“Acid Gas” means carbon dioxide and hydrogen sulfide removed by the amine treater at the Treatment Plant and disposed of in the Injection Well (hereafter defined).

 

“Acid Gas Disposal Line” has the meaning set forth in the Recitals above.

 

“Affiliate” means any Person that, directly or indirectly, through one or more other Persons, controls, is controlled by or is under common control with the Person specified. With respect to any Person (i) the securities of which are not publicly traded and (ii) that has no ultimate parent the securities of which are publicly traded, the term “Affiliate” shall also include (a) any executive officer, partner, member, manager, or director of the Person specified, (b) any Person controlled by one or more executive officers, partners, members, managers, or directors of the Person specified, or (c) any Person related (by blood or marriage) to any executive officer, partner, member, manager, or director. For the purpose of this definition of Affiliate, the term “control” means the power to direct or cause the direction of the management of such Person, whether through the ownership of voting securities, by contract or agency or otherwise.

 

“Agreement” has the meaning set forth in the introductory paragraph.

 

“Ancillary Agreements” means the Gas Purchase Contract, the Termination and Release Agreement, the Escrow Agreement, and any other agreements executed in connection herewith.

 

“Area of Mutual Interest” or “AMI” means the area outlined on Exhibit A including, without limitation, the lands covered by the leases described in Exhibit A-1 and such other lands covered by leases or other interests that Redwood or its Affiliates may obtain while this Agreement is in force and effect within the AMI. If any lease or other interest acquired by Redwood lies partially within and partially outside of the AMI, the entire interest shall be considered as being situated within the AMI, and the AMI shall be revised to accord with any such change.

 

“Business Day” means any day other than a Saturday, Sunday, or legal holiday in the State of Texas, and on which banks are open for business in Houston, Texas.

 

“Claims” means any and all claims, demands, suits, causes of action, losses, damages, liabilities, fines, penalties and costs (including, without limitation, attorneys’ fees and costs of litigation), whether known or unknown, including environmental and non-environmental claims.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Closing” has the meaning set forth in Section 2.1.

 

“Drilling Program” has the meaning set forth in Section 3.1.

 

“Escrow Agreement” means that form of escrow agreement attached hereto as Exhibit E.

 

“Exhibits” mean the following exhibits which are attached to this Agreement and, as amended hereby, herein incorporated by reference for all purposes:

 

Exhibit A—Area of Mutual Interest

 

2

 

Exhibit A-1—Oil and Gas Leases

Exhibit A-2—Land Map with Interpreted Field Outline of the MRF

Exhibit B—Ruby Magness Well No. 1, the Angela Farris Fannin Well No. 1, and the Injection Well   Locations

Exhibit C—Gas Purchase Contract

Exhibit D—Termination and Release Agreement

Exhibit E—Form of Escrow Agreement

 

“Expansion” has the meaning set forth in Section 3.3 below.

 

“Force Majeure” has the meaning set forth in Section 7.1 below.

 

“Gas Purchase Contract” means the Gas Purchase Contract between MGP and Redwood in the form attached hereto as Exhibit C.

 

“Gathering Assets” has the meaning set forth in the Recitals above.

 

“Governmental Authority” means any federal, state, local, municipal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal.

 

“Injection Well” means Redwood’s injection well which disposes of Acid Gas from the Treatment Plant, which Injection Well is more particularly identified on Exhibit B attached hereto.

 

“Laws” means any and all laws, statutes, ordinances, permits, decrees, writs, injunctions, orders, codes, judgments, principles of common law, rules or regulations (including, without limitation, environmental laws) which are promulgated, issued or enacted by a Governmental Authority having jurisdiction.

 

“MAOP” means the maximum allowable operating pressure of the Gathering Assets, which pressure shall not exceed eight hundred pounds per square inch gauge (800 psig) pressure.

 

“Mcf” means one thousand cubic feet of gas.

 

“MMcf” means one million cubic feet of gas. MMCF/d means one million cubic feet of gas per day. “MRF” has the meaning set forth in the Recitals above.

 

“Party” and “Parties” has the meaning set forth in the introductory paragraph.

 

“Person” means an individual, group, partnership, limited liability company, corporation, trust or other entity.

 

“Rodessa/Sligo Interval” means the stratigraphic equivalent of those sands, zones, and horizons occurring below the surface of the earth encountered between the depths of 11,427 feet and 12,378 feet (electric log measurements) in the Ruby Magness Well No. 1 located in the Amy Boatwright Survey, A-7, Madison County, Texas.

 

3

 

“Security Documents” has the meaning set forth in Sections 3.2 and 3.4 below.

 

“Term” has the meaning set forth in Section 4.1 below.

 

“Third Party” means any Person other than the Parties, including any Governmental Authority.

 

“Treatment Plant” means the gas treatment plant acquired by MGP from Hanover Compression Limited Partnership, and any expansion thereof.

 

ARTICLE II.
Closing and Execution of Instruments

 

2.1                               Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Andrews Kurth LLP, counsel to Redwood, located at 600 Travis, Suite 4200, Houston, Texas 77002, on Monday, July 25, 2005 contemporaneously with MGP’s acquisition of the Treatment Plant from Hanover and the Gathering Assets from Gateway. At the Closing the Parties shall execute and deliver all of the instruments to be executed in connection herewith including, without limitation, the Ancillary Agreements. The Closing may occur by facsimile, PDF files bearing electronic signatures, overnight courier, or such other means as agreed by the Parties. Promptly following the Closing, each of the Parties shall provide the other with fully-executed originals of this Agreement and the Ancillary Agreements.

 

2.2                               Further Assurances. From time to time after the Closing, upon reasonable request by the other Party, each Party agrees to execute and deliver such additional documents as the requesting Party may reasonably require to accomplish the purposes of this Agreement.

 

ARTICLE III.
Madisonville Field Development Program

 

3.1                               Additional Well(s); Drilling Program. Subject to events of Force Majeure, and the availability of suitable rigs, well services, and equipment, Redwood shall undertake a minimum three (3) well drilling program in the MRF (the “Drilling Program”) as follows:

 

(a)                                  On or before March 1, 2006 Redwood will have (i) drilled the first well in the Drilling Program to a depth sufficient to test the Rodessa/Sligo Interval, and (ii) completed the well if, in the sole opinion of Redwood as a reasonable and prudent oil and gas operator, such well is capable of producing in paying quantities.

 

(b)                                 On or before August 1, 2006 Redwood will have (i) drilled the second well in the Drilling Program to a depth sufficient to test the Rodessa/Sligo Interval, and (ii) completed the well if, in the sole opinion of Redwood as a reasonable and prudent oil and gas operator, such well is capable of producing in paying quantities.

 

(c)                                  On or before September 30, 2008 Redwood will have (i) drilled the third well in the Drilling Program to a depth sufficient to test the Smackover Formation (estimated to be encountered at an approximate depth of 18,000 feet), and (ii) completed

 

4

 

the well if, in the sole opinion of Redwood as a reasonable and prudent oil and gas operator, such well is capable of producing in paying quantities.

 

3.2                               Redwood Mortgage. In order to secure Redwood’s performance under the Drilling Program, within thirty (30) days after the Closing hereunder, Redwood shall execute and deliver to MGP a mortgage, deed of trust, security agreement, and financing statement, and related security instruments (collectively, the “Security Documents”), in recordable form, encumbering all of Redwood’s fee, oil and gas leasehold, oil and gas production, fixtures, and equipment situated within the AMI. At Redwood’s request, MGP shall subordinate its lien and security interest to any unaffiliated lender to Redwood. Upon the occurrence of any Redwood default under the Drilling Program, MGP may, in addition to any other remedies available at law or in equity and subject to the rights of any prior or superior lien or encumbrance, in its sole discretion elect to foreclose or exercise its other rights under the Security Documents. The Security Documents shall be released by MGP upon Redwood’s completion of the Drilling Program.

 

3.3                               Expansion of Treating Facilities. Subject to events of Force Majeure and the availability of fabricated components, on or before March 1, 2006 MGP shall install and make operational additional treating capacity of fifty (50) MMcf/d at the inlet of the Treatment Plant (the “Expansion”). Following the Expansion, the Treatment Plant shall have a total capacity of approximately sixty-eight million cubic feet of untreated gas per day (68 MMcf/d). MGP shall act as a reasonable and prudent gas treatment plant operator to operate and maintain the Treatment Plant to attempt to obtain maximum efficiency in terms of (i) the volume of treated gas redelivered at the “Point of Redelivery,” as such term is defined in the Gas Purchase Contract, and (ii) minimizing Treatment Plant downtime in accordance with prevailing gas treating plant industry standards, the quality specifications and requirements of the receiving transportation pipeline, and applicable Laws. MGP’s obligation to maintain the capacity of the Treatment Plant shall remain in effect only for so long as such capacity is necessary to treat Redwood’s owned or controlled gas produced from the AMI.

 

3.4                               MGP Mortgage. In order to secure MGP’s Treatment Plant Expansion obligations under Sections 3.3 above, within thirty (30) days after the Closing hereunder, MGP shall execute and deliver to Redwood a mortgage, deed of trust, security agreement, and financing statement, and related security instruments (collectively, the “Security Documents”), in recordable form, encumbering all of MGP’s fee, leasehold, Treatment Plant, Gathering Assets, fixtures, and equipment situated within the AMI. At MGP’s request, Redwood shall subordinate its lien and security interest to any unaffiliated lender to MGP, or to any commercial bank even if affiliated with MGP. Upon the occurrence of any MGP default of its Treatment Plant expansion obligation, Redwood may, in addition to any other remedies available at law or in equity and subject to the rights of any prior or superior lien or encumbrance, in its sole discretion elect to foreclose or exercise its other rights under the Security Documents. The Security Documents shall be released by Redwood upon MGP’s completion of the Expansion.

 

3.5                               All-Electric. Subject to the provisions hereof, MGP shall not use any gas owned or controlled by Redwood for fuel to the extent of the Expansion of its Treatment Plant facilities. MGP shall configure the Expansion component of its Treatment Plant to be powered entirely by purchased electricity rather than onsite gas-generated electricity. Promptly after Closing, MGP

 

5

 

shall investigate the estimated costs and timing related to converting gas-powered compression and other equipment at the current existing in-service Treatment Plant from gas to purchased electricity. MGP shall provide the results of the investigation to Redwood. If Redwood determines that such a conversion should occur, MGP and Redwood shall agree upon the mechanism for cost reimbursement, and MGP shall undertake the conversion of the Plant at Redwood’s sole cost and expense. Moreover, any additional continuing operating expenses shall be added to the Treating Fee set forth in the Gas Purchase Contract. If MGP decommissions a portion of the Treatment Plant, it shall first decommission the current existing in-service Treatment Plant gas-powered facilities.

 

3.6                               The Injection Well / The Acid Gas Disposal Line.

 

(a)                                  The Injection Well. The Injection Well, which is owned and operated by Redwood and connected to the Treatment Plant by the Acid Gas Disposal Line, shall have sufficient capacity to dispose of all volumes of Acid Gas removed at the Treatment Plant from gas reserves owned or controlled by Redwood, produced from the AMI, and sold to MGP pursuant to the Gas Purchase Contract. Under Redwood’s disposal permit issued by the Railroad Commission of Texas for the Injection Well, Redwood may dispose only of Acid Gas removed at the Treatment Plant from gas reserves owned or controlled by Redwood. MGP shall not utilize the Acid Gas Disposal Line in any manner which would violate, or result in a violation of, Redwood’s disposal permit. Redwood shall operate and maintain the Injection Well as a reasonable and prudent disposal well operator and in accordance with applicable Law.

 

(b)                                 The Acid Gas Disposal Line. MGP owns and operates the Acid Gas Disposal Line. MGP shall operate and maintain the disposal line as a reasonable and prudent pipeline operator and in accordance with applicable Law. The Acid Gas Disposal Line shall have sufficient capacity to transport Acid Gas removed from a minimum inlet volume of sixty-eight million cubic feet of gas per day (68 MMcf/d) from the Treatment Plant to the Injection Well. Title to and custody of the Acid Gas shall be transferred from MGP to Redwood at the outlet flange of the Acid Gas Disposal Line at the Injection Well.

 

3.7                               Gathering System for Additional Wells / Gas Specifications / Gas Sales

 

(a)                                  The Gathering System. Promptly after Closing, MGP shall commence and diligently perform at the earliest possible time, or cause to be commenced and diligently performed at the earliest possible time, the construction of a gathering line from the Angela Fannin Farris Well No. 1 to the Ruby Magness Well No. 1 or the Treatment Plant, as applicable, the actual location and route of the gathering line to be determined at MGP’s sole discretion, after reasonable consultation with Redwood. Upon notification by Redwood of its successful completion of any Drilling Program or other additional well or wells in the AMI, MGP shall commence and diligently perform at the earliest possible time, or cause to be commenced and diligently performed at the earliest possible time, the construction of a gathering line(s) from the additional well(s) to the Ruby Magness Well No. 1 (or any other additional well) or the Treatment Plant, as applicable, the actual location and route of the gathering line(s) to be determined at MGP’s sole discretion,

 

6

 

after reasonable consultation with Redwood. Any such additional gathering line(s) shall be constructed and operated by MGP as a prudent gas gatherer in accordance with applicable Laws. MGP will build any additional gathering line(s) to additional wells at its sole cost, risk, and expense. To the extent that Redwood has the right to lay pipelines across any of the lands or leases in the AMI and such right may be assigned, then, if requested by MGP, Redwood shall assign nonexclusive rights-of-way and easements to MGP to assist in the installation of the gathering and transportation pipelines, provided that MGP shall reimburse Redwood for all costs and expenses, if any, incurred in any assignment of pipeline right-of-way or similar instrument.

 

(b)                                 Wellhead Gas Specifications. Prior to the introduction of gas owned or controlled by Redwood into MGP’s gathering system Redwood shall, at its sole cost, risk, and expense, promptly install, operate, and maintain all necessary equipment and facilities at the well location(s) in order to deliver such gas at an adequate pressure to enter MGP’s gathering system not to exceed the MAOP and at a temperature not to exceed one hundred twenty (120) degrees Fahrenheit. MGP shall accept such gas and shall, at its sole cost, risk, and expense, promptly install, operate, and maintain all necessary equipment, instrumentation, metering, safety equipment, and facilities at the well location (or such other convenient location), and perform such other services, as are necessary to make such gas conform to the specifications of MGP’s gathering system so that such gas may be safely and efficiently delivered to the Treatment Plant.

 

(c)                                  Gas Sales. Redwood shall sell to MGP and MGP shall purchase from Redwood all of Redwood’s owned or controlled gas produced from any depth from within the AMI to the extent of the Treating Plant Expansion capacity for the Term of the Gas Purchase Contract. If the volume of Redwood’s owned or controlled gas produced from any depth from within the AMI exceeds the Treating Plant Expansion capacity, then MGP and Redwood shall attempt to negotiate mutually agreeable terms for MGP to undertake additional Treatment Plant expansion; provided, however, if the Parties fail to reach agreement with respect to additional Treatment Plant expansion, MGP shall release the excess volumes of Redwood’s owned or controlled gas from the terms hereof and the Gas Purchase Contract.

 

ARTICLE IV.
Term / Third Party Treating

 

4.1                               Term. The term of this Agreement shall be from the effective date hereof and for so long thereafter as Redwood, its successors and assigns, owns any oil and gas leasehold or mineral interest in the AMI; provided, however, this Agreement shall terminate thirty (30) years from effective date hereof unless extended by the mutual agreement of the Parties. The Term shall be extended by the duration of any event of Force Majeure under Article 7.1 below.

 

4.2                               Third Party Gas Treating; Additional Expansion. While this Agreement is in force and effect, all deliveries by MGP of Redwood’s owned or controlled gas to the Treatment Plant will have priority over any gas deliveries made by any other Person up to the total Treatment Plant capacity. The Parties acknowledge that MGP may transport and treat certain volumes of Third Party gas on an interruptible basis subject to available excess Treatment Plant

 

7

 

capacity. If the total volumes of any Third Party gas delivered to the Treatment Plant plus Redwood’s owned or controlled gas delivered to the Treatment Plant exceed the capacity of the Treatment Plant, MGP shall utilize one hundred percent (100%) of the Treatment Plant capacity for Redwood’s owned or controlled gas from the AMI. If, under an order of any Governmental Authority or in compliance with applicable Law, MGP must provide firm Treatment Plant capacity for Third Party gas, and the result is a reduction of Treatment Plant capacity so that MGP cannot handle or treat all of Redwood’s available gas, then MGP promptly shall install and make operational additional treating capacity at the Treatment Plant to accommodate all of Redwood’s owned or controlled gas to the extent of the Treatment Plant Expansion capacity (i.e. available Treatment Plant capacity to Redwood of sixty-eight million cubic feet of untreated gas per day (68 MMcf/d)) at no additional cost to Redwood other than the “Treating Fee” set forth as a “Permitted Deduction” in the Gas Purchase Contract.

 

4.3                               Binding Covenant. This Agreement and the dedication of gas owned or controlled by Redwood from the AMI and purchased by MGP under the Gas Purchase Contract shall be a real covenant running with the land. Any assignment by Redwood or MGP shall be made expressly subject to the terms and conditions of this Agreement and the Gas Purchase Contract.

 

ARTICLE V.
Representations and Warranties

 

Each Party represents and warrants to the other Party that as of the date hereof:

 

5.1                               Organization and Good Standing. Such Party is duly organized, validly existing and in good standing under the Laws of the state of its formation and has all requisite partnership power and authority to own and develop its interests and assets in or related to the MRF. Such Party is duly qualified to do business in Texas and is in good standing in the State of Texas and, if applicable, in the other jurisdictions in which it transacts business.

 

5.2                               Company Authority; Authorization of Agreement. Such Party has all requisite partnership power and authority to execute and deliver this Agreement and the Ancillary Agreements, to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, and to perform all of its obligations under this Agreement and the Ancillary Agreements. This Agreement and the Ancillary Agreements constitute the valid and binding obligations of such Party, enforceable against it in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency or other Laws relating to or affecting the enforcement of creditors’ rights and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

 

5.3                               No Violations. Such Party’s execution and delivery of this Agreement and the Ancillary Agreements to which it is a party, and the consummation of the transactions contemplated hereby and thereby, will not:

 

(a)                                  conflict with or require the consent of any Person under any of the terms, conditions or provisions of the partnership agreement, certificate of formation or other organizational document of such Party;

 

8

 

(b)                                 conflict with, result in a breach of, constitute a default under or constitute an event that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under: (i) any mortgage, indenture, loan, credit agreement or other agreement evidencing indebtedness for borrowed money to which such Party is a party or by which such Party is bound except, where such conflict, breach or default would not materially affect such Party’s ability to consummate the transactions contemplated hereby and thereby; or (ii) any order, judgment or decree of any Governmental Authority; or

 

(c)                                  result in the creation or imposition of any lien or encumbrance on any assets of such Party in the MRF.

 

5.4                               Third Party Claims, Disputes and Litigation. Except as set forth on Schedule 5.4, there are no Third Party Claims, disputes, or litigation pending or, to such Party’s knowledge, threatened against such Party that would prevent the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements.

 

5.5                               Agreements. The Ancillary Agreements, the Contingency Plan Agreement entered into and effective May, 2003, and that Escrow Agreement by and among The Chase Manhattan Bank (now JPMORGAN CHASE BANK), Hanover, and Redwood dated June 15, 2001 are the only agreements in existence to which Redwood is a signatory party which are applicable to or binding upon MGP or its operations within the AMI. There are no other Redwood agreements which affect the rights, duties, or obligations of MGP.

 

5.6                               Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to such Party’s knowledge, threatened against such Party.

 

5.7                               Foreign Person. Such Party is not a “foreign person” within the meaning of Section 1445 of the Code.

 

5.8                               Brokers, Agents, and Finders. No Person claiming by, through, or under such Party is entitled to any broker’s, finder’s or similar fee by reason of the transactions contemplated by this Agreement or the Ancillary Agreements.

 

5.9                               Investments. Prior to entering into this Agreement, such Party was advised by and has relied solely on its own legal, tax, and other professional counsel concerning this Agreement, the Ancillary Agreements, the interests and assets to which it may become entitled hereunder, and the value thereof. Such Party is and will be acquiring such interests and assets for its own account and not for distribution or resale in any manner that would violate any state or federal securities Laws.

 

9

 

ARTICLE VI.
Choice of Law and Dispute Resolution

 

6.1                               Choice of Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Texas, without giving effect to conflicts of laws principles that would apply the laws of another jurisdiction.

 

6.2                               Dispute Resolution.

 

(a)                                  Good Faith Efforts. The Parties wish to avoid disputes relating to or arising out of this Agreement. In the event of any dispute or perceived problem, each Party shall notify the other Party and seek an amicable resolution without regard to mediation. Except as otherwise provided in this Agreement, the Party receiving a notice hereunder shall be given fifteen (15) Business Days from the date of receipt of such notice to remedy the breach or otherwise correct its performance under this Agreement.

 

(b)                                 Mediation. In the event the Parties cannot reach an amicable resolution to a dispute or perceived problem, the Parties shall within fifteen (15) Business Days after the end of the fifteen (15) Business Day period set forth in Section 6.2(a) agree upon a mediator and shall promptly attempt to mediate a solution.

 

(c)                                  Litigation; Mandatory Venue. If the Parties cannot reach an amicable resolution to a dispute or perceived problem through mediation, each Party hereto consents and submits to the exclusive personal jurisdiction and venue of the federal or state courts in Houston, Harris County, Texas.

 

ARTICLE VII.
Miscellaneous

 

7.1                               Force Majeure.

 

(a)                                  If either Party hereto is unable, wholly or in part, by an event of Force Majeure to carry out its obligations under this Agreement, other than to make payments due hereunder, it is agreed that upon such Party giving notice and full particulars of such Force Majeure event in writing or by facsimile to the other Party as soon as possible after the occurrence of the cause relied on, then the obligations of the Party giving such notice, as far as they are affected by such event of Force Majeure, shall be suspended from the commencement of and during the continuance of any inability so caused but for no longer period, and such cause shall as far as possible be remedied with all reasonable dispatch.

 

(b)                                 The term “Force Majeure,” as used herein, shall mean an act of God, act of the public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion and any other causes whether of the kind enumerated or otherwise not reasonably within the control of the Party claiming the suspension and which by the exercise of reasonable diligence such Party is unable to prevent or overcome. “Force Majeure” regarding Redwood shall also include subsurface conditions or formations encountered during the Drilling Program, whether natural or mechanical, including but not limited to blowout, heaving shale, igneous rock, salt, saltwater flow, loss of circulation, loss of hole,

 

10

 

abnormal pressures, or any other impenetrable substance or adverse condition, which renders further drilling of any Drilling Program well, in Redwood’s sole opinion, either impossible or impractical. “Force Majeure” regarding MGP shall also include the inability to secure raw materials or equipment (after expending reasonable commercial efforts to obtain same), transportation accidents, labor disputes, and equipment failures which materially interfere with the operation of the Treatment Plant.

 

7.2                               Notices. All notices and other communications required or desired to be given hereunder must be in writing and sent (properly addressed as set forth below) by: (a) U.S. mail with all postage and other charges fully prepaid, (b) hand delivery, or (c) e-mail or electronic facsimile transmission. A notice will be deemed effective on the date on which such notice is received by the addressee, if by mail or hand delivery, or on the date sent, if by e-mail or facsimile (as evidenced by telephonic or fax machine confirmation of receipt or return confirming e-mail from the recipient); provided, however, if such date is not a Business Day, the date of receipt will be on the next date that is a Business Day. Either Party may change its address by notifying the other Party in writing of such address change.

 

If to Redwood:                                                                                       Redwood Energy Production, L.P.

One Maritime Plaza, Suite 700

San Francisco, CA  94111

Attn:  Mr. Stuart J. Doshi

Telephone  (415)  398-8186

Facsimile:  (415)  398-9227

E-mail: sdoshi@geopetro.com

 

If to MGP:                                                                                                               Madisonville Gas Processing, LP

1625 Broadway, Suite 2400

Denver, CO 80202

Attn:  Mr. Robert J. Clark

Telephone  (303)  626-8288

Facsimile:  (303)  626-8259

E-mail:  rjclark@bearcubenergy.com

 

7.3                               Amendments and Severability. No amendments or other modifications to this Agreement will be effective or binding on either of the Parties unless the same are in writing, are designated as an amendment or modification, expressly reference this Agreement, and are signed by each Party. The invalidity of any one or more provisions of this Agreement will not affect the validity of this Agreement as a whole, and in case of any such invalidity, this Agreement will be construed as if the invalid provision had not been included herein.

 

7.4                               Successors and Assigns. The terms, covenants and conditions contained in this Agreement are binding upon and inure to the benefit of the Parties and their respective successors and assigns.

 

7.5                               No Partnership Created. It is not the purpose or intention of this Agreement to create (and it should not be construed as creating) a joint venture, partnership or any type of association, and the Parties are not authorized to act as an agent or principal for each other with

 

11

 

respect to any matter related hereto. If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, and if the Parties have not otherwise agreed to form a tax partnership, each Party thereby affected elects to be excluded from the application of all of the provisions of Subchapter “K,” Chapter 1, Subtitle “A,” of the Code, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. Either Party is authorized and directed to execute on behalf of the other Party such evidence of this election as may be required by the Secretary of the Treasury of the United States or the Federal Internal Revenue Service, including specifically, but not by way of limitation, all of the returns, statements, and the data required by Treasury Regulations §1.761. Should there be any requirement that each Party give further evidence of this election, each Party shall execute such documents and furnish such other evidence as may be required by the Federal Internal Revenue Service or as may be necessary to evidence this election. No Party shall give any notices or take any other action inconsistent with the election made hereby. If any present or future income tax laws of the state in which the MRF is located or any future income tax laws of the United States contain provisions similar to those in Subchapter “K,” Chapter 1, Subtitle “A,” of the Code, under which an election similar to that provided by Section 761 of the Code is permitted, each Party shall make such election as may be permitted or required by such laws. In making the foregoing election, each Party states that the income derived by such Party from operations hereunder can be adequately determined without the computation of partnership taxable income.

 

7.6                               Waiver of Certain Remedies. Notwithstanding anything to the contrary in this Agreement, in no event shall either Party be entitled to receive or be liable to the other Party for (and each Party hereby waives) any consequential, special, indirect, or punitive damages arising out of this Agreement or the transactions contemplated hereby, irrespective of whether alleged to be by way of indemnity (other than indemnity for Third Party claims), as a result of breach of any provision of this Agreement, tort (including negligence and strict liability), or otherwise, including, without limitation, any loss of profits, loss of income, loss of use, loss of revenue, loss of contracts, or loss of fuel, REGARDLESS OF WHETHER ANY SUCH DAMAGES ARE CAUSED BY, CONTRIBUTED TO BY, OR ARISE OUT OF, THE SOLE, JOINT OR CONCURRENT NEGLIGENCE (IN ANY DEGREE) OR STRICT LIABILITY OF THE OTHER PARTIES.

 

7.7                               No Third Party Beneficiaries. Nothing contained in this Agreement will entitle anyone other than the Parties or their successors and permitted assigns to any Claim, cause of action, remedy, or right of any kind whatsoever.

 

7.8                               Construction. THE PARTIES ACKNOWLEDGE THAT THEY HAVE HAD AN ADEQUATE OPPORTUNITY TO REVIEW EACH AND EVERY PROVISION CONTAINED IN THIS AGREEMENT AND TO SUBMIT THE SAME TO LEGAL COUNSEL FOR REVIEW AND COMMENT. BASED ON THE FOREGOING, THE PARTIES AGREE THAT THE RULE OF CONSTRUCTION THAT A CONTRACT BE CONSTRUED AGAINST THE DRAFTER, IF ANY, NOT BE APPLIED IN THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT.

 

7.9                               Conflict in Agreements. If any conflict exists between this Agreement and any Ancillary Agreement, then (as between the Parties) the provisions of this Agreement shall control.

 

12

 

7.10                        Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, all which when taken together shall constitute one and the same agreement.

 

7.11                        Entire Agreement. This Agreement and the Exhibits attached hereto, which are incorporated herein by reference, (i) supersede all prior and contemporaneous negotiations, understandings, memoranda of understanding and agreements (whether oral or written) between the Parties with respect to the subject matter hereof, and (ii) constitute the entire understanding and agreement between the Parties with respect thereto.

 

7.12                        Headings. The headings contained herein are for reference only and shall not in any way affect the meaning or interpretation of this Agreement.

 

7.13                        DTPA Waiver. After consultation with their respective attorneys, and to the extent permitted by applicab