Common use of Appointment and Removal of Party Operator Clause in Contracts

Appointment and Removal of Party Operator. (a) EXCO Operator is hereby designated and agrees to serve as the initial operator under each Joint Development Operating Agreement and to operate the Subject Oil and Gas Assets covered by such Joint Development Operating Agreement in accordance with the terms and conditions thereof, subject (in each case) to the terms of this Agreement. To the extent EOC or EPC serves as operator under any Third Party Operating Agreement, such Person is hereby designated and agrees to serve as operator under such Third Party Operating Agreement and to operate the Subject Oil and Gas Assets covered by such Third Party Operating Agreement in accordance with the terms and conditions thereof, subject (in each case) to the terms of this Agreement. The designations set forth in this Section 3.5(a) are personal to the applicable EXCO Operator, as a consequence of the specific skills it holds with respect to shale operations, and operations in the Haynesville shale in particular. For the avoidance of doubt, a Party Operator shall conduct each Sole Risk Development Operation conducted pursuant to the Joint Development Operating Agreement for which it is operator on behalf of all of the parties participating in such operation, unless otherwise agreed by such participating parties in accordance with the terms of such Joint Development Operating Agreement. (b) A Party Operator may be removed as operator under any Joint Development Operating Agreement, or if any Person that is not a Development Party is party to such Joint Development Operating Agreement, then a Party Operator may be required to resign as operator under such Joint Development Operating Agreement, under the following circumstances: (i) by the affirmative vote of the Development Parties that are parties to such Joint Development Operating Agreement, other than Party Operator and its Affiliates, holding a majority of the Participating Interest held by such Development Parties: (A) if there is a Change in Control of such Party Operator; or (B) for good cause, provided that in the case of removal or a required resignation for good cause, such vote shall not be deemed effective until a written notice has been delivered to such Party Operator by another Party that is a party to such Joint Development Operating Agreement detailing the alleged default and such Party Operator has failed to cure the default within thirty (30) days from its receipt of the notice or, if the default concerns an operation then being conducted, within forty-eight (48) hours of its receipt of the notice; (ii) by the affirmative vote of the Development Parties that are parties to such Joint Development Operating Agreement holding a majority of the Participating Interest in the event that Party Operator’s and its Affiliates’ aggregate Participating Interest falls below twelve and a half percent (12.5%); or (iii) solely with respect to those After Acquired Units for which EXCO or any Affiliate of EXCO serves as Party Operator under the relevant Joint Development Operating Agreement, upon a change in Control of the ultimate parent company of EXCO. For purposes hereof, “good cause” shall mean not only gross negligence and willful misconduct, but also the material breach of or inability to meet the standards of operation contained in Section 3.3, or a material failure or inability of a Party Operator to perform its obligations under the relevant Joint Development Operating Agreement. As used herein, “gross negligence” and “willful misconduct” shall include material unlawful acts committed by an operator of which such operator had actual knowledge at the time in question. Notwithstanding anything to the contrary herein, (I) if there is a dispute as to whether a condition resulting in good cause to remove a Party Operator has occurred, or whether such condition has been cured, such Party Operator shall continue to serve and discharge its duties in such capacity until the dispute has been resolved in accordance with Section 13.2, and (II) a change of a corporate name or structure of a Party Operator or Transfer of a Party Operator’s interest to another direct or indirect Wholly-Owned Affiliate of the same ultimate parent company shall not be the basis for removal of such Party Operator. During the term of this Agreement, for avoidance of doubt, as between the Parties, the provisions of this Section 3.5(b) and Section 3.5(c) shall be in lieu of any provisions in any Joint Development Operating Agreement for the removal or resignation of the operator thereunder. (c) Upon the occurrence of a Material Event with respect to a Party Operator, it shall be deemed to have resigned as operator under each Joint Development Operating Agreement for which it serves as operator, or if any Person that is not a Development Party is party to such Joint Development Operating Agreement, then a Party Operator shall be required to resign as operator under such Joint Development Operating Agreement, without any action by the other Parties, except the selection of a successor pursuant to the terms and conditions of the relevant Joint Development Operating Agreement. (d) Following any resignation or removal of EXCO Operator as operator under any Applicable Operating Agreement, if BG or one of its Affiliates is still a Party to this Agreement, EXCO shall vote for BG or BG’s designee to serve as the successor operator under such Applicable Operating Agreement. (e) Each Party Operator shall conduct all operations in accordance with and subject to the terms of Article 4, and Sections 3.3, 3.4, this 3.5, 3.7, 3.10 and 3.11, in addition to any terms set forth in the relevant Applicable Operating Agreements.

Appointment and Removal of Party Operator. (a) EXCO Operator Subject to Section 3.4(g), the Company is hereby designated and agrees to serve as the initial operator under each Joint Development Operating Agreement and to operate the Subject Oil and Gas Assets covered by such Joint Development Operating Agreement in accordance with the terms and conditions thereof, subject (in each case) to the terms of this Agreement. To the extent EOC or EPC the Company serves as operator under any Third Party Operating Agreement, such Person the Company is hereby designated retained as and agrees to serve as operator under such Third Party Operating Agreement and to operate the Subject Oil and Gas Assets covered by such Third Party Operating Agreement in accordance with the terms and conditions thereof, subject (in each case) to the terms of this Agreement. The designations set forth in this Section 3.5(a3.4(a) are personal to the applicable EXCO OperatorCompany, as a consequence of the specific skills it holds with respect to shale operations, and operations in the Haynesville Marcellus shale in particular. For the avoidance of doubt, a Party Operator shall conduct each Sole Risk Development Operation and Sole Risk Entity Operation conducted pursuant to the a Joint Development Operating Agreement for which it is operator on behalf of all of the parties participating in such operation, unless otherwise agreed by such participating parties in accordance with the terms of such Joint Development Operating Agreement, and provided that in the event of a Sole Risk Entity Operation that is undertaken by any Joint Entity on behalf of any Entity Member or Entity Members under Section 4.1(i)(ii), the Entity Member or Entity Members causing the Joint Entity to conduct such operation shall make such determination on behalf of the Joint Entity. In the event an operator other than the Joint Development Operator is chosen for a Sole Risk Development Operation or Sole Risk Entity Operation, or the Joint Development Operator is removed as Party Operator under any Applicable Operating Agreement pursuant to this Section 3.4, the payment procedures in Section 2.3 shall not apply with respect to such Sole Risk Development Operation or Sole Risk Entity Operation or operations under such Applicable Operating Agreement, and the Participating Parties shall instead pay the applicable Development Costs (and, if applicable, Carried Costs) directly to such operator, in accordance with the terms of the Applicable Operating Agreement. (b) A In addition to any provisions of a Joint Development Operating Agreement regarding the removal of the operator, a Party Operator may be removed as operator under any Joint Development Operating Agreement, or if any Person that is not a Development Party or a Joint Entity (or, if applicable, an Entity Member in connection with a Farmout Sole Risk Entity Operation) is party to such Joint Development Operating Agreement, then a Party Operator may be required to resign as operator under such Joint Development Operating Agreement, under the following circumstances: (i) Agreement by the affirmative vote of the Development Parties Parties, the Joint Entities and the Entity Members that are parties to such Joint Development Operating Agreement, other than such Party Operator and its Affiliates, holding a majority of the Participating Interest working interest held by such parties under the Joint Development Parties: (A) if there is a Change in Control of such Party Operator; or (B) Operating Agreement, for good cause, provided that in the case of removal or a required resignation for good cause, such vote shall not be deemed effective until a written notice has been delivered to such Party Operator by another Party Development Party, Joint Entity or Entity Member that is a party to such Joint Development Operating Agreement detailing the alleged default and such Party Operator has failed to cure the default within thirty (30) days from its receipt of the notice or, if the default concerns an operation then being conducted, within forty-eight (48) hours of its receipt of the notice; (ii) by the affirmative vote of the Development Parties that are parties to such Joint Development Operating Agreement holding a majority of the Participating Interest in the event that Party Operator’s and its Affiliates’ aggregate Participating Interest falls below twelve and a half percent (12.5%); or (iii) solely with respect to those After Acquired Units for which EXCO or any Affiliate of EXCO serves as Party Operator under the relevant Joint Development Operating Agreement, upon a change in Control of the ultimate parent company of EXCO. For purposes hereof, “good cause” shall mean not only gross negligence and willful misconduct, but also the material breach of or inability to meet the standards of operation contained in Section 3.3, or a material failure or inability of a Party Operator to perform its obligations under the relevant Joint Development Operating Agreement. As used herein, “gross negligence” and “willful misconduct” shall include material unlawful acts committed by an operator of which such operator had actual knowledge at the time in question. Notwithstanding anything to the contrary herein, (I) if there is a dispute as to whether a condition resulting in good cause to remove a Party Operator has occurred, or whether such condition has been cured, such Party Operator shall continue to serve and discharge its duties in such capacity until the dispute has been resolved in accordance with Section 13.2, and . Where a Joint Entity (IIother than the Joint Development Operator) a change of a corporate name or structure of a Party Operator or Transfer of a Party Operator’s interest is party to another direct or indirect Wholly-Owned Affiliate of the same ultimate parent company shall not be the basis for removal of such Party Operator. During the term of this Agreement, for avoidance of doubt, as between the Parties, the provisions of this Section 3.5(b) and Section 3.5(c) shall be in lieu of any provisions in any Joint Development Operating Agreement for Agreement, the removal Entity Member or resignation Entity Members other than the Party Operator and Affiliates of the operator thereunderParty Operator shall make the determination as to whether a notice is delivered by the Joint Entity, and as to the vote of the Joint Entity, under this Section 3.4(b). (c) Upon the occurrence of a Material Event with respect to a Party Operator, it shall be deemed to have resigned as operator under each Joint Development Operating Agreement for which it serves as operator, or if any Person that is not a Development Party or a Joint Entity (or, if applicable, an Entity Member in connection with a Farmout Sole Risk Entity Operation) is party to such Joint Development Operating Agreement, then a Party Operator shall be required to resign as operator under such Joint Development Operating Agreement, without any action by the other Parties, except the selection of a successor pursuant to the terms and conditions of the relevant Joint Development Operating Agreement. (d) Following any resignation or removal of EXCO Operator the Company as operator under any Applicable Operating Agreement, if BG or one of its Affiliates is still a Party any other Joint Entity holds working interests in the affected Leases, the Development Parties, any Joint Entities and any Entity Members that are party to this Agreement, EXCO the Applicable Operating Agreement shall vote for BG or BG’s designee such other Joint Entity to serve as the successor operator under such Applicable Operating Agreement. If no other Joint Entity holds working interests in the affected Leases, and the Participating Parties are able to cause the Company to transfer its working interest in the affected Leases to another Joint Entity without loss of rights and to thereafter appoint the other Joint Entity as successor operator under the Applicable Operating Agreement, they shall do so, and the Company shall cooperate in such transfer. In the event the Participating Parties are unable to effectuate such transfer and appointment pursuant to the preceding sentence, the Participating Parties will mutually agree upon a successor Party Operator for such Applicable Operating Agreement and the standards of operation applicable thereto. (e) Any successor Party Operator must agree to adhere to the standards, principles, plan and management system, as amended from time to time, adopted by the Company pursuant to Section 2.13 of the Joint Entity Agreement for the Company, and shall also perform the obligations and be subject to the requirements set forth in Sections 2.15, 2.16, and 2.17 and Article 3 of the Joint Entity Agreement for the Company as of the date the Company ceases to be Party Operator, as if such obligations and requirements were set forth herein and specifically referenced such successor Party Operator, in each case to the extent relevant to duties performed by the Party Operator and subject to any modifications thereafter approved by the Operating Committee. In addition, if the Company ceases to be Party Operator, the terms of Section 2.18 of the Joint Entity Agreement for the Company shall be deemed to be incorporated herein by reference and shall apply as if the references to “Members” were references to “Development Parties”, the references to “Management Board” were references to “Operating Committee”, the references to the “Company” were references to the “Party Operator” and references to the Company participating were references to all Development Parties participating. (f) Each Party Operator shall conduct all operations in accordance with and subject to the terms of Article 4, Section 3.3 and Sections 3.3, this Section 3.4, this 3.5, 3.7, 3.10 and 3.11, in addition to any terms set forth in the relevant Applicable Operating Agreements. (g) In the event that the Joint Entity or Joint Entities other than the Company would be the only parties to a Joint Development Operating Agreement, such Joint Entity or Joint Entities shall appoint the Company as the operator with respect to such Joint Development Operating Agreement; provided that any such Joint Development Operating Agreement shall be modified to permit the operator thereunder to not own any interests in the contract area covered thereby and such other modifications as reasonably necessary from the form set forth in Exhibit “B” hereto to account for the fact that the Company will not own any interests in such contract area and any other applicable difference, such modifications to be agreed to by the Operating Committee working in good faith. In the event that (i) one or more Joint Entities other than the Company are parties to a Third Party Operating Agreement or a Joint Development Operating Agreement to which a third party is a party, (ii) the Company is not a party to such Third Party Operating Agreement or Joint Development Operating Agreement, and (iii) a Joint Entity other than the Company is the operator of such Third Party Operating Agreement or Joint Development Operating Agreement at the time that such Joint Entity is acquired or subsequently becomes operator under such agreement, then such Joint Entity shall remain operator and, if permitted under the terms of the Applicable Operating Agreement, shall delegate operational responsibility to the Company as a Contract Operator through a contract operating agreement in a form to be approved by the Operating Committee working in good faith (a “Contract Operating Agreement”). (h) In the event an Entity Member undertakes a Farmout Sole Risk Entity Operation, and the applicable Joint Entity has been operating the relevant Oil and Gas Assets, then unless the Entity Member exercises its rights to replace the Party Operator for such Sole Risk Entity Operations pursuant to Section 3.4(a), the Entity Member, if permitted under the terms of the Applicable Operating Agreement, shall vote to cause the Joint Entity to remain the operator of the relevant Oil and Gas Assets following the farmout, or, if that is not possible, if permitted under the terms of the Applicable Operating Agreement, such Entity Member shall seek to become operator for such Farmout Sole Risk Entity Operation and delegate operational responsibility to the Company as a Contract Operator under a Contract Operating Agreement.