GGA had not occurred and (ii) the performance or payment of any such obligations by the Person who is a party to such Separate GGA (or its permitted successors and assigns under the terms of such Separate GGA) shall be accepted by Producers and be considered as performed or paid by Gatherer.

9.3 Sale of Dedicated Properties.

(a) Transfer by Producers. If Producers or their Affiliates sell, transfer, or otherwise dispose of any of the Barnett Dedicated Properties (or any interest therein), including the sale or transfer of a production payment, overriding royalty interest, net profits interest, or other similar interest, and no assignment of rights and obligations under this Agreement occurs under Section 9.1, Producers shall cause, or shall cause their Affiliates to cause, the acquiring Person to either (i) enter into an agreement with Gatherer, substantially in the form attached as Exhibit F (a “Dedicated Properties Owner Acknowledgement Agreement”) whereby such Person acknowledges the dedication to the Barnett Gathering System of Producers’ Gas from the Barnett Dedicated Properties (or interest therein) acquired by such Person or (ii) enter into a Separate GGA with Gatherer with respect to the Barnett Dedicated Properties (or interest therein) acquired by such Person. Neither the entry into a Dedicated Properties Owner Acknowledgment Agreement or a Separate GGA shall constitute an assignment for purposes of Section 9.1.

(b) Continued Performance by Producers. With respect to each Dedicated Properties Owner Acknowledgement Agreement, Producers shall continue to be obligated to perform and

 

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pay their obligations under this Agreement as if the sale, transfer or other disposition of the Barnett Dedicated Properties (or any interest therein) acquired by the Person who is a party to such Dedicated Properties Owner Acknowledgement Agreement had not occurred.

(c) Separate GGA. With respect to each Separate GGA referenced in this Section 9.3, unless released under Section 9.5(b), (i) Producers shall continue to be obligated to perform and pay their obligations under this Agreement as if the sale, transfer or other disposition of the Barnett Dedicated Properties (or interest therein) acquired by the Person who is a party to such Separate GGA had not occurred and (ii) the performance or payment of any such obligations by the Person who is a party to such Separate GGA (or its permitted successors and assigns under the terms of such Separate GGA) shall be accepted by Gatherer and be considered as performed or paid by Producers.

9.4 Separate Gas Gathering Agreement.

(a) Completion. As to each Separate GGA relating to any Barnett Gathering System to be entered into in the Minimum Volume Period, the Separate GGA will need to be completed by the insertion of the relevant information in any blanks contained in such Separate GGA. Volumes of Gas received in the Barnett Gathering Systems under a Separate GGA shall be applied to the Adjusted Barnett Annual Minimum Volume to the extent that (i) such volumes would have constituted Producers’ Gas or MV Mitigation Gas if the Barnett Dedicated Properties covered by such Separate GGA had continued to be owned by Producers or their Affiliates and (ii) the Adjusted Barnett Annual Minimum Volume has not otherwise been reduced to reflect volumes delivered under such Separate GGA.

(b) Producers Terms. If the Separate GGA is being entered into in connection with a sale, transfer or other disposition by Gatherer of part of the Barnett Gathering System, then Producers shall have the right to approve the information to be inserted in any of the blanks contained in such form, such approval not to be unreasonably withheld or delayed.

(c) Gatherer Terms. If the Separate GGA is being entered into in connection with the sale, transfer or other disposition by Producers of an interest in or part of the Barnett Dedicated Properties, then Gatherer shall have the right to approve the information to be inserted in any of the blanks contained in such form, such approval not to be unreasonably withheld or delayed.

9.5 Release.

(a) Release of Gatherer. If the assignee under an assignment consented to by Producers under Section 9.1 or the acquiring Person under a Separate GGA entered into under Section 9.2(a) has (or the guarantor of its obligations under a guaranty provided pursuant to the following sentence has) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then Gatherer shall be released from the Assumed Obligations applicable to such assignment or the obligations of such acquiring Person under such Separate GGA, as applicable (the “Separate GGA Gatherer Obligations”). If at the time of the assignment or the entry into the Separate GGA, as applicable, such assignee or acquiring Person does not have a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then such assignee or acquiring Person, as applicable, may provide to Producers a guaranty of such

 

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assignee’s/acquiring Person’s Assumed Obligations or the Separate GGA Gatherer Obligations, as applicable, from a Person with (at time of such assignment or entry into such Separate GGA) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, which guaranty shall be in a form reasonably acceptable to Producers.

(b) Requested Gatherer Release. If in connection with any assignment or Separate GGA under Section 9.5(a) the acquiring Person does not have (and is unable to provide a guarantor with) a credit rating equal to or greater than the Applicable Rating and thus is not entitled to a release under such Section 9.5(a)(i), Gatherer may nevertheless request that Gatherer be released from the Assumed Obligations or Separate GGA Gatherer Obligations, as applicable, and in connection with each such request the financial ability of the acquiring Person (and any guarantor provided by such acquiring Person) and credit support provided by such acquiring Person or any guarantor to satisfy the Assumed Obligations or Separate GGA Gathering Obligations shall be taken into consideration and Producers shall not unreasonably withhold or delay the approval of such request.

(c) Release of Producers. If the assignee under an assignment consented to by Gatherer under Section 9.1 or the acquiring Person under a Separate GGA entered into under Section 9.3(a) has (or the guarantor of its obligations under a guaranty provided pursuant to the following sentence has) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then Producers shall be released from the Assumed Obligations applicable to such assignment or the obligations of such acquiring Person under such Separate GGA, as applicable (the “Separate GGA Producer Obligations”). If at the time of the assignment or the entry into the Separate GGA, as applicable, such assignee or acquiring Person does not have a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, then such assignee or acquiring Person, as applicable, may provide to Gatherer a guaranty of such assignee’s/acquiring Person’s Assumed Obligations or Separate GGA Producer Obligations under such Separate GGA, as applicable, from a Person with (at time of such assignment or entry into such Separate GGA) a long-term, senior unsecured credit rating equal to or greater than the Applicable Rating, which guaranty shall be in a form reasonably acceptable to Gatherer.

(d) Requested Producers Release. If in connection with any assignment or Separate GGA referenced in Section 9.5(c) the acquiring Person does not have (and is unable to provide a guarantor with) a credit rating equal to or greater than the Applicable Rating and thus is not entitled to a release under such Section 9.5(c), Producers may nevertheless request that Producers be released from the Assumed Obligations or Separate GGA Producer Obligations, as applicable, and in connection with each such request the financial ability of the acquiring Person (and any guarantor provided by such acquiring Person) and credit support provided by such acquiring Person or any guarantor to satisfy the Assumed Obligations or Separate GGA Producer Obligations shall be taken into consideration and Gatherer shall not unreasonably withhold or delay the approval of such request.

9.6 Inurement. Subject to this Article 9, this Agreement binds and inures to the benefit of the Parties and their respective successors and assigns.

 

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Article 10

Jurisdiction and Additional Charges

10.1 Regulatory Bodies. This Agreement is subject to, and each Party will comply with, all Applicable Laws of any Governmental Authority now or hereafter having jurisdiction over either or both Parties or their facilities.

10.2 Additional Fees and Changes in Laws. Producers shall reimburse Gatherer for Producers’ allocable share of (a) any additional, increased, or subsequently applicable taxes (other than income taxes and any real or personal property or other ad valorem tax imposed on any Barnett Gathering System) implemented or imposed after September 30, 2009 that are lawfully levied on or paid by Gatherer with respect to its performance under this Agreement or on any part of a Barnett Gathering System and (b) any new or subsequently applicable assessments, fees or other charges implemented or imposed on Gatherer with respect to the services provided hereunder, including any such assessments, fees or other charges arising from any carbon tax or cap and trade law, rule or regulation adopted after September 30, 2009. Producers’ allocable share of any such amounts shall be based on the ratio that Producers’ Gas and MV Mitigation Gas (each expressed in Mcf’s) received at the Barnett Receipt Points in the State or States in which such amounts are imposed bears to the total volume of Gas (expressed in Mcf’s) received at such Barnett Receipt Points, in each case during the applicable period for which such taxes, assessments, fees or other charges are incurred or imposed, as the case, may be. To the extent that any of Gatherer’s activities pursuant to this Agreement produce or result in the generation of or otherwise qualify for any emission reduction credits or emission offset credits or bonus emission allowances (collectively, “Greenhouse Gas Credits”) and Producers have paid for an allocable share of the costs of such activities pursuant to this Section 10.2, then Producers shall be entitled to receive, and Gatherers shall obtain and convey to Producers, their allocable share of any such Greenhouse Gas Credits. If any Governmental Authority takes any action (including issuance of any “policy statement,” rule, or regulation) whereby the receipt, gathering, treating, or delivery of Producers’ Gas and MV Mitigation Gas as contemplated under this Agreement shall be prohibited or subject to terms, conditions or regulations, including rate or price controls or ceilings or open access requirements not in effect on September 30, 2009 and which, in the reasonable judgment of Gatherer, materially adversely affect the economics of the services provided, and Barnett Fees received, under this Agreement, then, upon Notice by Gatherer to Producers, the Parties shall as promptly as practicable meet to negotiate in good faith such changes to the terms of this Agreement as may be necessary or appropriate to preserve and continue for the Parties the rights and benefits originally contemplated by the parties to the CHK Agreement (in the form originally executed by such parties on and as of September 30, 2009, without regard to any amendments thereto), including the returns expected by Gatherer, with such amendment to this Agreement to be effective no later than the effective date of such new or amended Applicable Law.

Article 11

Notices

11.1 Agency. For all purposes of this Agreement, TEPUSA irrevocably appoints TGPNA as its agent to receive and make all notices, invoices, payments and other communications under this Agreement from or applicable to Producers and to make, withhold, grant and take all approvals, consents, decisions, and actions required or permitted of Producers under or in connection with this Agreement.

 

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11.2 Notice. All notices, invoices, payments, and other communications made under this Agreement (“Notice”) shall be in writing and sent to the addresses shown in Exhibit C.

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

11.4 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.

Article 12

Other Provisions

12.1 Governing 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 Harris County, Texas over any dispute or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each Party hereby 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. 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.

12.2 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.

12.3 Specific Performance. The Parties acknowledge and agree (i) that each Party would be irreparably harmed by a breach by the other Party of any of their obligations under this Agreement and (ii) that there would be no adequate remedy at law or damages to compensate the non-breaching Party for any such breach. The Parties agree that the non-breaching Party shall be entitled to injunctive relief requiring specific performance by the breaching Party of its obligations under this Agreement, and the Parties hereby consent and agree to the entry of such injunctive relief.

 

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12.4 Representations. 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 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. Producers and Gatherer jointly acknowledge and agree that (a) the movement of Producers’ Gas and MV Mitigation Gas on each Barnett Gathering System under this Agreement constitutes (and is intended to constitute for purposes of all Applicable Laws in effect in Texas) a movement of Producers’ Gas and MV Mitigation Gas that is not subject to the jurisdiction of the FERC pursuant to the Natural Gas Act or Section 311 of the Natural Gas Policy Act, (b) the Barnett Fees have been freely negotiated and agreed upon as a result of good faith negotiations and are not discriminatory or preferential, but are just, fair, and reasonable in light of the Parties’ respective covenants and undertakings herein during the term of this Agreement, and (c) neither Producers nor Gatherer had an unfair advantage over the other during the negotiation of this Agreement.

12.5 Processing Rights. Subject to the following sentence, Producers retain all processing rights with respect to Producers’ Gas and MV Mitigation Gas and Gatherer shall not process Producers’ Gas or MV Mitigation Gas unless Producers agree in writing to such processing. Gatherer shall have the right to process Producers’ Gas covered by the processing agreements between one or more Producers and Gatherer described on Exhibit G. Without the prior written consent of Gatherer, Producers shall have no right to locate a processing plant or other processing-type facilities (whether owned by Producers, their Affiliates, or a third party) on any portion or segment of any of the Barnett Gathering Systems. If Producers propose to engage or contract (or renew or extend the term of any existing contract or agreement) with a third party to process any of Producers’ Gas gathered on any Barnett Gathering System, Producers shall provide Gatherer with the opportunity to submit a proposal to Producers to perform such processing services.

12.6 Enforceability. 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.

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

12.8 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;

 

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(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) unless otherwise specified, the plural shall be deemed to include the singular, and vice versa; and

(vi) each gender shall be deemed to include the other genders.

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

12.10 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.

12.11 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 Affiliates, employees, lenders, royalty owners, co-working interest owners, counsel, accountants, and agents of the Party, or a prospective or permitted assignee under Article 9 or prospective or actual purchaser of an interest in any Barnett Gathering System or in any of the Barnett Dedicated Properties, provided such Persons shall have agreed to keep such terms confidential), except (i) to comply with any Applicable Law or exchange rule, (ii) to the extent necessary for the enforcement of this Agreement, or (iii) 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 this Agreement (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. The entry into, or filing of a memorandum in the applicable public records with respect to this Agreement, a Separate GGA, a Dedicated Properties Owner Acknowledgment Agreement, or a Gathering System Owner Acknowledgment Agreement shall not constitute a breach of this Section 12.11. 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 this Agreement shall be kept confidential by the Parties for one Year from the expiration or termination of this Agreement. If 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.

 

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12.12 Easements.

(a) Surface Rights. Oil and gas leases, oil and gas rights derived under farmout agreements, surface damage releases, right of way agreements, pooling orders and similar agreements and rights held by Producers covering the Barnett Dedicated Properties (collectively referred to herein as an “Oil and Gas Lease”) may permit Producers to lay gathering pipelines and related facilities for the purpose of moving natural gas and crude oil from any well producing from the oil, gas and mineral estate covered by such Oil and Gas Lease or lands pooled or unitized with such Oil and Gas Lease. The surface of the land covered by an Oil and Gas Lease is referred to herein as the “Surface Estate” and the owner of such Surface Estate is referred to herein as a “Surface Estate Owner.”

(b) Cooperation. With respect to any easements/rights of way across Surface Estates needed by Gatherer to connect the Barnett Gathering System to existing or future wells producing from the oil, gas and mineral estate covered by the related Oil and Gas Lease or lands pooled or unitized with such Oil and Gas Lease (a “Subject Well”), Gatherer shall first attempt to obtain such easements/right of ways from the Surface Estate Owners. If Gatherer is unable to obtain any such easement/right of way from a Surface Estate Owner, Gatherer may notify the Producers thereof and request that the Producer holding the related Oil and Gas Lease reasonably cooperate with Gatherer in attempting to obtain the needed easement/right of way and such Producer shall so reasonably cooperate with Gatherer. The aforesaid obligation of Producer to reasonably cooperate with Gatherer shall not require Producer to pay any consideration to a Surface Estate Owner unless there is a contemporaneous reimbursement by Gatherer.

(c) Partial Assignment. If the needed easement/right of way has not been obtained after such cooperative efforts or Gatherer in good faith believes that such efforts will not be successful, Gatherer may request that the applicable Producer execute and deliver to Gatherer an assignment in the form of Exhibit H (a “Oil and Gas Lease Partial Assignment”). Provided that the applicable Oil and Gas Lease permits the assignment contemplated by the form attached as Exhibit H and (if applicable) any required consent from the other party to the Oil and Gas Lease is obtained, Gatherer and the applicable Producer shall cooperate in completing such form by inserting or attaching a description of the applicable Oil and Gas Lease, Subject Well and Surface Estate, Gatherer and Producer shall execute such completed Oil and Gas Lease Partial Assignment, and Producer shall have the right to record such Oil and Gas Lease Partial Assignment in the applicable public records. Gatherer shall not be required to pay any separate consideration to Producers for any such Oil and Gas Lease Partial Assignment. As reflected in the form attached as Exhibit H, Gatherer’s use of the Surface Estate covered by each Oil and Gas Lease Partial Assignment shall be subject to the terms of the related Oil and Gas Lease.

(d) Removal. As between Gatherer and Producers, any property of Gatherer placed in, on or under any such Surface Estate pursuant to an Oil and Gas Lease Partial Assignment shall remain the property of Gatherer, subject to removal by Gatherer (at its expense) when necessary or desirable (as determined by Gatherer in its sole and reasonable judgment provided that such removal shall not result in Gatherer being in breach of its other obligations under this Agreement). Gatherer shall have a reasonable time after the expiration or termination of this Agreement to remove its property placed on, in or under a Surface Estate under any such Oil and Gas Lease Partial Assignment. If under the terms of the Oil and Gas Lease applicable to any

 

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Oil and Gas Lease Partial Assignment the property placed in, on or under the Surface Estate by Gatherer is required to be removed upon the expiration or termination of such Oil and Gas Lease, then Gatherer shall be obligated to effect such removal (at its expense) in a manner consistent with the terms of such Oil and Gas Lease and any applicable regulations. The obligations of Gatherer under this Section 12.12 shall survive the expiration or termination of this Agreement.

12.13 Cooperation Meetings. As frequently as necessary, Producers and Gatherer shall meet at a mutually agreeable location to discuss and review Producers’ drilling and other development plans on the Barnett Dedicated Properties, Gatherer’s expansion plans for the Barnett Gathering Systems, and any other information regarding Producers’ and Gatherer’s operations that may be appropriate or helpful to the Parties performance under this Agreement.

12.14 DFW Gathering System. If Gatherer’s right to operate the DFW Gathering System terminates under the CHK Agreement, then Gatherer shall have no further obligation to receive Producers’ Gas and MV Mitigation Gas under this Agreement on the DFW Gathering System from and after the date of such termination.

12.15 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Gatherer and Producers.

 

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

 

TOTAL GAS & POWER NORTH AMERICA, INC.
By:  

/s/ Laurent Vivier

Name:  

Laurent Vivier

Title:  

Vice President, Trading

TOTAL E&P USA, INC.
By:  

/s/ Eric Bonnin

Name:  

Eric Bonnin

Title:  

Vice President, Business Development & Strategy

CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.
By:  

/s/ J. Mike Stice

Name:  

J. Mike Stice

Title:  

Chief Executive Officer

[SIGNATURE PAGE TO

BARNETT GAS GATHERING AGREEMENT]


List of Exhibits and Schedules

 

Exhibits
Exhibit A    Barnett Gathering System Terms and Conditions
Exhibit B    Nominations and Measurement Practices
Exhibit C    Addresses for Notice
Exhibit D    Payout Calculation
Exhibit E    Gathering System Owner Acknowledgement Agreement
Exhibit F    Dedicated Properties Owner Acknowledgement Agreement
Exhibit G    Existing Processing Agreements
Exhibit H    Oil and Gas Lease Partial Assignment
Exhibit I    Memorandum of Gas Gathering Agreement
Schedules
Schedule 1    Barnett Gathering Systems
Schedule 2    Barnett Fees
Schedule 3    Barnett Delivery Points
Schedule 4    Barnett Dedicated Wells, Barnett Receipt Points, and Pressures
Schedule 5    Barnett AMI
Schedule 6    Barnett Maximum Daily Quantity
Schedule 7    Barnett Annual Minimum Volume
Schedule 8    Minimum Volume Commitment Example
Schedule 9    Barnett Type Curve
Schedule 10    Acquired Properties
Schedule 11    Barnett Unconnected Wells


Exhibit A

BARNETT GATHERING SYSTEMS TERMS AND CONDITIONS

The following terms and conditions shall apply to the gathering of Producers’ Gas and (where applicable) MV Mitigation Gas on the Barnett Gathering Systems.

1. Barnett Dedication.

(a) Producers’ Commitment. Subject only to Producers’ Barnett Reservations, Producers exclusively dedicate and commit to the performance of this Agreement the Barnett Dedicated Properties, represent that, from and after the Effective Date, the Barnett Dedicated Properties are not otherwise subject to any other gas gathering agreement or other commitment or arrangement that would permit or require Producers’ Gas from the Barnett Dedicated Properties to be gathered on any other gas gathering system, and agree not to deliver any Gas produced from the Barnett Dedicated Properties and owned or controlled by Producers or their Affiliates to any other gas gatherer, gas purchaser, gas marketer, or other Person prior to the Barnett Delivery Points. Producers agree to cause any existing or future Affiliates of Producers to be bound by, and to execute and join as a party, this Agreement. The dedication and commitment made by Producers and their Affiliates under this Agreement is a covenant running with the land.

(b) Producers’ Reservations. Producers reserve the following rights (“Producers’ Barnett Reservations”): (i) to operate wells producing from the Barnett Dedicated Properties as a reasonably prudent operator, (ii) to separate or process Gas prior to delivery at the Barnett Receipt Points so long as such Producers’ Gas and MV Mitigation Gas meets the gas specifications herein after such separation or processing, (iii) to use Gas produced from the Barnett Dedicated Properties for lease operations, and (iv) to pool, communitize, or unitize Producers’ interests in the Barnett Dedicated Properties.

(c) Transfer of Producers’ Interests. Any transfer by Producers or their Affiliates of any of their interests in the Barnett Dedicated Properties shall comply with Article 9 of this Agreement.

(d) Memorandum. Producers shall enter into and deliver to Gatherer, at Gatherer’s request, a fully recordable memorandum of this Agreement, substantially in the form of Exhibit I.

2. Barnett Fees.

(a) Gathering and Compression Fees. As consideration for receiving Producers’ Gas or MV Mitigation Gas at each Barnett Receipt Point each Month, Producers shall pay Gatherer each Month an amount equal to the applicable Barnett Fees (expressed in $/Mcf) for each Barnett Receipt Point shown in Schedule 2 (as supplemented from time to time) applied to the volume of Producers’ Gas and MV Mitigation Gas (net of gas lift volumes) received at each such Barnett Receipt Point during such Month. In addition to payment of such amounts, Producers shall reimburse Gatherer each Month for Producers’ allocated share of Electric Power Charges on each Barnett Gathering System and any other Barnett Fees shown in Schedule 2, in each case based on the volume of Producers’ Gas and MV Mitigation Gas (net of gas lift volumes) received at each such Barnett Receipt Point during such Month.

 

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(b) Dehydration Service Fees. Producers’ Gas and MV Mitigation Gas delivered to the Barnett Receipt Points may have a water vapor content that exceeds the quality specification for water vapor content permitted from time to time by one or more of the Barnett Receiving Transporters. In such event, Gatherer will dehydrate, if necessary, Producers’ Gas or MV Mitigation Gas to reduce its water vapor content to 7 pounds per million Cubic Feet. The fee for such dehydration services is included in the Barnett Fees. In addition to the Barnett Fees, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with dehydration services performed under this Section 2(b). Gatherer shall be responsible for the costs incurred in disposing of water removed from Producers’ Gas or MV Mitigation Gas during dehydration. If the quality specification for water content is reduced below 7 pounds per million Cubic Feet by one or more of the Barnett Receiving Transporters, then the Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to reimburse Gatherer for the cost of additional dehydration services to comply with such specifications.

(c) Treating Service Fees. Producers’ Gas or MV Mitigation Gas delivered to the Barnett Receipt Points may have carbon dioxide or hydrogen sulfide content that exceeds the quality specification for carbon dioxide or hydrogen sulfide content required from time to time by one or more of the Barnett Receiving Transporters. In such event, without limiting Gatherer’s rights under Section 10(c) of this Exhibit A, Gatherer will treat, if necessary, Producers’ Gas or MV Mitigation Gas to reduce the carbon dioxide content to 2% and hydrogen sulfide to not more than 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas. The fee for Gatherer providing such treating services is included in the Barnett Fees to the extent such services are provided by Gatherer with facilities comprising part of a Barnett Gathering System on September 30, 2009. If additional facilities are required to provide such treating services or if the quality specification for carbon dioxide or hydrogen sulfide of the Barnett Receiving Transporters is reduced below 2% and 1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas, then Parties shall promptly negotiate an additional fee (that includes Gatherer’s cost of capital) to be paid by Producers to Gatherer to provide such additional treating services. If the Parties are unable to agree upon an additional fee, then Gatherer may refuse to accept receipt of such Producers’ Gas or MV Mitigation Gas for delivery to such Barnett Receiving Transporter. Gatherers’ right to negotiate additional treating fees or right to refuse further deliveries of such Producers’ Gas or MV Mitigation Gas shall apply to each additional reduction in quality specification for carbon dioxide or hydrogen sulfide content of the Barnett Receiving Transporters. In addition to the fees referred to above, Gatherer will charge Producer for, or retain Gas in connection with, as applicable, Producers’ allocable share of Fuel Gas and Lost and Unaccounted for Gas incurred in connection with treating services performed in accordance with this Section 2(c). If Gatherer removes carbon dioxide from Producers’ Gas or MV Mitigation Gas gathered on any Barnett Gathering System, Producers shall have the right (but not the obligation) to keep title to and retain all such carbon dioxide removed from Producers’ Gas or MV Mitigation Gas. If Producers so elect to retain title to such carbon dioxide, then Producers shall be responsible (at their sole risk, cost and expense) to arrange for the taking and delivery of such carbon dioxide at and from each point on the Barnett Gathering System where such carbon dioxide is so removed,

 

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and Gatherer shall make such carbon dioxide available for taking at prevailing pressures after treating. Notwithstanding the foregoing, nothing in this Section 2.3(c) shall require Gatherer to install facilities or incur any capital expense associated with such delivery.

3. Redetermination of Barnett Fees.

(a) Redetermination Period. For the period that commences as of July 1, 2009 and ends on June 30, 2019, the Parties acknowledge and agree (i) that the Barnett Fees are subject to being redetermined at the times and in accordance with terms set forth in Section 3 of Exhibit A of the CHK Agreement and the Additional Agreement (each such redetermination, a “Redetermination”). As promptly as practicable following a request for Redetermination, each of Producers and Gatherer agree to inform the other Party of such request as promptly as practicable and to provide to the other Party any information within its control that is useful in the making of each such Redetermination, and the Party receiving such information shall have the right to provide such information to the other CHK Parties.

(b) Barnett Fees. Any Barnett Fees redetermined in a Redetermination shall apply as of the first day of the Month following the date on which such redetermined Barnett Fees are finally determined, and shall remain in effect for the remainder of the Primary Term (or, if such redetermined Barnett Fees relate to the first Redetermination under the CHK Agreement and the Additional Agreement, until the Barnett Fees are redetermined in the second Redetermination under the CHK Agreement and the Additional Agreement, if any, which redetermined Barnett Fees shall remain in effect for the then remainder of the Primary Term). The fees determined in a Redetermination shall constitute “Barnett Fees” for all purposes of this Agreement.

4. Minimum Volume Commitment.

(a) Producers’ Obligation. Producers commit and agree to deliver to Gatherer for gathering on the Barnett Gathering Systems in each Year during the Minimum Volume Period no less than the Adjusted Barnett Annual Minimum Volume for each such Year. The exclusive remedies for any failure of Producers to comply with their obligations under the preceding sentence are set forth in Section 4(b) of this Exhibit A.

(b) Deficit Volumes. If the Annual Barnett Gathered Volumes delivered to the Barnett Gathering Systems in any Year of the Minimum Volume Period are less than the Adjusted Barnett Annual Minimum Volume for such Year, then Producers shall pay Gatherer in cash, no later than 30 Days following the receipt by Producers from Gatherer of an invoice therefor accompanied by reasonable support for the amount invoiced therein for an amount equal to the shortfall volume for such Year (expressed in Mcf’s) multiplied by the Average Barnett Fees for the Year in which such shortfall volume occurred, as liquidated and agreed damages for Producers’ failure to deliver the Barnett Annual Minimum Volume in such Year. As used herein, the term “Average Barnett Fee” means, for each Year in the Minimum Volume Period, the Barnett Fee specified in Schedule 2 for Barnett Receipt Point Pressures between ** to ** psig for each such Year, escalated as specified in such Schedule 2 and subject to redetermination in accordance with Section 3 of this Exhibit A.

 

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(c) Barnett Excess Volumes. Annual Barnett Excess Volumes shall be accumulated as a credit to be used to reduce the Adjusted Barnett Annual Minimum Volume in future Years as provided herein. Annual Barnett Excess Volumes shall be used to first reduce the Adjusted Barnett Annual Minimum Volume in the last Year of the Minimum Volume Period and then once the Adjusted Barnett Annual Minimum Volume for such Year is completely satisfied from such Annual Barnett Excess Volumes, any remaining Annual Barnett Excess Volumes will credited to the Adjusted Barnett Annual Minimum Volume for the preceding Year or Years.

(d) Adjusted Barnett Annual Minimum Volume. The “Adjusted Barnett Annual Minimum Volume” shall be determined for each Year in the Minimum Volume Period, solely for purposes of the calculation under Section 4(b) above, as follows: for each such Year the Barnett Annual Minimum Volume, as shown in Schedule 7, shall be (i) decreased by (w) volumes of Producers’ Gas not delivered in such Year that are attributable to Barnett Delayed Connections, (x) any Force Majeure Volumes or Maintenance Suspension Volumes not delivered in such Year, (y) the Annual Barnett Excess Volumes, if any, that are applicable to such Year as provided in Section 4(c) above; and (z) upon any termination of Gatherer’s rights to operate the DFW Gathering System under Section 12.14 of the CHK Agreement, 25% of the remaining DFW PDP Volumes that would have been produced in such Year, and (ii) increased by (x) the volumes of Producers’ Gas attributable to Barnett Delayed Connections that are connected to a Barnett Gathering System in such Year, (y) the Force Majeure Volumes credited under clause (i)(y) above after resumption of deliveries on the affected Barnett Gathering System, and (z) in the last Year of the Minimum Volume Period, any MVC Additional Volume Wells Amount.

(e) No Increase in MDQ. No increase or decrease in the Adjusted Barnett Annual Minimum Volume hereunder for a Year will cause an increase or decrease in the Barnett Maximum Daily Quantity for such Year.

(f) No Suspension. Producers’ obligations to make payments under this Exhibit A shall not be suspended by the inability of Producers to deliver Producers’ Gas or MV Mitigation Gas under this Agreement due to the occurrence of Force Majeure Events affecting Producers.

(g) [Intentionally deleted]

(h) Example Calculation. An example calculation of payments that may be due under this Section 4 of Exhibit A is shown in Schedule 8.

5. Gas Delivery.

(a) Receipt and Delivery. Producers agree to tender, or cause to be tendered, to the Barnett Receipt Points, Producers’ Gas and MV Mitigation Gas, each Day, and Gatherer agrees to accept Producers’ Gas and MV Mitigation Gas at the Barnett Receipt Points and redeliver Producers’ Gas and MV Mitigation Gas to the Barnett Delivery Points, subject to and on the terms provided in this Agreement. Nominations of Producers’ Gas and MV Mitigation Gas shall be made in accordance with the procedures in Exhibit B.

(b) Maximum Daily Quantity.

(1) Barnett MDQ. In no event shall Gatherer ever be required to accept from Producers on any of the Barnett Gathering Systems a volume of Producers’ Gas and MV Mitigation Gas in excess of the Barnett Maximum Daily Quantity for that Barnett Gathering System.

 

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(2) Increase in MDQ. If Producers have a volume of Producers’ Gas and MV Mitigation Gas available to deliver in excess of the Barnett Maximum Daily Quantity for a Barnett Gathering System, Producers may request that Gatherer increase the Barnett Maximum Daily Quantity for that Barnett Gathering System. Such request shall be made by Notice to Gatherer stating the amount (in Mcf’s) by which Producers desire to increase the Barnett Maximum Daily Quantity and the term of such increase. Gatherer shall accept such increase in the Barnett Maximum Daily Quantity prior to December 31, 2015 to the extent excess capacity is then available on the Barnett Gathering System, taking into account commitments and offers previously made by Gatherer to third parties (including letters of intent) for capacity on that Barnett Gathering System and considering the effects such increase may have on Gatherer’s ability to maintain required pressures on that Barnett Gathering System, but for no longer than the remaining term of the Minimum Volume Period. If Gatherer makes such excess capacity available to Producers (i) the Barnett Maximum Daily Quantity shall be increased by the amount of such excess capacity made available to Producers for the term of such increase (with the Barnett Fees to apply to Producers’ Gas and MV Mitigation Gas that utilizes such increased capacity) and (ii) Producers shall commit to deliver, or pay the applicable Barnett Fees with respect to, **% of such increase in the Barnett Maximum Daily Quantity commencing on the date such increased Barnett Maximum Daily Quantity becomes effective and continuing for the term of such increase (even if such volumes are not delivered). Such commitment by Producers under clause (ii) shall not affect or reduce Producers’ obligations to pay the Barnett Fees for all Producers’ Gas and MV Mitigation Gas delivered hereunder.

(3) MDQ After End of Minimum Volume Period. Effective as of the end of the Minimum Volume Period and continuing until the end of the first full Year following the end of the Minimum Volume Period, the Barnett Maximum Daily Quantity for each Barnett Gathering System shall be redetermined to equal **% of the average daily volumes of Producers’ Gas received and gathered hereunder at the Priority 1 Service level on such Barnett Gathering System in the final 6 Months of the Minimum Volume Period, but such redetermined Barnett Maximum Daily Quantity shall not exceed the Barnett Maximum Daily Quantity in effect for such Barnett Gathering System in the last Month of the Minimum Volume Period. For each Year thereafter, the Barnett Maximum Daily Quantity for each Barnett Gathering System shall be to equal **% of the average daily volumes of Producers’ Gas received and gathered hereunder at the Priority 1 Service level on each such Barnett Gathering System in the prior Year, but such redetermined Barnett Maximum Daily Quantity shall not exceed the Barnett Maximum Daily Quantity in effect for such Barnett Gathering System in the last Month of the Minimum Volume Period.

(4) Priority 3 Service. If Producers have volumes of Producers’ Gas and MV Mitigation Gas available on a Barnett Gathering System from time to time in excess of the Barnett Maximum Daily Quantity for such Barnett Gathering System, Producers may request, and Gatherer shall provide, to the extent available, Priority 3 Service for such volumes of Producers’ Gas and MV Mitigation Gas at rates to be agreed to by the Parties.

 

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(5) Delivery Point Changes. To the extent Producers’ Nominations of Gas to a Barnett Delivery Point or Barnett Delivery Points would not permit Gatherer to accept the Barnett Maximum Daily Quantity on any Barnett Gathering System, Producers shall exercise commercially reasonable efforts to nominate Gas at other Barnett Delivery Points to permit Gatherer to accept the Barnett Maximum Daily Quantity on any such Barnett Gathering System.

(6) Volumes in Excess of MDQ. If (i) Producers have a volume of Producers’ Gas and MV Mitigation Gas available to deliver in excess of the Barnett Maximum Daily Quantity for a Barnett Gathering System, (ii) Producers request that Gatherer accept such volume (the “Additional Volume”) on such Barnett Gathering System, and (iii) there is no capacity available on such Barnett Gathering System at the time of such request, then within 30 Days following receipt of such request Gatherer may offer to take such actions as are necessary to make available new capacity on such Barnett Gathering System sufficient to cover the Additional Volume. If within 10 Days following Producers’ receipt of such offer the Parties have not reached an agreement on the fees that would apply to such new capacity (or if Gatherer does not make an offer within the aforesaid 30 Day period), then Producers may request and Gatherer shall execute a written release from this Agreement of the spacing/drilling units of the wells that produce the Additional Volume (the “Additional Volume Wells”). With respect to any release pursuant to the preceding paragraph, Producers shall reasonably determine the volumes of Gas that would be produced from the Additional Volume Wells over the first 3 Years of the productive life of such wells, such determination to be based on the type curve shown in Schedule 9 (the sum of such volumes, the “Projected Additional Volume Wells Amount”). The “MVC Additional Volume Wells Amount” shall be equal to the amount by which the Projected Additional Volume Wells Amount exceeds the average daily capacity of such Barnett Gathering System used by Persons other than Producers and their Affiliates over the most recent 30 Day period preceding such release for which such information is available. Once determined, the MVC Additional Volume Wells Amount shall be included in the determination of the Adjusted Barnett Annual Minimum Volume as provided in Section 4(d) of Exhibit A in the last Year of the Barnett Annual Minimum Volume Period.

(7) **. The Maximum Daily Quantity for the Barnett Central Gathering System has been established based on ** providing the Barnett Delivery Points and the compression services contemplated by the ** Agreement. Gatherer is not a party to the ** Agreement and thus Gatherer shall have no liability to Producers for any failure of ** to perform under such agreement, for any curtailment or suspension of the services provided under such agreement or for any termination or expiration of such agreement. Producers shall be responsible for all obligations of Producers to ** under the ** Agreement, including the payment of all fees and other amounts due or owed thereunder. Producers do not guarantee or warrant **’s performance or nonperformance. If (i) ** curtails or suspends services at the Barnett Delivery Points on the Barnett Central Gathering System, including the occurrence of a force majeure event or similar interruption affecting **, (ii) Producers reduce the contracted volumes of Gas or volumes of Gas delivered under the ** Agreement, (iii) the pressures at any such Barnett

 

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Delivery Point increase as the result of changes by ** in any Month, or (iv) the ** Agreement terminates or expires without being renewed, the Parties recognize and agree that (x) the capacity of the Barnett Central Gathering System will be reduced in varying amounts and durations until such time as those services or equivalent services are restored or replaced, (y) the Gatherer shall have no obligation to accept Producers’ Gas and MV Mitigation Gas in excess of such reduced capacity, and (c) any such reductions in capacity shall not result in an decrease in the Barnett Annual Minimum Volume. The Parties agree that the restoration or replacement of such services shall not result in an increase in the Maximum Daily Quantity for the Barnett Central Gathering System or an increase in the Barnett Annual Minimum Volume. The provisions of this Section 7 and Section 4 of Schedule 2 shall apply to any replacements of the ** Agreement, whether with **, its successors, or other Person providing low pressure service.

(8) Nominations. Producers may request that volumes of Producers’ Gas and MV Mitigation Gas delivered to one Barnett Gathering System be transferred to a Barnett Delivery Point serving another Barnett Gathering System. Subject to Section 5(b), Gatherer will use commercially reasonable efforts to accommodate such request subject to (i) excess capacity being available to make such cross system movement and (ii) the pressures in the system served by such Barnett Delivery Point being able to accommodate the requested volume.

(c) Equivalent Quantities. Gatherer shall, as nearly as practicable each Day, deliver for Producers’ account Equivalent Quantities of Gas at the Barnett Delivery Points. All receipts and deliveries of Producers’ Gas and MV Mitigation Gas less System Fuel and Losses shall be balanced on a MMBtu basis, and all quantities referred to herein shall be adjusted for the Gross Heating Value thereof.

(d) Equal Receipt and Delivery. The Parties intend that Producers’ Gas and MV Mitigation Gas will be received and delivered hereunder at reasonably uniform rates, and Producers shall not, in any manner, use any Barnett Gathering System for storage or peaking purposes without Gatherer’s prior written approval, which approval may be withheld in Gatherer’s discretion.

(e) Proration. Producers shall, at all times, be holders of Priority 1 Service with respect to all Producers’ Gas and MV Mitigation Gas received by the Barnett Gathering Systems up to the Barnett Maximum Daily Quantity, subject to Gatherer’s obligations under third party gas gathering agreements relating to any of the Barnett Gathering Systems in effect on September 30, 2009 under which Gatherer provides a similar level of service. Gatherer represents that, as of the Effective Date, other than the Priority 1 Service currently being provided to the CHK Parties under the CHK Agreement, Gatherer has not agreed to provide Priority 1 Service on any Barnett Gathering System to any other Person. If capacity on a Barnett Gathering System is curtailed or reduced, or capacity is insufficient for the needs of all shippers desiring to use such capacity, the holders of Priority 3 Service will be curtailed first, the holders of Priority 2 Service will be curtailed next, and the holders of Priority 1 Service shall be curtailed last. As among the holders of Priority 1 Service, subject to the terms of the Additional Agreement, the capacity available to Priority 1 Service under the preceding sentence shall be allocated among the holders of Priority 1 Service based on the Economic Value of each contract

 

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granting such Priority 1 Service, with the contract having the highest Economic Value being the last Gas curtailed. As among the holders of Priority 2 Service, the capacity available to Priority 2 Service (if any) under the first sentence of this paragraph shall be allocated among the holders of such Priority 2 Service based on the percentage derived by dividing the volume of Gas nominated by each holder of Priority 2 Service by the total volume of Gas nominated by all holders of Priority 2 Service, in each case as such nominations exist as of the first of the relevant Month or, if applicable, such other day as such nominations are required to be made. As among holders of Priority 3 Service, the capacity available to Priority 3 Service (if any) under the first sentence of this Section 5(e) of Exhibit A shall be fully interruptible.

(f) Information. Each Party will furnish or cause to be furnished to the other Party hereto all data required to accurately account for all Producers’ Gas and MV Mitigation Gas received and delivered hereunder.

(g) Third Party Arrangements. Producers shall make, or cause to be made, all necessary arrangements with other pipelines or third parties at or upstream of the Barnett Receipt Points and at or downstream of the Barnett Delivery Points to effect Gatherer’s receipt and delivery of Producers’ Gas and MV Mitigation Gas. Such arrangements must be coordinated with Gatherer’s Gas Control Department and must, at all times, be acceptable to Gatherer, in its sole discretion.

(h) Allocations. The Barnett Receipt Points and Barnett Delivery Points may be at locations through which other volumes of Gas are being measured. As a result, the measurement of Producers’ Gas and MV Mitigation Gas under this Agreement may involve the allocation of Gas delivered. Upon the written request from a Party to the other Party, the Party receiving such request will furnish or cause to be furnished to the other Party hereto all data reasonably available to the furnishing Party that is required to account as accurately as reasonably possible for all Gas received and delivered hereunder.

(i) Commingling.

(i) Although Producers shall retain title to Producers’ Gas and MV Mitigation Gas delivered to Gatherer at the Barnett Receipt Points hereunder, Producers’ Gas and MV Mitigation Gas shall constitute part of the supply of Gas from all sources to the Barnett Gathering Systems, and as such Gatherer shall, subject to its obligation to deliver an Equivalent Quantity each Day and to the following provisions of this Section 5(i), have the right to commingle Producers’ Gas and MV Mitigation Gas with Gas of other Persons.

(ii) If (A) a Person other than Producers or their Affiliates delivers Gas to a Barnett Gathering System and (B) with respect to such Barnett Gathering System Producers or their Affiliates have a processing agreement downstream of such Barnett Gathering System with respect to Producers’ Gas and MV Mitigation Gas moved through such Barnett Gathering System, then prior to such Gas being delivered to such Barnett Gathering System Gatherer shall take (or require the third party producer to take) such actions as may be necessary to determine the Btu content of the Gas stream that would be delivered to such Barnett Gathering System by such Person (the “Third Party Btu

 

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Content”). If any such third party Gas has a Third Party Btu Content that is ** Btus higher or lower than the average Btu content of Producers’ Gas and MV Mitigation Gas delivered to such Barnett Gathering System based on the most recent Gas quality sample for which Btu content information is available (“Applicable Third Party Gas”), then Gatherer will provide Notice to Producers and the provisions of clause (iii) immediately below shall apply.

(iii) With respect to any Applicable Third Party Gas, Gatherer shall provide Notice to Producers of the Person proposing to move such gas over the applicable Barnett Gathering System if Gatherer receives the consent of such Person to disclose such information to Producers. For a period of 30 Days after any such Notice by Gatherer Producers and their Affiliates may pursue the establishment of a marketing arrangement with such Person whereby Producers or their Affiliates purchase such Third Party Gas at the wellhead. If Gatherer is unable to disclose information about such Person or if Producers are unable to reach an agreement with any such Person proposing to move Third Party Gas over the applicable Barnett Gathering System by the end of such 30 Day period, then promptly following request by Producers, Gatherer and Producers, together or separately, shall enter into discussions and negotiations with the applicable gas processor to effect such changes as may be necessary to eliminate or substantially mitigate any reduction in natural gas liquids that would be allocated to Producers resulting from commingling such Applicable Third Party Gas.

(iv) The provisions of this Section 5(i) shall not apply to volumes of Gas delivered under third party gathering agreements in effect on September 30, 2009.

(j) Lost and Unaccounted for Gas. Gatherer will conduct the services required to be performed by Gatherer under this Agreement using practices, methods and acts which are engaged in or which have been approved by a significant portion of the natural gas gathering industry. Producers acknowledge, however, that certain volumetric losses in Producers’ Gas and MV Mitigation Gas will occur even if such services are conducted in accordance with the preceding sentence, and such losses attributable to Lost and Unaccounted for Gas shall be shared and allocated among Producers and other third party shippers on each Barnett Gathering System in the proportion that each party delivers Gas to that Barnett Gathering System. Producers’ allocated share of Lost and Unaccounted for Gas on the Barnett Gathering Systems shall be based on actual losses on the Barnett Gathering Systems and shall not be subject to any minimum or maximum limits.

(k) Fuel Gas. Reductions in volumes of Producers’ Gas and MV Mitigation Gas due to Fuel Gas used for gathering, compression, dehydration, processing, and treating shall be shared and allocated among Producers and other third party shippers on each Barnett Gathering System in the proportion that each shipper delivers Gas to that Barnett Gathering System. Reductions due to Fuel Gas use on each Barnett Gathering System for dehydration and treating shall be shared and allocated among Producers and third party shippers as specified in Sections 2(b) and 2(c) of this Exhibit A.

(l) Drip Liquids. Producers acknowledge that certain reductions in volumes of Producers’ Gas and MV Mitigation Gas will occur due to shrinkage from Drip Liquids in each

 

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Barnett Gathering System, and such reductions attributable to Drip Liquids shall be shared and allocated among Producers and other third parties whose Gas is gathered on that Barnett Gathering System in the proportion to the C5+ constituents contained in the Gas delivered by each such shipper to the Barnett Gathering System. Such allocations shall be based on the most recent quality analysis available to Gatherer for such Gas. Gatherer shall provide Notice to Producers from time to time of the quantities of Drip Liquids collected on the Barnett Gathering Systems and attributable to Producers’ Gas and MV Mitigation Gas. Gatherer (or Gatherer’s agent) will cause such Drip Liquids to be collected and removed from Gatherer’s tanks and sold from time to time. Within a reasonable period of time after any such sale, Gatherer (or Gatherer’s agent) shall remit or credit to Producers their allocated share of the net proceeds received from such sale of Drip Liquids less the actual, reasonable costs and expenses incurred to collect, transport, and sell such Drip Liquids. Drip Liquids shall be measured by the Drip Liquids purchaser.

6. New Connections to Barnett Gathering Systems.

(a) Notice of New Pad and Well Connections.

(1) New Pad Connections. Producers shall provide Gatherer prior Notice as soon as practicable of the expected date of first production for each new pad or pads with one or more Producer Wells in the Barnett AMI. Such Notice to Gatherer shall include (i) the location of the pad or pads and wells to be connected to the Barnett Gathering System, and (ii) the projected date of final completion and testing of such well or wells to be connected to the Barnett Gathering System on such pad or pads. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party such other information and data regarding such pads and wells reasonably requested by such Party, including, if requested by Gatherer, Producers’ or Producers’ Affiliate’s good faith estimate of the Gas reserves for each such well or wells and the projected monthly production profile for the first 5 Years after initial production for each such well or wells. Because of the interrelated nature of the actions of the Parties required to obtain the necessary permits, authorizations, and rights of way from the appropriate state and local agencies and other Persons necessary to drill and complete each such well and construct the required extensions of the Barnett Gathering System to the pad or pads for such well or wells, the Parties agree to work together in good faith to obtain such permits, authorizations, and rights of way as expeditiously as reasonably practicable, as provided herein. The Parties agree to cooperate with each other and to communicate regularly regarding their efforts to obtain such permits, authorizations, and rights of way.

(2) New Well Connections. Producers shall use its commercially reasonable efforts to provide Gatherer no less than 90 days’ prior Notice of the location of, and expected date of first production for, new Producer Wells in the Barnett AMI on a pad or pads that are already connected to a Barnett Gathering System. Such Notice to Gatherer shall include the projected date of final completion and testing of such well or wells located on the existing pad or pads specified in the Notice. Following such Notice, Producers and Gatherer shall reasonably cooperate with each other in developing and providing to the other Party such other information and data regarding such pads and wells reasonably requested by such Party.

 

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(b) Completion of Connections During Minimum Volume Period.

(1) New Pad Connections. During the Minimum Volume Period, when Producers provide Notice under Section 6(a)(1) above, then Gatherer shall cause the necessary facilities to be constructed to tie-in such pad or pads to the applicable Barnett Gathering System subject to Producers complying with their obligations under Section 6(a)(1). Gatherer shall complete such facilities by the later of (x) the date of first production of such pad or pads with one or more Producer Wells and (y) 21 Months after the date of Producers’ Notice (as the same may be extended pursuant to the following sentence, the “Completion Date”). If Gatherer is delayed in completing such facilities by (i) Force Majeure Events or (ii) the actions of Producers or their representatives that are inconsistent with the cooperation requirements of Section 6(a)(1) above, then the Completion Date for such connection shall be extended for a period equal to that during which Gatherer’s performance was precluded by such events or actions. If Gatherer fails to complete its facilities necessary to connect any such pad or pads to a Barnett Gathering System on or before the Completion Date for that pad or pads, as such Completion Date may be extended as provided above (the “Barnett Delayed Connections”), then the Producers, as their sole remedy for Gatherer failing to connect such Barnett Delayed Connections by the applicable Completion Date (but without limiting the following provisions of this Section 6(b)(1)), shall be entitled to a delay in their obligations with respect to the Adjusted Barnett Annual Minimum Volume under Section 4(d) of this Exhibit A for volumes of Producers’ Gas that would have been delivered from such Barnett Delayed Connections between the Completion Date for such Barnett Delayed Connections and the date on which such Barnett Delayed Connections are connected by Gatherer, as such delayed volumes are reasonably determined by Gatherer based on the type curve shown in Schedule 9. If at any time after Gatherer’s receipt of the notice from Producers regarding the connection of a new pad Gatherer becomes aware that it will not be able to connect such pad to the Barnett Gathering System (whether before or after the Completion Date for such pad) due to Force Majeure Events, then Gatherer shall provide Notice thereof to Producers as soon as practicable after becoming so aware and shall include with such Notice evidence that substantiates such inability to connect such pad (a “Pad Notice”). With respect to each pad covered by a Pad Notice, the spacing/drilling units for the wells that will produce from such pad shall be released from this Agreement pursuant to a written release executed by Gatherer and delivered to Producers promptly following the sending of the related Pad Notice. If the release of any pad occurs after such pad has become a Barnett Delayed Connection and any volumes of Producers Gas that would have been delivered from such Barnett Delayed Connection have been included in the Adjusted Barnett Annual Minimum Volume under Section 4(d) of this Exhibit A, then the Parties shall reverse all of such adjustment as soon as practicable after the related Pad Notice.

(2) New Well Connections. During the Minimum Volume Period, when Producers provide Notice under Section 6(a)(2) of this Exhibit A, Gatherer shall be responsible for the cost to install the pipe and ancillary equipment from the outlet flange

 

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of the meter tube of the Primary Measurement Device to the existing common gas header, including any modifications thereto, on the existing pad for the Producers Wells covered by such Notice but only where Gatherer has not installed a Gatherer’s Receipt Meter on such existing pad. Producers shall be responsible for the cost of connecting (i) such new Producer Wells on pads on a Barnett Gathering System where Gatherer has installed a Gatherer’s Receipt Meter and (ii) new Barnett Delivery Points added to the Barnett Gathering Systems for gas lift operations under Section 11 of this Exhibit A.

(3) Existing Wells. Notwithstanding Sections 6(b)(1) and (2) above, Gatherer shall only be required to use its commercially reasonable efforts to connect the wells and pads listed in Schedule 11 by the date shown for each such well or pad in Schedule 11. The volumes attributable to any such well or pad shall not be included in the calculation of the Adjusted Barnett Annual Minimum Volume if Gatherer fails to complete the connection of such well or pad by such date.

(4) MV Mitigation Gas. During the Minimum Volume Period, if requested by Producers, Gatherer shall work with Producers to construct new connections to the Barnett Gathering Systems to accept deliveries of MV Mitigation Gas to the extent (i) Producers reasonably demonstrate to Gatherer that delivery of such MV Mitigation Gas would permit Producers to meet the Barnett Annual Minimum Volume in any Year, (ii) deliveries of MV Mitigation Gas from such connections would not cause the volumes of all Gas received on such Barnett Gathering Systems to exceed the applicable Barnett Maximum Daily Quantity and otherwise would meet all applicable requirements for Producers’ Gas delivered under this Agreement, and (iii) such connections are constructed entirely at Producers’ expense. Gas delivered through any such connection will be charged at the then prevailing Barnett Fees for Producers’ Gas delivered to such Barnett Gathering System.

(5) MAOP Limit. Notwithstanding the foregoing provisions of this Section 6, Gatherer shall not be required to make any connection to any of the Barnett Gathering Systems described in Part II of Schedule 1 if the delivery pressures at such new connection would exceed the maximum allowable operating pressures for such Barnett Gathering System.

(c) Completion of Connections After Minimum Volume Period.

(1) New Pad Connections. When Producers provide Notice under Section 6(a)(1) above after the end of the Minimum Volume Period, Gatherer, at its sole discretion, will determine whether the prevailing Barnett Fees at that time will allow it to earn an acceptable return on such connection and whether or not it will make the requested connection.

(A) New Connection. If Gatherer agrees to make such a requested connection, then Gatherer will Notify Producers of its determination within 15 Days after receipt of Producers Notice and Gatherer shall use its commercially reasonable efforts to complete such connection by its Completion Date and Producers will be charged at the then prevailing Barnett Fees for Producers’ Gas

 

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delivered through such connection. Gatherer’s failure to Notify Producers shall be deemed to constitute a refusal by Gatherer to construct the requested connection.

(B) Gatherer Declines to Make Connection. If Gatherer declines to make such a requested connection, Gatherer and Producers shall enter into discussions and negotiations to determine the gathering and other fees that would be paid to permit Gatherer to make such new connection. If the Parties reach agreement on such gathering and other fees, then Gatherer shall complete such connection as soon as reasonably practicable and such gathering and other fees shall be the Barnett Fees to be received by Gatherer hereunder for all Producers’ Gas received at the Barnett Receipt Point for that connection and Schedule 2 shall be amended to reflect such revised Barnett Fees.

(C) No Agreement. If the Parties fail to reach agreement within a reasonable period of time on the gathering and other fees with respect to a requested connection, Gatherer shall provide to Producers its estimated costs for such connection and Producers may elect to (i) if capacity is available, reimburse Gatherer for its costs to construct and complete such connection to a Barnett Gathering System (a “Reimbursed Connection”) or (ii) request and receive a release from the dedication under this Agreement for the spacing/drilling units of the affected wells if Producers reasonably determine that the terms offered for services by a third party gatherer in the Barnett AMI are more favorable than those under this Agreement. Producers shall furnish Notice to Gatherer of Producers’ election under the preceding sentence for each affected connection, and if Producers elect to reimburse Gatherer for the costs of any such connection, then (x) Gatherer shall proceed to commence and complete such connection, subject to Producers’ reimbursement of the costs therefor, and (y) all Producers’ Gas delivered through that Reimbursed Connection shall be gathered by Gatherer on the Barnett Gathering System under the terms of this Agreement, except that the prevailing Barnett Fees that apply to such Producers’ Gas shall be discounted by **% until Payout of the Reimbursed Connection occurs. Gatherer shall use good faith efforts to notify Producer no less than 60 Days prior to the date which Gatherer expects Payout of such Reimbursed Connection to occur. From and after Payout of a Reimbursed Connection, the applicable Barnett Fees that apply to Producers’ Gas from a Reimbursed Connection shall be the then prevailing undiscounted Barnett Fees. Producers shall be entitled to use the entire capacity of each Reimbursed Connection.

(2) New Well Connections. When Producers provide Notice under Section 6(a)(2) above after the end of the Minimum Volume Period, Gatherer shall be responsible for the cost to install the pipe and ancillary equipment from the outlet flange of the meter tube of the Primary Measurement Device to the existing common gas header, including any modifications thereto, on the existing pad for the Producers Wells covered by such Notice but only where Gatherer has not installed a Gatherer’s Receipt Meter on such existing pad. Producers shall be responsible for the cost of connecting (i) such new Producer Wells on pads on a Barnett Gathering System where Gatherer has installed a Gatherer’s Receipt Meter and (ii) new Barnett Delivery Points added to the Barnett Gathering Systems for gas lift operations under Section 11 of this Exhibit A.

 

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(d) Wells Not Operated by Producers. Producers shall use their good faith efforts to provide Gatherer Notice of Producer Non-Operated Wells to be drilled in the Barnett AMI after the Effective Date; provided, Producers shall not be obligated to provide any such notice as to wells that are operated by any of the CHK Parties or their Affiliates. Gatherer recognizes that such Notice, in some instances, may occur after a Producer Non-Operated Well is producing. Following such Notice, Producers and Gatherer and their Affiliates shall reasonably cooperate with each other in developing and providing to the other Party information and data regarding such well reasonably requested by the other Party; provided, the aforesaid cooperation rights shall not require Producers to take any action or make any claim against the operator of such well. Gatherer shall have the right, but not the obligation, to connect such Producer Non-Operated Wells to a Barnett Gathering System, at Gatherer’s cost. If Gatherer elects to make such a connection, then Gatherer will Notify Producers of its determination within 15 Days after receipt of Producers, initial Notice and Gatherer shall complete such connection as soon as reasonably practicable. Notwithstanding anything expressed or implied to the contrary, Gatherer’s connection to a Producer Non-Operated Well shall cover all Producers’ Gas from such well and Producers shall have no obligation or liability with respect to any other Gas produced from such well. For Producers’ Gas produced from each Producer Non-Operated Well and received, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered on and from a Barnett Gathering System, Producers will be charged at the then prevailing Barnett Fees for such Producers’ Gas. Gatherer’s failure to Notify Producers within such 15-Day period shall be deemed to constitute an election by Gatherer not to construct the connection. If Gatherer elects not to make such a connection, Gatherer shall provide to Producers a written release of the spacing/drilling unit for such Producer Non-Operated Well. If the aggregate working interest of Producers’ and their Affiliates in a spacing/drilling unit for a Producer Non-Operated Well to be connected to a Barnett Gathering System is less than **%, then Producers may, but shall not have the obligation to, comply with the Notice and connection obligations under this Section 6(d). If Producers elect not to comply with the Notice requirements under this Section 6(d) for such a Producer Non-Operated Well and the Operator of such well is not one of the CHK Parties or their Affiliates, Producers may request, and Gatherer shall provide, a written release of the spacing/drilling unit for such Producer Non-Operated Well. It is acknowledged that any capital expenditures made by Gatherer to connect Producer Non-Operated Wells to the Barnett Gathering Systems shall not be included in the Barnett Cap Ex, Actual Barnett Cap Ex or Projected Barnett Cap Ex under Section 3 of Exhibit A to the CHK Agreement (with the three preceding defined terms to have the meanings ascribed to such terms in the CHK Agreement).

(e) Abandonment of Connection. If Producers request in a Notice delivered under this Section 6 that Gatherer connect a pad or a well to the Barnett Gathering System and such well or wells are not completed and ready to produce on or before the first Day of the 13th Month following the date of completion of the pad or other facilities for such well or wells, then Producers shall pay Gatherer an amount equal to (i) all direct costs incurred by Gatherer to complete such connection plus (ii) a disconnect fee equal to an amount that would provide Gatherer the Target IRR on the direct costs (for clarification, direct costs would not include overhead or general and administrative expenses) incurred by Gatherer with respect to the

 

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installation of such connection. Gatherer will provide Producers a Notice of abandonment for such pad after the expiration of such period. Payment by Producers will be made 30 Days after receipt of such Notice of abandonment from Gatherer. Producers or their Affiliate(s), at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such pad or other facilities and related permits, authorizations, and rights of way by providing Notice to Gatherer no later than 30 Days after receipt of such Notice of abandonment, whereupon Gatherer shall assign to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such pad or other facilities and related permits, authorizations, and rights of way, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets.

(f) New Delivery Points. Producers shall furnish Notice to Gatherer of any new Barnett Delivery Point connection desired by Producers, which Notice shall include the location of such Barnett Delivery Point, the projected Gas deliverability to such Barnett Delivery Point from the Barnett Gathering System, and such other information as Gatherer reasonably requests. Gatherer may elect to increase the deliverability of such new Barnett Delivery Point above that requested by Producers. The cost of such increased deliverability shall be borne by Gatherer. As soon as commercially practicable after Gatherer’s receipt of Producers’ Notice, Gatherer shall provide Notice to Producer of (i) the estimated cost to complete such new Barnett Delivery Point in accordance with Producers’ specifications, (ii) any increase in the deliverability of such new Barnett Delivery Point as determined by Gatherer (“Gatherer’s Increased Deliverability”) and Gatherer’s estimated cost of such increase, and (iii) the estimated date of completion of such new Barnett Delivery Point. If Producers determine to proceed with completion of such new Barnett Delivery Point after receipt of Gatherer’s Notice, Producers shall Notify Gatherer of such election accompanied by Producers’ agreement to pay the cost to complete such connection (or, if Gatherer has determined to increase deliverability, Producers’ proportionate share of the cost based on the estimated costs submitted by Gatherer). If Producers pay the entire cost of a new Barnett Delivery Point, Producers shall have Priority 1 Service for the deliverability of such new Barnett Delivery Point, and Gatherer shall pay to Producers (or deduct from amounts owed by Producers hereunder) a fee of $** per Mcf for third party Gas delivered at such new Barnett Delivery Point in excess of Gatherer’s Increased Deliverability. All such third party Gas shall have Priority 3 Service level. If, however, Gatherer pays the cost to increase the deliverability of any new Barnett Delivery Point, Producers shall have Priority 1 Service for the deliverability of the new Barnett Delivery Point up to the amount requested by CEMI in its Notice and Gatherer shall have the right to provide Priority 1 Service for third party Gas volumes up to the Gatherer’s Increased Deliverability for such new Barnett Delivery Point. It is acknowledged that any capital expenditures made by Gatherer to add Gatherer’s Increased Deliverability to a Barnett Delivery Point shall not be included in the Barnett Cap Ex, Actual Barnett Cap Ex or Projected Barnett Cap Ex under Section 3 of Exhibit A to the CHK Agreement.

7. Receipt and Delivery Pressures.

(a) Receipt Point Pressures. Gatherer shall use commercially reasonable efforts to maintain the average monthly inlet pressures at the Barnett Receipt Points described in Schedule 4. Producers represent that the inlet pressures for such Barnett Receipt Points as of the Effective Date are within a reasonable tolerance of the pressures reflected in Schedule 4. Producers shall never deliver Gas to a Barnett Gathering System at a pressure that would exceed the maximum allowable operating pressure for such Barnett Gathering System.

 

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(b) Lower Pressure Service. At any time or from time to time, Producers, by providing Notice to Gatherer, may request that the pressure at any of the Barnett Receipt Points listed in Part I of Schedule 4 upstream of an existing mainline compressor station be reduced to the next lowest pressure service shown in Part I of Schedule 4 . If (i) adequate space is available on the applicable existing mainline compressor site to install such additional compression equipment, (ii) Gatherer can provide the lower pressure service by installing such compression equipment, (iii) Gatherer holds or can obtain the permits or other authorizations required to own and operate such compression equipment, and (iv) Gatherer can obtain the necessary electrical service for such compression equipment, then, within 30 Days of receipt of such Notice, Gatherer will provide Notice to Producers of the period of time that would be required for Gatherer to comply with Producers’ request for such lower pressure service. Gatherer shall use commercially reasonable efforts to install the compression equipment necessary to provide service at such Barnett Receipt Point at the requested lower pressure level for the applicable Barnett Fee shown in Schedule 2 within such period of time. If such space is not available or if the installation of additional facilities are required to provide such lower pressure service, then Parties shall enter into good faith discussions to determine the additional fees to be paid to Gatherer by Producers to install such compression equipment. Producers recognize and understand that if Gatherer provides such lower pressure service at a Barnett Receipt Point that the inlet pressures at all related Barnett Receipt Points may not be reduced to the next lower tier.

(c) Increased Pressures. Producers shall have the right to request an increase in the inlet pressure requirement at any Barnett Receipt Point listed in Part I of Schedule 4 by providing Notice to Gatherer. If Producers will deliver increased volumes of Producers’ Gas and MV Mitigation Gas along with such increased pressure service, Gatherer shall implement such increased pressure service as soon as reasonably practicable. If Producers will not deliver increased volumes of Producers’ Gas and MV Mitigation Gas along with such increased pressure service, then Gatherer shall have at least 6 Months from the date of Producers’ Notice to reconfigure its facilities to accommodate such higher pressure service. Producers recognize and understand that if Gatherer provides such higher pressure service at a Barnett Receipt Point that the inlet pressure at all related Barnett Receipt Points may not be increased to the next higher tier.

(d) Frequency of Changes. For a period of 2 Years after Producers have requested, and Gatherer has provided, at a Barnett Receipt Point (i) a lower pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a higher pressure service at such Barnett Receipt Point or (ii) a higher pressure service, Producers shall not request, and Gatherer shall have no obligation to honor any request by Producers to provide, a lower pressure service at such Barnett Receipt Point.

(e) Amendment. Any change in the level of service at a Barnett Receipt Point shall be agreed to by Producers and Gatherer through a supplement to Part I of Schedule 4 showing all affected Barnett Receipt Points, the new lower pressure or pressures, and the effective date of such lower pressure service.

 

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(f) Delivery Point Pressures. If the pressures at any Barnett Delivery Point increase as the result of changes by a Barnett Receiving Transporter, Gatherer may raise the pressures at the applicable Barnett Receipt Points by an amount reasonably necessary to permit delivery of Producers’ Gas and MV Mitigation Gas at such Barnett Delivery Point at such higher pressures. The Barnett Fees for all Producers’ Gas and MV Mitigation Gas delivered to such Barnett Receipt Point shall, however, continue to be determined at the lower pressure tier in effect for such Barnett Receipt Point in the prior month. To the extent Producers’ Nominations of Gas to a Barnett Delivery Point or Barnett Delivery Points on any Barnett Gathering System would cause an increase in the pressure tier on such Barnett Gathering System, Producers shall cooperate in good faith with Gatherer to nominate Gas at other Barnett Delivery Points to avoid such increase in the pressure tier on such Barnett Gathering System.

(g) Delivery. Subject to the foregoing provisions, Producers’ Gas and MV Mitigation Gas shall be delivered to Gatherer at the Barnett Receipt Points at pressures sufficient to effect delivery into Gatherer’s facilities at the Barnett Receipt Points. Delivery pressures at each Barnett Receipt Point shall not exceed the maximum allowable pressure of the Barnett Gathering System at each such Barnett Receipt Point; provided, however, neither Gatherer nor Producers shall be required to compress any Producers Gas at the wellhead in order to effectuate delivery hereunder.

(h) Fees. Subject to Section 7(f), for purposes of determining the Barnett Fees at the Barnett Receipt Points each Month, subject to Section 7(b), the average monthly inlet pressure will be determined at each Barnett Receipt Point, excluding Days in such Month on which no flow was recorded, or on which deliveries were precluded by a Force Majeure Event or maintenance operations conducted by Gatherer under Section 8.7 of the Agreement.

8. Measurement and Testing.

(a) Meters.

(1) Existing Barnett Receipt Points. The Parties recognize that Gatherer may not maintain a pad level custody transfer meter at any of the Barnett Receipt Points on the Effective Date. Gatherer, at its sole discretion, may elect to install such pad level custody transfer meters at any Barnett Receipt Point.

(2) Producers’ Wellhead Meters. If Gatherer elects not to install a pad level custody transfer meter at a Barnett Receipt Point, the Parties have agreed to use Producers’ Wellhead Meters for custody transfer purposes. If Gatherer uses Producers’ Wellhead Meters for custody transfer purposes, Producers shall cause the Operator to share with Gatherer, at no cost to Gatherer, the signal and information from the Secondary Measurement Device, either, at Gatherer’s option, directly from the field or from an office location where the signal has been transmitted. Producers (or the Operator on behalf of Producers) shall be responsible for maintenance and repair of such Secondary Measurement Devices. On those drill pads where Gatherer does not install a pad level custody transfer meter, Gatherer shall maintain, calibrate, and operate the Primary Measurement Devices, at Gatherer’s expense.

 

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(3) Gatherer’s Receipt Meters. If Gatherer elects to install a pad level custody transfer meter, Gatherer shall install, at its cost, the custody transfer meters (both Primary and Secondary Measurement Devices and such meters and any new custody transfer meters installed by Gatherer under Section 8(a)(3) below are referred to as “Gatherer’s Receipt Meters”). On those drill pads where Gatherer installs pad level custody transfer meters, Producers shall cause the Operator to maintain and operate Producers’ Wellhead Meters, at Operator’s expense. At the request of the Producers, Gatherer will test and calibrate the Operator’s meters that are upstream of Gatherer’s Receipt Meters and all such costs incurred by Gatherer to test or calibrate any of such Operator’s meters, including Producers’ Wellhead Meters, shall be promptly reimbursed by the Producers, or the Operator on behalf of the Producers. Gatherer, or its designee, shall maintain and operate Gatherer’s Receipt Meters, when installed, and the measuring stations at the Barnett Delivery Points. The Operator may install, maintain, and operate, at its expense, such check measuring equipment as desired and where appropriate. Such equipment shall be installed so as not to interfere with the operation of Gatherer’s or its designee’s measuring equipment. If Gatherer installs a pad level meter, such pad level meter will become the applicable Barnett Receipt Point at such time as the pad level meter is first placed into commercial service and the individual Producers’ Wellhead Meter will thereupon cease to be the applicable Barnett Receipt Point. With respect to any such pad level meters installed by Gatherer, Gatherer will share with the Operator, at Producers request and at no cost to the Operator, the signal and information from the Secondary Measurement Devices, either, at the Operator’s option, directly from the field or from an office location where the signal has been transmitted.

(4) Primary Measurement Devices. Producers agree to transfer (free from all liens and encumbrances) to Gatherer any interest they may hold in the Primary Measurement Devices with respect to wells or pads in which Producers’ and their Affiliates and the CHK Parties own 100% of the working interest as soon as reasonably practicable after the Effective Date. Upon completion by Gatherer of a Gatherer’s Receipt Meter for custody transfer at an existing pad, Gatherer shall convey and transfer to Producers all of Gatherer’s right, title and interest in and to the meter runs that were previously transferred to Gatherer for such Producers’ Wellhead Meter. Except as provided in the preceding sentence, Gatherer shall not have any obligation to convey any meter runs to Producers.

(5) New Barnett Receipt Points. For each new drill pad connection, Gatherer shall install a custody transfer meter on the drill pad at such location where Producers connect, or intend to connect, three or more Producer Wells to a Barnett Gathering System at such location. Otherwise, the Parties shall rely on Producers’ Wellhead Meter for custody transfer and measurement purposes hereunder at such location.

(6) Field Telemetry. Producers shall cause the Operator to share the Field Telemetry signal or data with Gatherer, at Gatherer’s option and at no cost to Gatherer, for those Barnett Receipt Points which use a Producers’ Wellhead Meter for custody transfer purposes. Gatherer will share the Field Telemetry signal or data with the Operator, at Operator’s option and at no cost to the Operator, for those Barnett Receipt Points which use a Gatherer’s Receipt Meter for custody transfer purposes. If requested,

 

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the Operator, on the one hand, and Gatherer, on the other hand, shall make available or cause their respective Affiliates to make available Field Telemetry to Gatherer for Gatherer’s Receipt Meters or the Operator for Producers’ Wellhead Meters, as applicable, either new or existing. For Gatherer’s Receipt Meters, Producers shall cause the Operator to charge Gatherer its actual costs for such service prorated based on the actual capacity used by Gatherer. For Producers’ Wellhead Meters, Gatherer shall charge Producers or Operator, as applicable, its actual costs for such service prorated based on the actual capacity used by Producers or Operator. Additionally, costs for system upkeep, ongoing maintenance, and repairs of Field Telemetry and associated facilities to Barnett Receipt Points which use a Producers’ Wellhead Meter (i) will be billed by the Operator (on behalf of Producers) to Gatherer prorated by the actual capacity used by Gatherer at such times as the Operator shares Field Telemetry signal or data with Gatherer or (ii) will be billed by Gatherer to Producers or the Operator prorated by the actual capacity used by Operator at such times as Gatherer shares Field Telemetry signal or data with the Operator.

(7) Operator. Notwithstanding anything to the contrary herein, Gatherer acknowledges that to the extent that the Operator is not wholly-owned by Producers’ Parent, Producers shall have no ability to require the Operator to comply with the provisions of this Exhibit A, Section 8(a), provided that TEPUSA shall use commercially reasonable efforts to cause the Operator to do so.

(b) Measurement Practices. Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be constructed, installed, and operated in accordance with the standards in Exhibit B.

9. Quality Specifications.

(a) Producers’ Gas. All Producers’ Gas and MV Mitigation Gas delivered at the Barnett Receipt Points shall conform to the following specifications:

(1) Water: Producers’ Gas and MV Mitigation Gas shall not contain any free water.

(2) Water Vapor: Producers’ Gas and MV Mitigation Gas shall not contain more than 7 pounds of water per 1,000,000 Cubic Feet of Gas. Any Producers’ Gas or MV Mitigation Gas containing water vapor content in excess of 7 pounds of water per 1,000,000 Cubic Feet of Gas is subject to Section 2(b) of this Exhibit A.

(3) Hydrogen Sulfide: Producers’ Gas and MV Mitigation Gas shall not contain more than  1/4 grain of hydrogen sulfide per 100 Cubic Feet of Gas at the Barnett Receipt Points, as determined by quantitative tests. Any Producers’ Gas or MV Mitigation Gas containing excess hydrogen sulfide is subject to the provisions of Section 2(c) of this Exhibit A.

 

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(4) Total Sulfur: Producers’ Gas and MV Mitigation Gas shall not contain more than 5 grains of total sulfur per 100 Cubic Feet of Gas at the Barnett Receipt Points.

(5) Temperature: Producers’ Gas and MV Mitigation Gas shall not have a temperature less than 40ºF or more than 120ºF.

(6) Carbon Dioxide: Producers’ Gas and MV Mitigation Gas shall not contain more than 2% by volume of carbon dioxide. Any Producers’ Gas or MV Mitigation Gas containing excess carbon dioxide is subject to the provisions of Section 2(c) of this Exhibit A.

(7) Oxygen: Producers’ Gas and MV Mitigation Gas shall not contain any oxygen.

(8) Nitrogen: Producers’ Gas and MV Mitigation Gas shall not contain more than 3% by volume of nitrogen.

(9) Nonhydrocarbons: Producers’ Gas and MV Mitigation Gas shall not contain more than 4% by volume of total nonhydrocarbons. Nonhydrocarbons shall include, but not be limited to, water, hydrogen sulfide, sulfur, carbon dioxide, oxygen and nitrogen.

(10) Other Constituents: Producers’ Gas and MV Mitigation Gas shall not contain any carbon monoxide, halogens or unsaturated hydrocarbons, and no more than 400 parts per million of hydrogen.

(11) Objectionable Liquids and Solids and Dilution: Producers’ Gas and MV Mitigation Gas shall be free of all objectionable liquids and solids, shall not contain any free hydrocarbon liquids, and shall be commercially free from dust, gums, gum-forming constituents, and other liquids or solid matter which might become separated from Producers’ Gas or MV Mitigation Gas in the course of transportation through pipelines.

(12) Gross Heating Value: Producers’ Gas and MV Mitigation Gas shall not have a Gross Heating Value less than 950 Btu’s per Cubic Foot of Gas or more than 1300 Btu’s per Cubic Foot of Gas.

(13) Hydrocarbon Dewpoint: Producers’ Gas and MV Mitigation Gas shall conform to the dewpoint specifications of the Barnett Receiving Transporters.

(b) Barnett Receiving Transporters. Notwithstanding the Gas specifications above, if a Barnett Receiving Transporter notifies Gatherer or Producers of different or additional quality specifications required at any Barnett Delivery Point that are more stringent than the specifications above, Gatherer will notify Producers of any such different or additional specifications as soon as practicable after being notified of such specifications. Such revised specifications will be considered as the quality specifications for Producers’ Gas and MV Mitigation Gas under this Agreement for as long as required by the Barnett Receiving Transporter.

 

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(c) Failure to Meet Specifications. Notwithstanding anything in this Section 9(c) to the contrary, if Gatherer determines at any time that acceptance of Producers’ Gas or MV Mitigation Gas (even if blended as contemplated below in this Section 9(c)) does not meet any of the quality specifications in Section 9(a) (as revised in accordance with Section 9(b)) is not operationally feasible or would result in a material damage or harm to the applicable Barnett Gathering System, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers Gas or MV Mitigation Gas, as the case may be, until Gatherer no longer believes that there is a risk of material damage or harm to the applicable Barnett Gathering System. If Producers’ Gas or MV Mitigation Gas delivered hereunder fails to meet any of the quality specifications above, Gatherer will blend, where feasible and when permitted by the applicable Barnett Receiving Transporter, such nonconforming Producers’ Gas or MV Mitigation Gas with other Producers’ Gas or MV Mitigation Gas gathered on that Barnett Gathering System to cause such nonconforming Producers’ Gas or MV Mitigation Gas to meet the Gas quality specifications hereunder and of the applicable Barnett Receiving Transporter. Producers shall reimburse Gatherer for their prorata share of the direct costs incurred by Gatherer to blend such nonconforming Producers’ Gas or MV Mitigation Gas. If Gatherer determines at any time that the continued acceptance of such blended nonconforming Producers’ Gas or MV Mitigation Gas is not operationally feasible or would result in any material damage or harm to the applicable Barnett Gathering System, Gatherer may Notify Producers that it intends to discontinue blending and accepting such nonconforming Producers’ Gas or MV Mitigation Gas. If Gatherer provides such Notice to Producers that it intends not to accept nonconforming Gas or to discontinue blending Producers’ Gas or MV Mitigation Gas, Gatherer will work with Producers to determine the best method of treating such nonconforming Producers’ Gas or MV Mitigation Gas. Within 30 Days of the date on which Gatherer provides Notice to Producers that it will discontinue accepting or blending Producers’ Gas or MV Mitigation Gas as provided above. Gatherer shall prepare and provide to Producers an estimate of the costs to install the equipment and other facilities necessary to treat such nonconforming Producers’ Gas or MV Mitigation Gas on such Barnett Gathering System and a proposed treating fee based on such costs and other relevant factors customarily included in the determination of such a treating fee. The Parties will use good faith efforts to reach an agreement regarding a treating fee within 30 Days following the provision of such information. If such an agreement is reached, then Gatherer (at its cost) shall install and construct such facilities as soon as commercially practicable. Subject to the first sentence of this Section 9(c), during the notification process, the determination of the treating fee and the installation of the facilities, Gatherer shall continue to receive, accept and blend nonconforming Producers’ Gas and MV Mitigation Gas. Notwithstanding the foregoing, if the applicable Barnett Receiving Transporter refuses to accept such blended nonconforming Producers’ Gas or MV Mitigation Gas at any time, then Gatherer shall have the right, at its option and effective immediately upon Notice to Producers, to refuse to accept such nonconforming Producers’ Gas or MV Mitigation Gas for so long as such Barnett Receiving Transporter refuses to accept such nonconforming Producers’ Gas or MV Mitigation Gas.

(d) Acceptance of Nonconforming Gas. Without limiting the rights and obligations of the Parties pursuant to clause (c) immediately above, Gatherer may elect to accept receipt at

 

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any Barnett Receipt Point of Producers’ Gas and MV Mitigation Gas that fails to meet any of the quality specifications stated above. Such acceptance by Gatherer shall not be deemed a waiver of Gatherer’s right to refuse to accept non-specification Gas at a subsequent time, provided that Gatherer is in compliance with clause (c) immediately above in so refusing. In addition, if Producers continue to flow any Gas that fails to meet the quality specifications under this Section 9 of Exhibit A, Producers shall be responsible for (i) any fees charged by any Barnett Receiving Transporter; (ii) any costs incurred by Gatherer and agreed to by Producers in order to avoid such fees for such Gas; and (iii) any costs, expenses, damages incurred by Gatherer or assessed to Gatherer by third parties caused by such non-specification Producers’ Gas or MV Mitigation Gas. If Gatherer does not object to non-specification Producers’ Gas or MV Mitigation Gas within ** Days after the date of delivery, then Gatherer will be deemed to have waived its right to be reimbursed under the preceding sentence (but only as to such non-specification Gas volumes). Notwithstanding the foregoing, Producers shall always be responsible for fees charged by a Barnett Receiving Transporter due to non-specification Producers’ Gas or MV Mitigation Gas and will indemnify Gatherer from Claims by a Barnett Receiving Transporter arising from non-specification Producers’ Gas or MV Mitigation Gas, unless such failure is a result of non-performance of Gatherer for services to treat non-conforming Producers’ Gas and MV Mitigation Gas provided as of the Effective Date or contracted with Gatherer at a later date.

11. Gas Lift Operations. Producers shall have the right to establish from time to time new delivery points on the Barnett Gathering System to permit redelivery of Producers’ Gas or MV Mitigation Gas gathered on the Barnett Gathering System to Producers or their Affiliates for use in gas lift operations in Producers’ wells on the Barnett Dedicated Properties. Upon receipt of Notice from Producers to create such a delivery point, Gatherer shall install the facilities required to establish such delivery point for gas lift operations as soon as reasonably practicable. Producers shall promptly reimburse Gatherer for all costs incurred by Gatherer to install, operate, maintain, and abandon such Barnett Delivery Point for gas lift operations. Upon completion of gas lift operations at such Barnett Delivery Point, Producers shall have the right to remove and retain, or to request that Gatherer reuse, meters, equipment, and other facilities installed by Gatherer at Producers’ expense for such gas lift operations.

12. Uneconomic Systems. After the end of the Minimum Volume Period, Gatherer shall have the right to declare, acting reasonably, that the operation of all of any Barnett Gathering System is uneconomic (as defined below) by Notifying Producers. Upon receipt of such Notice by Producers, Gatherer and Producers shall negotiate in good faith to reach agreement on additional gathering fees to be paid by Producers for Producers’ Gas and MV Mitigation Gas gathered on such Barnett Gathering System that would cause the operation of that Barnett Gathering System to be economic to Gatherer. If the Parties fail to reach agreement on such additional gathering fees within a reasonable period of time, then Gatherer will have the right, upon no less than 90 Days advance Notice of abandonment to Producers, to abandon and cease operating such Barnett Gathering System, with no further liability to Producers under this Agreement or otherwise with respect to gathering Producers’ Gas or MV Mitigation Gas on such Barnett Gathering System. Subject to the Additional Agreement, Producers, at their option, may elect to take assignment of Gatherer’s right, title, and interest in and to such Barnett Gathering System by providing Notice to Gatherer no later than 30 Days prior to the date on which Gatherer proposes to abandon such Barnett Gathering System, whereupon Gatherer shall assign

 

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to Producers (or their designee) all of Gatherer’s right, title, and interest in and to such Barnett Gathering System and any third party gathering agreements (to the extent assignable at no cost to Gatherer) on such Barnett Gathering System, without any representation or warranty whatsoever, except that Gatherer shall represent that there are no liens or encumbrances created by or through Gatherer burdening Gatherer’s title to the transferred assets. For purposes of this Section 12 of Exhibit A, a Barnett Gathering System shall be treated as uneconomic at such time as the Operating Cash Flow for that Barnett Gathering System for the 12 Months preceding such determination is negative. For purposes of the preceding sentence, “Operating Cash Flow” is defined as the earnings attributable to such Barnett Gathering System, before deducting interest, taxes, depreciation, and amortization, less normal maintenance capital, as reasonably determined by Gatherer.

 

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Exhibit B

Nomination Procedures and Measurement Practices

1. Nomination Procedures. “Nominations” or “Nominate” means a request submitted by Producers to Gatherer for the prospective gathering of specific volumes of Producers’ Gas and/or MV Mitigation Gas on a Barnett Gathering System. The nomination procedure for each Barnett Gathering System is as follows:

(a) First-of-the-Month Nominations. Gatherer shall advise Producers of the estimated percentage of Producers’ Gas and/or MV Mitigation Gas to be consumed as System Fuel and Losses on each Barnett Gathering System for the next Month. Producers shall submit in writing to Gatherer, by facsimile or email, its total estimated volumes, in Mcf’s per Day and MMBtu’s per Day, to be delivered to Gatherer at each Barnett Receipt Point for redelivery by Gatherer at the Barnett Delivery Points on such Barnett Gathering System, less System Fuel and Losses, during the then subsequent Month by 11:30 A.M. (CPT) on the first Business Day prior to the earliest deadline for first-of-the-Month nominations of the Barnett Receiving Transporters. After the deadline set forth herein, Gatherer shall accept nominations from Producers for first-of-the-Month deliveries subject to Gatherer’s ability, through reasonable efforts, to notify the applicable Barnett Receiving Transporter of such untimely nomination and such Barnett Receiving Transporter’s confirmation of such untimely nomination.

(b) Changes to First-of-the-Month Nominations. Producers shall submit changes to its first-of-the-month nominations in writing to Gatherer, by facsimile or email, as set forth in Section 1(a) above, no later than 11:30 a.m. (CPT) one Business Day prior to the scheduled Day of flow. Subject to acceptance and confirmation by the Barnett Receiving Transporter, such revised nominations shall be effective for the remainder of the Month unless later changes are made in accordance with this Exhibit B. After this deadline, Gatherer shall accept such nomination changes from the Producers, subject to Gatherer’s ability, through reasonable efforts, to notify the applicable Barnett Receiving Transporter of such untimely nomination and such Barnett Receiving Transporter’s confirmation of such untimely nomination.

(c) Nomination Confirmations. Upon receipt of Producers’ timely nomination, Gatherer shall review said nomination and promptly notify Producers should a discrepancy exist between Producers’ nominated volumes and volumes confirmed by the Barnett Receiving Transporters for Producers at the applicable Barnett Delivery Points. If it is determined that Producers are responsible for the discrepancy, it shall be the Producers’ responsibility to correct the discrepancy and timely re-nominate the corrected volumes. If the discrepancy is not resolved, the “corrected volumes” will be considered the lesser of the volume nominated by Producers at the applicable Barnett Delivery Points or the volume confirmed by the Barnett Receiving Transporters. Gatherer shall notify Producers in writing, by facsimile or email, of the confirmed nomination on the Barnett Gathering System for first-of-the-Month nominations or changes thereto. Gatherer shall not be obligated to provide service hereunder on any Day that Producers do not nominate under the procedures herein or of the Barnett Receiving Transporters. Any waiver by Gatherer of the provisions of this Section 1(c) shall not constitute a waiver of Gatherer’s future rights under this Section 1.


(d) Producers’ Obligation to Maintain Balance. Producers shall manage receipts and deliveries of Producers’ Gas and MV Mitigation Gas and, if necessary, make adjustments to maintain a balance of receipts and deliveries. Producers shall manage receipts and deliveries so that the Imbalance shall be kept as near zero as practicable. “Imbalance” shall be defined as the difference between the quantity (expressed in MMBtu’s) of Producers’ Gas and MV Mitigation Gas received at the Barnett Receipt Points on a Barnett Gathering System on any Day, after deducting Producers’ allocated share of System Fuel and Losses, and the quantity (expressed in MMBtu’s) of Producers’ Gas and MV Mitigation Gas delivered to the Barnett Delivery Points on such Barnett Gathering System on such Day.

(e) Gatherer’s Right to Minimize Variances and to Balance. Unless agreed between the Parties, Gatherer shall not be required to receive quantities from Producers in excess of the quantities of Producers’ Gas and MV Mitigation Gas the Barnett Receiving Transporters will accept at the Barnett Delivery Points on a concurrent basis. Gatherer shall have the right, in its sole discretion, to amend receipts or deliveries of Producers’ Gas and/or MV Mitigation Gas 24 hours after Notice to Producers if Producers fail to provide evidence to Gatherer’s satisfaction that within such 24 hour period it has commenced a good faith effort to eliminate any existing Imbalance within a reasonable time.

(f) Imbalance Resolution. Gatherer and Producers shall keep accurate records of the quantities of Producers’ Gas and MV Mitigation Gas nominated, confirmed, allocated, and redelivered from the Barnett Receipt Points to the Barnett Delivery Points and any Imbalance related thereto. Monthly imbalances shall be added/subtracted to/from the cumulative imbalance from the previous Month and the newly calculated Imbalance position will be considered in the subsequent months’ nominations to bring said Imbalance position as close to zero as practicable.

(g) Receipt Allocations. If Producers’ Gas or MV Mitigation Gas is commingled with other gas at a Barnett Receipt Point, the allocation of Gas at each Barnett Receipt Point shall be based upon each Producers’ marketing percentage as defined by the Operator of that Barnett Receipt Point.

(h) Curtailment Procedures. If Gatherer determines on any Day that for any reason whatsoever, including Force Majeure Events and periods of normal and routine maintenance, that confirmed nominations exceed the Barnett Gathering System’s available capacity at any area or point, Gatherer shall, without liability to Producers, curtail or interrupt deliveries of all Gas in such area or point as provided in the Agreement, determined by confirmed nominations for all Gas gathered in such area or point. In instances where gathering of Producers’ Gas and/or MV Mitigation Gas is interrupted and Gatherer has provided Producers Notice thereof, Producers shall notify the applicable Barnett Receiving Transporters of any modification to the confirmed nominations at the applicable Barnett Delivery Points. In the event of a curtailment described herein, the applicable Fees shall apply only to Producers’ Gas and MV Mitigation Gas received by Gatherer at the affected Barnett Receipt Points (expressed in Mcf’s).

(i) Operational Control. Gatherer shall retain full operational control of the Barnett Gathering Systems and shall at all times be entitled to schedule deliveries and to operate its facilities in a manner which, in Gatherer’s judgment, is consistent with the obligations and operating conditions, inclusive of normal and routine maintenance, as may exist from time to

 

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time on the Barnett Gathering Systems or which will allow Gatherer to optimize the use of the Barnett Gathering Systems consistent with the terms of this Agreement. Gatherer’s performance shall be excused, in full or in part, during periods of Force Majeure Events and normal and routine maintenance.

(j) Coordination with Barnett Receiving Transporters. The Parties recognize that Gatherer must coordinate its actions with those of the Barnett Receiving Transporters. Accordingly, upon 30 Days Notice to Producers, Gatherer may modify provisions of this Agreement to implement standards promulgated by the National Association of Energy Standards Board adopted by any Barnett Receiving Transporter as it relates to a Barnett Gathering System or to otherwise coordinate the provisions of this Agreement with the operating conditions, rules, or tariffs of the Barnett Receiving Transporters.

(k) Communications with Operator. At Producers’ election (indicated in writing), any communications concerning nominations or changes thereto, and any other Notice to be provided by or directed to Producers pursuant to the procedures set forth in this Exhibit B may, instead, be provided by or directed to, as applicable, Operator, on Producers’ behalf. Any such election by Producers made under this Section 1(k) of Exhibit B shall remain effective for a period of three (3) months; provided, that Producers may, at any time, and from time to time, renew such election. All communications provided by Gatherer to Operator during any such three (3) month period shall be binding upon Producers (to the extent such communications would have been binding upon Producers if made directly by Gatherer to Producers), and all communications provided by Operator to Gatherer during any such three (3) month period shall be binding upon Gatherer (to the extent such communications would have been binding upon Gatherer if made directly by Producers to Gatherer).

2. Meters.

(a) Practices. All Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be constructed, installed, and operated in accordance with the following standards depending on the type of meters used.

(1) Orifice Meters - In accordance with ANSI/API 14.3.2 (American Gas Association Report No. 3), Orifice Metering of Natural Gas and Other Hydrocarbon Fluids, Fourth Edition, dated April 2000, and any subsequent amendments, revisions or modifications thereof and shall include the use of flange connections.

(2) Positive Meters - In accordance with the American Gas Association Measurement Committee Report No. 6 (American Gas Association Report No. 6) dated January 1971, and any subsequent amendments, revisions or modifications thereof.

(3) Turbine Meters - In accordance with the American Gas Association Measurement Committee Report No. 7 (American Gas Association Report No. 7), First Revision, dated November 1984, and any subsequent amendments, revisions or modifications thereof.

 

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(4) Electronic Transducers and Flow Computers - in accordance with the applicable standards of the American Petroleum Institute, including but not limited to API No. 21.1, and any subsequent amendments, revisions, or modification thereof.

(5) Ultrasonic Meters - In accordance with the American Gas Association Measurement Committee Report No. 9 (American Gas Association Report No. 9), dated June 1998, and any subsequent amendments, revisions or modifications thereof.

(6) Coriolis Meters - In accordance with American Gas Association Report No. 11, and any subsequent amendments, revisions, or modifications, thereof.

Notwithstanding anything contained in this Exhibit to the contrary, Gatherer shall not be required to replace or make any alterations to its measuring equipment as a result of any subsequent amendments, revisions, or modifications of the American Gas Association Reports cited in Subparagraphs (1) through (6) of this Section 2(a), unless the Parties mutually agree to such replacement or alteration.

(b) Testing. Gatherer shall give reasonable Notice to Producers of any cleaning, changing, repairing, inspecting, testing, calibrating, or adjusting of Gatherer’s Receipt Meters or Producer’s Wellhead Meters or the measuring equipment at the Barnett Delivery Points to permit Producers to have a representative present. The official charts (recordings) from the measuring equipment shall remain the property of Gatherer. Upon request, Gatherer will submit its records and charts, together with calculations therefrom, to Producers for inspection and verification, subject to return to Gatherer or its designee within 30 Days after receipt thereof.

(c) Accuracy of Meters. All Producers’ Wellhead Meters and Gatherer’s Receipt Meters shall be verified (and calibrated) at the following intervals: (i) if the deliveries of Gas through the meter average less than 100 Mcf/d, at least once each Year, (ii) if the deliveries of Gas through the meter average between 100 Mcf/d and 500 Mcf/d, at least once each 6 Months, (iii) if the deliveries of Gas through the meter average between 500 Mcf/d and 5,000 Mcf/d, at least once each 3 Months, (iv) if the deliveries of Gas through the meter average more than 5,000 Mcf/d, at least 12 times per Year with no longer than 45 Days between each meter verification and calibration. Meters located on land managed by the Bureau of Land Management will be verified at least once each calendar quarter by Gatherer. If, upon any test, the measuring equipment is found to be inaccurate by 2% or less, previous readings of such equipment will be considered correct in computing the deliveries of Producers’ Gas and MV Mitigation Gas hereunder, but such equipment shall immediately be adjusted to record accurately. If, upon any test, the measuring equipment is found to be inaccurate by more than 2% of the average flow rate since the last test, then any previous recordings of such equipment shall be corrected to zero (0) error for any period which is known definitely or agreed upon, using the procedure set forth in Section 1(d) below. If such period is not known or agreed upon, such correction shall be made for a period covering 1/2 of the time elapsed since the date of the latest test, but not to exceed 16 Days when the equipment is tested every Month and not to exceed 45 Days when the equipment is tested every 3 months. If Producers desire a special test of any measuring equipment, then at least 72 hours advance Notice shall be given to Gatherer by Producers, and both Parties shall cooperate to secure a prompt test of the accuracy of such equipment. If the measuring equipment so tested is found to be inaccurate by 2% or less, Gatherer shall have the right to bill Producers for the costs incurred due to such special test, including any labor and transportation costs and Producers shall pay such costs promptly upon invoice thereof.

 

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(d) Adjustments. If, for any reason, any measurement equipment is out of adjustment, out of service, or out of repair and the total calculated hourly flow rate through each meter run is found to be in error by an amount of the magnitude described in Section 2(c), the total quantity of Producers’ Gas and MV Mitigation Gas delivered shall be redetermined in accordance with the first of the following methods which is feasible:

(1) by using the registration of any check meters, if installed and accurately registering (subject to testing as described in Section 2(c)), or

(2) where parallel multiple meter runs exist, by calculation using the registration of such parallel meter runs; provided that they are measuring Producers’ Gas and MV Mitigation Gas from upstream headers in common with the faulty metering equipment, are not controlled by separate regulators, and are accurately registering; or

(3) by correcting the error by rereading of the official charts, or by straightforward application of a correcting factor to the quantities recorded for the period (if the net percentage of error is ascertainable by calibration, tests or mathematical calculation); or

(4) by estimating the quantity, based upon deliveries made during periods of similar conditions when the meter was registering accurately.

(e) Meter Records Retention. Gatherer shall retain and preserve for a period of at least 6 years all test data, charts, and other similar records.

(f) Nonuse of Barnett Receipt Point. If Producers have failed to nominate Producers’ Gas or MV Mitigation Gas for delivery at a Barnett Receipt Point for 3 consecutive Months, Gatherer shall have the right, at any time thereafter, to Notify Producers of such nonuse. Upon receipt of such nonuse Notice, Producers shall promptly provide Notice to Gatherer whether they intend to resume deliveries of Producers’ Gas or MV Mitigation Gas at such Barnett Receipt Point and the date by which such deliveries will resume. If Producers fail to provide such Notice or Notify Gatherer that they do not intend to resume deliveries of Producers’ Gas or MV Mitigation Gas at such Barnett Receipt Point, then Gatherer will have the right to disconnect the pad level custody transfer meter at such Barnett Receipt Point (or, if Gatherer has not installed a pad level custody meter at such Barnett Receipt Point, to disconnect Producers’ Wellhead Meter at such Barnett Receipt Point).

(g) Performance by Producers. Gatherer shall have the right to request that Producers or its designee(s) provide the services necessary to read, test, calibrate, and adjust Producers’ Wellhead Meters and Gatherer’s Receipt Meters on behalf Gatherer hereunder. Upon Notice by Gatherer to Producers to perform such services for any of Producers’ Wellhead Meters or Gatherer’s Receipt Meters, Producers or its designee(s) shall commence performing such services as soon as reasonably practicable. Such services shall be performed by Producers or its designee(s) for Gatherer at a reasonable allocated cost for the actual, recorded time spent by the employees of Producers or its designee(s) performing such services.

 

5


(h) Pulsation. If Gas pulsation problems occur upstream of the Barnett Receipt Points, Producers, or their designee, shall take the reasonable and customary industry adopted steps necessary to mitigate such pulsation. If Gas pulsation occurs downstream of the Barnett Receipt Points, Gatherer, or its designee, shall take the reasonable and customary industry adopted steps necessary to mitigate such pulsation

3. Measurement Specifications.

(a) Units. The unit of volume for measurement shall be one (1) Cubic Foot. Such measured volumes shall be multiplied by their Gross Heating Value per Cubic Foot and divided by 1,000,000 to determine MMBtu’s delivered hereunder.

(b) Temperature. The temperature of Producers’ Gas and MV Mitigation Gas shall be determined by a recording thermometer installed so that it may record the temperature of Producers’ Gas and MV Mitigation Gas flowing through the meters, or such other means of recording temperature as may be mutually agreed upon by the Parties. The average of the record to the nearest one degree Fahrenheit (1°F), obtained while Producers’ Gas and MV Mitigation Gas is being delivered, shall be the applicable flowing Gas temperature for the period under consideration.

(c) Specific Gravity. The specific gravity of Producers’ Gas and MV Mitigation Gas shall be determined by a recording gravitometer or chromatographic device installed and located at a suitable point to record representative specific gravity of Gas being metered or, at Gatherer’s option, by spot samples or continuous sampling using standard type gravity methods. If a recording gravitometer or chromatographic device is used, the gravity to the nearest one-thousandth (0.001) obtained while Producers’ Gas and MV Mitigation Gas is being delivered shall be the specific gravity of the Gas used for the recording period. If the spot sample or continuous sampling method is used, the gravity shall be determined to the nearest one-thousandth (0.001). Spot sampling shall be determined at the same frequency as Gross Heating Value is determined pursuant to Section 3(f), below. The result should be applied during such Month for the determination of Producers’ Gas and MV Mitigation Gas volumes delivered.

(d) Supercompressibility. Adjustments to measured Gas volumes for the effects of supercompressibility shall be made in accordance with accepted American Gas Association standards. Gatherer shall obtain appropriate carbon dioxide and nitrogen mole fraction values for Producers’ Gas and MV Mitigation Gas delivered as may be required to compute such adjustments in accordance with standard testing procedures. At Gatherer’s option, equations for the calculation of supercompressibility may be taken from either the American Gas Association Manual for the Determination of Supercompressibility Factors for Natural Gas, dated December, 1962 (also known as the “NX-19 Manual”) or the American Gas Association Report No. 8, dated December 1985, Compressibility and Supercompressibility for Natural Gas and Other Hydrocarbon Gases, latest revision.

 

6


(e) Pressure. For purposes of measurement and meter calibration, the atmospheric pressure for each of the Barnett Receipt Points and Barnett Delivery Points shall be assumed to be the pressure value determined by Gatherer, or its designee, for the county elevation in which such point is located under generally accepted industry practices irrespective of the actual atmospheric pressure at such points from time to time. For the purposes herein, such atmospheric pressure will be assumed to be 14.65 pounds per square inch absolute.

(f) Gross Heating Value. The Gross Heating Value of the Gas delivered at the Barnett Receipt Points and Barnett Delivery Points shall be determined using the following schedule: (i) if the deliveries of Gas through the meter average less than 100 Mcf/d, at least once each Year, (ii) if the deliveries of Gas through the meter average between 100 Mcf/d and 500 Mcf/d, at least once each 6 Months, (iii) if the deliveries of Gas through the meter average between 500 Mcf/d and 5,000 Mcf/d, at least once each 3 Months, (iv) if the deliveries of Gas through the meter average more than 5,000 Mcf/d, at least 12 times per Year with no longer than 45 Days between each test, by means of some approved method of general use in the Gas industry.

(g) Quality Specifications. Determination of the Gross Heating Value, relative density and compressibility at the Barnett Receipt Points and Barnett Delivery Points will be made using the following standards (as amended from time to time by the relevant professional association):

(1) Gas Processors Association (GPA) 2166 – Obtaining Natural Gas Samples for Analysis of Gas.

(2) Gas Processors Association (GPA) 2261 – Analysis for Natural Gas and Similar Gaseous Mixtures by Gas Chromatography.

(3) Gas Processors Association (GPA) 2145 – Physical Constants for paraffin Hydrocarbons and Other Components of Natural Gas.

(4) Gas Processors Association (GPA) 2172 – Calculation of Gross Heating Value, Relative Density, and Compressibility of Natural Gas Mixtures from Compositional Analysis.

(h) Other Contaminants. Other tests to determine water content, sulfur, hydrogen sulfide, inert gases, and other impurities in Producers’ Gas and MV Mitigation Gas shall be conducted whenever requested by either Party and shall be conducted in accordance with standard industry testing procedures.

(i) New Test Methods. If a new method or technique is developed with respect to Gas measurement or the determination of the factors used in such Gas measurement, then such new method or technique may be substituted for a method set forth in this Section 3 when such methods or techniques are in accordance with the currently accepted standards of the American Gas Association if mutually agreed to by the Parties.

 

7


Exhibit C

ADDRESSES FOR NOTICE

If to Chesapeake Midstream Partners, L.L.C., to:

Chesapeake Midstream Partners, L.L.C.

777 NW Grand Boulevard

Oklahoma City, Oklahoma 73118

Attn: J. Mike Stice

Fax: (405) 849-6134

With a copy to:

Global Infrastructure Management, LLC

12 East 49th Street

38th Floor

New York, New York 10017

Attn: Salim Samaha

Fax: (646) 282-1599

If to Total Gas & Power North America, Inc. or Total E&P USA, Inc., to:

Total Gas & Power North America, Inc.

1201 Louisiana Street, Suite 1600

Houston, Texas 77002

Attn: Bruce Henderson, President & General Manager

Fax: (713) 647-4030

With a copy to:

Total E&P USA, Inc.

1201 Louisiana Street, Suite 1600

Houston, Texas 77002

Attn: Daniel Jouhet, Vice President- Finance, Marketing and IT

Fax: (713) 647-3646


Exhibit D: Payout Calculation

 

($ thousands)    Jun-2020    2021     2022     2023
(Pre-Payout)
    2023
(Post-Payout)
    2024     2025  

Illustrative Producers’ Gas Volume From a New Pad Connection (Mcf) (1)

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

% of Annual Producers’ Gas Volume Attributable to Payout

(Until Target IRR Achieved)

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

Producers’ Gas Volume Attributable to Payout

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

Barnett Fees ($ / Mcf) (2)

      $ **      $ **      $ **      $ **      $ **      $ **   

Escalation Factor

        2.0     2.0     2.0     2.0     2.0     2.0

Discount on Barnett Fees (%)

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

Discount on Barnett Fees ($ / Mcf)

      $ **      $ **      $ **      $ **      $ **      $ **   
                                                       

Value of Discount to Producers ($ 000s)

      $ **      $ **      $ **      $ **      $ **      $ **   
                                                       

Unlevered Cash Flows ($ 000s) (3)

   $ **    $ **      $ **      $ **      $ **      $ **      $ **   

Target IRR (4)

     **             
                                                       

Barnett Fees to Gatherer

      $ **      $ **      $ **      $ **      $ **      $ **   
                                                       

 

(1) Illustrative New Pad Connection assuming 3 wells drilled and production per well based on the Barnett Type Curve.
(2) Assumes **-** psig Receipt Point pressure; Barnett Fees of $** / Mcf in 2009 escalated at **% per year to 2021 (post-Minimum Volume Period).
(3) Assumes $** capital cost for illustrative New Pad Connection.
(4) Represents the unlevered pre-income tax rate of return on cash flows to Producers, calculated using Microsoft Excel’s XIRR formula.

 


Exhibit E

BARNETT GATHERING SYSTEM OWNER ACKNOWLEDGMENT

THIS BARNETT GATHERING SYSTEM OWNER ACKNOWLEDGMENT (this “Acknowledgment”) is entered into as of                     , by             , a                     , (“Acquirer”), and Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”). As indicated in Section 3 below, Total Gas & Power North America, Inc., a Delaware corporation, and Total E&P USA, Inc., a Delaware corporation (collectively the “Producers”) and their Affiliates are third party beneficiaries under this Acknowledgment.

Recitals

Gatherer and Producers are parties to that certain Gas Gathering Agreement, dated January 25, 2010 but effective as of February 1, 2010 (the “GGA”). This Acknowledgment is entered into by Gatherer and Acquirer pursuant to Section 9.2(a) of the GGA. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the GGA.

NOW THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Acquirer and Gatherer agree as follows:

1. Acquired System. As of                     , Acquirer has acquired from Gatherer the natural gas gathering system or interest in a natural gas gathering system described in Exhibit A hereto (the “Acquired System”).

2. Acknowledgments and Agreements. Gatherer and Acquirer (i) acknowledge that Gatherer has provided to Acquirer a copy of the GGA (excluding the exhibits and schedules thereto that do not relate to the Acquired System); (ii) acknowledge that the term of the GGA commenced on February 1, 2010 (the “Effective Date”) and, unless terminated sooner in accordance with its terms, continues in effect through September 30, 2029 (the “Primary Term”) and continues in effect for successive 12-month periods thereafter, unless terminated by Producers or Gatherer upon notice to the other no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable; (iii) acknowledge that the Acquired System is a part of a Barnett Gathering System; (iv) acknowledge Producers’ rights to have Producers’ Gas connected to, received by, gathered, compressed, dehydrated, treated and processed, as applicable, and redelivered to Producers on and over the Barnett Gathering System, on and subject to the terms and conditions provided in the GGA; and (v) agree that Producers, the successors and permitted assigns of Producers under the GGA, and any Persons who acquire any interest in the Dedicated Barnett Properties and enter into a separate gas gathering agreement pursuant to Section 9.3(a) of the GGA covering any part of the Acquired System (collectively, the “Producer Parties”) shall have the rights referenced in clause (iv) above in respect of the Acquired System. Acquirer agrees that if Acquirer sells, transfers or otherwise disposes of an interest in or all or any part of the Acquired System during the term of the GGA, Acquirer shall execute (and shall cause the Person acquiring such interest or part to execute) an acknowledgment substantially in the same form and content as this Acknowledgment and otherwise acceptable to Producers, acting reasonably.

 

1


3. No Assumption. Without limiting Acquirer’s acknowledgments, agreements and obligations pursuant to Section 2 above, the execution by Acquirer of this Acknowledgment shall not constitute any assumption by Acquirer of any of Gatherer’s liabilities or obligations under the GGA, nor shall it serve to make Acquirer a party to, or give Acquirer any rights (as a third party beneficiary or otherwise) under, the GGA.

4. Beneficiaries. Producer Parties are expressly intended by Acquirer and Gatherer to be third party beneficiaries of the acknowledgments and agreements set forth in this Acknowledgment. Any one or more of the Producer Parties shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of Gatherer. Likewise, Gatherer shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of the Producer Parties.

5. No Amendment to GGA. Nothing contained in this Acknowledgment shall be deemed to modify, amend, alter, limit or otherwise change any of the provisions of the GGA itself or the rights or obligations of Gatherer or Producers thereunder.

6. Counterparts. This Acknowledgment may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same document. To facilitate recordation, there may be omitted from the exhibits to this Acknowledgment in certain counterparts descriptions of assets located in recording jurisdictions other than the jurisdiction (county, parish, state, Indian or federal agency) in which the particular counterpart is to be filed or recorded.

7. Governing Law. This Acknowledgment shall be construed, enforced and interpreted according to the laws of the State of Texas, without regard to the conflicts of laws rules thereof.

8. Amendment. This Acknowledgment shall not be amended or modified except pursuant to a written instrument executed by Gatherer and Acquirer and consented to in writing by the Producer Parties.

[Signature page follows]

 

2


IN WITNESS WHEREOF, the undersigned have executed this Acknowledgment as of the day first above written.

 

ACQUIRER:
[ACQUIRER]
By:  

 

  [Name]
  [Title]
GATHERER:
CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.
By:  

 

  [Name]
  [Title]

[Add appropriate state acknowledgment forms for notaries public]

Signature Page to Barnett Gathering System Owner Acknowledgment


EXHIBIT A

Acquired System

[See attached.]

Exhibit A to Barnett Gathering System Owner Acknowledgment


Exhibit F

DEDICATED PROPERTIES OWNER ACKNOWLEDGMENT

THIS DEDICATED PROPERTIES OWNER ACKNOWLEDGMENT (this “Acknowledgment”) is entered into as of                     , by             , a                     , (“Acquirer”), and [insert name of seller/transferor of the Acquired Interests described on Exhibit A] (the “Producer”). As indicated in Section 3 below, Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”) and its Affiliates are third party beneficiaries under this Acknowledgment.

Recitals

Gatherer, Producer and certain Affiliates of Producer are parties to a Gas Gathering Agreement, dated January 25, 2010 but effective as of February 1, 2010 (the “GGA”). This Acknowledgment is made by Acquirer pursuant to Section 9.3(a) of the GGA. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the GGA.

NOW THEREFORE, for and in consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Acquirer and Producer agree as follows:

1. Acquired Interests. As of                     , Acquirer has acquired from Producer the interest in the oil and gas leases and properties described in Exhibit A hereto (the “Acquired Interests”).

2. Acknowledgments and Agreement. Producer and Acquirer (i) acknowledge that Producer has provided to Acquirer a copy of the GGA (excluding the exhibits and schedules thereto that do not relate to the Acquired Interests); (ii) acknowledge that the term of the GGA commenced on February 1, 2010 (the “Effective Date”) and, unless terminated sooner in accordance with its terms, continues in effect through September 30, 2029 (the “Primary Term”) and continues in effect for successive 12-month periods thereafter, unless terminated by Producer or Gatherer upon notice to the other no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable; (iii) acknowledge that the Acquired Interests are a part of the Barnett Dedicated Properties and are exclusively dedicated and committed to the performance of the GGA; (iv) acknowledge that Gas produced from the Acquired Interests and owned or controlled by Acquirer or its Affiliates shall not be gathered on any other gas gathering system or delivered to any other gas gatherer, gas purchaser, gas marketer, or other Person prior to the Barnett Delivery Points, in each case on and subject to the terms and conditions provided in the GGA; and (v) agree that Gatherer, the successors and permitted assigns of Gatherer under the GGA, and any Persons who acquire any interest in the Barnett Gathering System and enter into a separate gas gathering agreement pursuant to Section 9.3(a) of the GGA covering any part of the Acquired Interests (collectively, the “Gatherer Parties”) shall have the dedication rights referenced in clause (iv) above in respect of the Acquired Interests. Acquirer agrees that if Acquirer sells, transfers or otherwise disposes of an interest in or all or any part of the Acquired Interests during the term of the GGA, Acquirer shall


execute (and shall cause the Person acquiring such interest or part to execute) an acknowledgment substantially in the same form and content as this Acknowledgment and otherwise acceptable to Gatherer, acting reasonably.

3. No Assumption. Without limiting Acquirer’s acknowledgments, agreements and obligations pursuant to Section 2 above, the execution by Acquirer of this Acknowledgment shall not constitute any assumption by Acquirer of any of Producers’ liabilities or obligations under the GGA, nor shall it serve to make Acquirer a party to, or give Acquirer any rights (as a third party beneficiary or otherwise) under, the GGA.

4. Beneficiaries. Gatherer Parties are expressly intended by Acquirer and Producer to be third party beneficiaries of the acknowledgments and agreements set forth in this Acknowledgment. Any one or more of the Gatherer Parties shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of Producer. Likewise, any one or more of Producers shall have the right to enforce the terms of this Acknowledgment without the joinder or consent of the Gatherer Parties.

5. No Amendment to GGA. Nothing contained in this Acknowledgment shall be deemed to modify, amend, alter, limit or otherwise change any of the provisions of the GGA itself or the rights or obligations of Gatherer or Producers thereunder.

6. Counterparts. This Acknowledgment may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same document. To facilitate recordation, there may be omitted from the exhibits to this Acknowledgment in certain counterparts descriptions of assets located in recording jurisdictions other than the jurisdiction (county, parish, state, Indian or federal agency) in which the particular counterpart is to be filed or recorded.

7. Governing Law. This Acknowledgment shall be construed, enforced and interpreted according to the laws of the State of Texas, without regard to the conflicts of laws rules thereof.

8. Amendment. This Acknowledgment shall not be amended or modified except pursuant to a written instrument executed by Producer and Acquirer and consented to in writing by the Gatherer Parties.

[Signature page follows]

 

2


IN WITNESS WHEREOF, the undersigned have executed this Acknowledgment as of the day first above written.

 

ACQUIRER:
[ACQUIRER]
By:  

 

  [Name]
  [Title]
PRODUCER:
[insert name of seller/transferor of the Acquired Interests described on Exhibit A]
By:  

 

  [Name]
  [Title]

[Add appropriate state acknowledgment forms for notaries public]

Signature Page to Dedicated Properties Owner Acknowledgment


EXHIBIT A

Acquired Interests

[See attached.]

Exhibit A to Dedicated Properties Owner Acknowledgment


Exhibit G

Existing Processing Agreements

None.


Exhibit H

OIL AND GAS LEASE PARTIAL ASSIGNMENT

KNOW ALL MEN BY THESE PRESENTS:

THIS OIL AND GAS LEASE PARTIAL ASSIGNMENT (this “Assignment”), made and entered this     day of         ,             , by and between [name of Producer entity], a             , hereinafter referred to as Assignor, and [name of Gatherer entity], a             , hereinafter referred to as “Assignee.”

RECITALS

Assignor is a party of those certain oil and gas leases and/or farmout agreements, right of way agreements, pooling orders and other instruments described on Annex 1 to this Assignment (collectively, the “Leases”). The Leases cover and include the drilling and spacing unit described as [insert description of the Unit] (the “Unit”).

The Leases grant Assignor the right to construct, operate and maintain pipelines for the purpose of transporting hydrocarbons from the premises covered by the Leases or lands pooled therewith.

NOW, THEREFORE, for the consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, and subject to the following terms, Assignor does hereby grant, convey, assign and transfer unto Assignee on a non-exclusive basis, without representation or warranty of title, either express or implied, part of the rights granted to Assignor as Lessee under the Leases to construct, operate and maintain pipelines to and from the [name of well] located in the Unit together with rights of ingress and egress to the premises covered by the Leases and all other necessary rights and purposes incident to construction, operation and maintenance of pipelines (the “Assigned Non-Exclusive Rights”). Assignor reserves the right to exercise itself or to assign to other parties the rights granted to Assignor under the Lease to construct pipelines and also reserves all other rights, obligations and benefits under the Leases not expressly assigned herein.


Assignee agrees to comply with any and all terms, conditions and restrictions contained in the Leases relating to the exercise of the Assigned Non-Exclusive Rights especially those concerning use of the surface for laying pipelines and conducting related operations.

This Assignment is executed on the date first referenced above.

 

ASSIGNOR
[Name of Producer entity]
By:  

 

Name:  
Title:  
ASSIGNEE
[Name of Gatherer entity]
By:  

 

Name:  
Title:  

[Insert forms of applicable State acknowledgements]


Annex 1 to Partial Assignment of Oil and Gas Leases

[insert description of oil and gas leases, farmout agreements, right of way agreements, pooling orders and other instruments constituting the Leases]


Exhibit I

MEMORANDUM OF GAS GATHERING AGREEMENT

THIS MEMORANDUM OF GAS GATHERING AGREEMENT (this “Memorandum”) is made and entered into as of February 1, 2010 (the “Effective Date”), by and among (i) Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”) (ii) Total Gas & Power North America, Inc., a Delaware corporation (“TGPNA”), and (iii) Total E&P USA, Inc., a Delaware corporation (“TEPUSA” and together with TGPNA, “Producers”). Gatherer and Producers are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals

Gatherer and Producers entered into that certain Gas Gathering Agreement (the “Agreement”) dated of even date herewith.

The Parties desire to file this Memorandum in the applicable real property records to give notice of the existence of the Agreement and certain provisions contained therein.

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

1. Certain Terms. The following terms shall have the meanings indicated below:

 

  (A) Acquired Properties” means the oil, gas and/or mineral leases (or interests therein) and other interests and properties acquired described in Schedule 10 to the Agreement.

 

  (B) Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person, whether by contract, voting power, or otherwise. For purposes of this definition, Gatherer shall not be considered an Affiliate of any of the CHK Parties or any of their Affiliates and the CHK Parties and their Affiliates (other than Gatherer) shall not be considered an Affiliate of Gatherer.

 

  (C) Barnett AMI” means the geographic area described in Exhibit A hereto.

 

  (D) Barnett Dedicated Properties” means the Acquired Properties and all interests of Producers and their Affiliates (and their successors and assigns) in oil, gas, and/or mineral leases covering lands located within the Barnett AMI, whether now owned or hereafter acquired, and all Gas produced or delivered therefrom or attributable thereto, and all interests of Producers or their Affiliates (and their successors and assigns) in all oil or gas wells, whether now existing or drilled hereafter, on, or completed on, lands covered by any such oil, gas, and/or mineral lease or on other lands within the Barnett AMI, including the wells described in Part I of Exhibit B, but excluding (i) any oil, gas and/or mineral leases purchased

 

1


 

by Producers or their Affiliates after the Effective Date that are subject to a dedication to a gas gathering system or agreement (other than the Barnett Gathering Systems) that was in effect prior to (and was not entered into in connection with or as part of) such acquisition (but only to the extent of such dedication), (ii) the properties described in Part II of Exhibit B and (iii) any other non-material properties dedicated by Producers as of the Effective Date to a gathering system owned and operated by a Person not an Affiliate of either Producer, not to exceed 750 net mineral acres.

 

  (E) Barnett Delivery Points” means (i) the points identified in Schedule 3 to the Agreement at which Gas is delivered to a Barnett Receiving Transporter by Gatherer, (ii) any additional delivery points that, from time to time, are added at the request of Producers (at Producers’ expense) to the Barnett Gathering Systems after the Effective Date to permit delivery of Gas to the same or other Barnett Receiving Transporters, as provided in Section 6(f) of Exhibit A to the Agreement and (iii) any additional delivery points added to the Barnett Gathering Systems for gas lift operations at Producer’s request and expense, as provided in Section 6(b)(2) or Section 11 of Exhibit A to the Agreement.

 

  (F) Barnett Gathering System” means each of the discrete gas gathering systems described in Exhibit C, together with any modifications, alterations, replacements, extensions, or expansions made by Gatherer, from time to time, to each such gathering system.

 

  (G) Barnett Receiving Transporters” means the intrastate or interstate pipeline companies, gathering companies, local distribution companies, or end-users taking delivery or custody of Producers’ Gas and MV Mitigation Gas at, or immediately downstream of, a Barnett Delivery Point.

 

  (H) Control” (and the correlative terms “controlling,” “controlled by,” and “under common control with”) means as to any entity the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the Securities Exchange Act of 1934, as amended) of the power or authority, through ownership of voting securities, by contract, or otherwise, to control or direct the management and policies of the entity. Notwithstanding anything herein to the contrary, other than with respect to the term “Affiliates” as used in the definition of “Producers’ Gas”, the term “Control” and its correlative terms shall not apply to the definition of “Producers’ Gas”.

 

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

 

  (J)

Producers’ Barnett Reservations” means Producers’ rights to (i) operate wells producing from the Barnett Dedicated Properties as a reasonably prudent operator, (ii) separate or process Gas prior to delivery at the Barnett Receipt Points so long as such Producers’ Gas and MV Mitigation Gas meets the gas

 

2


 

specifications set forth in the Agreement after such separation or processing, (iii) use Gas produced from the Barnett Dedicated Properties for lease operations, and (iv) pool, communitize, or unitize Producers’ interests in the Barnett Dedicated Properties.

2. Notice. Notice is hereby given of the existence of the Agreement and all of its terms, provisions, covenants and conditions to the same extent as if the Agreement was fully set forth herein. Certain provisions of the Agreement are summarized in Sections 3 through 6 below.

3. Term. The term of the Agreement commenced on the Effective Date and, unless terminated sooner in accordance with its terms, continues in effect through September 30, 2029 (the “Primary Term”) and continues in effect for successive 12-month periods thereafter, unless terminated by either Party upon notice to the other Party no less than 6 months prior to the end of the Primary Term or any 12-month period thereafter, as applicable.

4. Dedication. Subject to the terms and conditions of the Agreement, including, without limitation, those relating to Producers’ Barnett Reservations, Producers have (i) exclusively dedicated and committed to the performance of the Agreement the Barnett Dedicated Properties, (ii) agreed not to deliver any Gas produced from the Barnett Dedicated Properties and owned or controlled by Producers or their Affiliates to any other gas gatherer prior to the Barnett Delivery Points, and (iii) agreed to cause any existing or future Affiliates of Producers to be bound by, and to execute and join as a party, the Agreement.

5. Gathering Services. Gatherer has agreed to connect, receive, gather, compress, dehydrate, treat, and process, as applicable, and redeliver, any Gas produced from the Barnett Dedicated Properties and owned or controlled by Producers or their Affiliates, on the Barnett Gathering System, for the fees and on and subject to the terms and conditions provided in the Agreement.

6. Covenant Running with the Land. The dedication and commitment made by Producers and their Affiliates referenced in Section 1 above is a covenant running with the land. Any transfer by Producers or their Affiliates of any of Producers’ interests in the Barnett Dedicated Properties shall comply with Article 9 of the Agreement.

7. No Amendment to Agreement. This Memorandum is executed and recorded solely for the purpose of giving notice of the Agreement and of certain of the terms set forth therein. Nothing contained in this Memorandum shall be deemed to modify, amend, alter, limit or otherwise change any of the provisions of the Agreement itself or the rights or obligations of the Parties thereunder. In the event of any conflict between the terms of the Agreement and the terms of this Memorandum, the terms of the Agreement shall control.

 

3


8. Contact Information. The contact information of the Parties is as follows:

Gatherer:

Chesapeake Midstream Partners, L.L.C.

777 Northwest Grand Avenue

Oklahoma City, Oklahoma 73118

Attention: J. Mike Stice

Fax: (405) 849-6134

With a copy to:

Global Infrastructure Management, LLC

12 East 49th Street

38th Floor

New York, New York 10017

Attention: Salim Samaha

Fax: (646) 282-1599

Producers:

Total Gas & Power North America, Inc.

1201 Louisiana Street, Suite 1600

Houston, Texas 77002

Attn: Bruce Henderson, President & General Manager

Fax: (713) 647-4030

With a copy to:

Total E&P USA, Inc.

1201 Louisiana Street, Suite 1600

Houston, Texas 77002

Attn: Daniel Jouhet, Vice President- Finance, Marketing and IT

Fax: (713) 647-3646

9. Counterparts. This Memorandum may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same document. To facilitate recordation, there may be omitted from the exhibits to this Memorandum in certain counterparts descriptions of assets located in recording jurisdictions other than the jurisdiction (county, parish, state, Indian or federal agency) in which the particular counterpart is to be filed or recorded.

[Signature Page Follows]

 

4


IN WITNESS WHEREOF, this Memorandum has been signed by or on behalf of each of the Parties as of the Effective Date.

 

GATHERER:
CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.
By:  

 

  J. Michael Stice
  Chief Executive Officer
PRODUCERS:
TOTAL GAS & POWER NORTH AMERICA, INC.
By:  

 

  [Name]
  [Title]
TOTAL E&P USA, INC.
By:  

 

  [Name]
  [Title]

Signature Page to Memorandum of Gas Gathering Agreement

 

1


STATE OF OKLAHOMA    §         
   §         
COUNTY OF OKLAHOMA    §         

This instrument was acknowledged before me this     day of             , 2010 by J. Michael Stice, the Chief Executive Officer of Chesapeake Midstream Partners, L.L.C.

 

Notary Public in and for:
  

[ATTACH APPROPRIATE ACKNOWLEDGMENTS/NOTARY BLOCKS FOR PRODUCERS]

Attachments:

Exhibit A – Barnett AMI

Exhibit B – Barnett Dedicated Wells

Exhibit C – Barnett Gathering System

Acknowledgement Page to Memorandum of Gas Gathering Agreement

 

1


EXHIBIT A

BARNETT AMI

See attached.

 


EXHIBIT B

BARNETT DEDICATED WELLS

See attached.

 


EXHIBIT C

BARNETT GATHERING SYSTEM

See attached.


Schedule 1

Barnett Gathering Systems

 

GGS Name

   CMP Area    Location /
County
   Location /
State
   Active
Constructed
Pipe

Length in Miles
   Constructed
Pipe Not in
Service
Length in
Miles
   # ROW
Agreements
   # ROW
Related
Permits
Barnett Central GGS    Barnett Central    Johnson    TX    163.47       650    137
Barnett North GGS    Barnett Arc Park    Tarrant    TX    142.3    63.95    322    102
Barnett South GGS    Barnett Cleburne    Johnson    TX    301.95    1.65    127    119
Covington GGS    Barnett Cleburne    Johnson    TX    1.01       4    1
Forsberg GGS    Barnett Cleburne    Johnson    TX    1.7       5    1
Freedom 1 GGS    Barnett Cleburne    Johnson    TX    proposed pipe       0    0
Lewisville GGS    Barnett Arc Park    Tarrant    TX    3.92         
Little Hoss GGS    Barnett Cleburne    Johnson    TX    23.99       6    3
Mary’s Creek GGS    Barnett Arc Park    Tarrant    TX    6.93       23    4
Paloma GGS    Barnett Cleburne    Johnson    TX    1.01       10    2
Peregrine Loop 2 and 4 GGS    Barnett Cleburne    Johnson    TX          9    0
Peregrine Loop 3 GGS    Barnett Cleburne    Johnson    TX    0.36       4    0
Peregrine Loop 5 GGS    Barnett Cleburne    Johnson    TX    1.11       4    0
Peregrine Loop 6 GGS    Barnett Cleburne    Johnson    TX    4.68       19    0
Peregrine Loop 7 GGS    Barnett Cleburne    Johnson    TX    2.92       11    4
Tarrant West GGS    Barnett Arc Park    Tarrant    TX    6.18       10    0

DFW Gathering System (see map attached to this Schedule A1)


LOGO


SCHEDULE 2

BARNETT FEES

 

1. Producers shall pay Gatherer the amount specified in the table below as consideration for receiving Producers’ Gas and MV Mitigation Gas at each Barnett Receipt Point (excluding the DFW Area and the fixed fees areas described in this Schedule 2) each month and providing the applicable level of gathering services provided:

 

Receipt Point Pressures

   Deemed Stages  of
Compression1
  Fee2  ($/Mcf)

Less than ** psig

   **   $ **

** to ** psig

   **   $ **

** to ** psig

   **   $ **

** to ** psig

   **   $ **

Greater than or equal to ** psig

   **   $ **

 

2. Producers shall pay Gatherer a Fee of $** per Mcf as consideration for receiving Producers’ Gas and MV Mitigation Gas at each Receipt Point in the DFW Area and providing the gathering services contemplated in the Agreement. The Fee specified in this Section 2 of this Schedule 2 will be escalated as of January 1 of each Year to equal the product of (i) the Fee in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011.

 

1

For the avoidance of doubt, the data in this column is applicable only to fuel cap calculations.

 

2

The Fees specified in this table will be escalated effective as of January 1 of each Year to equal the product of (i) the Fee in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011; provided, as to the Barnett Central GGS, the escalation of the fees will also be made in accordance with Section 4 of this Schedule 2.

 

1


3. Producers shall pay Gatherer the amount specified in the table below as consideration for receiving Producers’ Gas and MV Mitigation Gas in the areas described in such table each month and providing the applicable level of gathering services provided:

 

CMP Gas Gathering System

   Fee3
($/Mcf)
    Cost4
($/Mcf)
    CMP
Net  Proceeds
($/Mcf)
 

Forsberg

   $ *   $ *   $ *

Covington

   $ *   $ *   $ *

Mary’s Creek

   $ *   $ *   $ *

Peregrine Loop 2/4

   $ *   $ *   $ *

Peregrine Loop 3

   $ *   $ *   $ *

Peregrine Loop 5

   $ *   $ *   $ *

Peregrine Loop 6

   $ *   $ *   $ *

Peregrine Loop 7

   $ *   $ *   $ *

West Tarrant

   $ *   $ *   $ *

Chip Shot (Barnett South)

   $ *   $ *   $ *

 

3

The Fees specified in this table will be escalated effective as of January 1 of each Year to equal the product of (i) the Fee in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011.

 

4

The costs specified in this table will be escalated effective as of January 1 of each Year to equal the product of (i) the cost in effect immediately prior to such escalation and (ii) **, with the first such escalation occurring as of January 1, 2011.

 

2


4. Barnett Central Gathering System. The following terms shall apply to the calculation of the Barnett Fees on the Barnett Central Gathering System.

(a) Gatherer shall invoice Producers for Producers' Gas and MV Mitigation Gas received each Month at the Barnett Receipt Points on the Barnett Central Gathering System based on the Barnett Fees shown in Section 1 above.

(b) The following delivery points on the Barnett Central Gathering System are covered by the North Johnson Agreement dated September 1, 2007, between Chesapeake Energy Marketing, Inc. (“CEMI”) and ** (“**”), as amended (the “** Agreement”) are identified below, and such delivery points (together with any other mutually agreeable future delivery points on the Barnett Central Gathering that the Parties designate as such) shall be referred to herein as the “Barnett Central ** Delivery Points”:

 

Delivery Point

 

Meter Number

**

  **

**

  **

**

  **

**

  **

(c) If (i) ** curtails or suspends services at the Barnett Central ** Delivery Points, including the occurrence of a force majeure event or similar interruption affecting **, (ii) Producers or CEMI reduce the contracted volumes of Gas or actual volumes of Gas delivered under the ** Agreement, or (iii) the pressures at any Barnett Central ** Delivery Point increase as the result of changes by ** in any Month and (as to each of clause (i), (ii) and (iii) preceding) any such event (or combination of such events) causes or results in a change in the distribution of the volume weighted average monthly Barnett Fee pressure tiers in Section 1 above for the Barnett Receipt Points on the Barnett Central Gathering System resulting in lower revenues to Gatherer from such Barnett Receipt Points for such Month, then such event is referred to herein as a “** Event.”

(d) During any Month when a ** Event occurs or is in effect, the Barnett Fees for each Barnett Receipt Point on the Barnett Central Gathering System for such Month shall be calculated using the Barnett Fee pressure tier that applied to such Barnett Receipt Point during the most recent Month preceding such ** Event in which a ** Event did not occur.

(e) The provisions of this Section 4 of Schedule 2 shall apply to any replacements of the ** Agreement, whether with **, its successors, or other Person providing low pressure service.

 

3


(f) An illustrative calculation of the volume weighted average monthly Barnett Fee pressure tiers under clause (c) above is shown below.

 

4


Month Before ** Event

 

Tier

   CMP Pressure   Monthly
MMCF
  Monthly
MMCF
(%)
    Applicable
Tariff

($/MCF)
    WA Fee
($/MCF)
 

1

   **   **   * *%    $    **    $    ** 

2

   **   **   * *%    $    **    $    ** 

3

   **   **   * *%    $    **    $    ** 

4

   **   **   * *%    $    **    $    ** 

5

   **   **   * *%    $    **    $    ** 
                            
     **   * *%      $    ** 

Month of ** Event

 

Tier

   CMP Pressure   Monthly
MMCF
  Monthly
MMCF
(%)
    Applicable
Tariff

($/MCF)
    WA Fee
($/MCF)
 

1

   **   **   * *%    $    **    $    ** 

2

   **   **   * *%    $    **    $    ** 

3

   **   **   * *%    $    **    $    ** 

4

   **   **   * *%    $    **    $    ** 

5

   **   **   * *%    $    **    $    ** 
                            
     **   * *%      $    ** 

Month of ** Event - Application of Additional Fee

 

Tier

   CMP Pressure   Monthly
MMCF
  Monthly
MMCF
(%)
    Applicable
Tariff

($/MCF)
    WA Fee
($/MCF)
 

1

   **   **   * *%    $    **    $    ** 

2

   **   **   * *%    $    **    $    ** 

3

   **   **   * *%    $    **    $    ** 

4

   **   **   * *%    $    **    $    ** 

5

   **   **   * *%    $    **    $    ** 
                            
     **   * *%      $    ** 

Note: Illustrative example only to show application of additional fee.

Step 1 - Calculate the volume operating in each tier each month.

Step 2 - Convert volumes into a percentage operating within each tier - MMCF %.

Step 3 - Occurrence of a “** Event”.

Step 4 - Compare the percentages (MMCF %) before the occurrence of a “** Event” with those after the event.

Step 5 - Calculate revenue impairment to gatherer by multiplying MMCF % by appropriate Fees in both months.

Step 6 - If revenue impairment is confirmed, the weighted average Fee will be adjusted to the Fee for the most recent Month preceding such ** Event in which a ** Event did not occur.

Step 7 - The difference in the weighted average Fee will be applied to each tier.

 

5


SCHEDULE 3**

BARNETT DELIVERY POINTS

 

CMO GGS Number

   CMO GGS    Meter
Code
   Meter Name    Counter Party    Counter Party
Meter  ID

[Barnett Delivery Points]

              

 

** One (1) page omitted pursuant to confidential treatment request


SCHEDULE 4**

BARNETT DEDICATED WELLS RECEIPT POINTS AND PRESSURES

 

CMO

Property

Number

   Pipeline    Well
Number
   Well Name    County    State    First Sales    Existing Receipt
Point Pressure
   Township    Range    Section    Survey    Abstract

[Barnett Dedicated Wells, Receipt Points and Pressures]

 

 

** 11 pages omitted pursuant to confidential treatment request

Page 1 of 1


SCHEDULE 4**

BARNETT DEDICATED WELLS, RECEIPT POINTS, AND PRESSURES

(EXCLUDED WELLS)

 

Excluded Wells

   County    State    Abstract    Survey

[Excluded Wells]

           

 

** One (1) page omitted pursuant to confidential treatment request


SCHEDULE 5**

BARNETT AMI

 

Barnett AMI Abstracts                                        

ABSTRACT SECT GRANTEE

   BLK    SURVEY    COUNTY    RRD    STATE    CLASS    TYPE    STCTY

[Barnett AMI Abstracts]

                       

 

** 72 pages omitted pursuant to confidential treatment request


Schedule 6: Barnett Maximum Daily Quantity

 

Barnett Gathering System

   Barnett Maximum Daily
Quantity (Mcf / D)

Barnett North GGS

   **

Barnett Central GGS

   **

Barnett South GGS

   **

DFW GGS

   **

Little Hoss GGS

   **

Mary’s Creek GGS

   **

Paloma GGS

   **

Peregrine Loop 2 and 4 GGS

   **

Peregrine Loop 3 GGS

   **

Peregrine Loop 5 GGS

   **

Peregrine Loop 6 GGS

   **

Peregrine Loop 7 GGS

   **

Tarrant West GGS

   **

Covington GGS

   **

Forsberg GGS

   **

Freedom 1 GGS

   **

Lewisville GGS

   **

(1) MAOP is maximum allowable operating pressure. Without limiting the other terms of this Agreement, Gatherer shall not be required to make any connection to any of these Barnett Gathering Systems if the delivery pressures at such would exceed the maximum allowable operating pressures for such Barnett Gathering System. Neither Gatherer nor Producers shall be required to compress any Producers Gas or MV Mitigation Gas at the wellhead in order to effectuate delivery.


Schedule 7: Barnett Annual Minimum Volume

(in MCF)

 

Minimum Volume Period

   Barnett Annual
Minimum Volume

2010

   82,218,281

2011

   88,271,623

2012

   91,640,829

2013

   95,412,959

2014

   99,074,771

2015

   102,898,824

2016

   105,516,014

2017

   107,619,120

2018

   108,535,293

H1 2019

   51,051,043


Schedule 8: Minimum Volume Commitment Example

 

($ thousands)

  7/09 - 12/09     2010     2011     2012     2013     2014     2015     2016     2017     2018     1/19 - 6/19  

Barnett Annual Gathered Volume (Mcf)

    *     *     *     *     *     *     *     *     *     *     *

Barnett Annual Minimum Volume (Mcf)

    *     397,671,878        401,234,650        416,549,223        433,695,266        450,339,869        467,721,928        479,618,248        489,177,817        493,342,239        232,050,194   
                                                                                       

Difference

    *     *     *     *     *     *     *     *     *     *     *

Illustrative Adjustments:

                     

A - Year 1 Deficit Volume Carried Forward

    * * A      * * A      * * A      * * A      * * A      * * A      * * A      * * A      * * A      * * A      * * A 

B - Annual Barnett Excess Volume

    * * B      * * B      * * B      * * B      * * B      * * B      * * B      * * B      * * B      * * B      * * B 

C - Barnett Delayed Connection Volume

    * * C      * * C      * * C      * * C      * * C      * * C      * * C      * * C      * * C      * * C      * * C 

D - Force Majeure Volume

    * * D      * * D      * * D      * * D      * * D      * * D      * * D      * * D      * * D      * * D      * * D 

E - Maintenance Suspension Volume

    * * E      * * E      * * E      * * E      * * E      * * E      * * E      * * E      * * E      * * E      * * E 
                                                                                       

Illustrative Adjusted Barnett Annual Minimum Volume (Mcf)

    *     *     *     *     *     *     *     *     *     *  

Barnett Fees ($ / Mcf)

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *

Illustrative Payments:(1)

                     

Monthly Invoiced Amount

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *

True Up Payment

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *
                                                                                       

Illustrative Total Payments (1)

  $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *   $ *

 

(1) Illustrative payments, which does not reflect total charges under the GGA, e.g., does not include electric and other charges.

Description of Illustrative Adjustments:

A - Assumes a **% volume shortfall relative to the Barnett Annual Minimum Volume Commitment in 2009.

B - Assumes Producers' Gas exceeds Barnett Annual Minimum Volume Commitment by **% in 2015.

C - Barnett Delayed Connection Volume; annual adjustments based on volume shift as per the Barnett Type Curve. Example illustratively assumes ** wells delayed for a period of ** in 2011 (** to **); see example volume adjustment for one well below.

D - Force Majeure Volume; annual adjustments based on volume shift as per the Barnett Type Curve under same methodology as Barnett Delayed Connection Volume.

E - Maintenance Suspension Volume; adjustments may result only in a decrease in Adjusted Barnett Annual Minimum Volume

Note: Upon any termination of Gatherer's agency designation or the O&M Terms under 12.14, the Adjusted Barnett Annual Minimum Volume would be adjusted pursuant to Section 4(d) of Exhibit A. Adjusted Barnett Annual Minimum Volume may be increased in the last year for any MVC Additional Volume Wells Amount under 5(b)(6).

Illustrative Barnett Delayed Connection Volume (1 well example)

 

     7/09 - 12/09     2010     2011     2012     2013     2014     2015     2016     2017     2018     1/19 - 6/19     Total  

Illustrative Volume Shift (Mcf):(1)

                        

Illustrative Volume - Target Completion Date (7/1/2011)

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

Illustrative Volume - Delayed Connection (10/1/2011)

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

Illustrative Impact on Adjusted Barnett Annual Minimum Volume

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

 

(1) Volume based on well production profile as per the Barnett Type Curve. Example illustratively assumes 1 well delayed from a target Completion Date of 7/1/2011 by ** to **.

Methodology For Volume Increases / Decreases

Methodology applied to any Barnett Delayed Connection Volume and Force Majeure Volume

(1) In the event of a Barnett Delayed Connection, Adjusted Barnett Annual Minimum Volume decreased during period of delay based on Barnett Type Curve. Adjustment based on Barnett Type Curve to include period from target Completion Date to end of Minimum Volume Period.

(2) Upon actual connection, Adjusted Barnett Annual Minimum Volume increased based on Barnett Type Curve. Adjustment based on Barnett Type Curve to include period from actual connection to end of Minimum Volume Period.

(3) In each year, net impact of (1) and (2) above is increase / decrease to Adjusted Barnett Annual Minimum Volume. At end of Minimum Volume Period, any remaining volume attributable to the Barnett Annual Minimum Volume over the Minimum Volume Period is accumulated in the final period of the Minimum Volume Period. In no event should total volume adjustments reduce the nominal Barnett Minimum Volume.

Note: The numbers in this example reflect the aggregate ownership of the Producers and the CHK Parties in the Barnett Dedicated Properties under this Agreement and the CHK Agreement.


Schedule 9**

Barnett Type Curve

 

Well Profile Calculation

Quarter

   Time    Data
Points
   CHK Curve    Lagged
MMcf/d
[Well Profile Calculation]            

 

** Four (4) pages omitted pursuant to confidential treatment request


SCHEDULE 10

ACQUIRED PROPERTIES

An undivided 25% interest in all Barnett Dedicated Properties (as such term is defined in the CHK Agreement in the form executed on January 25, 2010 without regard to any amendment thereto) owned by Chesapeake Exploration L.L.C. as of January 25, 2010.


Schedule 11**

Barnett Unconnected Wells

 

CEMI Well Name

   District    Well
Status
   CEMI Ready
to Flow Date
   COI
Ready
to
Flow
Date
   Days
Ahead
   Project Dependencies    Gatherer

[Barnett Unconnected Wells]

                    

 

** 86 pages omitted pursuant to confidential treatment request
EX-10.4 5 dex104.htm ADDITIONAL AGREEMENT Additional Agreement

Exhibit 10.4

Execution Version

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

ADDITIONAL AGREEMENT

THIS ADDITIONAL AGREEMENT (this “Agreement”), executed on January 25, 2010, but effective as of February 1, 2010 (the “Effective Date”), is by and among: (i) Chesapeake Midstream Partners, L.L.C., a Delaware limited liability company (“Gatherer”); (ii) Total Gas & Power North America, Inc., a Delaware corporation (“TGPNA”); (iii) Total E&P USA, Inc., a Delaware corporation (“TEPUSA” and together with TGPNA, the “Total Parties”), (iv) Chesapeake Energy Marketing, Inc., an Oklahoma corporation (“CEMI”); (v) Chesapeake Exploration L.L.C., an Oklahoma limited liability company (“CELLC”); (vi) Chesapeake Louisiana L.P., an Oklahoma limited partnership (“CLLP”); (vii) DDJET Limited LLP, a Texas limited liability partnership (“DDJET”); and (viii) Chesapeake Operating, Inc., an Oklahoma corporation (“COI” and together with CEMI, CELLC, CLLP and DDJET, the “CHK Parties”). Gatherer, the Total Parties and the CHK Parties are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals:

A. Gatherer owns and operates natural gas gathering systems and related facilities in Texas.

B. Gatherer and the CHK Parties entered into that certain Gas Gathering Agreement dated effective September 30, 2009 (as amended, the “CHK Agreement”).

C. On January 25, 2010 (the “Closing Date”), TEPUSA acquired certain oil and gas leases (or interests therein) and related assets in the Barnett AMI from CELLC and TGPNA agreed to buy from TEPUSA all of TEPUSA’s entitlement to Gas produced from such oil and gas leases (or interests therein) and related assets.

D. On the Closing Date, the Total Parties and Gatherer entered into that certain Gas Gathering Agreement dated effective February 1, 2010 (as amended, the “Total Agreement”).

 

Page 1


Execution Version

 

Agreements:

NOW, THEREFORE, for good and valuable consideration, Gatherer, the Total Parties and the CHK Parties agree as follows:

Article 1

DEFINITIONS

1.1 Defined Terms. The following capitalized terms used in this Agreement and the attached exhibits and schedules shall have the meanings set forth below:

Abandoned Interest” is defined in Section 2.4.

Adjusted Barnett Annual Minimum Volume” (a) as to the Total Parties has the meaning provided in the Total Agreement and (b) as to the CHK Parties has the meaning provided in the CHK Agreement.

Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person, whether by contract, voting power, or otherwise. For purposes of this Agreement, Gatherer shall not be considered an Affiliate of the CHK Parties or any of their Affiliates and the CHK Parties and their Affiliates (other than Gatherer) shall not be considered an Affiliate of Gatherer.

Aggregate MV Mitigation Gas” is defined in Section 2.8.

Agreement” is defined in the preamble.

Allocable Share” means, with respect to any Abandoned Interest and any Producer Group, the proportion that the quantity of Gas owned or controlled by such Producer Group transported through such Abandoned Interest in the six (6) Month period preceding the applicable Abandonment Election bears to the total quantity of Gas transported though such Abandoned Interest during the same period by both Producer Groups. If no Gas or immaterial quantities of Gas were transported through such Abandoned Interest during such period, the Allocable Share of the CHK Parties’ Producer Group shall be **% and the Allocable Share of Total Parties’ Producer Group shall be **%.

Barnett AMI” has the meaning provided in the CHK Agreement.

Barnett Dedicated Properties” (a) as to the Total Parties has the meaning provided in the Total Gathering Agreement and (b) as the CHK Parties has the meaning provided in the CHK Agreement.

Barnett Delivery Points” (a) as to the Total Parties has the meaning provided in the Total Gathering Agreement and (b) as the CHK Parties has the meaning provided in the CHK Agreement.

Barnett Fees” means the CHK Barnett Fees and the Total Barnett Fees.

 

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Barnett Gathering System” (a) as to the Total Parties has the meaning provided in the Total Gathering Agreement and (b) as the CHK Parties has the meaning provided in the CHK Agreement.

Barnett Gathering Systems” means, collectively, all of the Barnett Gathering Systems.

Barnett Receipt Points” (a) as to the Total Parties has the meaning provided in the Total Gathering Agreement and (b) as the CHK Parties has the meaning provided in the CHK Agreement.

Business Day” has the meaning provided in the CHK Agreement.

Capital Projects” has the meaning provided in the CHK Agreement.

CHK Agreement” is defined in the recitals.

CHK Barnett Fees” means the “Barnett Fees” under the CHK Agreement.

Closing Date” is defined in the Recitals.

CMP AMI Transaction Confirmation” means that certain CMP AMI Transaction Confirmation- Sale and Purchase of Gas from the Barnett Area- CMP Delivery Points by and between TGPNA and CEMI dated January 25, 2010, but effective as of February 1, 2010, which transaction confirmation is subject to the terms and conditions of that certain Base Contract for Sale and Purchase of Natural Gas by and between such parties, dated May 1, 2004.

Control” (and the correlative terms “controlling,” “controlled by,” and “under common control with”) means as to any entity the possession, directly or indirectly, through one or more intermediaries, by any Person or group (within the meaning of Section 13(d)(3) under the Securities Exchange Act of 1934, as amended) of the power or authority, through ownership of voting securities, by contract, or otherwise, to control or direct the management and policies of the entity.

Day” means the 24-hour period beginning at 9:00 a.m., CPT, on one calendar day and ending at 9:00 a.m., CPT, on the following calendar day.

DFW Gathering System” has the meaning provided in the CHK Agreement.

DFW PDP Volumes” has the meaning provided in the CHK Agreement.

Economic Value” (a) as to the Total Parties has the meaning provided in the Total Agreement and (b) as to the CHK Parties has the meaning provided in the CHK Agreement.

 

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Effective Date” is defined in the preamble.

First Barnett Redetermination” means the redetermination that occurs pursuant to the First Barnett Redetermination Notice.

First Barnett Redetermination Notice” has the meaning provided in the CHK Agreement.

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

Gatherer” is defined in the preamble.

Gathering Agreements” means, collectively, the CHK Agreement and the Total Agreement, and “Gathering Agreement” means either of them.

Guarantor Financial Statements” is defined in Section 2.10(g).

Industry Expert” has the meaning provided in the CHK Agreement.

Maximum Daily Quantity” (a) as to the Total Parties has the meaning provided in the Total Agreement and (b) as to the CHK Parties has the meaning provided in the CHK Agreement.

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.

MV Mitigation Gas” (a) as to the Total Parties has the meaning provided in the Total Agreement and (b) as to the CHK Parties has the meaning provided in the CHK Agreement.

Notice” is defined in Section 3.1.

**” means ** and its successors and assigns under the ** Agreement.

** Agreement” means the Gas Gathering Agreement dated September 1, 2007 among ** and CEMI, as supplemented by the Assignment Agreement entered into by **, CEMI and Total Parties and dated effective as of the Closing Date.

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.

 

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Priority 1 Service” means the highest level of service for each of gathering, compression, dehydration and treating on a Barnett Gathering System.

Producers’ Gas” (a) as to the Total Parties has the meaning provided in the Total Agreement and (b) as to the CHK Parties has the meaning provided in the CHK Agreement.

Producer Group” means either (a) collectively, the Total Parties; or (b) collectively, the CHK Parties.

Redetermination” means the First Barnett Redetermination, or the Second Barnett Redetermination, as applicable.

Second Barnett Redetermination” means the redetermination that occurs pursuant to Second First Barnett Redetermination Notice.

Second Barnett Redetermination Notice” has the meaning provided in the CHK Agreement.

TEPUSA” is defined in the recitals.

THUSA” means Total Holdings USA Inc., a Delaware corporation.

THUSA Guaranty” means a guaranty, duly executed by THUSA, in the form attached hereto as Exhibit “A”.

Total Agreement” is defined in the recitals.

Total Agreement Effective Date” means the effective date of the Total Agreement.

Total Barnett Fees” means the “Barnett Fees” under the Total Agreement.

1.2 Attachments. Each exhibit, schedule, or other attachment to this Agreement is a part of this Agreement and incorporated herein for all purposes. When the term Agreement is used herein, it means this Agreement and all of the exhibits, schedules, and other attachments hereto. A list of the exhibits, schedules, and other attachments to this Agreement is on the signature page.

Article 2

CERTAIN ISSUES IN THE GATHERING AGREEMENTS

2.1 Equal Priority as to Capacity. The Parties agree that the Economic Value of the Total Agreement shall be deemed to be equal to the Economic Value of the CHK Agreement. In each situation where (a) capacity on a Barnett Gathering System is curtailed or reduced, or capacity is insufficient for the needs of all shippers desiring to use such capacity, and (b) some curtailment of capacity is required with respect to the

 

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holders of Priority 1 Service, the Parties agree that the total capacity available to both Producer Groups on such Barnett Gathering System shall be allocated between the Producer Groups based on the percentage derived by dividing the volume nominated by each Producer Group by the total volume of Gas nominated by both Producer Groups, in each case as such nominations exist as of the first of the relevant Month or, if applicable, such other Day as such nominations are required to be made.

2.2 Redetermination of Barnett Fees.

(a) The Parties acknowledge and agree that any redetermination of the CHK Barnett Fees and the Total Barnett Fees (as provided in Exhibit A, Section 3 of each of the Gathering Agreements) are interrelated, and shall be conducted together in accordance with Exhibit A, Section 3 of the CHK Agreement and this Section 2.2. Any adjustment to the Barnett Fees under either Gathering Agreement pursuant to such redetermination shall result in an identical adjustment to the Barnett Fees in the other Gathering Agreement.

(b) Subject to any agreement among the Producer Groups to the contrary, either Producer Group may provide such Notice to Gatherer (in which event a copy of such Notice shall be provided to the other Producer Group simultaneous with the giving of such Notice to Gatherer). If Gatherer gives the First Barnett Redetermination Notice or Second Barnett Redetermination Notice under the CHK Agreement, then Gatherer shall provide a copy of such notice to the Total Parties simultaneous with the giving of such Notice to the CHK Parties. The giving of Notice as contemplated by this Section 2.2(b) shall constitute the giving of the First Barnett Redetermination Notice or Second Barnett Redetermination Notice, as applicable, provided that such Notice is given within the six month notice period for the First Barnett Redetermination Notice or two year notice period for the Second Barnett Redetermination Notice, as applicable, set forth in the CHK Agreement. The Producer Groups shall cooperate in good faith in any Barnett Fee redetermination negotiations with Gatherer.

(c) If, within 30 Days after a Party’s receipt of a First Barnett Redetermination Notice or Second Barnett Redetermination Notice, as applicable, the Parties have not entered into amendments to the Gathering Agreements reflecting the Parties’ agreements regarding adjustments to the Barnett Fees, any Party may provide Notice to the others of its request to have an Industry Expert determine adjustments to all or any portion of the Barnett Fees, and the provisions of Exhibit A, Section 3(d) of the CHK Agreement shall apply.

(d) The Parties acknowledge and agree that each such redetermination shall be made as if the Barnett Dedicated Properties under the Total Agreement were covered by and subject to the CHK Agreement during all periods included in or relevant to such redetermination.

(e) The Parties agree that no amendment of the provisions in Exhibit A, Section 3 of either Gathering Agreement shall occur without the prior written consent of all Parties, which consent may be withheld by any Party for any reason in the sole discretion of such Party.

 

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(f) Each Redetermination of the Barnett Fees pursuant to Exhibit A, Section 3 of the CHK Agreement shall be made without taking into account any increase or decrease in revenue realized by Gatherer due to any amendment of any of the Barnett Fees that occurs under one of the Gathering Agreements without a corresponding amendment to the same Barnett Fee under the other Gathering Agreement.

2.3 Release of Units, Pads and Wells. If the release of any spacing or drilling unit is permitted under Exhibit A, Section 5(b)(6), Exhibit A, Section 6(b)(1) or Exhibit A, Section 6(c)(1)(C) of either Gathering Agreement and such spacing or drilling unit includes any of the Barnett Dedicated Properties covered by the CHK Agreement and any of the Barnett Dedicated Properties covered by the Total Agreement, then, at the option of the Producer Group under the other Gathering Agreement, a corresponding release will occur under the other Gathering Agreement with respect to the Barnett Dedicated Properties covered by such other Gathering Agreement and included in such spacing or drilling unit.

2.4 Abandonment of Barnett Gathering Systems. If a Producer Group elects by written notice (any such notice, an “Abandonment Election”) to take assignment of Gatherer’s right, title and interest in and to:

(a) a pad or other facilities and related permits, authorizations and rights of way (in each case, “Abandoned Interests”) pursuant to Exhibit A, Section 6(e) of the applicable Gathering Agreement; or

(b) any interest in any Barnett Gathering System pursuant to Exhibit A, Section 12 of the applicable Gathering Agreement,

(in either case, an “Abandoned Interest”), such Producer Group (the “Initiating Producer Group”) shall provide Notice to the other Producer Group (the “Responding Producer Group”) simultaneous to so notifying Gatherer. The Responding Producer Group shall have the right to elect to take its Allocable Share of the Abandoned Interests, which right may be exercised by Notice to the Initiating Producer Group and Gatherer, in which case Gatherer shall assign each Producer Group (or its designee) its Allocable Share of the Abandoned Interest. Failure of a Responding Producer Group to provide Notice to the Initiating Producer Group and Gatherer of its election to take its Allocable Share of the Abandoned Interests in writing within 30 Days of its receipt of an Abandonment Election shall be deemed an election by such Responding Producer Group not to take its Allocable Share of the Abandoned Interests, in which case Gatherer shall assign the entirety of the Abandoned Interests to the Initiating Party in accordance with the terms of the applicable Gathering Agreement.

 

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2.5 Capital Project Expenditures.

(a) The Total Parties and CHK Parties agree that the amounts allocated for expenditure for Capital Projects pursuant to Exhibit A, Section 13 of the CHK Agreement shall not be used for Capital Projects primarily serving wells acquired by the CHK Parties or any of their Affiliates outside of the Barnett AMI.

(b) The CHK Parties hereby acknowledge and agree that if the CHK Parties approve Gatherer’s implementation of a Capital Project, the payment of any related incremental costs and (if applicable) the method by which Gatherer shall recover any related Excess Costs pursuant to Section 13 of Exhibit A to the CHK Agreement (collectively, “Chesapeake Approved Capital Project Matters”), the CHK Parties shall provide Notice to the Total Parties of such approval and the Total Parties shall have the right to approve or disapprove of such CHK Approved Capital Project Matters, such approval not to be unreasonably withheld. Failure of the Total Parties to provide Notice to the CHK Parties and Gatherer of the Total Parties’ approval or disapproval of the CHK Approved Capital Project Matters within thirty (30) Days following receipt of Notice from the CHK Parties covering such CHK Approved Capital Project Matters shall be deemed the Total Parties’ approval of such CHK Approved Capital Project Matters. If the Total Parties provide Notice of their disapproval, Gatherer shall not implement the applicable Chesapeake Approved Capital Project Matters.

2.6 ** Agreement. Gatherer acknowledges that the Producer Groups may work with ** in an effort to have ** and the Total Parties enter into a separate agreement containing the same terms and provisions as are in the ** Agreement, but limited to the Total Parties and Total’s Gas. If such separate agreement is entered into by the Total Parties and ** and a copy of the same is provided to Gatherer and the CHK Parties, then such separate agreement will become and constitute the “** Agreement” for purposes of the Total Agreement.

2.7 DFW Gathering System. Gatherer agrees to continue to operate the DFW Gathering System in accordance with the terms and conditions of Section 12.14 of the CHK Agreement. If Gatherer’s right to operate the DFW Gathering System is terminated pursuant to Section 12.14 of the CHK Agreement and the CHK Parties make the termination payment required to be made in connection with such termination, then (a) 25% of DFW PDP Volumes remaining to be delivered as of the date of such termination (as determined pursuant to the CHK Agreement) shall be included in the determination of the Adjusted Barnett Annual Minimum Volume under Exhibit A, Section 4(d) of the Total Agreement to decrease the Barnett Annual Minimum Volume in the Year such DFW PDP Volumes would have been delivered and (b) 75% of DFW PDP Volumes remaining to be delivered as of the date of such termination (as determined pursuant to the CHK Agreement) shall be included in the determination of the Adjusted Barnett Annual Minimum Volume under Exhibit A, Section 4(d) of the CHK Agreement in the Year such DFW PDP Volumes would have been delivered. For clarification purposes, the CHK Parties (and not the Total Parties) shall continue to be liable for the payment in its entirety of the above referenced termination payment and the performance of the indemnity and other obligations under such Section 12.14 of the CHK Agreement.

 

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2.8 MV Mitigation Gas. For each Year during the Minimum Volume Period, the aggregate volume of MV Mitigation Gas (in Mcf’s) delivered under both Gathering Agreements during such Year shall be used to determine the Annual Barnett Gathered Volumes under each Gathering Agreement as follows (as to each Year, the “Aggregate MV Mitigation Gas”). For purposes of the definition of “Annual Barnett Gathered Volumes” in the CHK Agreement, **% of the Aggregate MV Mitigation Gas for the applicable Year shall be used in clause (ii) of such definition in lieu of the volume of MV Mitigation Gas delivered under the CHK Agreement during such Year. For purposes of the definition of “Annual Barnett Gathered Volumes” in the Total Agreement, **% of the Aggregate MV Mitigation Gas for the applicable Year shall be used in clause (ii) of such definition in lieu of the volume of MV Mitigation Gas delivered under the Total Agreement during such Year. This allocation of MV Mitigation Gas volumes between the Producer Groups shall not affect either Producer Group’s obligation to pay the Barnett Fees for MV Mitigation Gas delivered under the applicable Gathering Agreement.

2.9 Certain Payments. The Total Parties shall have no obligation to make any payments in respect of any amounts due and payable as of the Effective Date pursuant to Section 10.2 of the Total Agreement, it being understood that all such amounts have been paid or will be payable by the CHK Parties under the CHK Agreement.

2.10 Certain Guaranty Issues.

(a) The Total Parties and Gatherer currently contemplate that the obligations of the Total Parties under the Total Agreement will be guaranteed by Total Holdings USA Inc. (“THUSA”) pursuant to a guarantee in the form attached hereto as Exhibit A (the “THUSA Guaranty”, and such transaction structure, the “THUSA Supported Structure”).

(b) Gatherer may need to obtain a waiver or consent from the lenders under its existing credit facility for the THUSA Supported Structure (the “Lender Consent”). In connection therewith, Gatherer shall use commercially reasonable efforts to obtain the Lender Consent as soon as reasonably practicable. Gatherer shall notify the Total Parties when the Lender’s Consent is granted (assuming it is so granted). Within two (2) Business Days following receipt of such notice, the Total Parties shall deliver to Gatherer the THUSA Guaranty fully executed by THUSA.

 

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(c) If the Lender Consent is not obtained by February 8, 2010, then the Total Parties shall use commercially reasonable efforts to deliver to Gatherer a guaranty in the form attached as Exhibit A (revised to reflect the actual date of execution and the name, jurisdiction of formation, contact information and signatory of the relevant guarantor) duly executed by a Person that has a senior, unsecured credit rating of “**” (or the then equivalent) from Standard & Poor’s Rating Service and of “**” (or the then equivalent) by the rating service of Moody’s Investors Services, Inc. or an equivalent rating from any other NRSRO. In the event Total Parties delivers to Gatherer a guaranty pursuant to this Section 2.10(c), the following language shall be deemed to be inserted into the Total Agreement as Section 12.16 thereof:

12.16 Limitation of TEPUSA Liability. Notwithstanding anything to the contrary herein: (a) Gatherer acknowledges that TEPUSA is party to this Agreement for the sole purposes of: (i) dedicating the Barnett Dedicated Properties to the performance of this Agreement and agreeing to perform and be bound by the obligations set forth in Section 12.11, Section 12.12 and Exhibit A, Section 1 (subject to any reservations of rights of Producers set forth therein); and (ii) performing those responsibilities of or with respect to Operator required hereunder where TEPUSA or an Affiliate of TEPUSA so serves as Operator, and taking those actions with respect to the Operator where the Operator is not wholly-owned by Producers’ Parent; and (b) TEPUSA shall never have any responsibility hereunder for the payment of any amounts required to be paid by Producers hereunder, including payments in respect of any Barnett Fees, liquidated damages in respect of deficit volumes, costs in respect of any connections to the Barnett Gathering System, or any other amounts.

(d) If the Total Parties deliver a duly executed Guaranty to Gatherer pursuant to clause (b) or (c) above prior to the termination of the Total Agreement pursuant to clause (f) below, the date such delivery occurs is herein referred to as the “Guaranty Delivery Date” and the Person providing such Guaranty is herein referred to as the “Guarantor.”

(e) If the Guaranty Delivery Date has not occurred by February 1, 2010, then the following provisions shall apply:

(i) If the Guaranty Delivery Date does occur, then in lieu of the February 1, 2010 Effective Date stated in each Gathering Agreement, the Effective Date of each Gathering Agreement shall be the first day of the first Month that follows the Guaranty Delivery Date (the “New Effective Date”).

(ii) Notwithstanding anything to the contrary in the CMP AMI Transaction Confirmation, during the period commencing on February 1, 2010 and ending on the New Effective Date (the “Subject Period”), the Delivery Point under the CMP AMI Transaction Confirmation shall be deemed to be moved from the Barnett Delivery Points to the Barnett Receipt Points.

(iii) During the Subject Period, all Gas that would have otherwise constituted Producers’ Gas under the Total Agreement if such agreement was in effect will be gathered under and in accordance with the terms of the CHK Agreement and the Barnett Maximum Daily Quantity for Year 2010 under the CHK Agreement will be increased by an amount equal to the volume stated for Year 2010 on Schedule 6 to the Total Agreement.

 

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(iv) Schedule A7 to the CHK Agreement will be deemed amended to increase the volume stated for 2010 by an amount (stated in Mcf) equal to the product of ** Mcf/Day multiplied by the number of Days in the Subject Period.

(v) Schedule 7 to the Total Agreement will be deemed amended to decrease the volume stated for 2010 by the amount calculated pursuant to clause (iv) preceding.

(vi) The provisions of Sections 2.1 through 2.9 of this Agreement shall not apply during the Subject Period.

(f) Unless otherwise agreed by the Total Parties and Gatherer, if the Guaranty Delivery Date has not occurred by May 1, 2010, Gatherer shall have the right and option to terminate the Total Agreement by notice to the Total Parties (with a copy of such notice to be given to the CHK Producer Group). If a termination occurs under this clause (f), then the following provisions shall apply:

(i) The Effective Date for the CHK Agreement shall remain February 1, 2010.

(ii) All Gas that would have otherwise constituted Producers’ Gas under the Total Agreement if such agreement was in effect will be gathered under and in accordance with the terms of the CHK Agreement and the Barnett Maximum Daily Quantity under the CHK Agreement for each annual period or portion thereof shall be increased by an amount equal to volume stated for such annual period or portion thereof on Schedule 6 to the Total Agreement (and in lieu of the deemed increase described in clause (e)(iii) above).

(iii) Notwithstanding anything to the contrary in the CMP AMI Transaction Confirmation, from and after such termination and continuing for the term of the CHK Agreement (or such other period as may be agreed to by TGNPA and CEMI), the Delivery Point under the CMP AMI Transaction Confirmation shall be deemed to be moved from the Barnett Delivery Points to the Barnett Receipt Points.

(iv) Exhibit A7 to the CHK Agreement will be deemed amended to increase the volume stated for each annual period or portion thereof by an amount (stated in Mcf) equal to the volume stated for such annual period or portion thereof on Schedule 7 to the Total Agreement (and in lieu of the deemed increase described in clause (e)(iv) above).

(v) The Total Parties and Gatherer shall execute the form of Dedicated Properties Owner Acknowledgement Agreement attached as Exhibit F to the CHK Agreement and counterparts of such agreement shall be recorded in the applicable public records of the counties in which the Barnett Dedicated Properties are located.

 

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(vi) TGNPA and CEMI shall negotiate in good faith regarding arrangements whereby CEMI would resell to TGNPA all of the Gas purchased from TGPNA under the CMP AMI Transaction Confirmation.

(vii) This Agreement shall be of no further force or effect.

(g) If the Total Parties deliver a duly executed Guaranty to Gatherer pursuant to clause (b) or (c) above, the Total Parties shall cause the Guarantor to deliver to Gatherer (i) audited consolidated financial statements of Guarantor and its consolidated subsidiaries not later than the close of business Oklahoma City time on the 60th calendar day after the end of each fiscal year of Guarantor during the term of the Guaranty and (ii) unaudited interim consolidated financial statements of Guarantor and its consolidated subsidiaries not later than the close of business Oklahoma City time on the 15th calendar day after the date upon which any such interim unaudited financial statements are produced by or on behalf of Guarantor (the financial statements referred to in clauses (i) and (ii) of this sentence are referred to as the “Guarantor Financial Statements”). Gatherer agrees that Guarantor shall not be obligated to deliver to Gatherer any Guarantor Financial Statements during the period, if any, that Guarantor files its consolidated financial statements with the US Securities and Exchange Commission in accordance with the requirements of the Securities Exchange Act of 1934. Gatherer agrees to treat any Guarantor Financial Statements furnished in accordance with this clause (g) as confidential, provided that Gatherer may furnish a copy of any such Guarantor Financial Statements to any actual and potential lenders or equity investors if such Person undertakes and agrees to maintain the confidentiality of any such Guarantor Financial Statements furnished to such Person.

Article 3

NOTICES

3.1 Notice. All notices and other communications made under this Agreement (“Notice”) shall be in writing and sent to the addresses shown in Schedule 2.

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

3.3 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 4

OTHER PROVISIONS

4.1 Governing 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 Harris County, Texas over any dispute or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each Party hereby 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. 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.

4.2 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.

4.3 Specific Performance. The Parties acknowledge and agree (a) that each Party would be irreparably harmed by a breach by the other Party of any of their obligations under this Agreement and (b) that there would be no adequate remedy at law or damages to compensate the non-breaching Party for any such breach. The Parties agree that the non-breaching Party shall be entitled to injunctive relief requiring specific performance by the breaching Party of its obligations under this Agreement, and the Parties hereby consent and agree to the entry of such injunctive relief.

4.4 Representations. Each Party represents to the other Party during the term hereof as follows: (a) 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, (b) 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, (c) 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, (d) 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 (e) there are no bankruptcy, insolvency, reorganization, receivership or other arrangement proceedings pending or being contemplated by it. The Parties jointly acknowledge and agree that no Party had an unfair advantage over the other during the negotiation of this Agreement.

 

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4.5 Enforceability. 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.

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

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

(a) no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Agreement;

(b) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(c) the word “includes” and its syntactical variants mean “includes, but is not limited to” and corresponding syntactical variant expressions;

(d) 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;

(e) unless otherwise specified, the plural shall be deemed to include the singular, and vice versa; and

(f) each gender shall be deemed to include the other genders.

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

4.9 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.

4.10 Confidentiality. For purposes of the confidentiality obligations set forth in Section 12.11 of each Gathering Agreement, (a) the term “Agreement” as used in such Sections shall be deemed to include the Gathering Agreement in which such Section is located and this Agreement and (b) the disclosure of this Agreement and its terms by any Party to another Party to this Agreement is permitted and consented to by all Parties.

4.11 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each Party.

4.12 Definitions. For purposes of this Agreement: (a) each definition in the CHK Agreement incorporated by reference herein shall have the same meaning provided in the CHK Agreement in the form originally executed on January 25, 2010 without

 

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regard to any amendment thereof by the parties to the CHK Agreement or termination of the CHK Agreement; and (b) each definition in the Total Agreement incorporated by reference herein shall have the same meaning provided in the Total Agreement in the form originally executed on January 25, 2010 without regard to any amendment thereof by the parties to the Total Agreement or termination of the Total Agreement.

4.13 Assignment. If Gatherer or either Producer Group assigns all of its rights and interests under the applicable Gathering Agreement in accordance with Section 9.1 of such Gathering Agreement, then such assignor shall also assign all of its rights and interests under this Agreement to the assignee and shall cause such assignee to execute an instrument reasonably satisfactory to the other Parties wherein such assignee acknowledges and agrees that it has become a party to and is bound to this Agreement. Except as provided in the preceding sentence, no Party may assign such Party’s rights or delegate such Party’s duties under this Agreement without the express written consent of the other Parties.

4.14 No Joint Liability.

(a) (i) The entry into this Agreement by the Total Parties does not make any of the Total Parties a party to or third party beneficiary under the CHK Agreement and (ii) the Total Parties shall have no rights or obligations under the CHK Agreement; provided, this clause (a) shall not limit the rights and obligations of the Parties under this Agreement.

(b) (i) The entry into this Agreement by the CHK Parties does not make any of the CHK Parties a party to or third party beneficiary under the Total Agreement and (ii) the CHK Parties shall have no rights or obligations under the Total Agreement; provided, this clause (b) shall not limit the rights and obligations of the Parties under this Agreement.

(c) (i) The Total Parties shall have no liability or obligation to Gatherer for any failure of the CHK Parties to comply with any of the CHK Parties’ obligations under this Agreement. The CHK Parties shall have no liability or obligation to Gatherer for any failure of the Total Parties to comply with any of the Total Parties’ obligations under this Agreement. Neither the Total Parties nor the CHK Parties shall have any liability or obligation to the other for the failure of Gatherer to comply with any of Gatherer’s obligations under this Agreement. Gatherer shall have no liability or obligation to the Total Parties or the CHK Parties for the failure of the Total Parties or the CHK Parties (as applicable) to comply with any of their obligations under this Agreement.

4.15 Waiver of Damages. A PARTY’S LIABILITY UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY OR ITS AFFILIATES 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

 

Page 15


Execution Version

 

OR OTHERWISE, ALL OF THE SAME BEING HEREBY EXPRESSLY WAIVED AND NEGATED. 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 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.

4.16 Certain Conflicts. This Agreement and the Gathering Agreements shall be read together to avoid inconsistent interpretations, but in the event of a conflict between this Agreement and either of the Gathering Agreements, this Agreement shall control.

[signature pages follow]

 

Page 16


Execution Version

 

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

 

CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.
By:  

/s/ J. Mike Stice

Name:  

J. Mike Stice

Title:  

Chief Executive Officer

TOTAL GAS & POWER NORTH AMERICA, INC.
By:  

/s/ Laurent Vivier

Name:  

Laurent Vivier

Title:  

Vice President, Trading

TOTAL E&P USA, INC.
By:  

/s/ Eric Bonnin

Name:  

Eric Bonnin

Title:  

Vice President, Business Development & Strategy

CHESAPEAKE ENERGY MARKETING, INC.
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:  

President

CHESAPEAKE EXPLORATION, L.L.C.
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:  

Sr. Vice President—Marketing


Execution Version

 

CHESAPEAKE LOUISIANA, L.P.
By:   CHESAPEAKE OPERATING, INC.
      its General Partner
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:  

Sr. Vice President—Marketing

DDJET LIMITED LLP
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:  

Sr. Vice President—Marketing, Chesapeake Exploration, L.L.C., its General Partner

CHESAPEAKE OPERATING, INC.
By:  

/s/ James C. Johnson

Name:  

James C. Johnson

Title:  

Sr. Vice President—Marketing

Schedule 1 – Notice Addresses

Exhibit “A” – Form of THUSA Guaranty


Execution Version

 

SCHEDULE 1

NOTICES

If to Chesapeake Midstream Partners, L.L.C., to:

 

Chesapeake Midstream Partners, L.L.C.
777 NW Grand Boulevard
Oklahoma City, Oklahoma 73118
Attn:   J. Mike Stice
Fax:   (405) 849-6134

 

With a copy to:
Global Infrastructure Management, LLC
12 East 49th Street
38th Floor
New York, New York 10017
Attn:   Salim Samaha
Fax:   (646) 282-1599

If to Chesapeake Energy Marketing, Inc., Chesapeake Exploration, L.L.C., Chesapeake Louisana L.P. or DD JET, L.L.C., to:

 

Chesapeake Energy Marketing, Inc.
6100 North Western Avenue
Oklahoma City, Oklahoma 73118
Attention:   James C. Johnson
Telecopy:   (405) 849-9163
and  
Attention:   Mark C. Edge
Telecopy:   (405) 849-9239

If to Total Gas & Power North America, Inc. or Total E&P USA, Inc., to:

 

Total Gas & Power North America, Inc.
1201 Louisiana Street, Suite 1600
Houston, Texas 77002
Attn:   Bruce Henderson, President & General Manager
Fax:   (713) 647-4030

with a copy to:

 

Total E&P USA, Inc.
1201 Louisiana Street, Suite 1600
Houston, Texas 77002
Attn:   Daniel Jouhet, Vice President- Finance, Marketing and IT
Fax:   (713) 647-3646

 

Schedule 1


EXHIBIT A

FORM OF GUARANTY

[SEE THE FOLLOWING PAGES]


 

GUARANTY

made by

TOTAL HOLDINGS USA INC

in favor of

CHESAPEAKE MIDSTREAM PARTNERS, LLC

Dated as of January     , 2010

 

 


TABLE OF CONTENTS

 

ARTICLE 1. DEFINITIONS    2
    Section 1.01   Definitions    2
ARTICLE 2. THE GUARANTY    3
    Section 2.01   The Guarantee    3
    Section 2.02   No Set-Off    3
    Section 2.03   Subrogation    3
    Section 2.04   Obligations Unconditional    3
ARTICLE 3. REPRESENTATIONS    5
    Section 3.01   Representations and Warranties    5
ARTICLE 4. MISCELLANEOUS    5
    Section 4.01   No Waiver    5
    Section 4.02   Notices, Etc.    6
    Section 4.03   Amendments. Etc.    6
    Section 4.04   Benefit, Successors and Assigns    6
    Section 4.05   Captions    6
    Section 4.06   Counterparts    6
    Section 4.07   Severability    6
    Section 4.08   Expenses, Etc.    6
    Section 4.09   Agreements Superseded; Integrated Transactions    7
    Section 4.10   Governing Law, Jurisdiction and Venue    7
    Section 4.11   Consent to Jurisdiction and Service of Process; Appointment of Agent for Service of Process    7
    Section 4.12   Waiver of Jury Trial    8
    Section 4.13   Termination    8

 

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GUARANTY

This Guaranty, dated as of January     , 2010 but effective as of February 1, 2010 (as amended, supplemented or otherwise modified from time to time, this “Guaranty”), is made and entered into by TOTAL HOLDINGS USA INC., a                      corporation (“Guarantor”), in favor of CHESAPEAKE MIDSTREAM PARTNERS, L.L.C., a Delaware limited liability company (the “JV” or the “Beneficiaryand its successor(s) and permitted assigns under the Transaction Documents (hereinafter defined). Capitalized terms used in this Guaranty, but not defined herein, shall have the meanings given to such terms in the Total Gathering Agreement (hereafter defined).

RECITALS

A. Gatherer owns and operates natural gas gathering systems and related facilities in Texas.

B. Total E&P USA, Inc., a Delaware corporation (“TEPUSA”), has acquired the oil, gas and/or mineral leases (or interests therein) and other interests and properties described in Schedule 10 of the Total Gathering Agreement (defined below; such leases and other interests and properties, the “Acquired Properties). TEPUSA has agreed to sell to Total Gas & Power North America, Inc., a Delaware corporation (“TGPNA” and together with TEPUSA, the “Producers”), and TGPNA has agreed to purchase, all of TEPUSA’s entitlement to natural gas produced from the Acquired Properties.

C. Concurrently with the closing of the acquisition by TEPUSA of the Acquired Properties, on January     , 2010, the JV and Producers executed and delivered the Barnett Gas Gathering Agreement, effective as of February 1, 2010 (the “Total Gathering Agreement”), pursuant to which Producers agreed to deliver natural gas produced from the Acquired Properties for gathering, compression, dehydration, treating, and processing, as applicable, on Gatherer’s gathering systems, and Gatherer agreed to provide gathering, compression, dehydration, treating and processing services, as applicable, for such natural gas, in each case on the terms and subject to the conditions in the Total Gathering Agreement and the Additional Agreement (defined below) .

D. Concurrently with the execution and delivery of the Total Gathering Agreement, the other Covered Agreements (as defined below) were executed and delivered by the parties thereto.

E. Guarantor has agreed with the JV to execute and deliver this Guaranty to the Beneficiary to guarantee, as herein provided, the obligations of the Producers (the “Total Obligors”) under the Total Gathering Agreement and the Additional Agreement, dated as of January     , 2010 but effective as of February 1, 2010 (the “Additional Agreement”), by and among the JV, Producers, Chesapeake Energy Marketing, Inc., Chesapeake Exploration L.L.C., Chesapeake Louisiana L.P., Chesapeake Operating, Inc. and DDJET Limited LLP (collectively, the “Covered Agreements”).

 

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F. Guarantor is familiar with the Covered Agreements and acknowledges that it will benefit if the transactions provided for in the Covered Agreements are consummated.

G. This Guaranty is being executed and delivered by Guarantor and Beneficiary contemporaneous with, and as a condition precedent to, the execution, delivery and performance of the Covered Agreements, and Guarantor and Beneficiary intend that this Guaranty constitutes part of a single, integrated transaction being effected in accordance with the terms of the Covered Agreements.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:

ARTICLE 1.

DEFINITIONS

Section 1.01 Definitions “Acquired Properties” is defined in Recital B hereof.

“Additional Agreement” is defined in Recital E hereof.

“Bankruptcy Event” shall be deemed to occur with respect to any Person upon the occurrence of one or more of the following events: (a) such Person (i) admits in writing its inability to pay its debts as they become due, (ii) files, or consents or acquiesces by answer or otherwise to the filing against it of a petition for relief or reorganization or rearrangement, readjustment or similar relief or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, dissolution, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as bankrupt or as insolvent or to be liquidated, (vi) gives notice to any Governmental Authority of insolvency or pending insolvency, or (vii) takes corporate action for the purpose of any of the foregoing; or (b) a court of Governmental Authority of competent jurisdiction enters an order appointing, without consent by such Person, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of such Person, or a petition or involuntary case with respect to any of the foregoing shall be filed or commenced against such Person.

Beneficiary” is defined in the preamble hereof.

Covered Agreements is defined in Recital E hereof.

Guaranteed Obligations is defined in Section 2.01 hereof.

Guarantor is defined in the preamble hereof.

 

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Guaranty is defined in the preamble hereof.

“Producers” is defined in Recital B hereof.

“TEPUSA” is defined in Recital B hereof.

Termination Date means the first date on which all of Total Obligors’ obligations under the Covered Agreements shall have been fully performed or otherwise extinguished.

“TGPNA” is defined in Recital B hereof.

“Total Gathering Agreement” is defined in Recital C hereof.

“Total Obligors” is defined in Recital E hereof.

“Transaction Documents” means this Guaranty and the Covered Agreements.

ARTICLE 2.

THE GUARANTY

Section 2.01 The Guarantee Subject to the provisions of this Guaranty, Guarantor hereby irrevocably and unconditionally guarantees the full, complete and timely performance when due under the provisions of the applicable Covered Agreements of all of Total Obligors’ obligations (the “Guaranteed Obligations”) under the Covered Agreements, whether for the payment of money, the giving of indemnification, the performance of obligations or otherwise.

Section 2.02 No Set-Off (a) Guarantor agrees to pay all amounts that may be due from time to time with respect to the Guaranteed Obligations, directly and without deduction, recoupment, set-off, netting or counterclaim, to the JV under the Covered Agreements.

(b) Guarantor confirms and agrees, for the benefit of the Beneficiary, that, in making payments in respect of this Guaranty, it will not seek to recoup, set-off or net any amount owed to it by any of the Total Obligors.

Section 2.03 Subrogation. Guarantor shall be subrogated to all rights of the Beneficiary in respect of any amounts paid by Guarantor pursuant to the provisions of this Guaranty; provided, however, that Guarantor shall not be entitled to enforce or to receive any payments arising out of or based upon such right of subrogation if any Guaranteed Obligations then due have not been satisfied. If any amount is paid to Guarantor on account of subrogation rights under this Guaranty in violation of this Section 2.03, such amount, to the extent of the amount of the unsatisfied Guaranteed Obligations then due, shall be held in trust for the benefit of the Beneficiary and shall be promptly paid to the Beneficiary to be credited and applied to such unsatisfied Guaranteed Obligations.

Section 2.04 Obligations Unconditional (a) This Guaranty is a guaranty of payment and performance and not of collection and may be enforced by the Beneficiary directly against the Guarantor without any requirement that the Beneficiary must first exercise its rights against any of the Total Obligors. There are no conditions precedent to the enforcement of this Guaranty. The obligations of the Guarantor hereunder shall be continuing, absolute and unconditional and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by any of the following events:

(i) at any time or from time to time, without notice to Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

 

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(ii) any of the acts (other than payment or other satisfaction of the Guaranteed Obligations) mentioned in any of the provisions of the Covered Agreements or any other agreement or instrument referred to herein or therein shall be done or omitted;

(iii) the Guaranteed Obligations shall be modified, supplemented, increased or amended in any respect or any right under the Covered Agreements or any other agreement or instrument relating thereto (other than this Guaranty) shall be waived or any other guarantee of the Guaranteed Obligations or any other letter of credit, guaranty or security therefor shall be released or exchanged in whole or in part or otherwise dealt with;

(iv) at any time, the Covered Agreements or any other agreement or instrument relating thereto (other than this Guaranty) shall cease to be valid or enforceable, other than the termination of the Covered Agreements, in accordance with its respective terms; or

(v) a Bankruptcy Event shall occur with respect to Guarantor or any Total Obligor.

(b) Except as provided in Section 2.04(a), Guarantor hereby (i) unconditionally and irrevocably waives diligence, presentment, demand, protest and all notices whatsoever in respect of the Guaranteed Obligations and this Guaranty and (ii) unconditionally and irrevocably waives any requirement that the Beneficiary exhaust any right, power or remedy or proceed against any Total Obligor or any other Person under the Covered Agreements. This Guaranty constitutes a guaranty of payment and not of collection, and the obligations of Guarantor under this Guaranty are primary obligations of Guarantor, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Total Obligors or any other Person or whether the Total Obligors or any other Person is joined in such action or actions.

(c) Guarantor warrants and agrees that each of the waivers and consents set forth in this Guaranty are made voluntarily and unconditionally after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which Guarantor otherwise may have against the Total Obligors or any other Person or against any collateral. If, notwithstanding the intent of the parties to this Agreement that the terms of this Guaranty shall control in any and all circumstances, any such waivers or consents are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law.

 

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ARTICLE 3.

REPRESENTATIONS

Section 3.01 Representations and Warranties. Guarantor represents and warrants to the Beneficiary that as of the date of this Guaranty:

(i) Organization; Corporate Authority. Guarantor (1) is duly incorporated and validly existing under the laws of its jurisdiction of incorporation, and (2) has all requisite company power and authority to execute, deliver and perform its obligations under this Guaranty. Guarantor is not subject to any current orders for winding up, or appointment of a receiver or liquidator or to any notice of any proposed deregistration.

(ii) Authorization; Enforceability; No Conflicts. The execution and delivery by Guarantor of this Guaranty and the performance by Guarantor of its obligations under this Guaranty have been duly authorized by all necessary corporate action and do not violate, breach or contravene (1) Guarantor’s organizational documents or (2) any law or contractual restriction binding on or affecting Guarantor or its properties except where such violation, breach or contravention, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on Guarantor’s ability to perform its obligations under this Guaranty. This Guaranty has been duly executed and delivered by Guarantor, and constitutes the legal, valid and binding obligation of Guarantor, enforceable against it in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, including concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief (regardless of whether such enforceability is considered in a proceeding in equity or at law). All authorizations, consents and approvals of any governmental authority or third party necessary for the execution, delivery or performance by Guarantor of this Guaranty have been obtained and are in full force and effect.

(iii) Ownership. Guarantor directly or indirectly owns 100% of the aggregate issued and outstanding equity interests of the Total Obligors.

ARTICLE 4.

MISCELLANEOUS

Section 4.01 No Waiver. No failure on the part of the Beneficiary to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law.

 

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Section 4.02 Notices, Etc. All notices, requests and demands hereunder shall be in writing and faxed or delivered, (a) if to Guarantor,                     ,                     , Attn:                     ; (b) if to the Beneficiary,                     , Attn:                    ; with a copy to Global Infrastructure Management, LLC, 12 East 49th Street, 38th Floor, New York, New York 10017, Attn: Salim Samaha, Fax: (646) 282-1599; and a copy to Global Infrastructure Management UK Limited, Cardinal Place, 80 Victoria Street, London SW1E 5JL, United Kingdom, Attention: Joseph Blum, Fax: +44 207 798 0530; and a copy to Andrews Kurth LLP, 4200 JPMorgan Chase Tower, Houston, Texas 77002), Attn: G. Michael O’Leary, Fax: (713) 238-7130; or (c) as to any party, at such other address or facsimile number as shall be designated by such party in a written notice to each other party.

Section 4.03 Amendments. Etc. The terms of this Guaranty may be waived, altered or amended only by an instrument in writing duly executed by Guarantor and the Beneficiary.

Section 4.04 Benefit, Successors and Assigns. This Guaranty is for the benefit of and is enforceable by the Beneficiary and not for the benefit of or enforceable by any other Person. This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and shall inure to the benefit of the successors and permitted assigns of the Beneficiary under the Covered Agreements. This Guaranty may not be assigned by Guarantor to any other Person without the prior written consent of the Beneficiary. Guarantor and the Beneficiary acknowledge and agree that the execution and delivery of this Guaranty and the rights and obligations of the parties hereto are part of an integrated transaction being effected pursuant to the terms of the Transaction Documents.

Section 4.05 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Guaranty.

Section 4.06 Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts, and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

Section 4.07 Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

Section 4.08 Expenses, Etc. Guarantor agrees to reimburse the Beneficiary for all reasonable costs and expenses of the Beneficiary (including the reasonable fees and expenses of legal counsel) incurred in connection with (a) any enforcement or collection proceeding resulting from this Guaranty, including in connection with any bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, judicial or regulatory proceedings and workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (b) the enforcement of this Section 4.08. This Section 4.08 shall survive the termination of this Guaranty.

 

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Section 4.09 Agreements Superseded; Integrated Transactions. This Guaranty, together with the other Transaction Documents, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, written or oral, between the parties with respect to the subject matter of this Guaranty and the matters addressed or governed hereby or in the other Transaction Documents. Without limiting the foregoing, each of the parties hereto acknowledges and agrees that (i) this Guaranty is being executed and delivered in connection with each of the other Transaction Documents and the transactions contemplated hereby and thereby; (ii) the performance of this Guaranty and the other Transaction Documents and expected benefits herefrom and therefrom are a material inducement to the willingness of the parties to enter into and perform this Guaranty and the other Transaction Documents and the transactions contemplated herein and therein; (iii) the parties hereto would not have been willing to enter into this Guaranty in the absence of the execution, delivery, performance and economic interdependence of the Transaction Documents; (iv) the execution and delivery of this Guaranty and the other Transaction Documents and the rights and obligations of the parties hereto and thereto are interrelated and part of an integrated transaction being effected pursuant to the terms of this Guaranty and the other Transaction Documents; (v) the transactions contemplated by this Guaranty and the other Transaction Documents are necessary elements of the same and integrated transaction; (vi) the transactions contemplated by this Guaranty and by the other Transaction Documents are economically interdependent; and (vii) such party will cause any of its successors or permitted assigns to expressly acknowledge and agree to this Section 4.09.

Section 4.10 Governing Law, Jurisdiction and Venue. This Guaranty shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law.

Section 4.11 Consent to Jurisdiction and Service of Process; Appointment of Agent for Service of Process. EACH PARTY TO THIS GUARANTY HEREBY CONSENTS TO THE JURISDICTION OF ANY UNITED STATES DISTRICT COURT LOCATED IN WILMINGTON, DELAWARE OR DELAWARE CHANCERY COURT LOCATED IN WILMINGTON, DELAWARE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER SUCH ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (B) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OR FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE

 

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BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

Section 4.12 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS GUARANTY HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS GUARANTY AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, INCLUDING ANY MATTER RELATING TO A GUARANTEED OBLIGATION ARISING UNDER ANY COVERED AGREEMENT, EACH PARTY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS GUARANTY, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS, EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS GUARANTY AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRAIL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY, IN THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

Section 4.13 Termination. This Guaranty shall terminate and be of no force and effect with respect to Guaranteed Obligations arising on and after the Termination Date.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered as of the day and year first above written and effective as of the date and year specified.

 

GUARANTOR:
  TOTAL HOLDINGS USA INC
  By:  

 

  Name:  

 

  Title:  

 

BENEFICIARY:
  CHESAPEAKE MIDSTREAM PARTNERS, L.L.C.
  By:  

 

  Name:   J. Mike Stice
  Title:   Chief Executive Officer

Signature Page to Total                                         

EX-10.5 6 dex105.htm FORM OF CONTRIBUTION AGREEMENT Form of Contribution Agreement

Exhibit 10.5

CONTRIBUTION, CONVEYANCE AND ASSUMPTION

AGREEMENT

By and Among

CHESAPEAKE MIDSTREAM HOLDINGS, L.L.C.

GIP-A HOLDING (CHK), L.P.

GIP-B HOLDING (CHK), L.P.

GIP-C HOLDING (CHK), L.P.

CHESAPEAKE MIDSTREAM VENTURES, L.L.C.

CHESAPEAKE MIDSTREAM GP, L.L.C.

CHESAPEAKE MIDSTREAM PARTNERS, L.P.

And

CHESAPEAKE MLP OPERATING, L.L.C.

Dated as of [•], 2010


CONTRIBUTION, CONVEYANCE AND ASSUMPTION

AGREEMENT

This Contribution, Conveyance and Assumption Agreement, dated as of July [•], 2010 (this “Agreement”), is by and among Chesapeake Midstream Partners, L.P., a Delaware limited partnership (the “Partnership”), Chesapeake Midstream GP, L.L.C., a Delaware limited liability company and the general partner of the Partnership (the “General Partner”), Chesapeake MLP Operating, L.L.C. (formerly known as Chesapeake Midstream Partners, L.L.C.), a Delaware limited liability company (“MLP Operating”), Chesapeake Midstream Holdings, L.L.C., a Delaware limited liability company (“Holdings”), GIP-A Holding (CHK), L.P., a Delaware limited partnership (“GIP-A”), GIP-B Holding (CHK), L.P., a Delaware limited partnership (“GIP-B”), GIP-C Holding (CHK), L.P., a Delaware limited partnership (“GIP-C”), and Chesapeake Midstream Ventures, L.L.C., a Delaware limited liability company (“Midstream Ventures”). The above-named entities are sometimes referred to in this Agreement individually as a “Party and collectively as the “Parties.” Capitalized terms used herein shall have the meanings assigned to such terms in Article I.

RECITALS

WHEREAS, the General Partner and Midstream Ventures have formed the Partnership, pursuant to the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP Act”), for the purpose of engaging in any business activity that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware LP Act.

WHEREAS, in order to accomplish the objectives and purposes in the preceding recital, each of the following actions has been taken prior to the date hereof:

 

  1. MLP Operating borrowed $124.9 million (the “OLLC Debt”) on a nonrecourse basis under its existing bank line of credit and distributed the cash to Holdings, GIP-A, GIP-B and GIP-C in accordance with their respective ownership interests in MLP Operating.

 

  2. MLP Operating filed the necessary amendments to its certificate of formation under the Delaware Limited Liability Company Act (the “Delaware LLC Act”) to change its name to “Chesapeake MLP Operating, L.L.C.”

 

  3. Holdings, GIP-A, GIP-B and GIP-C formed Midstream Ventures under the terms of the Delaware LLC Act, to which Holdings contributed $1,500, GIP-A contributed $527.45, GIP-B contributed $204.59 and GIP-C contributed $767.96 in exchange for a 50% member interest, a 17.5816953% member interest, a 6.8197258% member interest and a 25.5985789% member interest, respectively, in Midstream Ventures.

 

  4. Midstream Ventures formed the General Partner under the terms of the Delaware LLC Act and contributed $1,000 in exchange for all of the membership interests in the General Partner.

 

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  5. Midstream Ventures and the General Partner formed the Partnership under the terms of the Delaware LP Act and contributed $980 and $20, respectively, in exchange for a 98% limited partner interest and a 2% general partner interest, respectively, in the Partnership.

 

  6. Midstream Ventures distributed its 98% limited partner interest in the Partnership to Holdings, GIP-A, GIP-B and GIP-C pro rata in accordance with their ownership interests in Midstream Ventures, resulting in limited partnership ownership in the Partnership of 49%, 17.230061443%, 6.683331284% and 25.086607273%, respectively.

WHEREAS, pursuant hereto, each of the following will occur at the times specified hereinafter:

 

  1. Holdings will convey a portion of its membership interest in MLP Operating (the “Holdings GP Interest”) to Midstream Ventures equal to 1% of the equity value of the Partnership at closing based upon the pricing of its initial public offering (the “Offering”); GIP-A will convey a portion of its membership interest in MLP Operating (the “GIP-A GP Interest”) to Midstream Ventures equal to 0.351633907% of the equity value of the Partnership at closing based upon the pricing of the Offering; GIP-B will convey a portion of its membership interest in MLP Operating (the “GIP-B GP Interest”) to Midstream Ventures equal to 0.136394516% of the equity value of the Partnership at closing based upon the pricing of the Offering; and GIP-C will convey a portion of its membership interest in MLP Operating (the “GIP-C GP Interest,” and together with the Holdings GP Interest, the GIP-A GP Interest and the GIP-B GP Interest, the “GP Interest”) to Midstream Ventures equal to 0.511971577% of the equity value of the Partnership at closing based upon the pricing of the Offering.

 

  2. Midstream Ventures will convey the GP Interest to the General Partner as a capital contribution.

 

  3. The General Partner will convey the GP Interest to the Partnership in exchange for a (i) continuation of its 2% general partner interest in the Partnership and (ii) all of the equity interests in the Partnership classified as Incentive Distribution Rights under the Partnership Agreement (the “IDRs”).

 

  4. Holdings will convey its remaining membership interest in MLP Operating (the “Holdings LP Interest”) to the Partnership in exchange for (i) the Holdings Common Units and (ii) 50% of the Sponsor Subordinated Units (collectively, the “Holdings Consideration”).

 

  5. GIP-A will convey its remaining membership interest in MLP Operating (the “GIP-A LP Interest”) to the Partnership in exchange for (i) 35.1633907% of the GIP Common Units, (ii) 17.5816953% of the Sponsor Subordinated Units and (iii) the right to receive 35.1633907% of the Deferred Issuance and Distribution (collectively, the “GIP-A Consideration”).

 

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  6. GIP-B will convey its remaining membership interest in MLP Operating (the “GIP-B LP Interest”) to the Partnership in exchange for (i) 13.6394516% of the GIP Common Units, (ii) 6.8197258% of the Sponsor Subordinated Units and (iii) the right to receive 13.6394516% of the Deferred Issuance and Distribution (collectively, the “GIP-B Consideration”).

 

  7. GIP-C will convey its remaining membership interest in MLP Operating (the “GIP-C LP Interest”) to the Partnership in exchange for (i) 51.1971577% of the GIP Common Units, (ii) 25.5985789% of the Sponsor Subordinated Units and (iii) the right to receive 51.1971577% of the Deferred Issuance and Distribution (collectively, the “GIP-C Consideration”).

 

  8. In connection with the Offering, the public, through the Underwriters, will contribute an amount agreed upon by the Underwriters and the Partnership pursuant to the Underwriting Agreement, less the Underwriters’ Spread, in exchange for the Firm Units.

 

  9. The Partnership will (i) pay transaction expenses, estimated at $3.5 million, excluding the Underwriters’ Spread, and (ii) contribute the remaining proceeds from Step 8 above to MLP Operating as a capital contribution.

 

  10. MLP Operating will use the amount contributed to it pursuant to Step 9 to retire the OLLC Debt and reserve the balance for future partnership purposes.

WHEREAS, the members or partners of the Parties have taken all partnership and limited liability company action, as the case may be, required to approve the transactions contemplated by this Agreement; and

WHEREAS, the Partnership may adjust upward or downward the number of Firm Units to be offered to the public through the Underwriters.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The terms set forth below in this Article I shall have the meanings ascribed to them below or in the part of this Agreement referred to below:

Commission” means the United States Securities and Exchange Commission.

Common Unit” means a common unit representing a limited partner interest in the Partnership having the rights set forth in the Partnership Agreement

Effective Time” means 8:00 a.m. prevailing Eastern Time on the date of the closing of the Offering.

 

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Firm Units” means the Common Units to be sold to the Underwriters pursuant to the terms of the Underwriting Agreement, but does not include any Option Units.

GIP Common Units” means 20,725,561 Common Units; provided, that if the Partnership increases the number of Firm Units to be offered in the Offering, the GIP Common Units will be decreased by a number of Common Units equal to 65% of such increase in the number of Firm Units, and if the Partnership decreases the number of Firm Units offered to the public through the Underwriters, the GIP Common Units will be increased by a number of Common Units equal to 65% of such decrease in the number of Firm Units (it being understood and agreed, for the avoidance of doubt, that the difference between such percentage and the percentage referred to in the definition of “Holdings Common Units” is to accommodate the corresponding increases or decreases in each of the number of Option Units and Deferred Issuance and Distribution).

Holdings Common Units” means 23,913,061 Common Units; provided, that if the Partnership increases the number of Firm Units to be offered in the Offering, the Holdings Common Units will be decreased by a number of Common Units equal to 50% of such increase in the number of Firm Units, and if the Partnership decreases the number of Firm Units offered to the public through the Underwriters, the Holdings Common Units will be increased by a number of Common Units equal to 50% of such decrease in the number of Firm Units.

Option Closing Date” has the meaning assigned to it in the Partnership Agreement.

Option Units” means the Common Units that the Partnership will agree to issue upon an exercise of the Over-Allotment Option.

Original Partnership Agreement” means that certain Agreement of Limited Partnership of the Partnership, dated as of January 21, 2010.

Over-Allotment Option” has the meaning assigned to it in the Partnership Agreement.

Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, substantially in the form attached as Appendix A to the Registration Statement.

Registration Statement” means the Registration Statement on Form S-1 filed with the Commission (Registration
No. 333-164905), as amended.

Sponsor Subordinated Units” means 69,076,122 Subordinated Units.

Subordinated Units” means a subordinated unit representing a limited partner interest in the Partnership having the rights set forth in the Partnership Agreement.

Transaction Documents” means (i) the documents set forth in the definition of “Transaction Documents” in the Partnership Agreement, (ii) the Amended and Restated Limited Liability Company Agreement of Midstream Ventures, dated as of [    ], 2010, by and among Midstream Ventures, GIP-A, GIP-B, GIP-C and Holdings, (iii) the Purchase Agreement, by and among Holdings, Chesapeake Midstream Development, L.P., Chesapeake Energy Corporation, GIP-A Acquisition (CHK), LLC, GIP-B Acquisition (CHK), LLC and GIP-C Acquisition (CHK), LLC, dated as of September 24, 2009, as amended by the Agreement and Amendment to the Purchase Agreement, dated as of [    ], 2010, by and among Holdings, Chesapeake Midstream Development, L.P., Chesapeake Energy Corporation, Midstream Ventures, GIP-A, GIP-B, and GIP-C, and (iv) the Voting Agreement, dated as of [    ], 2010, by and among GIP-A, GIP-B, GIP-C, Holdings, and Chesapeake Energy Corporation, in each case as may be amended, supplemented or restated from time to time.

Underwriters” means the underwriting syndicate listed in the Underwriting Agreement.

 

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Underwriters’ Spread” means the total amount of the Underwriters’ discount and structuring fee.

Underwriting Agreement” means a firm commitment underwriting agreement to be entered into between the Partnership and the underwriters named in the Registration Statement.

ARTICLE II

CONTRIBUTIONS, ACKNOWLEDGEMENTS AND DISTRIBUTIONS

The following shall be completed immediately following the Effective Time in the order set forth herein:

Section 2.1 Execution of the Partnership Agreement. The Partnership, the General Partner, Holdings, GIP-A, GIP-B and
GIP-C shall amend and restate the Original Partnership Agreement by executing the Partnership Agreement in substantially the form included in Appendix A to the Registration Statement, with such changes as are necessary to reflect any adjustment to the number of Firm Units and Option Units as the Partnership may agree with the Underwriters and such other changes as the Partnership, the General Partner, Holdings, GIP-A, GIP-B and GIP-C may agree.

Section 2.2 Conveyance of the Holdings GP Interest by Holdings to Midstream Ventures. Holdings hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to Midstream Ventures, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the Holdings GP Interest, and Midstream Ventures hereby accepts the Holdings GP Interest.

Section 2.3 Conveyance of the GIP-A GP Interest by GIP-A to Midstream Ventures. GIP-A hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to Midstream Ventures, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GIP-A GP Interest, and Midstream Ventures hereby accepts the GIP-A GP Interest.

Section 2.4 Conveyance of the GIP-B GP Interest by GIP-B to Midstream Ventures. GIP-B hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to Midstream Ventures, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GIP-B GP Interest, and Midstream Ventures hereby accepts the GIP-B GP Interest.

Section 2.5 Conveyance of the GIP-C GP Interest by GIP-C to Midstream Ventures. GIP-C hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to Midstream Ventures, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GIP-C GP Interest, and Midstream Ventures hereby accepts the GIP-C GP Interest.

Section 2.6 Contribution of the GP Interest by Midstream Ventures to the General Partner. Midstream Ventures hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the General Partner, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GP Interest, as a capital contribution, and the General Partner hereby accepts such GP Interest.

 

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Section 2.7 Contribution of the GP Interest by the General Partner to the Partnership. The General Partner hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the Partnership, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GP Interest, as a capital contribution, in exchange for (i) a continuation of its 2.0% general partner interest in the Partnership and (ii) the issuance of the IDRs, and the Partnership hereby accepts the GP Interest as a contribution of capital to the Partnership.

Section 2.8 Contribution of the Holdings LP Interest by Holdings to the Partnership. Holdings hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the Partnership, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the Holdings LP Interest, as a capital contribution, in exchange for the Holdings Consideration.

Section 2.9 Contribution of the GIP-A LP Interest by GIP-A to the Partnership. GIP-A hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the Partnership, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GIP-A LP Interest, as a capital contribution, in exchange for the GIP-A Consideration.

Section 2.10 Contribution of the GIP-B LP Interest by GIP-B to the Partnership. GIP-B hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the Partnership, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GIP-B LP Interest, as a capital contribution, in exchange for the GIP-B Consideration.

Section 2.11 Contribution of the GIP-C LP Interest by GIP-C to the Partnership. GIP-C hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the Partnership, its successors and its assigns, for its and their own use forever, all right, title and interest in and to the GIP-C LP Interest, as a capital contribution, in exchange for the GIP-C Consideration.

Section 2.12 Underwriters’ Cash Contribution. The Parties acknowledge that the Partnership is undertaking the Offering and the Underwriters will, pursuant to the Underwriting Agreement, agree to make a capital contribution to the Partnership of an amount determined pursuant to the Underwriting Agreement in exchange for the issuance by the Partnership of the Firm Units.

Section 2.13 Payment of Transaction Expenses and Contribution of Proceeds by the Partnership. The Parties acknowledge (i) the payment by the Partnership, in connection with the transactions contemplated hereby, of estimated transaction expenses in the amount of approximately $3.5 million (exclusive of the Underwriters’ Spread) and (ii) subject to Section 3.1, the contribution of the balance of the proceeds from the Offering to MLP Operating as a capital contribution, to be used to retire the OLLC Debt and reserve the balance for future partnership purposes.

 

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ARTICLE III

DEFERRED ISSUANCE AND DISTRIBUTION

Section 3.1 Deferred Issuance and Distribution. If the Over-Allotment Option is exercised in whole or in part, the Underwriters will contribute additional cash to the Partnership in exchange for Option Units on the basis of the Offering price per Common Unit set forth in the Registration Statement. The Partnership will (i) upon the earlier to occur of the expiration of the period to exercise the Over-Allotment Option or the exercise in full of the Over-Allotment Option, issue to GIP-A, GIP-B and GIP-C a number of additional Common Units that, in the aggregate, is equal to the excess, if any, of (x) the maximum number of Common Units issuable pursuant to the Over-Allotment Option over (y) the aggregate number of Common Units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise(s) of the Over-Allotment Option and (ii) upon each Option Closing Date, make cash distributions to GIP-A, GIP-B and GIP-C of an amount of cash equal to, in the aggregate, the total amount of cash contributed by the Underwriters on or in connection with each such exercise of the Over-Allotment Option, if any, such distributions being treated as reimbursements for capital expenditures made by each of GIP-A, GIP-B and GIP-C. Both the additional Common Units issuable pursuant to clause (i) hereof and the cash distributions distributable pursuant to clause (ii) hereof (collectively, the “Deferred Issuance and Distribution”), when issued and/or distributed, shall be issued and distributed to GIP-A, GIP-B and GIP-C pursuant to Sections 2.9, 2.10 and 2.11 hereof in accordance with the percentages of the Deferred Issuance and Distribution outlined in Steps 5, 6 and 7 of the third recital above.

ARTICLE IV

FURTHER ASSURANCES

From time to time after the Effective Time, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and to do all such other acts and things, all in accordance with applicable law, as may be necessary or appropriate (a) more fully to assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement, or which are intended to be so granted, (b) more fully and effectively to vest in the applicable Parties and their respective successors and assigns beneficial and record title to the interests contributed and assigned by this Agreement or intended to be so and (c) more fully and effectively to carry out the purposes and intent of this Agreement.

ARTICLE V

EFFECTIVE TIME

Notwithstanding anything contained in this Agreement to the contrary, none of the provisions of Article II, Article III or Article IV shall be operative or have any effect until the Partnership executes the Underwriting Agreement, at which time all such provisions shall be effective and operative in accordance without further action by any Party.

 

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ARTICLE VI

MISCELLANEOUS

Section 6.1 Order of Completion of Transactions. The transactions provided for in Article II and Article III of this Agreement shall be completed immediately following the Effective Time in the following order: first, the transactions provided for in Article II shall be completed in the order set forth therein; and second, following the completion of the transactions provided for in Article II, the transactions provided for in Article III, if they occur, shall be completed.

Section 6.2 Headings; References; Interpretation. All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, including, without limitation, all Schedules and Exhibits attached hereto, and not to any particular provision of this Agreement. All references herein to Articles, Sections, Schedules and Exhibits shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement and the Schedules and Exhibits attached hereto, and all such Schedules and Exhibits attached hereto are hereby incorporated herein and made a part hereof for all purposes. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter.

Section 6.3 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.

Section 6.4 No Third Party Rights. The provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies, and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.

Section 6.5 Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all Parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument.

Section 6.6 Applicable Law; Forum, Venue and Jurisdiction. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. Each of the Parties (i) irrevocably agrees that any claims, suits, actions or proceedings arising out of or relating in any way to this Agreement shall be exclusively brought in the Court of Chancery of the State of Delaware, in each case regardless of whether such claims, suits, actions or proceedings sound in contract, tort, fraud or

 

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otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims; (ii) irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware in connection with any such claim, suit, action or proceeding; (iii) agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of the Court of Chancery of the State of Delaware or of any other court to which proceedings in the Court of Chancery of the State of Delaware may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper; (iv) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding; and (v) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such services shall constitute good and sufficient service of process and notice thereof; provided, nothing in clause (v) hereof shall affect or limit any right to serve process in any other manner permitted by law.

Section 6.7 Severability. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any political body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.

Section 6.8 Amendment or Modification. This Agreement may be amended or modified from time to time only by the written agreement of all the Parties. Each such instrument shall be reduced to writing and shall be designated on its face as an amendment to this Agreement.

Section 6.9 Integration. This Agreement, together with the other Transaction Documents, constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior contracts or agreements among the Parties with respect to the subject matter hereof and the matters addressed or governed hereby or in the other Transaction Documents, whether oral or written. Without limiting the foregoing, each of the Parties acknowledges and agrees that (i) this Agreement is being executed and delivered in connection with each of the other Transaction Documents and the transactions contemplated hereby and thereby, (ii) the performance of this Agreement and the other Transaction Documents and expected benefits herefrom and therefrom are a material inducement to the willingness of the Parties to enter into and perform this Agreement and the other Transaction Documents and the transactions described herein and therein, (iii) the Parties would not have been willing to enter into this Agreement in the absence of the entrance into, performance of, and the economic interdependence of, the Transaction Documents, (iv) the execution and delivery of this Agreement and the other Transaction Documents and the rights and obligations of the parties hereto and thereto are interrelated and part of an integrated transaction being effected pursuant to the terms of this Agreement and the other Transaction Documents, (v) irrespective of the form such documents have taken, or otherwise, the transactions contemplated by this Agreement and the other Transaction Documents are necessary elements of one and the same overall and integrated transaction, (vi) the transactions contemplated by this Agreement and by the other

 

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Transaction Documents are economically interdependent and (vii) such Party will cause any of its successors or permitted assigns (including any transferee of such Party) to expressly acknowledge and agree to this Section 6.9 prior to any assignment or transfer of this Agreement, by operation of law or otherwise.

Section 6.10 Deed; Bill of Sale; Assignment. To the extent required and permitted by applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of the assets and interests referenced herein.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties to this Agreement have caused it to be duly executed as of the date first above written.

 

CHESAPEAKE MIDSTREAM HOLDINGS, L.L.C.
By:    
  Name:
  Title:

 

GIP-A HOLDING (CHK), L.P.
By:    
  Name:
  Title:

 

GIP-B HOLDING (CHK), L.P.
By:    
  Name:
  Title:

 

GIP-C HOLDING (CHK), L.P.
By:    
  Name:
  Title:

 

CHESAPEAKE MIDSTREAM GP, L.L.C
By:    
  Name:
  Title:

Signature Page to Contribution, Conveyance and Assumption Agreement


CHESAPEAKE MIDSTREAM PARTNERS, L.P.
By:   CHESAPEAKE MIDSTREAM GP, L.L.C., its general partner
By:    
  Name: J. Mike Stice
  Title: Chief Executive Officer

 

CHESAPEAKE MLP OPERATING, L.L.C.
By:    
  Name:
  Title:

 

CHESAPEAKE MIDSTREAM VENTURES, L.L.C.
By:    
  Name:
  Title:

Signature Page to Contribution, Conveyance and Assumption Agreement

EX-10.16 7 dex1016.htm FORM OF REGISTRATION RIGHTS AGREEMENT Form of Registration Rights Agreement

Exhibit 10.16

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of [                    ], 2010, by and among Chesapeake Midstream Partners, L.P., a Delaware limited partnership (the “Partnership”), GIP-A Holding (CHK), L.P., a Delaware limited partnership (“GIP-A”), GIP-B Holding (CHK), L.P., a Delaware limited partnership (“GIP-B”), GIP-C Holding (CHK), L.P., a Delaware limited partnership (“GIP-C” and collectively with GIP-A and GIP-B, the “GIP Entities”), and Chesapeake Midstream Holdings, L.L.C., a Delaware limited liability company (“Chesapeake Holdings”). The GIP Entities and Chesapeake Holdings are referred to collectively herein as the “Sponsors.” The Partnership and the Sponsors are referred to collectively herein as the “Parties.”

WHEREAS, unless the context otherwise requires, capitalized terms used and not otherwise defined herein shall have the meanings ascribed in Section 1;

WHEREAS, the Sponsors have acquired, and may (together with their respective Affiliates) acquire in the future, certain Partnership Securities; and

WHEREAS, as an inducement to the willingness of the Sponsors and their respective Affiliates to hold certain Partnership Securities, the Parties desire to provide certain registration rights to the Sponsors with respect to any Registrable Securities held by them upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth in this Section 1:

Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used in this definition, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. Notwithstanding anything in the foregoing to the contrary, for purposes of this Agreement, the GIP Entities and their respective Affiliates, on the one hand, and Chesapeake and its Affiliates, on the other hand, will not be deemed to be Affiliates of one another hereunder unless there is a basis for such Affiliation independent of their respective Affiliation with the General Partner, the Partnership, any of its subsidiaries or any Person controlling the General Partner.

Agreement” has the meaning set forth in the preamble.

Automatic Shelf Registration Statement” means an “automatic shelf registration statement” as defined under Rule 405.

Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of Oklahoma shall not be regarded as a Business Day.

 

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Chesapeake” means Chesapeake Energy Corporation, an Oklahoma corporation.

Chesapeake Holdings” has the meaning set forth in the preamble.

Class B Units” means a class of equity interests of the Partnership separate from the Common Units, but having substantially the same rights, designations and preferences as Common Units, and which are convertible into Common Units on a one-to-one basis upon receipt of the requisite vote of holders of Common Units required in connection with the issuance and conversion of the Class B Units by the Trading Market on which the Common Units are listed.

Commission” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act or Exchange Act.

Common Units” has the meaning set forth in the LP Agreement.

Demand Notice” has the meaning set forth in Section 2(a).

Demand Registration” has the meaning set forth in Section 2(a).

Effective Date” means the time and date that a Registration Statement is first declared effective by the Commission or otherwise becomes effective.

Effectiveness Period” has the meaning set forth in Section 2(a).

Exchange Act” means the Securities Exchange Act of 1934, as amended.

General Partner” means Chesapeake Midstream GP, L.L.C., a Delaware limited liability company, and its successor and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context otherwise requires).

GIP-A” has the meaning set forth in the preamble.

GIP-B” has the meaning set forth in the preamble.

GIP-C” has the meaning set forth in the preamble.

GIP Entities” has the meaning set forth in the preamble.

Holder” means (i) any Sponsor who holds Registrable Securities, (ii) any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 7(e) hereof or (iii) any holder of Registrable Securities received by such holder from Chesapeake Midstream Ventures, L.L.C. (solely with respect to such Registrable Securities).

Incentive Distribution Rights” has the meaning set forth in the LP Agreement.

 

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Indemnified Persons” has the meaning set forth in Section 5.

Initiating Holder” has the meaning set forth in Section 2(a).

IPO” means the initial public offering of Common Units pursuant to the IPO Registration Statement.

IPO Registration Statement” means the Registration Statement on Form S-1 (File No. 333-164905) of the Partnership, as amended and declared effective by the Commission.

Losses” has the meaning set forth in Section 5.

LP Agreement” means the First Amended and Restated Agreement of Limited Partnership of Chesapeake Midstream Partners, L.P. dated as of [                    ], 2010, as may be amended from time to time.

Parties” has the meaning set forth in the preamble.

Partnership” has the meaning set forth in the preamble.

Partnership Securities” means any equity interest of any class or series in the Partnership, including Common Units, Subordinated Units, Class B Units and Incentive Distribution Rights.

Person” means an individual or group, corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

Piggyback Notice” has the meaning set forth in Section 2(b).

Piggyback Registration” has the meaning set forth in Section 2(b).

Piggyback Request” has the meaning set forth in Section 2(b).

Proceeding” means any action, claim, suit, proceeding or investigation (including a preliminary investigation or partial proceeding, such as a deposition) pending or known to the Partnership to be threatened.

Prospectus” means the prospectus included in a Registration Statement (including a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

Registrable Securities” means (i) Subordinated Units, (ii) Common Units, and

 

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(iii) Class B Units; provided, however, that Registrable Securities shall not include any Partnership Securities for which Rule 144 of the Securities Act or another exemption from registration is available to enable the holder of such Partnership Securities to dispose of the number of Partnership Securities it desires to sell at the time it desires to do so without registration under the Securities Act or other similar applicable law (and without any limitation on volume, timing, recipients or intended method or methods of distribution, including through the use of an underwriter, that would not be applicable with a Registration Statement).

Registration Expenses” has the meaning set forth in Section 4.

Registration Statement” means a registration statement in the form required to register the resale of the Registrable Securities under the Securities Act and other applicable law, and including any Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 405” means Rule 405 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 433” means Rule 433 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Securities Act” means the Securities Act of 1933, as amended.

Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder.

Special Successor” means any Person that is a transferee of a Sponsor or Special Successor of (i) Partnership Securities sufficient to provide such Person with the direct or indirect right to designate or cause the designation of at least one member to the Board of Directors of the General Partner or (ii) equity interests in Chesapeake Midstream Ventures, L.L.C. sufficient to provide such Person with the right to designate or cause the designation of at least member of the Board of Directors of Chesapeake Midstream Ventures, L.L.C.

 

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Sponsors” has the meaning set forth in the preamble.

Stand-Off Period” has the meaning set forth in Section 7(f).

Subordinated Units” has the meaning set forth in the LP Agreement.

Suspension Period” has the meaning set forth in Section 2(a).

Trading Day” means a day during which trading in the Common Units generally occurs.

Trading Market” means the principal national securities exchange on which Registrable Securities are listed.

Transaction Documents” means (i) the documents set forth in the definition of “Transaction Documents” in the LP Agreement, (ii) the Amended and Restated Limited Liability Company Agreement of Chesapeake Midstream Ventures, L.L.C., dated as of [                    ], 2010, by and among Chesapeake Holdings, the GIP Parties and Chesapeake Midstream Ventures, L.L.C., (iii) the Purchase Agreement, dated as of September 24, 2009, by and among Chesapeake Holdings, Chesapeake Midstream Development, L.P., Chesapeake, and the GIP Entities, as amended by the Agreement and Amendment to the Purchase Agreement, dated as of [                    ], 2010, by and among Chesapeake Holdings, Chesapeake Midstream Development, L.P., Chesapeake, Chesapeake Midstream Ventures, L.L.C. and the GIP Entities and (iv) the Voting Agreement, dated as of [                    ], 2010, by and among the GIP Entities, Chesapeake Holdings and Chesapeake, in each case, as may be amended, supplemented or restated from time to time.

WKSI” means a “well known seasoned issuer” as defined under Rule 405.

Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) the terms “include”, “includes”, “including” or words of like import shall be deemed to be followed by the words “without limitation”; (d) the terms “hereof”, “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (f) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (g) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (h) references to any Person include such Person’s successors and permitted assigns; and (i) references to “days” are to calendar days unless otherwise indicated.

 

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2. Registration.

(a) Demand Registration.

(i) At any time following the date that is one hundred and eighty (180) days after the closing date of the IPO, any Holder or group of Holders that holds Registrable Securities (the “Initiating Holder”) that desires to sell shall have the option and right, exercisable by delivering a written notice to the Partnership (a “Demand Notice”), to require the Partnership to, pursuant to the terms of and subject to the limitations contained in this Agreement, prepare and file with the Commission a Registration Statement registering the offering and sale of the number and type of Registrable Securities on the terms and conditions specified in the Demand Notice in accordance with the intended timing and method or methods of distribution thereof specified in the Demand Notice (the “Demand Registration”).

(ii) Within two (2) Trading Days of the receipt of the Demand Notice, the Partnership shall give written notice of such Demand Notice to all Holders and shall, subject to the limitations of this Section 2(a), file a Registration Statement covering all of the Registrable Securities that the Holders shall in writing request (such request to be given to the Partnership within three (3) days of receipt of such notice of the Demand Notice given by the Partnership pursuant to this Section 2(a)(ii)) to be included in such Demand Registration as promptly as practicable as directed by the Initiating Holder in accordance with the terms and conditions of the Demand Notice and use all commercially reasonable efforts to cause such Registration Statement to become effective under the Securities Act and remain effective under the Securities Act for not less than six (6) months following the Effective Date or such shorter period when all Registrable Securities covered by such Registration Statement have been sold (the “Effectiveness Period”); provided, however, that the Partnership shall not be required to effect the registration of Registrable Securities pursuant to this Section 2(a) unless at least an aggregate of 2,500,000 Registrable Securities (as adjusted to reflect splits, combinations, dividends and recapitalizations) are offered or the Registrable Securities are offered at an aggregate proposed offering price of not less than $50 million.

(iii) Subject to the other limitations contained in this Agreement, the Partnership is not obligated hereunder to effect more than (A) one (1) Demand Registration on Form S-1 (or any equivalent or successor form under the Securities Act) in any twelve (12) month period; provided, that notwithstanding anything in this Agreement to the contrary, the Partnership shall not be obligated to effect any Demand Registration on Form S-1 (or any equivalent or successor form under the Securities Act) that is not requested by a Sponsor or a Special Successor; and (B) two (2) Demand Registrations on Form S-3 (or any equivalent or successor form under the Securities Act) in any twelve (12) month period.

(iv) Notwithstanding any other provision of this Section 2(a), the Partnership shall not be required to effect a registration or file a Registration Statement pursuant to this Section 2(a): (A) during the period starting with the date sixty (60) days prior to a good faith estimate, with the approval of a simple majority of the Board of Directors of the General Partner, of the date of filing of, and ending on a date ninety (90) days after the effective date of, a Partnership-initiated registration; provided that the Partnership is actively employing commercially reasonable efforts to cause such registration statement to become effective; (B) for a period of up to ninety (90) days after

 

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the date of a Demand Notice for registration pursuant to this Section 2(a) if at the time of such request (1) the Partnership is engaged, or has fixed plans with the approval of a simple majority of the Board of Directors of the General Partner to engage, within ninety (90) days of the time of such Demand Notice, in a firm commitment underwritten public offering of Common Units in which the Holders of Registrable Securities include Registrable Securities pursuant to Section 2(b), or (2) the Partnership is currently engaged in a self-tender or exchange offer and the filing of a Registration Statement would cause a violation of the Exchange Act; or (C) for a period of up to ninety (90) days, if (1) the General Partner determines that a postponement is in the best interest of the Partnership and its Limited Partners generally due to a pending transaction or (2) the General Partner determines that a postponement is in the best interest of the Partnership due to an investigation or other event (any such period, a “Suspension Period”); provided, however, that in no event shall the Partnership postpone or defer any Demand Registration pursuant to this Section 2(a)(iv) and/or Section 7(f) for more than an aggregate of one hundred and eighty (180) days in any twelve (12) month period.

(v) Notwithstanding any other provision of this Section 2(a), if (A) the Holders intend to distribute the Registrable Securities covered by a Demand Registration by means of an underwriting and (B) the managing underwriter advises the Partnership that the inclusion of all of the Holders’ Registrable Securities in the subject Registration Statement would have a material adverse effect on the timing or success of the offering, then the Partnership shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders). Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

(vi) The Partnership may include in any such Demand Registration other Partnership Securities for sale for its own account or for the account of any other Person; provided that if the managing underwriter for the offering determines that the number of Partnership Securities proposed to be offered in such offering would have a material adverse effect on the timing or success of such offering, then the Registrable Securities to be sold by the Holders shall be included in such registration before any Partnership Securities proposed to be sold for the account of the Partnership or any other Person.

(vii) Subject to the limitations contained in this Agreement, the Partnership shall effect any Demand Registration on Form S-3 (except if the Partnership is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such Demand Registration shall be effected on another appropriate form for such purpose pursuant to the Securities Act) and if the Partnership becomes, and is at the time of its receipt of a Demand Notice, a WKSI, the Demand Registration for any offering and selling of Registrable Securities through a firm commitment underwriting shall be effected pursuant to an Automatic Shelf Registration Statement, which shall be on Form S-3 or any equivalent or successor form under the Securities Act (if available to the Partnership); provided, however, that if at any time a Registration Statement on Form S-3

 

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is effective and a Holder provides written notice to the Partnership that it intends to effect an offering of all or part of the Registrable Securities included on such Registration Statement, the Partnership will amend or supplement such Registration Statement as may be necessary in order to enable such offering to take place.

(viii) Without limiting Section 3, in connection with any Demand Registration pursuant to and in accordance with this Section 2(a), the Partnership shall, (A) promptly prepare and file or cause to be prepared and filed (1) such additional forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents, as may be necessary or advisable to register or qualify the securities subject to such Demand Registration, including under the securities laws of such states as the Holders shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof, the Partnership would become subject to general service of process or to taxation or qualification to do business in such jurisdiction solely as a result of registration and (2) such forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents as may be necessary to apply for listing or to list the Registrable Securities subject to such Demand Registration on the Trading Market and (B) do any and all other acts and things that may be necessary or appropriate or reasonably requested by the Holders to enable the Holders to consummate a public sale of such Registrable Securities in accordance with the intended timing and method or methods of distribution thereof.

(ix) In the event a Holder transfers Registrable Securities included on a Registration Statement and such Registrable Securities remain Registrable Securities following such transfer, at the request of such Holder, the Partnership shall amend or supplement such Registration Statement as may be necessary in order to enable such transferee to offer and sell such Registrable Securities pursuant to such Registration Statement.

(x) The Partnership shall use commercially reasonable efforts to become eligible to use Form S-3 and, after becoming eligible to use Form S-3, shall use commercially reasonable efforts to remain eligible to use Form S-3, including by timely filing all reports with the Commission and meeting the other requirements of the Exchange Act.

(b) Piggyback Registration.

 

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(i) If the Partnership shall at any time propose to file a Registration Statement, other than pursuant to any Demand Registration, for an offering of Partnership Securities for cash (whether in connection with a public offering of Partnership Securities by the Partnership, a public offering of Partnership Securities by unitholders, or both, but excluding an offering relating solely to an employee benefit plan, an offering relating to a transaction on Form S-4 or an offering on any registration statement form that does not permit secondary sales), the Partnership shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least two (2) Trading Days before) the anticipated filing date (the “Piggyback Notice”). The Piggyback Notice shall offer the Holders the opportunity to include for registration in such Registration Statement the number of Registrable Securities as they may request (a “Piggyback Registration”). The Partnership shall use commercially reasonable efforts to include in each such Piggyback Registration such Registrable Securities for which the Partnership has received written requests within three (3) days after mailing of the Piggyback Notice (“Piggyback Request”) for inclusion therein. If a Holder decides not to include all of its Registrable Securities in any Registration Statement thereafter filed by the Partnership, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Partnership with respect to offerings of Partnership Securities, all upon the terms and conditions set forth herein.

(ii) If the Registration Statement under which the Partnership gives notice under this Section 2(b) is for an underwritten offering, the Partnership shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to be included in a registration pursuant to this Section 2(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Partnership. If the managing underwriter or managing underwriters of such offering advise the Partnership and the Holders in writing that in their reasonable opinion that the inclusion of all of the Holders’ Registrable Securities in the subject Registration Statement would have a material adverse effect on the timing or success of the offering, the Partnership shall include in such offering only that number or amount, if any, of Registrable Securities held by the Holders that, in the reasonable opinion of the managing underwriter or managing underwriters, will not have a material adverse effect on the timing or success of the offering, with any reduction in the amount of Registrable Securities to be registered applied pro-rata among all Holders desiring to register Registrable Securities based on the number of Registrable Securities owned by each such Holder of the class (or classes) for which registration is being sought and, as to any other holders of Partnership Securities who may be seeking to register such Partnership Securities, with such reduction applied first, subject to the rights of any holder that has priority by virtue of any agreement approved in accordance with Section 2(f) below, to the amount of Partnership Securities sought to be registered by such other holders. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Partnership and the managing underwriter(s) delivered on or prior to the time of pricing of such offering. Any

 

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Registrable Securities withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder that is a partnership, limited liability company, corporation or other entity, the partners, members, stockholders, subsidiaries, parents and Affiliates of such Holder, or the estates and family members of any such partners/members and retired partners/members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of securities carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

(iii) The Partnership shall have the right to terminate or withdraw any registration initiated by it under this
Section 2(b) prior to the Effective Date of such Registration Statement whether or not any Holder has elected to include Registrable Securities in such Registration Statement. The registration expenses of such withdrawn registration shall be borne by the Partnership in accordance with Section 4 hereof.

(c) All registration rights granted under this Section 2 shall continue to be applicable with respect to any Holder for so long as may be required for each such Holder to sell all of the Registrable Securities held by such Holder (without any limitation on volume, timing, recipients or intended method or methods of distribution, including through the use of an underwriter, that would not be applicable with a registration under the Securities Act).

(d) Any Demand Notice or Piggyback Request shall (i) specify the Registrable Securities intended to be offered and sold by the Holder making the request, (ii) express such Holder’s present intent to offer such Registrable Securities for distribution, (iii) describe the nature or method of the proposed offer and sale of Registrable Securities and (iv) contain the undertaking of such Holder to provide all such information and materials and take all action as may reasonably be required in order to permit the Partnership to comply with all applicable requirements in connection with the registration of such Registrable Securities.

(e) No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

(f) The Partnership has not entered into and, unless agreed in writing by each of the Sponsors and any Special Successor, on or after the date of this Agreement will not enter into, any agreement which (a) is inconsistent with the rights granted to the Holders with respect to Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof in any material respect or (b) would allow any holder of Partnership Securities to include Partnership Securities in any Registration Statement filed by the Partnership on a basis that is superior or more favorable in any material respect to the rights granted to the Holders hereunder.

 

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3. Registration Procedures.

The procedures to be followed by the Partnership and each Holder electing to sell Registrable Securities in a Registration Statement pursuant to this Agreement, and the respective rights and obligations of the Partnership and such Holders, with respect to the preparation, filing and effectiveness of such Registration Statement, are as follows:

(a) The Partnership will, at least three (3) days prior to the anticipated filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do nothing more than name Holders and provide information with respect thereto), (i) unless available to the Holders through public filings with the Commission, furnish to such Holders copies of all such documents proposed to be filed and (ii) use its reasonable efforts to address in each such document when so filed with the Commission such comments as such a Sponsor or Special Successor reasonably shall propose within two (2) days of the delivery of such copies to the Sponsors and Special Successors.

(b) The Partnership will use commercially reasonable efforts to as promptly as reasonably possible (i) prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby for its Effectiveness Period and, subject to the limitations contained in this Agreement, prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities held by the Holders; (ii) cause the related Prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible provide such Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to such Holders as selling Holders but not any comments that would result in the disclosure to such Holders of material and non-public information concerning the Partnership.

(c) The Partnership will comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

(d) The Partnership will notify such Holders as promptly as reasonably practicable: (i)(A) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Partnership whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Partnership shall provide true and complete copies thereof and all written responses thereto to each of such Holders that pertain to such Holders as selling Holders, but not information which the Partnership believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post-effective amendment thereto, when the same has been declared effective; (ii) of any request by the Commission or any other federal or state

 

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governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information that pertains to such Holders as sellers of Registrable Securities; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Partnership of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of (but not the nature or details concerning) any event or passage of time that makes any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Partnership shall be required pursuant to this clause (v) in the event that the Partnership either promptly files a prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which in either case, contains the requisite information that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading).

(e) The Partnership will use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment, or if any such order or suspension is made effective during any Suspension Period, at the earliest practicable moment after the Suspension Period is over.

(f) During the Effectiveness Period, the Partnership will furnish to each such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Holder (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Partnership will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

(g) The Partnership will promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Holder may reasonably request during the Effectiveness Period. The Partnership consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

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(h) The Partnership will cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request in writing. In connection therewith, if required by the Partnership’s transfer agent, the Partnership will promptly, after the Effective Date of the Registration Statement, cause an opinion of counsel as to the effectiveness of the Registration Statement to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without any such legend upon sale by the Holder of such Registrable Securities under the Registration Statement.

(i) Upon the occurrence of any event contemplated by Section 3(d)(v), as promptly as reasonably possible, the Partnership will prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(j) Such Holders may distribute the Registrable Securities by means of an underwritten offering; provided that (i) such Holders provide written notice to the Partnership of their intention to distribute Registrable Securities by means of an underwritten offering, (ii) the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein, (iii) the managing underwriter or managing underwriters thereof shall be designated by the Initiating Holder in the case of a Demand Registration (provided, however, that such designated managing underwriter or managing underwriters shall be reasonably acceptable to the Partnership) or by the Partnership in the case of a registration initiated by the Partnership, (iv) each Holder participating in such underwritten offering agrees to enter into an underwriting agreement in customary form and sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled to select the managing underwriter or managing underwriters hereunder and (v) each Holder participating in such underwritten offering completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. The Partnership hereby agrees with each Holder that, in connection with any underwritten offering in accordance with the terms hereof, it will negotiate in good faith and execute all indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, including using all commercially reasonable efforts to procure customary legal opinions and auditor “comfort” letters.

(k) In the event such Holders seek to complete an underwritten offering, for a reasonable period prior to the filing of any Registration Statement and throughout the Effectiveness Period, the Partnership will make available upon reasonable notice at the

 

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Partnership’s principal place of business or such other reasonable place for inspection by the managing underwriter or managing underwriters selected in accordance with Section 3(j) such financial and other information and books and records of the Partnership, and cause the officers, employees, counsel and independent certified public accountants of the Partnership to respond to such inquiries, as shall be reasonably necessary (and in the case of counsel, not violate an attorney-client privilege in such counsel’s reasonable belief) to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act.

(l) In connection with any registration of Registrable Securities pursuant to this Agreement, the Partnership will take all commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of Registrable Securities by such Holders, including using commercially reasonable efforts to cause appropriate officers and employees to be available, on a customary basis and upon reasonable notice, to meet with prospective investors in presentations, meetings and road shows.

4. Registration Expenses. All Registration Expenses incident to the Parties’ performance of or compliance with their respective obligations under this Agreement or otherwise in connection with any Demand Registration or Piggyback Registration (excluding any Selling Expenses) shall be borne by the Partnership, whether or not any Registrable Securities are sold pursuant to a Registration Statement. “Registration Expenses” shall include, without limitation, (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made with the Trading Market and (B) in compliance with applicable state securities or “Blue Sky” laws), (ii) printing expenses (including expenses of printing certificates for Partnership Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by a Holder of Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel, auditors and accountants for the Partnership, (v) Securities Act liability insurance, if the Partnership so desires such insurance and (vi) fees and expenses of all other Persons retained by the Partnership in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Partnership shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of their officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on the Trading Market.

5. Indemnification. If requested by a Holder, the Partnership shall indemnify and hold harmless each underwriter, if any, engaged in connection with any registration referred to in Section 2 and provide representations, covenants, opinions and other assurances to any underwriter in form and substance reasonably satisfactory to such underwriter and the Partnership. Further, in addition to and not in limitation of the Partnership’s obligations under Section 7.7 of the LP Agreement, the Partnership shall indemnify and hold harmless each Holder, its Affiliates and each of their respective officers and directors and any Person who controls any such Holder (within the meaning of the Securities Act) and any agent thereof (collectively, “Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of preparation and reasonable attorneys’ fees) and expenses, judgments, fines,

 

14


penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which any Registrable Securities were registered, in any preliminary prospectus (if used prior to the Effective Date of such Registration Statement), or in any summary or final prospectus or free writing prospectus or in any amendment or supplement thereto (if used during the period the Partnership is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading; provided, however, that the Partnership shall not be liable to any Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or free writing prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Partnership by or on behalf of such Indemnified Person specifically for use in the preparation thereof. The Partnership shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Partnership is aware in connection with the transactions contemplated by this Agreement. Notwithstanding anything to the contrary herein, this Section 5 shall survive any termination or expiration of this Agreement indefinitely.

6. Facilitation of Sales Pursuant to Rule 144. To the extent it shall be required to do so under the Exchange Act, the Partnership shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144), and shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144. Upon the request of any Holder in connection with that Holder’s sale pursuant to Rule 144, the Partnership shall deliver to such Holder a written statement as to whether it has complied with such requirements.

7. Miscellaneous.

(a) Remedies. In the event of a breach by the Partnership of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Partnership agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(b) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Partnership of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(d), such Holder will forthwith

 

15


discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement or until it is advised in writing by the Partnership that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Partnership may provide appropriate stop orders to enforce the provisions of this Section 7(b).

(c) Amendments and Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed by the Parties. The Partnership shall provide prior notice to all Holders of any proposed waiver or amendment. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

(d) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Section 7(d) prior to 5:00 p.m. (Eastern Standard Time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Agreement later than 5:00 p.m. (Eastern Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the Party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

 

If to the Partnership    Chesapeake Midstream Partners, L.P.
   777 NW Grand Boulevard
   Oklahoma City, Oklahoma 73118
   Attention: J. Mike Stice
   Facsimile: (405) 840-6134
With a copy to:    Vinson & Elkins L.L.P.
   666 Fifth Avenue, 26th Floor
   New York, NY 10103-0040
   Attention: Alan P. Baden
   Facsimile: (917) 849-5337
   and
   Latham & Watkins LLP
   885 Third Avenue
   New York, New York 10022
   Attention: Edward Sonnenschein
   Facsimile: (212) 751-4864

 

16


If to the GIP Entities:    Global Infrastructure Management, LLC
   12 East 49th Street, 38th Floor
   New York, New York 10017
   Attention: Salim Samaha
   Facsimile: (646) 282-1599
With a copy to:    Global Infrastructure Management UK Limited
   Cardinal Place, 80 Victoria Street
   London SW1E 5JL
   United Kingdom
   Attention: Joseph Blum
   Facsimile: +44 207 798 0530
   and
   Latham & Watkins LLP
   885 Third Avenue
   New York, New York 10022
   Attention: Edward Sonnenschein
   Facsimile: (212) 751-4864
If to Chesapeake Holdings:    Chesapeake Midstream Holdings, L.L.C.
   777 NW Grand Boulevard
   Oklahoma City, Oklahoma 73118
   Attention: J. Mike Stice
   Facsimile: (405) 840-6134
With a copy to:    Vinson & Elkins L.L.P.
   666 Fifth Avenue, 26th Floor
   New York, NY 10103-0040
   Attention: Alan P. Baden
   Facsimile: (917) 849-5337
If to any other Person who is then the registered Holder:    To the address of such Holder as it appears in the applicable register for the Registrable Securities or such other address as may be designated in writing hereafter, in the same manner, by such Person.

(e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. Except as provided in this Section 7(e), this Agreement,

 

17


and any rights or obligations hereunder, may not be assigned without the prior written consent of the Partnership and the Sponsors and any Special Successors. Notwithstanding anything in the foregoing to the contrary, the registration rights of a Holder pursuant to this Agreement with respect to all or any portion of its Registrable Securities may be assigned without such consent (but only with all related obligations) with respect to such Registrable Securities (and any Registrable Securities issued as a dividend or other distribution with respect to, in exchange for or in replacement of such Registrable Securities) by such Holder to a transferee of such Registrable Securities; provided (i) the Partnership is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Agreement. The Partnership may not assign its respective rights or obligations hereunder without the prior written consent of each of the Sponsors and any Special Successors.

(f) “Market Stand-Off” Agreement. In connection with any underwritten offering of Partnership Securities, each Holder holding five percent (5%) or more of the Partnership’s voting securities (each a “5% Holder”) hereby agrees that such Holder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Partnership Securities held by such Holder (other than those included in such offering) for a period specified by the representative of the underwriters of Partnership Securities not to exceed ninety (90) days following the closing date of the offering of Partnership Securities (the “Stand-Off Period”); provided that all officers and directors of the General Partner and holders of at least five percent (5%) of the Partnership’s voting securities enter into similar agreements and only if such Persons remain subject thereto (and are not released from such agreement) for such Stand-Off Period. Each 5% Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Partnership or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Partnership or the representative of the underwriters of Partnership Securities, each Holder shall provide, within three (3) days of such request, such information as may be required by the Partnership or such representative in connection with the completion of any public offering of the Partnership Securities pursuant to a Registration Statement. The obligations described in this Section 7(f) shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Partnership may impose stop-transfer instructions with respect to Common Units (or other securities) subject to the foregoing restriction until the end of the Stand-Off Period.

(g) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or electronic mail transmission, such signature shall create a valid binding obligation of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature delivered by facsimile or electronic mail transmission were the original thereof.

 

18


(h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law.

(i) Submission to Jurisdiction. Each of the Parties irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, and any appellate court from and thereof, in any action or proceeding arising out of or relating to this Agreement, or for the recognition or enforcement of any judgment, and each of the Parties irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Delaware court or, to the fullest extent permitted by applicable law, in such federal court. The Parties agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(j) Waiver of Venue. The Parties irrevocably and unconditionally waive, to the fullest extent permitted by applicable law, (i) any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in Section 7(i) and (ii) the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

(l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the Parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(m) Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior contracts or agreements with respect to the subject matter hereof and the matters addressed or governed hereby or in the other Transaction Documents, whether oral or written. Without limiting the foregoing, each of the Parties acknowledges and agrees that (i) this Agreement is being executed and delivered in connection with each of the other Transaction Documents and the transactions contemplated hereby and thereby, (ii) the performance of this Agreement and the other Transaction Documents and expected benefits herefrom and therefrom are a material inducement to the willingness of the Parties to enter into and perform this Agreement and the other Transaction Documents and the transactions described herein and therein, (iii) the Parties would not have been willing to enter into this Agreement in the absence of the entrance into, performance of, and the economic interdependence of, the Transaction Documents, (iv) the execution and delivery of this Agreement and the other Transaction Documents and the rights and obligations of the parties hereto and thereto are

 

19


interrelated and part of an integrated transaction being effected pursuant to the terms of this Agreement and the other Transaction Documents, (v) irrespective of the form such documents have taken, or otherwise, the transactions contemplated by this Agreement and the other Transaction Documents are necessary elements of one and the same overall and integrated transaction, (vi) the transactions contemplated by this Agreement and by the other Transaction Documents are economically interdependent and (vii) such Party will cause any of its successors or permitted assigns to expressly acknowledge and agree to this Section 7(m) prior to any assignment or transfer of this Agreement, by operation of law or otherwise.

(n) Headings; Section References. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless otherwise stated, references to Sections, Schedules and Exhibits are to the Sections, Schedules and Exhibits of this Agreement.

[THIS SPACE LEFT BLANK INTENTIONALLY]

 

20


IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

CHESAPEAKE MIDSTREAM PARTNERS, L.P.
By:   CHESAPEAKE MIDSTREAM GP, L.L.C., its general partner
By:    
Name:  
Title:  

Signature Page to Registration Rights Agreement


GIP-A HOLDING (CHK), L.P.
By:    
Name:  
Title:  

 

GIP-B HOLDING (CHK), L.P.
By:    
Name:  
Title:  

 

GIP-C HOLDING (CHK), L.P.
By:    
Name:  
Title:  

Signature Page to Registration Rights Agreement


CHESAPEAKE MIDSTREAM HOLDINGS, L.L.C.
By:    
Name:
Title:

Signature Page to Registration Rights Agreement

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