JOINT VENTURE AGREEMENT

Exhibit 10.28

JOINT VENTURE AGREEMENT

HAGERMAN GAS GATHERING SYSTEM

FEAGAN GATHERING COMPANY

PARALLEL PETROLEUM CORPORATION

and

CAPSTONE OIL & GAS COMPANY, L.P.

INDEX

Article 1		Formation of Joint Venture
1.1		Formation of Joint Venture			1
Article 2		Definitions
2.1		Definitions			1
2.2		Terms Generally			3
Article 3		The Joint Venture
3.1		Name, Assumed Name Certificates			4
3.2		Joint Venture Office and Principal Place of Business			4
3.3		Purpose			4
3.4		Other Activities			4
Article 4		Ownership and Availability of the System
4.1		Ownership of Joint Venture Facilities			5
4.2		Availability of the System			5
Article 5		Representations and Warranties
5.1		Representations, Warranties and Covenants of Parties			5
Article 6		Capital Contributions and Ownership
6.1		Initial Capital Contribution and Ownership			6
6.2		Additional Capital Contributions			7
6.3		Payment of Capital Contributions			7
6.4		Carried Capital Contribution			8
6.5		Option to Purchase Additional Interest			8
6.6		Voluntary Contributions			8
Article 7		Allocations and Capital Accounts
7.1		Allocations; Capital Accounts			9

Article 8		Distributions and Reimbursements
8.1		Distributions			11
8.2		Reimbursement of Expenses			12
Article 9		Accounting; Books and Records; Taxes
9.1		Fiscal Year			12
9.2		Location of Records			12
9.3		Books of Account			12
9.4		Financial Statements			12
9.5		Taxation and Reports			13
9.6		Governmental Reports and Compliance with Laws			13
9.7		Inspection of Facilities and Records			14
9.8		Deposit of Funds			14
9.9		Tax Matters Partner			14
Article 10		Management; Operator and Conduct of Operations
10.1		Management of the Joint Venture			15
10.2		Operator			15
10.3		Composition of Management Committee			15
10.4		Authority of the Management Committee			15
10.5		Approval Requirements; Limitation on Voting Rights			17
10.6		Meetings			17
10.7		Appointment of Operator; Construction and Operation of the System			17
10.8		Conduct of Operations			17
10.9		Expenses			18
10.10		Personnel			18
10.11		Discharge of Expenses			18
10.12		Ad Valorem Taxes			18
10.13		Rights of Way			18
10.14		Removal and Replacement of Operator			19
Article 11		Liability and Indemnification of Joint Venturers; Insurance
11.1		Limitation of Liability of Joint Venturers			19
11.2		Insurance			20
11.3		Claims			20
11.4		Contractors and Subcontractors			21

Article 12		Assignments
12.1		Limitation of Rights to Transfer Joint Venturers' Interests			21
12.2		Permitted Transfers by Joint Venturers			22
12.3		Effect of Permitted Transfers			22
12.4		Effects of Prohibited Transfers			22
Article 13		Term; Termination and Winding Up
13.1		Term			23
13.2		Voluntary Withdrawal of a Joint Venturer			23
13.3		Automatic Termination			23
13.4		Removal for Default			25
13.5		Remedies of Non-Withdrawing Party			26
13.6		Buy-Sell Procedures			26
13.7		Appraisal Procedure			28
13.8		Termination and Winding Up			29
13.9		Effect of Termination or Withdrawal			31
Article 14		Salvage
14.1		Abandonment			31
Article 15		Confidentiality
15.1		Confidentiality			32
Article 16		Miscellaneous
16.1		Notice			32
16.2		Further Assurance			33
16.3		Amendment			33
16.4		Waiver			33
16.5		Exhibits			33
16.6		Applicable Laws			34
16.7		Counterparts			34
16.8		Headings			34
16.9		Section Numbers			34
16.10		Entirety			34
16.11		Severability			34
16.12		Binding Effect; Joinder of Additional Parties			34

Article 17		Arbitration
17.1		General			34
17.2		Procedures			35
17.3		Specific Enforcement			36
Exhibit A		Construction and Operating Agreement
Exhibit B		Project Area
Exhibit C		Gas Gathering Agreement
Exhibit D		Insurance

HAGERMAN GAS GATHERING SYSTEM
JOINT VENTURE AGREEMENT

     THIS JOINT VENTURE AGREEMENT (this “Agreement”), dated as of January 16, 2007, to be effective from and after April 1, 2006, is made by and among Feagan Gathering Company, a Texas corporation (“Feagan”), Parallel Petroleum Corporation, a Delaware corporation (“Parallel”), and Capstone Oil & Gas Company, L.P., a Texas limited partnership (“Capstone”). Feagan, Parallel and Capstone are hereinafter sometimes referred to collectively as “Joint Venturers”, and each, individually, as a “Joint Venturer”.

WITNESSETH:

     WHEREAS, Feagan, Parallel and Capstone desire to join together for the purposes of constructing, managing, owning, leasing and operating a natural gas pipeline located in Chaves County, New Mexico, and further desire to set forth the terms and conditions upon which such activities will be conducted;

     NOW, THEREFORE, in consideration of the mutual covenants set forth herein, Feagan, Parallel and Capstone hereby agree as follows:

ARTICLE 1
FORMATION OF JOINT VENTURE

     1.1 Formation of Joint Venture . Feagan, Parallel and Capstone hereby enter into and form a joint venture for the limited purposes and scope set forth herein. Except as expressly provided for herein to the contrary, the rights and obligations of the Joint Venturers and the administration and termination of the Joint Venture shall be governed by the Texas General Partnership Law (the “TGPL”), part of the Texas Business Organizations Code. A Joint Venturer’s interest in the Joint Venture shall be personal property for all purposes. All real and other property owned by the Joint Venture shall be deemed owned by the Joint Venture as an entity, and no Joint Venturer, individually shall have any direct ownership in such property.

ARTICLE 2
DEFINITIONS

     2.1 Definitions . In addition to the terms defined elsewhere in this Agreement, the following terms shall have the respective meanings set forth below:

      Capital Contribution . The capital contributed to the Joint Venture by a Joint Venturer pursuant to Article 6 of this Agreement.

      Code . The Internal Revenue Code of 1986, as amended from time to time, and any successor statute or statutes.

      Construction and Operating Agreement . The Construction and Operating Agreement between the Joint Venture and the Person designated as Operator in accordance herewith, the form of which is attached hereto as Exhibit “A”.

      Cost of a Joint Venture Expansion . All costs, expenses and liabilities incurred or paid by the Joint Venture for the real and personal property acquisitions, planning, design, engineering and construction of a Joint Venture Expansion, and securing necessary governmental authorizations and approvals therefor.

      Cost of the System . All cost, expenses and liabilities incurred or paid by the Joint Venture for the real property (excluding the Project Area) and personal property acquisitions, planning, design, engineering and construction of the System, and securing necessary governmental authorizations and approvals therefor.

      Gas . Natural gas having the physical and chemical qualities required for acceptance by the Joint Venture.

      Joint Venture . The entity created by this Agreement, which the parties agree is a joint venture.

      Joint Venture Expansion . Any pipelines and appurtenances together with related facilities and properties (including, but not limited to, rental compression facilities), which expand the System.

     “ Joint Venture Nonrecourse Liabilities ” shall have the meaning assigned to the term “nonrecourse liabilities” in Treasury Regulation section 1.752-1(a)(2).

      Joint Venturer(s) . The collective or individual reference, as the case may be, to each of the Joint Venturers executing this Agreement and any Joint Venturer admitted to the Joint Venture or substituted in place of an original Joint Venturer pursuant to Article 12; provided, however, that the term Joint Venturer shall not include any Person who shall be deemed to have withdrawn from the Joint Venture pursuant to Section 13.3(b).

      Joint Venture Percentage Interest . For each Joint Venturer, the percentage ownership of the Joint Venture based upon the proportion that such Joint Venturer’s

Capital Contributions bears to the total Capital Contributions made by all Joint Venturer’s, including, in the case of Feagan, the Carried Capital Contribution provided for in Section 6.4.

     “ Joint Venturer Nonrecourse Debt ” shall have the meaning assigned to the term “partner nonrecourse debt” in Treasury Regulation section 1.704.2(b)(4).

     “ Joint Venturer Nonrecourse Deductions ” shall have the meaning assigned to the term “partner nonrecourse deductions” in Treasury Regulation section 1.704-2(i).

      Management Committee . The Management Committee provided for in Section 10.3.

     “ Minimum Gain ” shall have the meaning assigned to that term in Treasury Regulation section 1.704-2(d) and section 1.704-2(i)(3), as applicable.

      Operator . The Operator provided for in Section 10.2.

      Person . An individual, a corporation, voluntary association, joint stock company, business trust, partnership or other entity.

      Project Area . The leasehold acreage situated in Chaves County, New Mexico that is subject, from time to time, to the area of mutual interest contained in that certain Exploration Agreement, dated as of March 1, 2004, between Parallel and Capstone and that is owned beneficially or of record by Parallel and Capstone and dedicated by Parallel and Capstone to the System, as further described on Exhibit “B” attached hereto and made a part hereof.

      System . The pipeline and appurtenant and related facilities owned by the Joint Venture, including any Joint Venture Expansion.

     “ Treasury Regulations ” (or any abbreviation thereof used herein) shall mean temporary or final regulations promulgated under the Code.

     2.2 Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments,

supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, provided such successors and assigns are permitted by this Agreement, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (d) all references herein to Articles, Sections, exhibits and schedules shall be construed to refer to Articles and Sections of, and exhibits and schedules to, this Agreement.

ARTICLE 3
THE JOINT VENTURE

     3.1 Name; Assumed Name Certificates . The name of the Joint Venture shall be Hagerman Gas Gathering System. The Joint Venturers shall execute all assumed or fictitious name certificates required by law to be filed in connection with the formation of the Joint Venture and the conduct of its business and shall cause such certificates to be filed in the applicable records of each state where the Joint Venture conducts business.

     3.2 Joint Venture Office and Principal Place of Business . The principal offices and principal place of business of the Joint Venture shall be located at 1004 N. Big Spring, Suite 400, Midland, Texas 79701.

     3.3 Purpose . The purpose of the Joint Venture shall be to plan, design, obtain any necessary governmental approval for, construct, own and operate the System for the purchase and sale or transport of Gas produced from the Project Area.

     3.4 Other Activities . Nothing contained in this Agreement shall be construed to prohibit any Joint Venturer or any firm or corporation controlled by or controlling any Joint Venturer from owning, operating or investing in any natural gas pipeline other than the System or from engaging in any business similar to or in competition with the Joint Venture. Each Joint Venturer agrees that the other Joint Venturers or any affiliate thereof may engage in or possess any interest in any other business venture or ventures of any nature and description independently or with others, including, but not limited to, the sale and purchase of natural gas, the ownership, financing, leasing, construction, operation, sale, maintenance, management, syndication, brokerage and development of natural gas pipeline systems and no Joint Venturer shall have any rights by virtue of this Agreement in and to said other business venture or ventures or the income or profits derived therefrom.

ARTICLE 4
OWNERSHIP AND AVAILABILITY OF THE SYSTEM

     4.1 Ownership of Joint Venture Facilities . Title to Joint Venture property, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Joint Venture as an entity, and no Joint Venturer, individually or collectively, shall have any ownership interest in such Joint Venture property or any portion thereof. Title to any or all of the Joint Venture property may be held in the name of the Joint Venture or one or more nominees, as the Management Committee may determine. Upon the withdrawal or removal of any Joint Venturer or as soon thereafter as practicable, the withdrawing or removed Joint Venturer holding title to any Joint Venture property as nominee for the Joint Venture shall transfer to the Joint Venture record title to such property and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the Joint Venture. All Joint Venture property shall be recorded as the property of the Joint Venture in its books and records, irrespective of the name in which record title to such Joint Venture property is held. Although the Project Area is dedicated to the facilities included in the System, ownership of the Project Area shall remain the sole property of each respective Joint Venturer having record or beneficial ownership thereof, subject to each such Joint Venturer’s right to sell, transfer and convey all or any portion of the Project Area owned by such Joint Venturer, at any time and from time to time. As natural gas reserves are developed in the Project Area by the Joint Venturers or by third parties, the Joint Venturers anticipate that gathering lines will need to be constructed from time to time to connect the producing areas within the Project Area. Such facilities are contemplated by the Joint Venturers to be part of the System. If any such facilities are acquired or constructed by the Joint Venture, the same will thereupon become a part of the System. No other facilities, whether existing facilities owned by any of the Joint Venturers or subsequently acquired or constructed by any of the Joint Venturers are or shall be the subject of this Agreement, except for those which are located within the Project Area.

     4.2 Availability of the System . First priority to the availability and capacity of the System shall be given to the Gas produced in the Project Area by Parallel and Capstone, and their respective successors and assigns, and gathered pursuant to that certain Gas Gathering Agreement, dated or to be dated of even date herewith, among Parallel, Capstone and the Joint Venture, and being in substantially the form attached hereto as Exhibit “C”.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES

     5.1 Representations, Warranties and Covenants of Parties . Each Joint Venturer represents and warrants to the other, and agrees that:

     (a) It is a corporation or limited partnership duly organized and validly existing under the laws of its jurisdiction of organization.

     (b) If it is organized under the laws of a jurisdiction other than Texas, it is duly qualified or authorized to do business in Texas.

     (c) It will not cause a dissolution or termination of the Joint Venture by reason of the failure to maintain its corporate or partnership existence, except as otherwise permitted herein.

     (d) The execution and delivery of this Agreement has been duly authorized, and this Agreement, when executed and delivered, will be valid and binding on it.

     (e) The execution and delivery of this Agreement, the formation of the Joint Venture and the performance hereof will not contravene any provision of, or constitute a default under, any indenture, mortgage or other material agreement to which it is a party or by which its assets may be bound, or any order of any court, commission or governmental agency having jurisdiction.

     (f) The Joint Venture is an “intrastate pipeline”, as defined in the Natural Gas Policy Act of 1978, as hereto or hereafter amended, and will not, through any act or omission, cause or contribute to causing itself, the Joint Venture, or any other Joint Venturers, or any of the facilities of any of them to become subject in whole or in part to the jurisdiction of the Federal Energy Regulatory Commission or any successor thereto, under the Federal Energy Regulatory Commission’s jurisdiction under the Natural Gas Policy Act of 1978 and the Natural Gas Act, as hereto or hereafter amended.

     (g) There are no claims for brokerage or other commission or finder’s or other similar fees in connection with the transactions covered by this Agreement insofar as such claims may be based on arrangements or agreements made by or on its behalf, and each Joint Venturer hereby agrees to indemnify and hold harmless the other from and against all liabilities, costs, damages and expenses from any such claims.

ARTICLE 6
CAPITAL CONTRIBUTIONS AND OWNERSHIP

     6.1 Initial Capital Contribution and Ownership . Promptly after receipt of a written request from the Operator given in accordance with Section 6.3, each Joint Venturer shall make its respective initial Capital Contribution to the Joint Venture, including each Joint Venturer’s obligation to contribute a total amount equal to its Joint Venture Percentage Interest of $5,500,000. Subject to Section 6.5 hereof, the Joint Venture Percentage Interest of each Joint Venturer is as follows:

Feagan			10.00	%
Parallel			76.50	%
Capstone			13.50	%

     6.2 Additional Capital Contributions . From time to time, whenever any part of the System or a Joint Venture Expansion shall be authorized by the Management Committee, each Joint Venturer shall contribute additional capital to the Joint Venture in an amount equal to its Joint Venture Percentage Interest of the Cost of the System or the Cost of a Joint Venture Expansion, as the case may be. Each Joint Venturer shall be obligated to make such additional Capital Contributions in the amount set forth in construction fund schedules prepared from time to time by the Operator and approved by the Management Committee in connection with the System and each Joint Venture Expansion pursuant to Section 10.4 hereof. Additional Capital Contributions to be made pursuant to this Section 6.2 shall be made in accordance with Section 6.3 hereof.

     6.3 Payment of Capital Contributions . Except as may be otherwise determined by the Management Committee:

     (a) The Operator shall issue or cause to be issued a written request for payment of each Capital Contribution to be made in accordance with Sections 6.1 and 6.2, at such times and in such incremental amounts as may be requested by the Operator from time to time, but only after approval of the Management Committee.

     (b) Each written request issued pursuant to this Section 6.3 shall contain the following information:

	(i)		the amount of the Capital Contribution requested from each Joint Venturer, which amount shall equal such Joint Venturer’s Percentage of the total Capital Contributions then requested of the Joint Venturers;
	(ii)		the purposes for which the Capital Contributions are to be applied; and
	(iii)		the date on which the Capital Contributions shall be made (which shall not be less than thirty (30) days following the date the request is made) and the method of payment, such date and method to be identical for all of the Joint Venturers.

     (c) Each Joint Venturer agrees to make payment of its respective Capital Contributions in accordance with the requests made by the Operator pursuant to this Agreement.

     6.4 Carried Capital Contribution . Subject to the last sentence of this Section 6.4, Parallel and Capstone shall pay, or “carry”, for the benefit of Feagan a portion of the Capital Contribution that would otherwise be required to be made by Feagan under the terms of this Agreement. The amount required to be paid, or “carried”, by Parallel and Capstone shall be an amount equal to fifty percent (50.0%) of the Capital Contributions that would otherwise be required to be made by Feagan under the terms of this Agreement (the “Carried Capital Contribution”). The Carried Capital Contribution provided for in this Section 6.4 shall be allocated between Parallel and Capstone based upon their respective Joint Venture Percentage Interests (with Parallel initially paying for eighty five percent (85%) of such Carried Capital Contribution and Capstone initially paying for the remaining fifteen percent (15%) of such Carried Capital Contribution). The obligation of Parallel and Capstone to fund and pay for the Carried Capital Contribution shall be limited to the first ten million dollars ($10,000,000.00) of capital expenditures made by the Joint Venture in connection with this Agreement.

     6.5 Option to Purchase Additional Interest . Until the close of business on March 31, 2007, Feagan shall have a one-time option to purchase from Parallel and Capstone a five percent (5%) interest in the Joint Venture. If Feagan elects to exercise such option, it shall give written notice thereof to Parallel and Capstone on or before the close of business on March 31, 2007. The total purchase price for such interest shall be equal to the sum of (a) (i) the aggregate Capital Contributions attributable to a five percent (5.0%) ownership interest (the “Option Purchase Price”) in the Joint Venture up to and including the date of exercise of the option, and (ii) an additional five and one-half percent (5.5%) of the Option Purchase Price, less (b) the amount of any distributions made by the Joint Venture to Feagan prior to the date of exercise of the option. The purchase price shall be paid within ten (10) days after Feagan gives notice to Parallel and Capstone of its election to exercise such option. The five percent (5%) ownership interest in the Joint Venture that is subject to the option provided for in this Section 6.5 shall be allocated between Parallel and Capstone based upon their respective Joint Venture Percentage Interests (with Parallel initially being obligated to deliver and convey eighty five percent (85%) of the five percent (5%) interest and Capstone being obligated to deliver and convey the remaining fifteen percent (15%) of the five percent (5%) interest).

     6.6 Voluntary Contributions . No Joint Venturer shall make any Capital Contributions to the Joint Venture except pursuant to a request of the Operator given in accordance with Section 6.3.

ARTICLE 7
ALLOCATIONS AND CAPITAL ACCOUNTS

     7.1 Allocations; Capital Accounts .

     (a) For accounting and federal and state income tax purposes, except as herein otherwise specifically provided, or as may be required by Section 704(c) of the Code and Treasury Regulation section 1.704-1(b)(2)(iv)(f)(4), all costs, expenditures, income, deductions, credits, gains and losses of the Joint Venture shall be allocated to the Joint Venturers in accordance with their respective Joint Venture Percentage Interest. Any item which is stipulated to be an expense of the Joint Venture under the terms of this Agreement or which would be so treated in accordance with generally accepted accounting principles shall be treated as an expense of the Joint Venture for all purposes, whether or not such item is deductible for purposes of computing net income for federal income tax purposes. Neither the allocations referred to in this Section 7.1 nor the utilization of varying tax bases as herein provided shall have any effect whatsoever upon any Joint Venturer’s Joint Venture Percentage Interest.

     (b) Notwithstanding any of the foregoing provisions of this Section 7.1 to the contrary:

     (i) If during any fiscal year of the Joint Venture there is a net increase in Minimum Gain attributable to a Joint Venturer Nonrecourse Debt that gives rise to Joint Venturer Nonrecourse Deductions, each Joint Venturer bearing the economic risk of loss for such Joint Venturer Nonrecourse Debt shall be allocated items of Joint Venture deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Joint Venturer Nonrecourse Debt and then, if necessary, a pro rata portion of the Joint Venture’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Joint Venturer Nonrecourse Debt in the subsequent year) equal to such Joint Venturer’s share of Joint Venturer Nonrecourse Deductions, as determined in accordance with applicable Treasury Regulations.

     (ii) If for any fiscal year of the Joint Venture there is a net decrease in Minimum Gain attributable to Joint Venture Nonrecourse Liabilities, each Joint Venturer shall be allocated items of Joint Venture income and gain for such year (consisting first of gain recognized from the disposition of Joint Venture property subject to one or more Joint Venture Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Joint Venture’s other items of income and gain, and then, if necessary, for subsequent years) equal to such Joint Venturer’s share

of such net decrease (except to the extent such Joint Venturer’s share of such net decrease is caused by a change in debt structure with such Joint Venturer commencing to bear the economic risk of loss as to all or part of any Joint Venture Nonrecourse Liability or by such Joint Venturer contributing capital to the Joint Venture that the Joint Venture uses to repay a Joint Venture Nonrecourse Liability), as determined in accordance with applicable Treasury Regulations.

     (iii) If for any fiscal year of the Joint Venture there is a net decrease in Minimum Gain attributable to a Joint Venturer Nonrecourse Debt, each Joint Venturer bearing the economic risk of loss for such Joint Venturer Nonrecourse Debt shall be allocated items of Joint Venture income and gain for such year (consisting first of gain recognized from the disposition of Joint Venture property subject to Joint Venturer Nonrecourse Debt, and then, if necessary, a pro rata portion of the Joint Venture’s other items of income and gain, and if necessary, for subsequent years) equal to such Joint Venturer’s share of such net decrease (except to the extent such Joint Venturer’s share of such net decrease is caused by a change in debt structure or by the Joint Venture’s use of capital contributed by such Joint Venturer to repay the Joint Venturer Nonrecourse Debt) as determined in accordance with applicable Treasury Regulations.

     (c) The losses and deductions allocated pursuant to this Article 7 shall not exceed the maximum amount of losses and deductions that can be allocated to a Joint Venturer without causing or increasing a deficit balance in the Joint Venturer’s adjusted capital account. If, at the end of any fiscal year, as a result of the allocations otherwise provided for in this Section 7.1, the adjusted capital account balance of any Joint Venturer shall become negative, items of deduction and loss otherwise allocable to such Joint Venturer for such year, to the extent such items would have caused such negative balance, shall instead be allocated to Joint Venturers having positive adjusted capital account balances remaining at such time in proportion to such balance.

     (d) If a Joint Venturer unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(4)-(6) that causes or increases a deficit balance in such Joint Venturer’s adjusted capital account, items of Joint Venture income and gain shall be allocated to that Joint Venturer in an amount and manner sufficient to eliminate the deficit balance as quickly as possible.

     (e) The allocations set forth in subsections (b), (c) (last sentence), and (d) (collectively, the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Joint Venturers that, to the extent possible, all Regulatory Allocations that are made be offset either with other Regulatory Allocations or with special allocations pursuant to this Section 7.1(g).

Therefore, notwithstanding any other provisions of this Article 7 (other than the Regulatory Allocations), Parallel shall make such offsetting special allocations in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Joint Venturer’s adjusted capital account balance is, to the extent possible, equal to the adjusted capital account balance such Joint Venturer would have had if the Regulatory Allocations were not part of this Agreement and all Joint Venture items were allocated pursuant to the remaining sections of this Article 7.

     (f) In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income and deductions with respect to any property carried on the books of the Joint Venture at an amount that differs from such property’s adjusted tax basis shall, solely for federal income tax purposes, be allocated among the Joint Venturers in a manner to take into account any variation between the adjusted tax basis of such property to the Joint Venture and such book value. In making such allocations, Parallel shall use the “traditional method with curative allocations” pursuant to Treasury Regulations Section 1-704-3(c).

     (g) All items of income, gain, loss, deduction, and credit allocable to any Joint Venture Percentage Interest that may have been transferred shall be allocated between the transferor and transferee based on the portion of the calendar year during which each was recognized as owning those Joint Venture Percentage Interests, without regard to whether cash distributions were made to the transferor or the transferee during that calendar year; provided, however, that this allocation must be made in accordance with a method permissible under section 706 of the Code and the applicable Treasury Regulations.

     (h) A capital account shall be maintained for each Joint Venturer, which account shall be increased (credited) by (i) the cash and adjusted tax basis of property contributed by it to the Joint Venture (net of liabilities assumed by the Joint Venture and liabilities to which such contributed property is subject), and (ii) the distributive share of net income and gain (including income exempt from tax) allocated to such Joint Venturer, and shall be decreased (debited) by (iii) the cash and the Joint Venture’s adjusted tax basis of property distributed to such Joint Venturer (net of liabilities assumed by such Joint Venturer and liabilities to which such distributed property is subject), (iv) the amount of net loss allocated to such Joint Venturer, and (v) such Joint Venturer’s distributive share of expenditures of the Joint Venture.

ARTICLE 8
DISTRIBUTIONS AND REIMBURSEMENTS

     8.1 Distributions . Distributions of excess cash to the Joint Venturers shall only be made to the Joint Venturers simultaneously in such aggregate amounts and at such

times as determined by the Management Committee from time to time. Distributions of cash shall be made to the Joint Venturers in the same manner that items of cost, expenditure, income, gain, loss, deduction and credit are allocated to the Joint Venturers under Section 7.1.

     8.2 Reimbursement of Expense s. The Joint Venture shall pay or reimburse the Joint Venturers all reasonable direct and indirect costs incurred by them in managing and conducting the business and affairs of the Joint Venture, including, without limitation, (i) all costs and expenses incurred in any business of the Joint Venture, (ii) secretarial, telephone, office rent and other office expenses, (iii) salaries and other compensation expenses of employees of any Joint Venturer, (iv) other administrative expenses, (v) travel expenses, (vi) legal and accounting costs and expenses, and (vii) expenses incurred in providing or obtaining such other professional, technical, administrative services and advice as the Management Committee may deem necessary or desirable. The Management Committee shall determine in good faith which expenses are allocable to the Joint Venture in a manner which is fair and reasonable to the Joint Venture.

ARTICLE 9
ACCOUNTING; BOOKS AND RECORDS; TAXES

     9.1 Fiscal Year . The fiscal year of the Joint Venture shall be the calendar year.

     9.2 Location of Records . The books and records of the Joint Venture shall be kept and maintained at the Joint Venture’s office.

     9.3 Books of Account . The books of account for the Joint Venture shall be kept and maintained at the principal place of business of Parallel. The books of account shall be maintained on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and shall show all items of income and expense.

     9.4 Financial Statements . Parallel shall prepare and furnish or cause to be prepared and furnished to the Joint Venturers, within forty (40) days after the close of each fiscal quarter of the Joint Venture, financial statements showing the financial condition and results of operations of the Joint Venture for such fiscal quarter, which statements shall include the balance in each Joint Venturer’s Capital Account, the unpaid balance due under all obligations of the Joint Venture, a statement of profit and loss and all other information, financial or otherwise, as may be necessary for any Joint Venturer to comply with various reporting and disclosure requirements of governmental agencies to which it may be subject, and all other information reasonably requested by a Joint Venturer. Parallel shall cause to be prepared and furnished, at the expense of the Joint Venture, to each of the Joint Venturers within seventy-five (75) days after the end of each

fiscal year, financial statements showing the financial condition and results of operations of the Joint Venture as of and for the twelve (12) month period ending on the last day of December of each year, which year-end statements may, at the sole election of Parallel, be audited by such independent registered public accounting firm as Parallel may engage for and on behalf of the Joint Venture and certified by such independent registered public accounting firm as having been prepared in accordance with generally accepted accounting principles consistently applied.

     In addition, Parallel will cause to be prepared and furnished to each Joint Venturer such other accounting and tax information as shall be necessary for the preparation by each Joint Venturer of its income tax returns for each fiscal year.

     9.5 Taxation and Reports .

     (a) Any provision hereof to the contrary notwithstanding, solely for United States federal income tax purposes, each of the Joint Venturers hereby recognizes that the Joint Venture will be subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however, the filing of U.S. Partnership Returns of Income shall not be construed to extend the purposes of the Joint Venture or expand the obligations or liabilities of the Joint Venturers. At the request of any Joint Venturer, the Joint Venture shall file an election under Section 754 of the Code.

     (b) Parallel shall prepare or cause to be prepared all federal and state income tax returns and related schedules and statements, and cause to be made all elections, if any, which must be filed on behalf of the Joint Venture with any taxing authority and shall submit such returns and related schedules and statements to all the Joint Venturers for their approval on or about March 15 of each year, and, upon approval thereof by all the Joint Venturers, make timely filing thereof.

     9.6 Governmental Reports and Compliance with Laws .

     (a) The Operator shall be responsible for all reports required of it by state and federal authorities on account of operations related to the System. However, each Joint Venturer shall be and remains solely responsible for all reports and accounts required by state and federal authorities on account of production delivered by it to the System, and for the payment of all royalties, overriding royalties, or payments from production with respect to all production owned by it and delivered to or handled by the System, and Operator shall have no rights or duties in connection therewith.

     (b) The Operator, on behalf of the Joint Venture, shall obtain such permits and approvals from governmental authorities having jurisdiction over the business and affairs

of the Joint Venture as may be necessary or advisable to construct and operate the System and to transport Gas.

     (c) The Operator shall at all times comply with all applicable rules, regulations, laws, orders, ordinances, decrees or other matters promulgated or administered by any governmental or quasi-governmental body with jurisdiction over the System or the ownership or operation thereof.

     9.7 Inspection of Facilities and Records . Each Joint Venturer shall have the right at all reasonable times during usual business hours to inspect the facilities of the Joint Venture and to examine, audit and make copies of the books of account and other records of the Joint Venture. Such right may be exercised through any agent or employee of a Joint Venturer designated in writing by it or by an independent public accountant, petroleum engineer, attorney or other consultant designated by such Joint Venturer. Each Joint Venturer shall bear all costs and expenses incurred in any inspection, examination or audit made for such Joint Venturer’s account.

     9.8 Deposit of Funds . The funds of the Joint Venture shall be deposited in a separate account with such banks or other financial institutions as may be designated from time to time by the Management Committee. The Management Committee from time to time shall authorize signatories for such accounts.

     9.9 Tax Matters Partner . Parallel shall act as the “tax matters partner” under Section 6231 of the Code (Parallel, in this Section, being called the “tax matters partner”). The tax matters partner shall promptly notify the Joint Venturers if any tax return or report of the Joint Venture is audited or if any adjustments are proposed by any governmental body. In addition, the tax matters partner shall promptly furnish to the Joint Venturers all notices concerning administrative or judicial proceedings relating to federal income tax matters as required under the Code. During the pendency of any such administrative or judicial proceeding, the tax matters partner shall furnish to the Joint Venturers periodic reports, not less often than monthly, concerning the status of any such proceeding. Without the consent of the Management Committee, the tax matters partner shall not extend the statute of limitations, file suit concerning any tax refund or deficiency relating to any Joint Venture administrative adjustment or enter into any settlement agreement relating to any Joint Venture item of income, gain, loss, deduction or credit for any fiscal year of the Joint Venture.

ARTICLE 10
MANAGEMENT; OPERATOR AND CONDUCT OF OPERATIONS

     10.1 Management of the Joint Venture . The overall management and control of the business and affairs of the Joint Venture shall be vested in the Joint Venturers and, except where herein expressly provided to the contrary, all decisions with respect to the management and control of the Joint Venture shall be made and approved by the Management Committee as provided in Section 10.4 below.

     10.2 Operator . The Operator of the System shall devote such time to the Joint Venture’s business as it deems necessary to manage and supervise the System in an efficient manner. The Operator shall, subject to the control and direction of the Management Committee, be responsible for the implementation of the decisions of and actions approved by the Management Committee, and in general supervise and control the System and perform all duties and exercise all powers as the Management Committee may delegate to the Operator from time to time, subject to the provisions of applicable law, this Agreement and the Construction and Operating Agreement. In addition, and subject to the provisions hereof, the Operator shall have and perform the duties and obligations specified in the Construction and Operating Agreement.

     10.3 Composition of Management Committee . The members of the Management Committee shall consist of one representative appointed by each Joint Venturer. Each Joint Venturer shall designate in writing its representative to serve on the Management Committee. If any representative appointed by a Joint Venturer fails, refuses or is unable to serve on the Management Committee for any reason, then the Joint Venturer that appointed such representative may appoint and designate an alternate representative who shall serve on the Management Committee in place of the previously appointed representative. Any Joint Venturer may at any time, by written notice to each other Joint Venturer, remove its representative on the Management Committee and appoint a new representative.

     10.4 Authority of the Management Committee . Except as otherwise expressly provided in this Agreement, the approval of the Management Committee shall be necessary before any action can be taken by the Joint Venture or any Joint Venturer (including the Operator) on behalf of the Joint Venture. Without limiting the generality of the foregoing, the Management Committee shall approve in advance:

     (a) the design of the System, any Joint Venture Expansion or any segment of the foregoing, and the construction, capital and operating budgets and construction fund schedules for the System, any Joint Venture Expansion or any segment of the foregoing;

     (b) any modification to an approved budget or construction fund schedule provided for in Section 6.2 hereof;

     (c) the establishment of any requirement for Capital Contributions outside the scope and coverage of an approved budget and construction fund schedule as specified in paragraph (a) or paragraph (b) of this Section 10.4;

     (d) a Joint Venture Expansion;

     (e) the transfer by a Joint Venturer of all or any part of its Joint Venture Percentage Interest, other than as permitted without Management Committee or Joint Venturer approval pursuant to Article 12 hereof;

     (f) gas contracts and transportation agreements;

     (g) the timing and amounts of distributions to Joint Venturers pursuant to Section 8.1 hereof;

     (h) engaging in any business other than as contemplated by this Agreement;

     (i) the selection of a successor Operator;

     (j) the sale of all or substantially all of the business and assets of the Joint Venture;

     (k) any modification to the Construction and Operating Agreement; and

     (l) rules of the Management Committee and any amendments or supplements thereto concerning the conduct of the business and affairs of the Joint Venture.

     Notwithstanding anything in this Section 10.4 or elsewhere in this Agreement to the contrary, advance approval of the Management Committee shall not be required for the Operator to make any single expenditure (or series of related expenditures) less than $20,000 during any month. In addition, and notwithstanding anything herein to the contrary, in cases of emergency, the Operator may proceed with required maintenance or repair work when necessary in the Operator’s judgment to keep the System operating or to restore the facilities to operating condition or to minimize damages without prior necessity for submitting same to the Management Committee. In such event, the Operator shall as soon as practicable notify the other Joint Venturers of the existence of occurrence of the emergency, which notice shall set forth the nature of the emergency, the corrective action taken or proposed to be taken, and the estimated cost of such corrective action;

provided that the Operator shall not be required to give such notice when the cost of the corrective action is reasonably estimated to be less than $20,000.

     10.5 Approval Requirements; Limitation on Voting Rights . Except as otherwise expressly provided by this Agreement, the business of the Joint Venture presented at any meeting of the Management Committee shall be decided by a vote of members of the Management Committee representing a majority of the Joint Venture Percentage Interests, plus one other member of the Management Committee. However, any member of the Management Committee representing a Joint Venturer who is in default in the payment of any Capital Contribution required to be made to the Joint Venture in accordance with this Agreement shall not have the right to vote on any matter unless and until such default is remedied. In addition, if an Affiliate of a Joint Venturer also owns a Joint Venture Percentage Interest, such Affiliate shall not be entitled to vote on any matter; provided, however, this limitation on the right to vote shall not apply to any Affiliate of Parallel, Capstone or Feagan. As used in this Section 10.5, “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

     10.6 Meetings . The Management Committee may hold such meetings at such place and at such time as it may determine. No notice shall be required of a regular meeting if the time and place of such meetings are fixed by the Management Committee. Notice of a special meeting shall be served not less than twenty-four (24) hours before the date and time fixed for such meeting by confirmed facsimile or other written communication or not less than three (3) days prior to such meeting if notice is provided by overnight delivery service. A special meeting of the Management Committee may be called by any Joint Venturer. Any member of the Management Committee may participate in a meeting by conference telephone or similar communications equipment. Any action required or permitted to be taken by the Management Committee may be taken without a meeting if such action is evidenced in writing and signed by the same number of members of the Management Committee required for a valid act of the Management Committee as set forth herein.

     10.7 Appointment of Operator; Construction and Operation of the System . The Joint Venturers have selected and designated Feagan as Operator of the System in accordance with the terms and conditions herein and in the Construction and Operating Agreement.

     10.8 Conduct of Operations . The Operator shall conduct all operations in a careful, diligent, prudent and workmanlike manner, but the Operator shall never be liable to any party for any acts done or omitted in good faith in the performance of any of the

provisions of this Agreement, except for acts or omissions resulting from Operator’s gross negligence, willful misconduct, breach of fiduciary duty or breach of this Agreement.

     10.9 Expenses . Subject to the provisions hereof, the Operator shall purchase or cause to be purchased for the Joint Venture necessary materials and supplies and incur such expenses and enter into necessary commitments, including, but not limited to,

     (a) contracts for any approved additions to and replacements for the System,

     (b) contracts for power, fuel, other utilities and communications facilities as may be necessary in connection with the proper operation and maintenance of same; and

     (c) contracts for gathering of Gas for and through the System and the downstream redelivery or resale thereof.

     10.10 Personnel . Subject to the provisions hereof, the Operator shall employ such personnel as may be necessary to efficiently operate and maintain the System, all of which persons shall either be employees of the Operator or an affiliate of the Operator or independent contractors. To the extent possible, the Operator shall utilize its own employees or those of its affiliates; provided, however, that the Operator may engage the services of such independent contractors as may be necessary to carry out the terms hereof.

     10.11 Discharge of Expenses . Subject to the provisions hereof, the Operator shall promptly pay and discharge, or cause the Joint Venture to promptly pay and discharge, all expenses, costs and liabilities incurred in operating and maintaining the System, and shall be fully responsible for any liens or other encumbrances which the Operator causes or allows to be affixed or assessed against the said property and shall fully satisfy same (other than liens and encumbrances approved in advance by the Management Committee).

     10.12 Ad Valorem Taxes . The Operator shall render, or cause the Joint Venture to render, for ad valorem tax purposes, all real or personal property jointly owned hereunder, or such part thereof as may be under existing laws or may become under future laws subject to ad valorem taxation, and shall pay, or cause the Joint Venture to pay, all such taxes at the time and in the manner required by law. All taxes so paid by the Operator or the Joint Venture shall be charged to the Joint Venturers according to their respective Joint Venture Percentage Interests at the time of assessment.

     10.13 Rights of Way . The Operator shall acquire in the name of the Joint Venture the necessary rights-of-way, easements and permits required for the ownership and operation of the System and any other facilities comprising a portion thereof. To the

extent possible, all such rights-of-way, easements and permits shall be acquired in such form as may allow assignment to the Joint Venturers. The costs of such rights-of-way, easements and permits shall be charged to the account of each of the Joint Venturers in accordance with their respective Joint Venture Percentage Interests. To the extent that any Joint Venturer (or their affiliates) has or owns rights of way, easements or other permits associated with the Project Area which may be assigned to or held on behalf of the Joint Venture such as would assist the Joint Venture in constructing, owning and operating the System, such Joint Venturer shall use its best efforts to transfer such rights to the Joint Venture and shall be reimbursed by the Joint Venture for any direct costs related thereto.

     10.14 Removal and Replacement of Operator . In addition to, but separate and apart from, the right of a Non-Defaulting Party (as defined in Section 13.4(a) hereof) to remove the Operator as a Joint Venturer from the Joint Venture pursuant to the provisions of Section 13.4 hereof, the Operator may be removed from the office of Operator (without being removed as a Joint Venturer) after written notice thereof to the Operator by any Joint Venturer in accordance with Section 9.2 of the Construction and Operating Agreement. If the Operator is removed from the office of Operator, the Management Committee (excluding the Operator) shall select a successor Operator.

ARTICLE 11
LIABILITY AND INDEMNIFICATION OF JOINT VENTURERS; INSURANCE

     11.1 Limitation of Liability of Joint Venturers . The Joint Venturers, the Management Committee, the members of the Management Committee and their respective affiliates, and their partners, officers, directors, employees and agents, shall not be liable, responsible or accountable in damages or otherwise to the Joint Venture or the other Joint Venturers for any acts or omissions that do not constitute recklessness, gross negligence, willful misconduct, a breach of fiduciary duty or a breach of the express terms of this Agreement, and the Joint Venture shall indemnify and save harmless the Joint Venturers, the Management Committee and the members of the Management Committee and their respective affiliates, and their partners, officers, directors, employees and agents (individually, “Indemnitee”) from all liabilities for which indemnification is not prohibited by the TGPL. Any act or omission performed or omitted by an Indemnitee on advice of legal counsel or a qualified independent consultant who has been employed or retained by the Joint Venture shall be presumed to have been performed or omitted in good faith without gross negligence or willful misconduct. THE PARTIES RECOGNIZE THAT THIS PROVISION SHALL RELIEVE ANY SUCH INDEMNITEE FROM ANY AND ALL LIABILITIES, OBLIGATIONS, DUTIES, CLAIMS, ACCOUNTS AND CAUSES OF ACTION WHATSOEVER ARISING OR TO ARISE OUT OF ANY ORDINARY NEGLIGENCE BY ANY SUCH

INDEMNITEE, AND SUCH INDEMNITEE SHALL BE ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE.

     11.2 Insurance .

     (a) The Operator shall, either in its own name and for the benefit of all Joint Venturers or in the name of the Joint Venture, secure and maintain in force the policies of insurance covering the System as set out in Exhibit “D” hereto, or as may otherwise be authorized and directed by the Management Committee from time to time. The premiums for all such insurance so carried shall be paid by the Operator or the Joint Venture, as the case may be, and charged to the Joint Venturers in accordance with their respective Joint Venture Percentage Interests. Such insurance shall name each Joint Venturer as an additional assured.

     (b) Notwithstanding the foregoing, each Joint Venturer, at its own expense, shall have the right to obtain and maintain for its own account and without naming any other party as an insured, during the term of this Agreement, insurance to protect such Joint Venturer from claims. Such insurance may be for such coverages and in such amounts as each Joint Venturer shall determine.

     11.3 Claims . The administrative responsibility for handling claims, whether or not covered by insurance carried by the Operator or the Joint Venture, and the administrative responsibility for handling litigation, including the employment of attorneys for the System, shall, but only with the unanimous concurrence of the Joint Venturers parties hereto, belong to the Operator; provided, however, that any Joint Venturer may have counsel of its own choice to defend its own interest. Each Joint Venturer who receives any claim or demand shall promptly give notice of same to the Operator and provide the Operator full and complete information with respect thereto. The Operator shall promptly give each other Joint Venturer written notice of any such claim or demand. The Operator may not settle any losses, damages and claims, whether or not covered by insurance, without the prior written consent of all Joint Venturers.

     All costs of handling, settling or otherwise discharging such claim or suit shall be charged to the Joint Venturers according to their respective Joint Venture Percentage Interests. The Operator shall at any time requested furnish any Joint Venturer with full information concerning the kind, character and amounts of insurance carried. The Operator shall promptly notify the Joint Venturers of any loss, damage or claim not covered by insurance carried by the Operator or the Joint Venture and of any loss, damage or claim that might be considered or assumed to be in excess of the insurance coverage provided by the Operator or the Joint Venture for the benefit of the Joint Venturers.

     11.4 Contractors and Subcontractors . The Operator shall require its contractors and subcontractors conducting operations on the System to carry insurance of the types set out above and in the amounts applicable to the contractor’s and subcontractor’s operations, and such other insurance in amounts deemed adequate by the Operator for any particular contract. The Operator shall require all contractors employed as provided herein, insofar as possible, to indemnify and hold the Operator and the other Joint Venturers hereto harmless from and against all claims, demands or causes of action arising out of the performance of contractor’s work.

ARTICLE 12
ASSIGNMENTS

     12.1 Limitation of Right to Transfer Joint Venturers’ Interests . Each Joint Venturer may sell, assign or otherwise transfer in any manner all or any part of its Joint Venture Percentage Interest in the Joint Venture and in this Agreement without the consent of the Management Committee or the other Joint Venturers, but the other Joint Venturers shall have a right, but not the obligation, to sell, assign or transfer a like percentage of their respective Joint Venture Percentage Interests on the same terms which the transferring Joint Venturer proposes to sell, assign or otherwise transfer; provided, however, a merger, consolidation, reorganization or other acquisition of a Joint Venturer shall not be deemed to be a sale, assignment or transfer of a Joint Venture Percentage Interest for purposes of this Section 12.1. In such event, the transferring Joint Venturer shall promptly give written notice to the other Joint Venturers of its desire to sell, assign or otherwise transfer its Joint Venture Percentage Interest, furnishing full information concerning the proposed sale, assignment or transfer, including the name and address of the prospective transferee (who shall be ready, willing and able to comply with all terms of the proposed sale, assignment or transfer), the purchase price and other consideration, and all terms of the offer made by the prospective transferee. Each non-transferring Joint Venturer shall then have an optional prior right, for a period of fifteen (15) days after its receipt of notice from the transferring Joint Venturer, to accept in writing and sell, assign or transfer a like percentage of its Joint Venture Percentage Interest upon the same terms and conditions which the transferring Joint Venturer proposes to sell, assign or otherwise transfer its Joint Venture Percentage Interest. Upon completion of the sale, assignment or transfer of a Joint Venturer’s Joint Venture Percentage Interest pursuant to this Section 12.1, the transferee shall be admitted as a Joint Venturer. Notwithstanding any other provision of this Section 12.1, no Joint Venture Percentage Interest or other interest in the profits and losses of the Joint Venture may be transferred if such transfer would result in the Joint Venture or any Joint Venturer becoming subject to the Public Utility Holding Company Act of 1935. In addition, and notwithstanding anything herein to the contrary, the provisions of this Section 12.1 shall not apply to the transfer or pledge of an interest in the Joint Venture made pursuant to Section 12.2 below.

     12.2 Permitted Transfers by Joint Venturers . Subject to the penultimate sentence of Section 12.1, nothing in this Agreement shall prevent or require the consent of any Joint Venturer for:

     (a) the transfer at any time by any Joint Venturer of all its right, title and interest in the Joint Venture (including indebtedness thereof) and in this Agreement if all of such right, title and interest is transferred to another Person by merger, reorganization, consolidation or sale of all or substantially all of its assets, or a sale or transfer of the stock or other voting securities of such Joint Venturer, or the sale or transfer of the interest in the Joint Venture to a subsidiary or parent company, or a subsidiary of a parent company, or to any company in which the transferring Joint Venturer (or an affiliate) owns a majority of the voting securities; provided that the transferee assumes by operation of law or express agreement with the Joint Venture (in form and substance reasonably satisfactory to the other Joint Venturers) all of the obligations of the transferor under this Agreement and that no such transfer (other than pursuant to a merger, reorganization, consolidation or other combination wherein all obligations and liabilities of the Joint Venturer are assumed by the successor by operation of law) shall relieve the transferor of its obligations under this Agreement without the written approval of the other Joint Venturers, and provided, further, that upon such transfer the transferee shall be admitted as a Joint Venturer in substitution of the Joint Venturer which was the transferor; or

     (b) an assignment, pledge or other transfer at any time creating a security interest (and any transfer made in foreclosure or other enforcement of such security interest) in all or any portion of a Joint Venturer’s interest in or distributions from the Joint Venture (as opposed to a pledge or mortgage of Joint Venture property) under any pledge or other security agreement created by any Joint Venturer; provided, however, that such assignee, pledgee, or secured party (i) shall hold the same subject to all the terms of this Agreement and (ii) shall not have any voice in the management of the Joint Venture as a result of any such assignment, pledge or other transfer.

     12.3 Effect of Permitted Transfers . No assignment, pledge or other transfer pursuant to Section 12.2 shall give rise to a right in any Joint Venturer to wind up the Joint Venture. Except as provided in Section 12.1 and in Section 12.2(a), no assignment, pledge or other transfer shall give rise to a right in any transferee to become a Joint Venturer in the Joint Venture, unless approved by the Management Committee.

     12.4 Effects of Prohibited Transfers . Any transfer or attempted transfer of an interest in the Joint Venture by a Joint Venturer in violation of the terms of this Agreement shall be void ab initio and shall not bind or be recognized by the Joint Venture or the Joint Venturers.

ARTICLE 13
TERM; TERMINATION AND WINDING UP

     13.1 Term . The Joint Venture shall be in effect for a term beginning on the date of this Agreement and shall continue until terminated and wound up in accordance with the provisions hereof. All provisions of this Agreement relative to termination and winding up shall be cumulative; that is, the exercise or use of one of the provisions hereof shall not, unless the context requires, preclude the exercise or use of any other provision hereof.

     13.2 Voluntary Withdrawal of a Joint Venturer . Any Joint Venturer shall have the right to withdraw from the Joint Venture on the last day of any fiscal year of the Joint Venture by giving the other Joint Venturers written notice of intent to withdraw. Such notice shall be given not less than 60 days prior to the last day of any fiscal year.

     13.3 Automatic Termination .

(a)

If any of the following shall occur:

	(1)		the Joint Venturers agree unanimously in writing to terminate and wind up the Joint Venture; or
	(2)		an event which makes it unlawful for the business of the Joint Venture to be carried on; or
	(3)		the sale or abandonment of all or substantially all of the Joint Venture’s business and assets; or
	(4)		the tenth anniversary of the date of this Agreement;

then the Joint Venture and its business shall be promptly wound up, terminated and liquidated.

(b)

If any of the following events of withdrawal shall occur:

	(1)		the voluntary withdrawal of a Joint Venturer in accordance with Section 13.2; or
	(2)		the commencement by any Joint Venturer of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by any Joint Venturer to, or acquiescence in, the appointment of or taking possession by a

			receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of said Joint Venturer or for all or any substantial part of its property or its interest in the Joint Venture (the term “acquiescence” being deemed to include, but not limited to, the failure to file a petition or motion to vacate or discharge any order, judgment or decree providing for such appointment within ten (10) days after the appointment); or
	(3)		the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of any Joint Venturer in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency, or other similar law, or appointing a receiver, liquidator, assignee, custodian trustee, sequestrator (or similar official) of the Joint Venturer or for any substantial part of its property or its interest in the Joint Venture, or ordering the winding up or liquidation of the affairs of said Joint Venturer, and said Joint Venturer shall acquiesce in the entry of such decree or order (the term “acquiesce” being deemed to include, but not limited to, the failure to file a petition or motion to vacate such order or decree within ten (10) days of the entry thereof) or any such order or decree shall continue unstayed and unvacated for a period of sixty (60) consecutive days from the date of entry thereof; or
	(4)		the failure or inability of any Joint Venturer generally to pay its debts as such debts become due; or
	(5)		any Joint Venturer shall give notice to any governmental body of insolvency or pending insolvency, or suspension or pending suspension of operations; or
	(6)		any Joint Venturer shall make an assignment for the benefit of creditors or take any other similar action for the protection or benefit of creditors; or

	(7)		any Joint Venturer shall sell or otherwise dispose of all or substantially all of its assets (other than by reason of a transaction described in Section 12.2(a)); or
	(8)		any Joint Venturer shall take any action in furtherance or confirmation of the events mentioned in (2) through (7) above; or
	(9)		the death of any Joint Venturer; or
	(10)		the removal of a Joint Venturer from the Joint Venture in accordance with Section 13.4,

then the Joint Venture and its business shall be promptly wound up, terminated and liquidated and:

	(i)		the Joint Venturer as to whom an event described above has occurred (the “Withdrawing Party”) shall immediately cease to be a Joint Venturer; and
	(ii)		the Joint Venture and its business shall be wound up and terminated, unless the remaining Joint Venturers (the “Non-Withdrawing Parties”) shall elect unanimously in writing to continue the business of the Joint Venture.

     13.4 Removal for Default .

     (a) If any Joint Venturer fails to observe or perform any of its obligations, covenants or agreements hereunder or set forth herein, then in such event, any other Joint Venturer (“Non-Defaulting Party”) shall have the right to give such party (“Defaulting Party”) a notice of default (“Notice of Default”). The Notice of Default shall set forth the nature of the obligation which the Defaulting Party has not observed or performed.

     (b) If within the thirty (30) day period following receipt of the Notice of Default, the Defaulting Party in good faith commences to perform such obligation and cure such default and thereafter prosecutes to completion with diligence and continuity the curing thereof and cures such default within a reasonable time, it shall be deemed that the Notice of Default was not given and the Defaulting Party shall lose no rights hereunder. If, within such thirty (30) day period, the Defaulting Party does not commence in good faith the curing of such default or does not thereafter prosecute to completion with diligence and continuity the curing thereof, any Non-Defaulting Party shall have the right to remove the Defaulting Party from the Joint Venture by giving the Defaulting Party and all other Joint Venturers written notice thereof.

     (c) The foregoing cure provisions of this Section 13.4 shall not apply to any default with respect to the payment of any sums of money by or to any Joint Venturer, which sums of money shall be paid within thirty (30) days after receipt of a Notice of Default with respect thereto. If such sums are not so paid within such thirty (30) day period, any Non-Defaulting Party shall have the right to remove the Defaulting Party from the Joint Venture by giving the Defaulting Party and all other Joint Venturers written notice thereof.

     13.5 Remedies of Non-Withdrawing Party .

     (a) If the Non-Withdrawing Parties continue the business of the Joint Venture as contemplated by Section 13.3(b)(ii) hereof, they shall promptly institute the procedures set forth in Section 13.6 hereof (the “Buy-Sell Procedures”).

     (b) The rights of a Non-Withdrawing Party under this Article 13 shall not be the exclusive remedies of the Non-Withdrawing Party, except in the case of a voluntary termination under Section 13.2, but shall be in addition to all other rights and remedies, if any, available to the Non-Withdrawing Party at law or in equity.

     13.6 Buy-Sell Procedures .

     (a) Upon the event specified in Section 13.5(a), the Non-Withdrawing Party(s) shall give written notice of the institution of the Buy-Sell Procedures to the Withdrawing Party within thirty (30) days after the event specified in Section 13.3(b). Within thirty (30) days after receipt of such notice, the Withdrawing Party shall deliver to each Non-Withdrawing Party an offer (“Offer”) in writing, stating the cash purchase price under which the Withdrawing Party is willing to purchase the interest in the Joint Venture of each Non-Withdrawing Party. Such price shall be stated in terms of the price attributable to 100% of the Joint Venture. The Non-Withdrawing Party(s) then shall be obligated either to elect:

(1)

to purchase the interest of the Withdrawing Party in the Joint Venture for cash at a price equal to the 100% price stated in the Offer multiplied by the Withdrawing Party’s Joint Venture Percentage Interest (in the event that more than one Non-Withdrawing Party elects to purchase the interest of a Withdrawing Party hereunder, then each Non-Withdrawing Party so electing shall purchase a fraction of the Withdrawing Party’s Joint Venture ownership interest equal to that Non-Withdrawing Party’s interest in the Joint Venture divided by the interest of all Non-Withdrawing Parties in the Joint Venture electing to purchase the interest of the Withdrawing Party); or

(2)

to sell to the Withdrawing Party the interest of the Non-Withdrawing Party in the Joint Venture for cash at a price equal to the 100% price stated in the Offer multiplied by the Non-Withdrawing Party’s Joint Venture Percentage Interest.

The Non-Withdrawing Parties shall exchange written notices with all other Non-Withdrawing Parties of such election within thirty (30) days after receipt of the Offer. After receipt of any notice from another Non-Withdrawing Party, a Non-Withdrawing Party may change its election but must notify all other Non-Withdrawing Parties in writing of its change prior to notifying the Withdrawing Party. After final notification to all other Non-Withdrawing Parties, but not later than one hundred eighty (180) days after receipt of the Offer, a Non-Withdrawing Party shall give written notice of its election to the Withdrawing Party. Failure of the Non-Withdrawing Party to give all Non-Withdrawing and Withdrawing Parties notice that the Non-Withdrawing Party has elected under Subsection (1) above shall be conclusively deemed to be an election under Subsection (2) above.

     (b) The closing of a purchase pursuant hereto shall be held at a mutually acceptable place on a mutually acceptable date not more than thirty (30) days after receipt by the Withdrawing Party of the written notice of all Non-Withdrawing Parties’ election under Section 13.6(a) hereof. At such closing, the selling party shall assign to the purchasing party the interest in the Joint Venture so sold free and clear of all liens, claims, and encumbrances an