PARTICIPATION AGREEMENT by and between Gastar Exploration USA, Inc. and Atinum Marcellus I LLC Dated [_____________], 2010
Execution
Version
by
and between
Gastar
Exploration USA, Inc.
and
Atinum
Marcellus I LLC
Dated
[_____________], 2010
TABLE
OF CONTENTS
Page
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ARTICLE
I DEFINITIONS
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1
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Section
1.1
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Definitions
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1
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Section
1.2
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Terms
Generally; Rules of Construction
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8
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ARTICLE
II NATURE OF JOINT DEVELOPMENT; SCOPE AND COSTS
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8
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Section
2.1
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Scope
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8
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Section
2.2
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Audit
of Accounts
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8
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Section
2.3
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Lease
Maintenance and Renewal Payments
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9
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Section
2.4
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Renewal
and Extension of Leases by Drilling
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9
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Section
2.5
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Shared
Cost of Renewals, Extensions and Re-acquisitions
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9
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Section
2.6
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Reasonable
Efforts
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9
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ARTICLE
III DRILLING CARRY PROGRAM
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9
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Section
3.1
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Drilling
Carry Obligation
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9
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Section
3.2
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Development
Plan During Drilling Carry Period
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10
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Section
3.3
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Changes
to Development Plan
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10
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Section
3.4
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Termination
of Drilling Carry Obligation
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10
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Section
3.5
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Drilling
Carry Pledged Interests
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11
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Section
3.6
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Releases
and Acknowledgments and Costs
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12
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ARTICLE
IV JOINT OPERATING AGREEMENTS AND OPERATIONS
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13
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Section
4.1
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Joint
Operating Agreement
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13
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Section
4.2
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Budgets
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13
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Section
4.3
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Participation
or Non-Participation During the Drilling Carry Period
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14
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Section
4.4
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Meetings
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14
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Section
4.5
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Reports
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14
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Section
4.6
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Gathering
and Marketing
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15
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ARTICLE
V AMI AND ADDITIONAL ACREAGE
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15
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Section
5.1
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Acquisition
of Additional Acreage
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15
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Section
5.2
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Additional
Acreage
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17
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Section
5.3
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Lease
and Brokerage Costs
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18
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Section
5.4
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Third
Party JOA
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18
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ARTICLE
VI TRANSFER RESTRICTIONS
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18
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Section
6.1
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Restrictions
on Transfer
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18
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Section
6.2
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Tag-Along
Rights
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19
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i
Section
6.3
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Documentation
for Transfers; Validity of Transfer
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20
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ARTICLE
VII ACCESS TO DATA
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20
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Section
7.1
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Land
Information
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20
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Section
7.2
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Geoscience
Data
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21
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Section
7.3
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Marketing
Information
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21
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Section
7.4
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No
Warranty of Accuracy
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21
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ARTICLE
VIII MISCELLANEOUS PROVISIONS
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21
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Section
8.1
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Participant
Representatives
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21
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Section
8.2
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Term
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22
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Section
8.3
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Notices
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22
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Section
8.4
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Relationship
of the Parties
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23
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Section
8.5
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Publicity
and Recordation of Documents
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24
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Section
8.6
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Waiver;
Rights Cumulative
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25
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Section
8.7
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Amendments;
Binding Effect
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25
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Section
8.8
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No
Third Party Beneficiaries
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25
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Section
8.9
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Severability
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25
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Section
8.10
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Governing
Law; Dispute Resolution
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25
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Section
8.11
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Confidentiality
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28
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Section
8.12
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Exhibits
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29
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Section
8.13
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Interpretation
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29
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Section
8.14
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Conflicting
Provisions
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29
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Section
8.15
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Entire
Agreement
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29
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Section
8.16
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Further
Assurances
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29
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Section
8.17
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Memorandum
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30
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Section
8.18
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Multiple
Counterparts
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30
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ii
EXHIBITS
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Exhibit
A
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Form
of Assignment
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Exhibit
B
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Form
of Joint Operating Agreement
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Exhibit
C-1
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Form
of Memorandum (PA)
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Exhibit
C-2
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Form
of Memorandum (WV)
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Exhibit
D
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Development
Plan
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Exhibit
E
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Tax
Partnership Exhibit
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iii
This
PARTICIPATION AGREEMENT
(this “Agreement”) dated
[__________], 2010 (the “Effective Date”) is
by and between Gastar Exploration USA, Inc., a Michigan corporation (“Gastar”) and Atinum
Marcellus I LLC, a Delaware limited liability company (“Participant”). Gastar
and Participant shall be referred to herein, individually, as a “Party” and,
collectively, as the “Parties.”
RECITALS
WHEREAS, pursuant to the
Purchase and Sale Agreement, dated as of September 21, 2010, by and between
Gastar and Participant (the “Purchase Agreement”),
Gastar sold and conveyed to Participant, and Participant purchased and acquired
from Gastar, concurrently with the execution of this Agreement, the Conveyed
Interests (as defined below), representing an undivided 50% (3/14ths to be
increased to 50% in accordance with the Conveyances (as defined in the Purchase
Agreement) in the case of the Conveyed Interests that are not Producing
Interests) in the Assets (as defined below) held by Gastar, and the Parties
acknowledge and agree that the transactions contemplated by the Purchase
Agreement are integral to the transactions contemplated by, and the rights and
obligations of the Parties under, this Agreement and the Transaction Documents
(as defined below);
WHEREAS, the Parties desire to
participate together in the exploration and development of the Joint Interests
(as defined below) and certain other Hydrocarbon Interests (as defined below) in
a coordinated manner; and
WHEREAS, the Parties desire to
set forth their respective rights and obligations with respect to such
arrangement in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, for and in
consideration of the mutual promises contained in this Agreement, the benefits
to be derived by each Party, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Gastar and Participant
agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions. The
respective terms defined in this Section 1.1, when
used in this Agreement, have the respective meanings specified
herein:
“Acquired Interests”
has the meaning set forth in Section
5.1(e).
“Acquiring Party” has
the meaning set forth in Section
5.1(a).
“Acquisition Notice”
has the meaning set forth in Section
5.1(b).
“Additional Acreage”
has the meaning set forth in Section
5.2(a).
“Additional Acreage
Notice” has the meaning set forth in Section
5.2(b).
“Additional AMI” means
lands located within the State of West Virginia or the Commonwealth of
Pennsylvania outside of the Initial AMI, to all depths.
“Affiliate” means,
with respect to any Person, another Person that, directly or indirectly, through
one or more intermediaries, Controls or is Controlled by, or is under common
Control with, the first Person.
“Agreement” has the
meaning set forth in the preamble.
“AMI” means (i) with
respect to lands acquired on or prior to June 30, 2011, the Initial AMI and (ii)
with respect to lands acquired after June 30, 2011, the Initial AMI and the
Additional AMI.
“AMI Acreage” has the
meaning set forth in Section
5.1(b).
“AMI Termination Date”
is the fifth anniversary of the Effective Date.
“Assets” has the
meaning set forth in the Purchase Agreement.
“Budget” has the
meaning set forth in Section
4.2(a).
“Business Day” means
any day other than a Saturday, a Sunday or a day on which banking institutions
in Houston, Texas or the Republic of Korea are authorized or required by Law to
close.
“Buyer Parent” means
The Xxxx Global Frontier Private Overseas Resources Development Special Asset
Fund[1](Equity).
“Confidential Data”
has the meaning set forth in Section
8.11(a).
“Control” means, with
respect to any Person, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the Person,
whether through the ownership of voting securities or other voting interests, by
contract or otherwise.
“Conveyed Interests”
has the meaning set forth in the Purchase Agreement.
“Development
Operation” means any operation undertaken pursuant to any JOA and
conducted in accordance with this Agreement and the Development
Plan.
“Development Plan” has
the meaning set forth in Section
3.2.
“Direct Overhead
Costs” means overhead costs and expenses incurred by Gastar in connection
with Development Operations in accordance with the Development
Plan.
“Dispute” has the
meaning set forth in Section
8.10(b).
“Drilling Carry
Balance” means, as of any time, the remainder (but not less than $0) of
the Drilling Carry Cap minus the aggregate amount of Specified Carry Costs as of
that time.
2
“Drilling Carry Cap”
means an amount equal to $40,000,000.00; provided, however, that (a) the
Drilling Carry Cap shall be increased as provided in Section 5.2(d), (b)
if the Net Title Adjustment Amount (as defined in the Purchase Agreement for
purposes of this Agreement) is a positive amount greater than $1,050,000, then
the Drilling Carry Cap shall be increased by an amount equal to the product of
(i) 4/3 and (ii) the amount of the Net Title Adjustment Amount in excess of
$1,050,000, and (c) if the Net Title Adjustment Amount is a negative amount the
absolute value of which is greater than $1,050,000, then the Drilling Carry Cap
shall be reduced by an amount equal to the product of (i) 4/3 and (ii) the
absolute value of the amount of the Net Title Adjustment Amount in excess of
$1,050,000.
“Drilling Carry
Obligation” has the meaning set forth in Section
3.1(a).
“Drilling Carry
Period” has the meaning set forth in Section
3.1(a).
“Drilling Carry Pledged
Interests” has the meaning set forth in Section
3.5(a).
“Drilling Carry Termination
Date” means, subject to Section 3.4, the
earlier to occur of:
(a) the
first date on which the aggregate Specified Carry Costs equals the Drilling
Carry Cap; and
(b) the
date that is 45 months after the Effective Date.
“Drilling Unit” means
the area fixed for the drilling of one well by order or rule of any state or
federal body having authority to make such order or rule. If a
Drilling Unit is not fixed by any such rule or order, a Drilling Unit will have
the size and shape as reasonably determined by the operator for such Drilling
Unit.
“Effective Date” has
the meaning set forth in the preamble.
“Eligible JOA Costs”
means all costs incurred with respect to the Joint Interests under any JOA in
the nature of capital expenditures associated with maintenance, development and
operations on or in connection with any Joint Interests or well, including
third-party title review or examination, permitting, drilling, completion and
infrastructure costs, reclamation and related costs and capital expenditures for
infrastructure required for gathering and treating, but excluding all
geotechnical, geophysical seismic and similar costs, taxes, all costs incurred
in the acquisition of acreage, all costs of lease maintenance, renewals and
extensions, all operating expenditures, all overhead charges, and general and
administrative expenses.
“Fee Interests” has
the meaning set forth in the Purchase Agreement.
“Form JOA” means a
joint operating agreement, in the form attached to this Agreement as Exhibit B, to be
executed by the Parties, which, in conjunction with this Agreement, shall govern
operations on the Joint Interests as between the Parties.
“Form of Assignment”
means an assignment be in substantially the same form as that attached to this
Agreement as Exhibit
A.
3
“Fully Earned Working
Interest Share” means the product of (a) the aggregate Working Interests
owned by Gastar and Participant multiplied by (b) 50% for Gastar and 50% for
Participant out of the aggregate.
“Gastar” has the
meaning set forth in the preamble.
“Gastar Credit
Agreement” means that certain Amended and Restated Credit Agreement,
dated as of October 28, 2009, by and between Gastar, Amegy Bank National
Association, as Administrative Agent and other signatories thereto.
“Gastar Interests” has
the meaning set forth in Section
6.1(b)(i).
“Gastar Parent” means
Gastar Exploration Ltd., an Alberta corporation.
“Gastar Working
Interest” has the meaning set forth in Section
2.1.
“Gastar Persons” has
the meaning set forth in Section
5.1(a).
“Gastar Producing Well
Interest” has the meaning set forth in Section
2.1.
“Gastar Production”
has the meaning set forth in Section
4.6(a).
“Governmental
Authority” means any foreign, federal, state, regional, local, municipal,
tribal or other government; any governmental, regulatory or administrative
agency, commission, body or other authority exercising or entitled to exercise
any administrative, executive, judicial, legislative, regulatory or taxing
authority or power; and any court or governmental tribunal, including any
arbitrator or tribal authority having or asserting jurisdiction.
“Hydrocarbon
Interests” means interests in, and rights with respect to, Hydrocarbons,
the Fee Interests and Leases, together with any and all other rights, titles and
interests in and to any pooled acreage, communitized acreage or units arising on
account of the Leases or Fee Interests having been pooled, communitized or
unitized into such units, including any arrangement by which the consideration
to acquire a Lease is paid at the time of signing of such Lease but such Lease
becomes effective only after expiration or termination of an existing
lease.
“Hydrocarbons” means
oil and gas and other hydrocarbons produced or processed in association
therewith (whether or not such item is in liquid or gaseous form), or any
combination of the foregoing, and any minerals produced in association
therewith.
“ICC” has the meaning
set forth in Section
8.10(b).
“ICC Court” has the
meaning set forth in Section
8.10(c).
“ICC Rules” has the
meaning set forth in Section
8.10(b).
4
“Initial AMI” means
(i) the entire States of New York and Ohio to all depths beneath the surface of
the lands in those states, (ii) Doddridge, Harrison, Xxxxx, Xxxxxx, Xxxxxxxx,
Monongalia, Xxxxxxxxx, Xxxxx and Xxxxxx Counties, in the State of West Virginia,
to all depths beneath the surface of the lands in those counties, (iii) Butler,
Cambria, Clarion, Clearfield, Fayette, Greene, Jefferson, Potter and Somerset
Counties in the Commonwealth of Pennsylvania, to all depths beneath the surface
of the lands in those counties and (iv) all lands in counties not listed in
clauses (ii) and (iii) to the extent and only to the extent that such lands are
within 2 miles of the Subject Leases or Fee Interests, to all depths beneath the
surface of such lands.
“XXXx” means,
collectively, the Form XXXx and all Third Party XXXx, and “JOA” means any of
them, as applicable.
“Joint Interests”
means all right, title and interest of the Parties to Hydrocarbon Interests to
the extent located within the AMI or acquired under Article V in which
both Parties hold an interest (and lands pooled or unitized therewith) including
(a) interests acquired pursuant to the Purchase Agreement and (b) interests
acquired after the Effective Date and made subject to this
Agreement.
“Law” means all
applicable statutes, laws, rules, regulations, orders, ordinances, judgments and
decrees of any Governmental Authority, including the common or civil law of any
foreign or domestic Governmental Authority.
“Lease” has the
meaning set forth in the Purchase Agreement.
“Lease Acquisition
Costs” shall mean all (a) direct costs paid or payable to lessors or
sellers incurred in acquiring AMI Acreage including cash bonus consideration
(including bonuses paid for interests acquired by compulsory pooling,
communitization or unitization) and (b) broker’s fees, recording fees, title
examination expense, legal expense, title curative costs, land costs, drafting
and other costs reasonably incurred and paid or payable to third parties in
connection with AMI Acreage.
“Liabilities” means
any and all claims, causes of actions, payments, charges, judgments,
assessments, liabilities, losses, damages, supplemental environmental projects,
penalties, fines or costs and expenses, including any reasonable fees of
attorneys, experts, consultants, accountants and other professional
representatives and legal or other expenses incurred in connection therewith and
including liabilities, costs, losses and damages for personal injury, illness or
death, property damage, contracts claims, torts or otherwise.
“Memorandum” means
that certain Memorandum of Participation Agreement, Leasehold Mortgage, Security
Agreement, Financing Statement, Fixture Filing and As Extracted Mineral Filing,
in the form of Exhibit
C-1, and that certain Memorandum of Participation Agreement, Leasehold
Deed Of Trust, Security Agreement, Financing Statement, Fixture Filing and As
Extracted Mineral Filing, in the form of Exhibit C-2, in each
case, to be executed on the Effective Date by the Parties and in sufficient
counterparts to allow for recording, and to evidence the releases contemplated
by Section
3.6(a) and filed against the Joint Interests to evidence the Parties
respective rights and obligations under this Agreement.
“Net Acre” means, as
computed separately with respect to each Lease, (a) the number of gross acres in
the lands covered by such lease, multiplied by (b) the undivided percentage
interest in oil, gas or other minerals covered by such Lease in such lands,
multiplied by (c) Gastar’s Working Interest in that lease; provided that if
items (b) and/or (c) vary as to different areas of the lands (including depths)
covered by that Lease, a separate calculation shall be done for each such area
as if it were a separate Lease.
5
“Non-Acquiring Party”
has the meaning set forth in Section
5.1(b).
“Non-Consenting Party”
has the meaning set forth in the Form JOA.
“Participant” has the
meaning set forth in the preamble.
“Participant Carry
Costs” means, with respect to the drilling and completion of any well,
the sum of (a) 75% of Gastar’s Fully Earned Working Interest Share of the
Eligible JOA Costs for the drilling and completion of that well not exceeding
125% of the amount of Eligible JOA Costs under the initial authority for
expenditure or similar estimate or assessment for the drilling and completion of
that well, plus (b) the product of (i) the Eligible JOA Costs for the drilling
and completion of that well multiplied by (ii) the remainder of the
Participant’s Fully Earned Working Interest Share minus the Participant’s
Working Interest Share with respect to that well.
“Participant
Interests” has the meaning set forth in Section
6.1(a)(i).
“Participant Working
Interest” has the meaning set forth in Section
2.1.
“Participant Persons”
has the meaning set forth in Section
5.1(a).
“Participant Producing Well
Interest” has the meaning set forth in Section
2.1.
“Participant
Production” has the meaning set forth in Section
4.6(a).
“Party” or “Parties” has the
meaning set forth in the preamble.
“Payment Date” has the
meaning set forth in Section
5.1(e).
“Person” means any
individual, firm, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization, Governmental Authority
or any other entity.
“Producing Interest”
means the following: (a) each well listed on
Exhibit A to the Purchase Agreement, (b) the Drilling Unit or Lease related to
such well, (c) all Hydrocarbons produced from such well and (d) all other
interests of Gastar in such well or such Drilling Unit, in each case of (a),
(b), (c) and (d), limited to those assets and interests to the extent relating
to depths above the Marcellus formation, except for the Xxxxx Xxxx #1 Well
described in Schedule
4.20 of the Purchase Agreement which will include the associated assets
and interests to all depths and (e) the Fee Interests.
“Purchase Agreement”
has the meaning set forth in the Recitals.
“Purchase Price” has
the meaning set forth in the Purchase Agreement.
“Representatives”
means, as to any Party, the employees, directors, officers, advisors,
consultants, agents, or representatives.
6
“Specified Carry
Costs” means, as of any time, the aggregate amount of Participant Carry
Costs described in clause (a) of the definition of that term that Participant
has paid as of that time.
“Specified Rate”
means, for any day, an amount (but not to exceed the maximum rate permitted by
applicable law) equal to 3% over the rate (rounded upwards, if necessary, to the
next 1/100 of 1%) appearing under “Key Rates” on xxx.xxxxxxxxx.xxx/xxxxxxx (or
on any successor or substitute quotation of such service) as “Current 1-Month
LIBOR” as of the close of the market on the first Business Day of the calendar
month in which that day occurs.
“Subject Lease” has
the meaning set forth in the Purchase Agreement.
“Tax Partnership” has
the meaning set forth in Section
8.4(a).
“Tax Partnership
Exhibit” means Exhibit E to this
Agreement.
“Tax Purposes” has the
meaning set forth in Section
8.4(a).
“Third Party JOA” has
the meaning set forth in Section
4.1(a).
“Transaction
Documents” has the meaning set forth in the Purchase
Agreement.
“Transfer” has the
meaning set forth in Section
6.1(a)(i).
“Unpaid Amount” has
the meaning set forth in Section
3.4.
“Vesting Point” means,
with respect to any well, the earliest to occur of (a) the date of the
completion of such well, (b) the first date of sales from such well and (c) the
date drilling of such well is abandoned.
“Working Interest”
means the interest in and to a Lease or Fee Interest that is burdened with the
obligation to bear and pay costs and expenses of maintenance, development and
operations on or in connection with such Lease or Fee Interest, but without
regard to the effect of any royalties, overriding royalties, production
payments, net profits interests and other similar burdens upon, measured by, or
payable out of production therefrom.
“Working Interest
Share” means, with respect to a Party and a Joint Interest, the aggregate
percentage Working Interests in that Joint Interest held by that Party and its
Affiliates. A Party’s Working Interest Share in one or more Joint
Interests may be adjusted from time to time in accordance with this Agreement
and any JOA. As of the Effective Date, the Working Interest Share of
Gastar is equal to the Gastar Working Interest, and the Working Interest Share
of Participant is equal to the Participant Working Interest, in each case
computed out of the total Working Interest attributable to the Joint
Interests.
7
Section
1.2 Terms Generally; Rules of
Construction. The
definitions of terms in this Agreement 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” as used in
this Agreement 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 that agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on amendments, supplements or
modifications set forth in the Transaction Documents), (b) any reference to any
Law shall be construed as referring to that Law as amended, modified, codified
or reenacted, in whole or in part, and in effect from time to time, (c) any
reference to any Person shall be construed to include that Person’s successors
and assigns (without limiting the restrictions contained in the Transaction
Documents), (d) with respect to the determination of any time period, the word
“from” means “from and including” and the word “to” means “to and including” and
(e) any reference herein to Articles, Sections and Exhibits shall be construed
to refer to Articles and Sections of, and Exhibits to, this
Agreement. No provision of this Agreement or any other Transaction
Document shall be interpreted or construed against any Person solely because
that Person or its legal representative drafted that provision.
ARTICLE
II
NATURE
OF JOINT DEVELOPMENT; SCOPE AND COSTS
Section
2.1 Scope. This
Agreement governs, among other things, the respective rights and obligations of
the Parties with respect to the funding, development and operation of the Joint
Interests. As of the Effective Date, (a) Gastar owns an undivided 50%
interest in the Producing Interests (“Gastar Producing Well
Interest”) and Participant owns an undivided 50% interest in the
Producing Interests (“Participant Producing Well
Interest”) and (b) Gastar owns an undivided 11/14ths interest in the
Assets other than the Producing Interests (collectively with the Gastar
Producing Well Interest, the “Gastar Working
Interest”), and Participant owns an undivided 3/14ths interest in the
Assets other than the Producing Interests (collectively with the Participant
Producing Well Interest, the “Participant Working
Interest”). Except as set forth in Article III or the
other provisions of this Agreement, each Party shall pay and be responsible for
its Working Interest Share of all costs incurred from and after the Effective
Date in accordance with, and subject to, the terms and conditions of, the
XXXx. If either Party assigns, sells, transfers, or conveys all or a
portion of its Working Interest Share in accordance with the provisions of this
Agreement, the Working Interest Shares shall be adjusted
accordingly.
Section
2.2 Audit of
Accounts. Participant
shall have the right to audit Gastar’s accounts with respect to Participant
Carry Costs and Direct Overhead Costs in accordance with, and subject to the
terms and conditions of, the XXXx.
8
Section
2.3 Lease Maintenance and
Renewal Payments. During
the Drilling Carry Period, each Party shall be responsible for its Fully Earned
Working Interest Share of all delay rentals, shut-in or minimum royalty payments
and any other lease payments necessary to renew, maintain or extend the Joint
Interests and, after Drilling Carry Period, each Party shall be responsible for
its Working Interest Share of all delay rentals, shut-in or minimum royalty
payments and any other lease payments necessary to renew, maintain or extend the
Joint Interests; provided, however, that,
subject to the foregoing, Gastar will make a diligent effort to pay, promptly
and timely, for and on behalf of the Parties, each delay rental, shut-in
payment, minimum royalty and any other lease renewal or maintenance payment for
the Joint Interests, and provided, further, however, that, Gastar
may determine, in its reasonable discretion, not to renew, maintain or extend
any such Joint Interest. Gastar will not be liable to Participant for
any act or omission pertaining to the performance of its obligations under this
Section 2.3,
Section 2.4 or
Section 2.5 or
any loss resulting from such act or omission unless such act or omission
constitutes gross negligence or willful misconduct by Gastar. Gastar
may invoice Participant up to 60 days prior to the date any delay rental,
shut-in payment, minimum royalty or any other lease maintenance or renewal
payment shall become due, and Participant shall pay any such invoice within 15
days of receipt. Gastar shall promptly refund to Participant any
excess amounts paid by Participant pursuant to any such invoice.
Section
2.4 Renewal and Extension of
Leases by Drilling. If
Gastar determines not to renew or extend any Joint Interest pursuant to Section 2.3, Gastar
will provide Participant with no less than 60 days’ (to the extent reasonably
possible) notice of such determination in writing prior to the expiration of
such Joint Interest, and Participant will have the right to enter into new
arrangements with the applicable lessor to become solely responsible with
respect to such Joint Interest. Thereafter, notwithstanding anything
contained in this Agreement to the contrary, such Joint Interest shall be deemed
to be excluded from the terms and conditions of this Agreement.
Section
2.5 Shared Cost of Renewals,
Extensions and Re-acquisitions. In
Gastar’s reasonable discretion, if any Subject Lease acquired as part of the
Assets expires, or with respect to which an option to extend has expired, then
Gastar shall, to the extent reasonably practicable, take any one of the
following actions on behalf of and at the expense of itself and Participant: (a)
renew the Subject Lease, (b) lease the lands covered by the Subject Lease under
a new Lease, in which case Gastar shall promptly assign to Participant (at no
further cost to Participant, except as provided in Section 2.3 or this
Section 2.5)
Participant’s Working Interest Share in such Lease pursuant to a form of
assignment reasonably acceptable to the Parties, or (c) extend the term of the
Subject Lease. Gastar may invoice Participant up to 60 days prior to
the date any such costs shall become due, and Participant shall pay any such
invoice within 15 days of receipt. Gastar shall promptly refund to
Participant any excess amounts paid by Participant pursuant to any such
invoice. The provisions of Article V shall not
apply to any leases contemplated by clause (b) of this Section
2.5.
Section
2.6 Reasonable
Efforts. Without
limiting Gastar’s obligations, if any, as operator under any JOA, during the
term of this Agreement, each Party will use reasonable efforts to execute the
Development Operations contemplated by this Agreement in accordance with the
terms of this Agreement.
ARTICLE
III
DRILLING
CARRY PROGRAM
Section
3.1 Drilling Carry
Obligation.
(a)
In addition to paying for its Working Interest Share of
any costs under a JOA, following the Effective Date until the Drilling Carry
Termination Date (the “Drilling Carry
Period”), Participant will pay, on behalf of Gastar, the Participant
Carry Costs (such obligation to pay, the “Drilling Carry
Obligation”), in the aggregate, up to an amount such that the aggregate
Specified Carry Costs equals the Drilling Carry Cap.
9
(b)
Participant will pay the Drilling Carry Obligation in the same
manner and at the same time it pays its own Working Interest Share of costs
pursuant to a JOA. Gastar will maintain an accurate record of the
Participant Carry Costs paid by Participant and applied toward the Drilling
Carry Obligation and will provide Participant with a monthly statement
reflecting (i) all such Participant Carry Costs paid for such month, (ii) all
Participant Carry Costs paid since the Effective Date and (iii) the Drilling
Carry Balance. Participant shall be entitled to exercise all rights
available to it under the JOA to audit the accounts of the operator thereunder
with respect to such payments.
Section
3.2 Development Plan During
Drilling Carry Period. Gastar
and Participant have agreed to a development plan through the end of the
calendar year of 2013 designed to facilitate the full utilization of the
Drilling Carry Obligation (the “Development Plan”),
which is attached as Exhibit D and may be
revised only as provided in Section
3.3. Subject to its obligations, if any, as operator to any
non-Affiliated third party under any Third Party JOA and the force majeure
provisions in the XXXx, Xxxxxx shall conduct all operations on the Assets in
accordance with the Development Plan if applicable.
Section
3.3 Changes to Development
Plan. Any
change to the Development Plan will require the written approval of both
Parties.
Section
3.4 Termination of Drilling
Carry Obligation. Notwithstanding
any provision of this Agreement to the contrary, if upon the occurrence of the
Drilling Carry Termination Date, the amount of the Specified Carry Costs for any
reason is less than the Drilling Carry Cap, the Drilling Carry Obligation shall
terminate and Participant shall have no further obligation with respect thereto;
provided, however, that if any Participant Carry Cost properly charged to
Participant under this Agreement prior to the occurrence of the earlier of the
events described in clauses (a) and (b) of the definition of Drilling Carry
Termination Date remains unpaid by Participant (the “Unpaid Amount”), the
Drilling Carry Termination Date shall not occur pursuant to clause (b)
of the definition of Drilling Carry Termination Date until such amount and any
additional Unpaid Amounts are satisfied.
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Section
3.5 Drilling Carry Pledged
Interests.
(a) Participant
grants to Gastar (i) a first priority lien upon and security
interest in Participant’s Working Interest Share in the Joint Interests which
Participant now owns or hereafter acquires other than the Producing Interests
and AMI Acreage and (ii) a first priority lien on and security
interest and/or purchase money security interest in any interest it now owns or
hereafter acquires in the personal property and fixtures on or used or obtained
for use in connection with Participant’s Working Interest Share in such Joint
Interests (the properties and other assets referred to in clauses (i) and
(ii) upon which such lien and security interests are granted are referred to
herein as the “Drilling Carry Pledged
Interests”), in each case to secure payment of the Drilling Carry
Obligation and payment of all reasonable and documented costs and expenses
(including attorney fees) incurred by Gastar and its Affiliates in connection
with the enforcement of the Drilling Carry Obligation. Except with
respect to the Producing Interests and AMI Acreage, such lien upon and security
interests in the Drilling Carry Pledged Interests granted by Participant shall
include (A) Participant’s Hydrocarbon Interests comprising Joint Interests
now owned or hereafter acquired or otherwise becoming subject to this Agreement,
(B) the Hydrocarbons when extracted therefrom (including any lien thereon in
favor of Participant pursuant to the provisions of Section 9.343 of the
Uniform Commercial Code to the extent Participant is permitted pursuant to
applicable Law to assign any such lien) and equipment situated thereon or used
or obtained for use in connection therewith (including all xxxxx, tools, and
tubular goods), (C) the revenues and proceeds now and hereafter attributable to
such Hydrocarbon Interests, including the Hydrocarbons and all products obtained
or processed therefrom, and all payments in lieu, such as “take or pay” payments
or settlements, (D) all amounts and proceeds hereafter payable or to become
payable to Participant or now or hereafter relating to any part of such
Hydrocarbon Interests and all amounts, sums, monies, revenues and income which
become payable to Participant from, or with respect to, any of such Hydrocarbon
Interests, present or future, now or hereafter constituting a part thereof, (E)
all accounts (including, without limitation, accounts arising from gas
imbalances or from the sale of Hydrocarbons at the wellhead), contract rights,
inventory and general intangibles relating thereto or arising therefrom, and (F)
all proceeds and products of the foregoing.
(b) To
perfect the lien and security interest granted in Section 3.5(a),
Participant shall execute and acknowledge, if applicable, a Memorandum and/or any financing
statement prepared and submitted by Gastar and reasonably acceptable to
Participant in conjunction herewith or at any time following execution hereof,
and Gastar is authorized to file such Memorandum as a lien or mortgage (and/or
notice thereof) in the applicable real estate records and as a financing
statement with the proper officer under the Uniform Commercial Code in the state
in which the Drilling Carry Pledged Interests are situated and such other states
as Gastar shall deem appropriate to perfect the security interest granted
hereunder. In furtherance of the foregoing, (i) the Parties will
execute and acknowledge a Memorandum for recordation in the
county or counties partially or wholly within the AMI, and (ii) Participant
shall execute, file and/or record any documents or instruments necessary or
reasonably desirable or appropriate to evidence Participant’s obligations and
Gastar’s rights and/or interests under or contemplated by this Agreement,
including additional Memoranda as to this Agreement in such form of Memorandum
as the Parties may reasonably determine to evidence any changes in or additions
to the Joint Interests forming a part of or covered by the AMI or to correct any
ministerial errors that either Party may find from time to time in such
Memorandum so filed pursuant to this Agreement.
(c) Except
as provided in any JOA or any lien arising by operation of law and required by
law to be senior to the Drilling Carry Pledged Interest, Participant represents
and warrants to Gastar that Participant has not granted a lien or security
interest to any Person (other than pursuant to this Agreement and the XXXx) in
or to the Drilling Carry Pledged Interests and that the lien and security
interest granted by Participant in the Drilling Carry Pledged Interests to
Gastar shall be a first and prior lien, and Participant hereby agrees to
maintain the priority of said lien and security interest against all Persons
acquiring an interest, if any, in the Drilling Carry Pledged Interests by,
through or under Participant. All parties acquiring an interest in
the Drilling Carry Pledged Interests, including Participant, whether by
assignment, merger, mortgage, operation of law, or otherwise, shall be deemed to
have taken subject to the lien and security interest granted by this Section 3.5 as to all
obligations attributable to such interest hereunder whether or not such
obligations arise before or after such interest is acquired.
11
(d) To
the extent that Gastar has a security interest under the Uniform Commercial Code
of the state in which the Drilling Carry Pledged Interests are situated, they
shall be entitled to exercise the rights and remedies of a secured party under
the Uniform Commercial Code. The bringing of any arbitration or other
proceeding and the obtaining of an arbitral or other award by Gastar for the
obligations secured by the lien and security interest granted by Participant
hereunder shall not be deemed an election of remedies or otherwise affect the
lien rights or security interest as security for the payment
thereof.
(e) If
Participant fails to pay any Participant Carry Cost properly charged under this
Agreement and any applicable JOA, and such failure subjects Participant to
foreclosure or execution proceedings to the extent allowed by applicable Law,
Participant waives (i) any available right of redemption from and after the
date of judgment, (ii) any required valuation or appraisement of the
Drilling Carry Pledged Interests prior to sale, (iii) any available right
to stay execution or to require a marshaling of assets and (iv) any
required bond in the event a receiver is appointed. In addition, to
the extent permitted by applicable Law, Participant hereby grants to Gastar a
POWER OF SALE as to the Drilling Carry Pledged Interests, such power to be
exercised in the manner and with such notice required or provided by applicable
Law or, in the absence of applicable Law, in a commercially reasonable manner
and upon reasonable notice. Without limiting the foregoing, if
Participant fails to pay any Participant Carry Cost properly charged under this
Agreement and any applicable JOA, in addition to any remedies that may be
available to Gastar pursuant to any applicable Law, the remedies set forth in
Article VII.D. of the Form JOA shall also be available to Gastar, the provisions
of which are hereby incorporated and made part of this Agreement.
Section
3.6 Releases and Acknowledgments
and Costs.
(a) Notwithstanding
anything to the contrary in Section 3.5, the lien
and security interest on any Drilling Carry Pledged Interests created by Section 3.5(a) is
automatically released, if at all, with respect to any well, the Drilling Unit
related to such well, all Hydrocarbons produced from such well and Drilling Unit
and all other interests with respect to such well at the Vesting Point for that
well and with respect to all Participant’s Working Interest Share in the Joint
Interests at the Drilling Carry Termination Date.
(b) On
or before the 15th day after the Vesting Point with respect to any well, Gastar
shall execute and deliver an acknowledgment, which will acknowledge the
occurrence of the Vesting Point with respect to, such well, the Drilling Unit
related to such well, all Hydrocarbons produced from such well and Drilling Unit
and all other interests of Participant with respect to such well.
(c) On
or before the 15th day after the Drilling Carry Termination Date, and thereafter
upon Participant’s request, Gastar shall execute and deliver to Participant an
acknowledgment and take such further action as may be reasonably requested by
Participant to acknowledge the occurrence of the Drilling Carry Termination
Date.
12
(d) All
required documentary, filing and recording fees and expenses in connection with
the filing and recording of any release of the lien and security interest on any
Drilling Carry Pledged Interest created by Section 3.5(a) or
acknowledgement contemplated by this Section 3.6 shall be
borne by both Parties in equal shares.
ARTICLE
IV
JOINT
OPERATING AGREEMENTS AND OPERATIONS
Section
4.1 Joint Operating
Agreement.
(a) Prior
to the commencement of operations for each well to be drilled by Gastar on the
Joint Interests, Gastar and Participant shall enter into an operating agreement
in the form of the Form JOA for each Drilling Unit which is not subject to a JOA
or which is not subject to a third party operating agreement (a “Third Party JOA”) as
of the date such well is proposed. If multiple leases or properties
contribute acreage to any unit formed for the drilling of a well, the JOA
executed shall include all such contributing leases or
properties. Gastar is hereby designated as operator during the term
of this Agreement and under the terms of the XXXx; provided that the
resignation or replacement of Gastar as operator under a JOA before the AMI
Termination Date shall require the consent of Participant (other than in the
context of a Transfer permitted by Section 6.1 of all of
Gastar’s Working Interest Share), such consent not to be unreasonably withheld;
provided, further, that
Participant agrees to vote for and otherwise support the nomination and
selection of Gastar as operator under any Third Party JOA during the Drilling
Carry Period unless Participant has had the right to remove, or has removed,
Gastar as operator under any JOA in accordance with the terms thereof for
cause. By way of illustration, Participant may reasonably withhold
its consent if the new operator is not an operator of oil and gas properties
that has significant experience in developing and operating shale resources or,
in the reasonable determination of Participant, does not have the financial
wherewithal to carry out the operation of the Joint Interests.
(b) In
the event any portion of the Joint Interests is governed by a Third Party JOA,
the terms of that Third Party JOA will control as between each other party and
the Parties to this Agreement; provided, however, that this
Agreement and the applicable Form JOA will apply as between the Parties to this
Agreement to the greatest extent possible. In the event of any
conflict or inconsistency between the terms of this Agreement and any Form JOA
entered into between the Parties, this Agreement shall prevail to the extent of
such conflict. If the remainder of the entire interest covered by an
existing Third Party JOA is subsequently acquired, then such Third Party JOA
shall be superseded and replaced in its entirety by a Form JOA (subject to the
prevailing terms of this Agreement).
Section
4.2 Budgets.
(a) On
or before November 15 of each year through the end of the Drilling Carry Period,
beginning on November 15, 2010, Gastar shall provide Participant with a proposed
budget for the succeeding calendar year; provided that Gastar
shall provide Participant with a preliminary version of such budget on or before
November 1 of each year, beginning on November 1, 2010. If the
Parties are unable to agree on such a budget prior to December 15, then Gastar’s
proposed budget shall be deemed approved if such budget is consistent with the
Development Plan but otherwise only if Participant agrees (as so agreed or
deemed approved and as amended in accordance with this Agreement, each a “Budget”).
13
(b) A
Budget may be amended only by written instrument signed by both
Parties.
(c) On
the Drilling Carry Termination Date, the then effective Budget shall continue to
be operative through the remainder of the period to which it applies; provided that a Party
may non-consent operations as permitted by the XXXx unless work on such
operations has already begun prior to the Drilling Carry Termination
Date.
Section
4.3 Participation or
Non-Participation During the Drilling Carry Period. During
the Drilling Carry Period, Gastar shall have the exclusive right to propose and
conduct all operations with respect to the Joint Interests, except as otherwise
provided for in Third Party XXXx; provided that such
operations shall be consistent with the then applicable
Budget. During the Drilling Carry Period, Participant may not elect
to be a Non-Consenting Party and shall provide its consent, if Gastar so
requests, in each case with respect to any operation proposed under a JOA if the
operation is consistent with the then applicable Budget. Otherwise,
Participant maintains all rights as a party under any JOA.
Section
4.4 Meetings. The
Parties will hold meetings to discuss and review the progress and plans related
to the development of the Joint Interests at least once per quarter in
accordance with a schedule they will develop and at any other times as the
Parties may agree. The meetings shall be held during normal business
hours at the offices of Gastar or any other mutually agreed upon
location.
Section
4.5 Reports. Gastar
shall cooperate with Participant and assist Participant in obtaining annual and
semi-annual reserve reports as they apply to the Participant’s Working Interest
Share. Gastar shall also provide to Participant copies of the
following documents, information and periodic reports relating to the Joint
Interests and the development thereof (or provide Participant with electronic
access to such information):
(a) a
copy of all applications for permits to drill and any and all amendments
thereto;
(b) a
daily drilling report (or reworking report or recompletion report, if
applicable), giving the depth, corresponding lithological information, data on
drilling fluid characteristics, information about drilling or operational
difficulties or delays, if any, and other pertinent information, by electronic
mail within 24 hours (exclusive of Saturdays, Sundays, and federal holidays in
the United States) for well operations conducted in the preceding 24 hour
period;
(c) a
complete report of each core analysis;
(d) a
copy of each electrical survey, currently as it is run; all data for each
radioactivity log, temperature survey, deviation or directional survey, caliper
log, and other log or survey obtained during the drilling of the well; and, upon
completion of the well, a composite of all electrical-type logs, insofar as is
reasonable and customary;
14
(e) upon
written request, a copy of all well test results, bottom-hole pressure surveys,
and fluid analyses;
(f) upon
written request, samples of cuttings and cores taken from the well (if
sufficient cores are retrieved), marked as to the depths from which they were
taken;
(g) after
a well’s initial completion, monthly reports on the volume of Hydrocarbons and
water produced;
(h) upon
written request, a copy of each report made to a Governmental
Authority;
(i)
upon written request, the anticipated date of completion
of a shut-in well or the shutting in or return to production of a producing
well; and
(j) upon
written request, any reports submitted by Gastar to their lenders and
information provided to third party reserve engineers.
Section
4.6 Gathering and
Marketing.
(a) Commencing
on the Effective Date and continuing until such time as Participant instead
notifies Gastar that it chooses to take the Participant Production in kind,
Participant designates Gastar as the marketer of Participant’s share of
Hydrocarbon production from any lease, property, Drilling Unit or acreage
related to the Joint Interests (the “Participant
Production”) in accordance with and subject to the following terms of
this Section
4.6. Gastar’s share of Hydrocarbon production from the same
lease, Drilling Unit or acreage related to the Joint Interests is herein
referred to as the “Gastar
Production.”
(b) Unless
Participant otherwise consents to the same in writing, none of the Participant
Production may be marketed to Gastar itself or any Affiliate of
Gastar.
(c) Gastar
will market the Participant Production on the same terms and conditions as it
markets the Gastar Production, and, notwithstanding Participant’s right to take
in kind pursuant to subsection (a) above, Participant agrees to be bound by the
same terms and conditions as Gastar with regard to any acreage dedications and
similar requirements necessary to secure access to gas gathering, processing and
transportation services; provided that prior
to entering into any agreement related to marketing, gas gathering, processing
and transportation services which relate to the Joint Interests, Gastar shall
provide copies of any such agreement to Participant and will consider in good
faith any comments made by Participant with respect to any such
agreement.
ARTICLE
V
AMI
AND ADDITIONAL ACREAGE
Section
5.1 Acquisition of Additional
Acreage.
(a) If,
after the Effective Date and prior to the AMI Termination Date, Gastar, Gastar
Parent or any of their respective Affiliates (collectively, the “Gastar Persons”) or
Participant, Buyer Parent or any of their respective Affiliates (collectively,
the “Participant
Persons”), directly or indirectly, acquires Leases within the AMI (such
acquiring Person, the “Acquiring Party”),
then the Acquiring Party shall comply with the terms and conditions of this
Section
5.1. This Section 5.1 shall not
apply to acquisitions by an Acquiring Party from its
Affiliates.
15
(b) No
later than 10 Business Days after the end of each calendar quarter, the
Acquiring Party shall notify Participant, in the event the Acquiring Party is a
Gastar Person, or Gastar, in the event the Acquiring Party is a Participant
Person, (such notice recipient, the “Non-Acquiring Party”)
of the Acquiring Party’s acquisition of Leases within the AMI during such
quarter (such Leases, the “AMI Acreage”),
including the material terms and conditions and copies of material agreements of
such acquisition (the “Acquisition
Notice”). Notwithstanding the preceding sentence, at such time
in any calendar quarter that the aggregate Lease Acquisition Costs for such
calendar quarter exceed $1,000,000, the Acquiring Party shall issue an
additional Acquisition Notice. The Acquisition Notice may include
Leases within the AMI that the Acquiring Party proposes to acquire.
(c) On
or before the 30th day after the Acquisition Notice is delivered to the
Non-Acquiring Party, the Non-Acquiring Party will have the option to acquire
all, but not less than all, of its Fully Earned Working Interest Share of all,
but not less than all, of the AMI Acreage on the same terms and conditions on
which the Acquiring Party acquired or has proposed to acquire the AMI Acreage by
providing written notice of such election to the Acquiring Party. If
the Non-Acquiring Party fails to exercise its option within such 30-day period,
the Non-Acquiring Party shall be deemed to have made an election not to
participate.
(d) If
the Non-Acquiring Party elects or is deemed to have elected not to participate
in accordance with Section 5.1(c), the
Acquiring Party will retain 100% of the AMI Acreage, which will be excluded from
the AMI and will not be governed by the terms of this Agreement or any Form
JOA.
(e) If
the Non-Acquiring Party elects to participate in accordance with Section 5.1(c), the
Non-Acquiring Party shall purchase its Fully Earned Working Interest Share of
the AMI Acreage (the “Acquired Interests”)
from the Acquiring Party on or before the 30th day following its election in the
case of any acquisition that has already taken place, or in the case of a
proposed acquisition no later than the later of (such date, the “Payment Date”) (i)
the closing of such acquisition and (ii) the fifth Business Day after the date
the Non-Acquiring Party has notified the Acquiring Party that it has elected to
participate in the acquisition of such AMI Acreage. At the closing of
the purchase of the Acquired Interests from the Acquiring Party in the case of
any acquisition that has already taken place, the Non-Acquiring Party will be
responsible for its Fully Earned Working Interest Share of the Lease Acquisition
Costs for the AMI Acreage. In the case of a prospective acquisition,
the Non-Acquiring Party will make arrangements reasonably satisfactory to the
Acquiring Party to fund its portion of the acquisition not later than the
Payment Date. At the closing of the purchase of the Acquired
Interests from the Acquiring Party, the Acquiring Party shall deliver to the
Non-Acquiring Party an assignment of the Acquired Interests using the Form of
Assignment, without warranty of title either express or implied, except as to
claims made by, through or under the Acquiring Party, but not
otherwise. The Non-Acquiring Party will be responsible for and will
pay the costs of recording such assignment in the real property records of the
appropriate county or township as applicable.
16
(f) During
the Drilling Carry Period, in the event any AMI Acreage acquired or proposed to
be acquired is required to complete a Drilling Unit that includes any Joint
Interests, Gastar, as the Acquiring Party, shall be entitled to send a separate
Acquisition Notice for such AMI Acreage and Participant shall be deemed to have
elected to participate in the AMI Acreage set forth in such
notice. In such event, Participant shall complete the acquisition of
the relevant interest in accordance with Section
5.1(e).
(g) Gastar
and Participant agree to cause the Gastar Persons and Participant Persons,
respectively, to comply with the provisions of this Section 5.1 and Section 5.2, or to
comply with such provisions on their behalf.
Section
5.2 Additional
Acreage.
(a) If,
after the Effective Date and prior to June 30, 2011, a Gastar Person directly or
indirectly acquires Leases within the Additional AMI (“Additional Acreage”),
then Gastar shall comply with the terms and conditions of this Section
5.2. This Section 5.2 shall not
apply to acquisitions by a Gastar Person from its Affiliates.
(b) On
or before the tenth Business Day after the acquisition of the Additional
Acreage, Gastar shall send to Participant a notice of such acquisition (an
“Additional Acreage
Notice”). On or before the 30th day after the Additional
Acreage Notice is delivered to Participant, Participant will have the option to
acquire all, but not less than all, of its Fully Earned Working Interest Share
of all, but not less than all, of the Additional Acreage by providing written
notice of such election to Gastar. If Participant fails to exercise
its option within such 30-day period, Participant shall be deemed to have made
an election not to participate.
(c) If
Participant elects or is deemed to have elected not to participate in accordance
with Section
5.2(b), (i) Gastar will retain 100% of the Additional Acreage, which will
not be governed by the terms of this Agreement or any Form JOA, and (ii) all of
the acreage in the county or counties in which such Additional Acreage is
located (other than those lands described in clause (iv) of the definition of
Initial AMI) shall be excluded from Section 5.1 and 5.2, such that
Participant shall have no right to acquire any acreage in such county or
counties (other than those lands described in clause (iv) of the definition of
Initial AMI).
(d) If
Participant elects to participate in accordance with Section 5.2(b),
Participant shall purchase its Fully Earned Working Interest Share of the
Additional Acreage from the Acquiring Party on or before the 30th day following
its election. At the closing of the purchase from Gastar, for each
Net Acre included in the Additional Acreage, (i) Participant shall pay to Gastar
an up front payment of $1,755.50 and (ii) the Drilling Carry Cap shall be
increased by $2,340.67. At the closing of the purchase from Gastar,
Gastar shall deliver to Participant an assignment of its Fully Earned Working
Interest Share of the Additional Acreage using the Form of Assignment, without
warranty of title either express or implied, except as to claims made by,
through or under Gastar, but not otherwise. Participant will be
responsible for and will pay the costs of recording such assignment in the real
property records of the appropriate county or township as
applicable.
17
Section
5.3 Lease and Brokerage
Costs. In
addition to the amounts payable to a Gastar Person, as the Acquiring Party, by
Participant under Section 5.1(e),
Gastar shall be entitled to receive, and the Participant shall pay to Gastar,
with respect to any AMI Acreage described in Section 5.1 in which
Participant elects to participate, an amount equal to (i) 10% of Lease
Acquisition Costs for such AMI Acreage incurred by Gastar in negotiating and
consummating any such acquisition to the extent such aggregated amounts are less
than or equal to $20,000,000 for the applicable calendar year plus (ii) 5% of
Lease Acquisition Costs for such AMI Acreage incurred by Gastar in negotiating
and consummating any such acquisition to the extent such aggregated amounts are
greater than $20,000,000 for the applicable calendar year. Such
amount shall be paid at the closing of the purchase and sale of the relevant
Acquired Interest between Gastar and Participant.
Section
5.4 Third Party JOA. If in
connection with any acquisition covered by this Article V in which
the Non-Acquiring Party elects to participate, the Acquiring Party enters into
any Third Party JOA, the Acquiring Party shall use its reasonable efforts to
cause such Third Party JOA to be in the form of Exhibit B to this
Agreement or such other form as the Non-Acquiring Party approves, unless a Third
Party JOA was already in place in which case the Acquiring Party shall use its
reasonable efforts to have the existing Third Party JOA replaced with one in the
form of Exhibit
B to this Agreement.
ARTICLE
VI
TRANSFER
RESTRICTIONS
Section
6.1 Restrictions on
Transfer.
(a) Participant Transfer
Restrictions.
(i) Until
the Drilling Carry Termination Date, without Gastar’s prior written consent, but
subject to the exceptions set forth in Section 6.1(c)(i),
neither Participant nor any of its Affiliates shall assign, sell, transfer,
convey or encumber, whether by assignment, sale, farmout, pledge or otherwise
(“Transfer”),
all or any portion of its rights or obligations under this Agreement or any of
the Participant’s Working Interest Share or the Joint Interests or any other
rights or interests obtained or acquired hereunder (collectively, the “Participant
Interests”). The failure of Buyer Parent to own, directly or
indirectly, more than 50% of the equity interests in Participant will be deemed
a Transfer for purposes of this Section
6.1(a).
(ii) After
the Drilling Carry Termination Date, and subject to the requirements of Section 6.3,
Participant and its Affiliates shall be permitted to Transfer all or any part of
the Participant Interests to any Person without consent of
Gastar.
18
(b) Gastar Transfer
Restrictions.
(i) Until
the Drilling Carry Termination Date, without Participant’s prior written
consent, but subject to the exceptions set forth in Section 6.1(c)(ii),
neither Gastar nor any of its Affiliates shall Transfer all or any portion of
its rights or obligations under this Agreement or any of the Gastar’s Working
Interest Share or the Joint Interests or any other rights or interests obtained
or acquired hereunder (collectively, the “Gastar
Interests”).
(ii) After
the Drilling Carry Termination Date, and subject to Section 4.1(a) and
the requirements of Section 6.3, Gastar
and its Affiliates shall be permitted to Transfer all or any part of the Gastar
Interests to any Person without consent of Participant.
(c) Permitted
Transfers.
(i) Notwithstanding
the restrictions on Transfer set forth in Section 6.1(a), but
subject to the requirements of Section 6.3,
Participant and its Affiliates may (A) encumber all or a portion of the
Participant Interests solely for financing purposes, subject to the express
subordination of any such encumbrance to the rights and obligations of the
parties under this Agreement and the Transaction Documents; and (B) Transfer all
or a portion of the Participant Interests to any Affiliate of Participant
residing and domiciled within the United States but only for as long as Buyer
Parent owns, directly or indirectly, more than 50% of the equity interests in
such Affiliate of Participant and more than 50% of the equity interests of the
transferee’s ceasing to be owned by Buyer Parent, collectively or individually,
directly or indirectly, shall be deemed to be a Transfer by Participant; provided that no
Transfer of the Participant Interests shall relieve Participant of its Drilling
Carry Obligation;
(ii) Notwithstanding
the restrictions on Transfer set forth in Section 6.1(b), but
subject to Section
4.1(a) and the requirements of Section 6.3, Gastar
and its Affiliates may (A) encumber all or a portion of the Gastar Interests
solely for financing purposes, subject to the express subordination of any such
encumbrance to the rights and obligations of the parties under this Agreement
and the Transaction Documents (except in the case of the Gastar Credit
Agreement); (B) except for transactions covered by Section 6.1(c)(ii)(C)
below, Transfer all or a portion of the Gastar Interests to any Affiliate but
only for as long as Gastar Controls such Affiliate, and the transferee’s ceasing
to be Controlled by Gastar shall be deemed to be a Transfer by Gastar; and (C)
enter into a transaction or series of related transactions pursuant to which
Gastar and its Affiliates sell all or substantially all of their assets,
including the Gastar Interests.
Section
6.2 Tag-Along Rights. If at
any time or from time to time until the AMI Termination Date, Gastar desires to
Transfer all or a portion of the Gastar Interests (other than Transfers made
pursuant to Section
6.1(c)(ii), except a Transfer made pursuant to Section 6.1(c)(ii)(C)
where all or substantially all of the applicable assets are sold to more than
one Person), prior to making such Transfer, Gastar shall notify Participant at
least 45 days in advance providing the name of the prospective purchaser and the
terms and conditions of the sale in reasonable detail. Participant
shall have the option, exercisable by so notifying Gastar on or before the 30th
day after the giving of such notice by Gastar, to require Gastar to also sell to
such prospective purchaser a pro rata portion of the Participant Interests upon
the same terms and conditions as are applicable to the sale of the Gastar
Interests. If Participant exercises this right but the purchaser
refuses to purchase the Participant Interests, then notwithstanding the
provisions of Section
6.1(b), Gastar may not consummate the sale.
19
Section
6.3 Documentation for Transfers;
Validity of Transfer. Any
Transfer by either Party that is permitted pursuant to Section 6.1 shall not
be effective unless such other Party has received a document executed by both
the transferring Party (or its legal representative) and the permitted
transferee that includes: (a) the notice address of the permitted transferee;
(b) such permitted transferee’s express agreement in writing to be bound by all
of the terms and conditions of this Agreement and the XXXx; (c) a description of
the participating interests of the transferring Party and the permitted
transferee immediately following the Transfer; and (d) representations and
warranties from both the transferring Party and the permitted transferee that
the Transfer was made in accordance with applicable Law (including state and
federal securities Law) and the terms and conditions of this Agreement and any
applicable Transaction Documents. Each permitted Transfer shall be
effective against the other Party as of the effective date of the permitted
Transfer. Any attempted Transfer in violation of Section 6.1 or this
Section 6.3
shall be, and is hereby declared, null and void ab initio.
ARTICLE
VII
ACCESS
TO DATA
Section
7.1 Land Information. Subject
to Section 7.2,
each Party will have reasonable access to existing leasehold and fee
documentation now or hereafter developed or obtained by any Party in connection
with the acquisition of interests in the AMI (including the Joint Interests, but
excluding any acreage with respect to which (i) the Non-Acquiring Party elects
not to acquire pursuant to Article V or (ii) the
Acquiring Party has no obligation to offer to sell to the Non-Acquiring Party
pursuant to Article
V), including all lease, land, title and division order files (including
any available abstracts of title, title opinions and reports, and title curative
documents), contracts, accounting records, correspondence, permitting,
engineering, production, and well files (including any well logs), to the extent
such access is not prohibited pursuant to any third party confidentiality
agreement or applicable law. Such information has been, and shall be,
provided to the Non-Acquiring Party without warranty as to completeness or
accuracy. To the extent permitted pursuant to third party agreements
and applicable Law, at no cost to Gastar, Gastar will permit Participant
reasonable access to its computer systems to the extent necessary to interpret
geologic, engineering and land data related to the Joint
Interests. To the extent the access described in this Section 7.1 is
prohibited pursuant to any third party confidentiality agreement, the Acquiring
Party will use its commercially reasonable efforts, at the Non-Acquiring Party’s
sole expense with the Non-Acquiring Party’s consent, to obtain the consent of
the applicable party to disclose any such data to the Non-Acquiring Party if
such disclosure is otherwise prohibited without such consent.
20
Section
7.2 Geoscience Data. To the
extent that a Party is not prohibited pursuant to any third party agreement or
applicable Law and to the extent no additional fees or costs will be incurred,
such Party will provide to the other Party, upon request, all seismic and
geological data and other similar information including drainage data, seismic
surveys, geological and geophysical maps, shot point location maps, information
regarding fracing of xxxxx and related information regarding the development and
operation of the Joint Interests that such Party may possess. The
disclosing Party will use its commercially reasonable efforts, at the
non-disclosing Party’s sole expense with the non-disclosing Party’s consent, to
obtain the consent of the applicable party to disclose any such data to the
non-disclosing Party if such disclosure is otherwise prohibited without such
consent. Any seismic, geophysical, geotechnical and other similar
data regarding a Joint Interest that is purchased after the Effective Date shall
be acquired jointly in the name of Gastar and Participant and any costs
associated therewith shall be borne equally by the Parties.
Section
7.3 Marketing
Information. To the
extent not prohibited pursuant to any third party agreement or applicable Law,
Gastar shall provide Participant with reasonable access to any and all
documentation now or hereafter developed or received by Gastar in connection
with the gathering, marketing and processing of the Participant
Production. Gastar will use its commercially reasonable efforts, at
Participant’s sole expense with Participant’s consent, to obtain the consent of
the applicable party to disclose any such documentation to Participant if such
disclosure is otherwise prohibited without such consent.
Section
7.4 No Warranty of
Accuracy. EACH
PARTY RECOGNIZES AND AGREES THAT ALL MATERIALS, DOCUMENTS, AND OTHER INFORMATION
MADE AVAILABLE TO IT AT ANY TIME IN CONNECTION WITH THIS AGREEMENT, WHETHER MADE
AVAILABLE PURSUANT TO THIS ARTICLE VII OR
OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED OR STATUTORY,
AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, AND OTHER
INFORMATION. EACH PARTY EXPRESSLY AGREES THAT ANY PARTICIPATION UPON
OR CONCLUSIONS DRAWN THEREFROM SHALL BE AT SUCH PARTY’S OWN RISK TO THE MAXIMUM
EXTENT PERMITTED BY LAW AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR AGAINST
THE OTHER PARTY. EACH PARTY HEREBY WAIVES AND RELEASES ANY CLAIMS
ARISING UNDER THIS AGREEMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY
MATERIALS, DOCUMENTS OR INFORMATION PROVIDED TO SUCH
PARTY. NOTWITHSTANDING THE FOREGOING, THIS SECTION 7.4 SHALL NOT
AFFECT THE EXPRESS RIGHTS OF THE PARTIES UNDER THE PURCHASE
AGREEMENT.
ARTICLE
VIII
MISCELLANEOUS
PROVISIONS
Section
8.1 Participant
Representatives. Participant
shall have the right, at Participant’s expense, to have two Representatives of
Participant present at the field office location(s) of Gastar to monitor the
development and operations of the Joint Interests. Gastar shall
provide office space for these Representatives at the relevant field office
location(s). Other than the cost of office space, Gastar shall not be
responsible for any costs related to Participant’s
Representatives. Participant’s Representatives shall comply with all
rules and codes of conduct applicable to similarly situated Gastar employees of
which such Representatives have been provided notice. If one or more
of Participant’s Representatives fail to comply with such rules and codes of
conduct and reasonable notice has been provided to such Representatives, Gastar
may terminate such Representative’s access immediately and require Participant
to replace such Representative. If Participant violates the terms of
this Agreement in any material respect (including any failure to pay any due
amount of the Drilling Carry Obligation), Gastar shall be permitted to terminate
the access permitted by this Section 8.1 until
such violation has been cured. Participant hereby releases, defends,
indemnifies and holds harmless Gastar, its Affiliates and their Representatives
from and against any and all Liabilities to the extent caused by Participant’s
Representatives or arising from injury to Participant’s Representative(s), EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, SOLELY
OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE,
STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY GASTAR, ITS
AFFILIATES OR THEIR REPRESENTATIVES, EXCEPTING ONLY LIABILITIES ARISING OUT OF
OR RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF GASTAR, ITS
AFFILIATES OR ITS REPRESENTATIVES.
21
Section
8.2 Term. The term
of this Agreement shall begin on the Effective Date and, unless earlier
terminated by mutual written agreement of the Parties, shall continue until the
fifth year anniversary of this Agreement. The provisions of Sections
1.1, 1.2, 3.5, 3.6 and 4.6, and Article VIII shall
survive termination of this Agreement. The termination of this
Agreement or any provision hereof shall not relieve any Party from any expense,
Liability or other obligation or remedy therefore that has accrued or attached
prior to the date of such termination.
Section
8.3 Notices. All
notices and communications required or permitted under this Agreement shall be
in writing addressed as indicated below, and any communication or delivery
hereunder shall be deemed to have been duly delivered upon
receipt. Addresses for all such notices and communication shall be as
follows:
To
Gastar:
Gastar
Exploration USA, Inc.
0000
Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Attn: J.
Xxxxxxx Xxxxxx, President & CEO
Fax: (000)
000-0000
with a
copy to:
Xxxxxx
& Xxxxxx, LLP
0000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 0000-0000
Attn: T.
Xxxx Xxxxx
Fax: (000)
000-0000
To
Participant:
Atinum
Marcellus I LLC
000 Xxxx,
Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attn: Xxxxx Xxx
Fax: (000)
000-0000
22
with a
copy to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
0000
Xxxxxxxxx Xx., Xxxxx 0000
Xxxxxxx,
XX 00000
Attn: Xxxx
X. Ale
Fax: 000-000-0000
Either
Party may, upon written notice to the other Party, change the address and person
to whom such communications are to be directed.
Section
8.4 Relationship of the
Parties.
(a) Notwithstanding
any provision of this Agreement or any provision of the Transaction Documents to
the contrary, the Parties agree that the operations hereunder shall constitute a
partnership for federal, and to the extent allowable by Law, state and local
income tax purposes (“Tax Purposes”), and
that the provisions of the Tax Partnership Exhibit are hereby incorporated into
and made a part of this Agreement and will govern the legal relationship between
the Parties solely with respect to federal (and if allowable, state and local)
income tax matters. In the event of any conflict or inconsistency
between the terms and conditions of the Tax Partnership Exhibit and the terms
and conditions of this Agreement or any other attachment or exhibit hereto or
any JOA, the terms and conditions of the Tax Partnership Exhibit shall govern
and control as between the Parties. The Parties intend and expect
that the transactions contemplated by the Purchase Agreement, this Agreement and
the Transaction Documents, taken together, will be treated, for Tax Purposes, as
resulting in (i) the creation of a partnership (the “Tax Partnership”) in
which Gastar and Participant are treated as partners, with the Tax Partnership
being treated as holding the Joint Interests (and any other oil and gas
interests acquired by Gastar and Participant jointly) and engaging in all
activities of the Parties with respect to such interests, (ii) a contribution to
the Tax Partnership by Gastar of the Joint Interests and a commitment to fund
the costs allocable to it under this Agreement with respect to the Joint
Interests in exchange for an interest therein allocable to it under this
Agreement, (iii) a contribution to the Tax Partnership by Participant of the
Purchase Price, as adjusted, and a commitment to fund the costs allocable to it
under this Agreement with respect to the Joint Interests in exchange for an
interest therein allocable to it under this Agreement, (iv) the distribution to
Gastar of the Purchase Price, as adjusted (a) as a reimbursement of Gastar’s
“preformation expenditures” with respect to the Joint Interests referred to in
clause (ii) above, as such term is used in Regulations Section 1.707-4(d), to
the extent applicable, and (b) in a transaction subject to treatment under
Section 707(a) of the Internal Revenue Code of 1986, as amended, and its
implementing Regulations as in part a sale, and in part a contribution, of such
Joint Interests to the Tax Partnership to the extent Regulations Section
1.707-4(d) is inapplicable, and (v) the realization by the Tax Partnership of
all items of income or gain and the incurrence by the Tax Partnership of all
items of costs or expenses attributable to the ownership, operation or
disposition of the Joint Interests (and any other oil and gas interests in the
AMI acquired by Gastar and Participant jointly), notwithstanding that such items
are realized, paid or incurred by the Parties individually. The
governing terms and conditions of the Tax Partnership are set forth in the Tax
Partnership Exhibit. Each Party shall be responsible for reporting
and discharging its own tax measured by the income of the Party attributable to
it from the Tax Partnership and the satisfaction of such Party’s share of all
contract obligations under this Agreement and any JOA. Each Party
shall protect, defend, and indemnify each other Party from and against any and
all losses, costs, and liabilities arising from the indemnifying Party’s failure
or refusal to report and discharge such taxes or satisfy such
obligations. The costs, expenses and fees for the preparation of any
tax return shall be borne equally by the Parties.
23
(b) Except
as otherwise provided in clause (a) above, this Agreement is strictly
contractual in nature and is not intended to create, and shall not be construed
to create, an association for profit, a trust, an agency, a joint venture, a
partnership or other relationship of partnership, or entity of any kind between
the Parties, or otherwise to create fiduciary duties between the
Parties. Notwithstanding anything to the contrary contained herein,
the Parties understand and agree that the arrangement and undertakings evidenced
by this Agreement and the Purchase Agreement, taken together, result in a
partnership for purposes of federal income taxation and for purposes of certain
state income tax laws which incorporate or follow federal income tax principles
as to tax partnerships. For these purposes, the Parties agree to be
governed by the Tax Partnership Exhibit. For every purpose other than
the above-described income tax purposes, however, the Parties understand and
agree that the liabilities of the Parties shall be several, not joint or
collective, and that each Party shall be solely responsible for its own
obligations.
Section
8.5 Publicity and Recordation of
Documents. Neither
Gastar nor Participant, nor their respective Affiliates, shall issue any press
release or similar public announcement pertaining to this Agreement or the
Transaction Documents or the transactions contemplated hereby or thereby without
the prior consent of the other Party (which consent shall not be unreasonably
withheld, delayed or conditioned), except as may be required by applicable Law
or by obligations pursuant to any listing agreement with any national securities
exchange, as reasonably determined by the Party issuing such press release or
making such public announcement, in which case such issuing or announcing party
shall provide prior notice of such press release or public announcement to the
other Party; provided, in the case
of any press release or public announcement to be issued or made in connection
with the consummation of this transaction, the Parties agree to reasonably
cooperate in advance of such issuance or announcement. The Parties
agree to cooperate in good faith and execute such documents and to take such
action as may be required to have the assignments and any other documents which
are necessary or helpful to establish, for purposes of public notice,
Participant’s rights in the Joint Interests filed of public record in the
conveyance records of the applicable townships and counties.
24
Section
8.6 Waiver; Rights
Cumulative. Any of
the terms, covenants, representations, warranties, or conditions hereof may be
waived only by a written instrument executed by or on behalf of the Party
waiving compliance. No course of dealing on the part of Gastar or
Participant, or their respective officers, employees, agents, or
representatives, nor any failure by Gastar or Participant to exercise any of its
rights under this Agreement shall operate as a waiver thereof or affect in any
way the right of such Party at a later time to enforce the performance of such
provision. No waiver by any Party of any condition, or any breach of
any term, covenant, representation, or warranty contained in this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of any breach of any other term, covenant, representation, or
warranty. The rights of Gastar or Participant under this Agreement
shall be cumulative, and the exercise or partial exercise of any such right
shall not preclude the exercise of any other right.
Section
8.7 Amendments; Binding
Effect. This
Agreement may be amended only by an instrument in writing executed by the
Parties against whom enforcement is sought. The provisions of this
Agreement shall constitute a covenant running with the land and shall remain in
full force and effect and be binding upon and inure to the benefit of the
Parties and their respective permitted successors and assigns.
Section
8.8 No Third Party
Beneficiaries. Except
as otherwise expressly set forth in this Agreement, nothing in this Agreement
shall create or be deemed to create any third-party beneficiary rights in any
person or entity not party to this Agreement.
Section
8.9 Severability. If any
term or other provision of this Agreement is invalid, illegal, or incapable of
being enforced by any rule of Law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any adverse manner to any Party. Upon such
determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
Section
8.10 Governing Law; Dispute
Resolution.
(a) THIS
AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF TEXAS (EXCEPT THAT,
WITH RESPECT TO ISSUES RELATING TO TITLE TO REAL PROPERTY LOCATED IN (I)
PENNSYLVANIA, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA SHALL GOVERN, (II)
WEST VIRGINIA, THE LAWS OF THE STATE OF WEST VIRGINIA SHALL GOVERN, (III) NEW
YORK, THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND (IV) OHIO, THE LAWS OF
THE STATE OF OHIO SHALL GOVERN), EXCLUDING ANY CONFLICTS OF LAW RULE OR
PRINCIPLE THAT MIGHT REFER TO THE LAWS OF ANOTHER JURISDICTION.
25
(b) ANY
DISPUTE, CONTROVERSY OR CLAIM, DIRECTLY OR INDIRECTLY, ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS THEY
CONTEMPLATE, OR THE VALIDITY, INTERPRETATION, CONSTRUCTION, PERFORMANCE, BREACH,
TERMINATION OR ENFORCEABILITY OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT,
WHETHER SOUNDING IN CONTRACT, TORT, STATUTE, COMMON LAW, OR EQUITY (A “DISPUTE”) SHALL BE
FINALLY, EXCLUSIVELY AND CONCLUSIVELY RESOLVED BY BINDING ARBITRATION UNDER THE
RULES OF ARBITRATION OF THE INTERNATIONAL CHAMBER OF COMMERCE (THE “ICC”) THEN IN EFFECT
(THE “ICC
RULES”), EXCEPT AS MODIFIED IN THIS AGREEMENT. THE AGREEMENT
TO ARBITRATE AS SET OUT IN THIS SECTION 8.10 SHALL BE
BINDING ON AND SHALL INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE
AFFILIATES.
(c) The
arbitral tribunal shall be comprised of three arbitrators. The
claimant(s) shall nominate one arbitrator and the respondent(s) shall nominate
one arbitrator in accordance with the ICC Rules, and the two arbitrators so
nominated shall nominate a third arbitrator, who shall chair the arbitral
tribunal within 30 days of the confirmation of the appointment of the
party-nominated arbitrators by the ICC Court of Arbitration (“ICC
Court”). If the chair or any other arbitrator is not timely
appointed, on the request of any party the chair or the other arbitrator shall
be appointed by the ICC Court. Any chair appointed by the ICC Court
shall be an experienced arbitrator, with at least 15 years’ experience as a
judge or practicing attorney, and shall be unaffiliated and without prior or
current financial alliances with any party. If practicable, the chair
shall also have experience relating to transactions involving the acquisition,
development and operation of oil and gas leases.
(d) The
arbitration proceedings shall be conducted in the English language, and all
documents not in English submitted by any party as evidence must be accompanied
by a certified English translation. The arbitration proceedings shall
be conducted and any arbitral award shall be rendered in Houston,
Texas.
(e) Any
claim that involves a Dispute relating to rights or obligations that are also
the subject of a dispute arising under or relating to another agreement
involving one or more of the parties may be joined in a single arbitration by
the claimant(s), and any arbitration under this Agreement that involves a
dispute relating to rights or obligations that are also at issue in another
arbitration proceeding under another agreement involving one or more of the
parties shall, at the request of any party, be consolidated with that other
arbitration proceeding, with the consolidated proceeding to be conducted as a
single arbitration before the panel of arbitrators appointed or nominated in
connection with the earliest-initiated arbitration of the arbitrations to be
consolidated; provided, that the
arbitral panel for the arbitration so selected determines that: (i)
the later Dispute presents significant issues of law or fact in common with
those in the prior pending arbitration, (ii) neither party to the dispute would
be unduly prejudiced and (iii) such consolidation would not result in undue
delay for the prior pending arbitration. The parties agree that, upon
such an order of consolidation, they will promptly discontinue any arbitration,
the subject of which has been consolidated into another arbitral proceeding in
connection with this Agreement.
(f) Each
party shall have the right to request the other party to produce certain
specified documents or categories of documents directly relevant to the issues
in dispute. In making any determination regarding the scope of
production, the arbitral tribunal shall be guided by the International Bar
Association Rules on the Taking of Evidence in International Commercial
Arbitration.
26
(g) The
arbitration hearing on the merits shall begin no later than six months after the
appointment of the arbitrators is completed, unless the arbitrators determine,
upon good cause shown, that the commencement of the hearing should be deferred
until up to nine months after the appointment of the arbitrators is
completed. The award shall be rendered no later than 30 days after
the hearing on the merits is concluded.
(h) In
rendering an award, the arbitral tribunal shall be required to follow the Law of
the jurisdiction designated by the Parties herein, provided that issues
involving application of arbitration law shall be governed by the Federal
Arbitration Act, 9 U.S.C. §§ 1 et. seq. The arbitral tribunal shall
not be empowered to award exemplary, punitive, treble, indirect, or
consequential damages, and the parties and their respective Affiliates waive any
right they may have to recover such damages from one another. In
addition to direct damages, the arbitral tribunal may award temporary or
permanent injunctive relief, and any other relief available at law or in equity,
including but not limited to specific performance of any obligation under this
Agreement or any ancillary agreement. The arbitral tribunal shall
award costs, attorneys’ fees, and expert witness fees to the prevailing party or
parties. The award shall include interest, at a rate equal to the
Specified Rate, from the date of any default, breach, or other accrual of a
claim until the arbitral award is paid in full. The award shall be
final and binding upon the parties subject only to grounds and procedures for
vacating or modifying the award under the Federal Arbitration Act, 9 U.S.C. §§ 1
et.seq. The award shall be the sole and exclusive remedy between the
parties regarding any claims, counterclaims, issues or accounting presented to
the arbitral tribunal. Judgment upon any award may be entered in any
court having jurisdiction thereof, over a party or any of its assets, as
applicable. The parties and their respective Affiliates agree to
jointly request that any application for recognition or enforcement of an award
be decided by the court on an expedited basis. The parties and their
respective Affiliates waive their right to appeal any court order confirming,
recognizing, or enforcing the award. The parties and their respective
Affiliates do not waive any rights they may have to appeal a court order
refusing to confirm, recognize, or enforce an award.
(i)
By agreeing to arbitration, the parties do not
intend to deprive any court sitting in Houston, Texas of its jurisdiction to
issue a pre-arbitral injunction, pre-arbitral attachment, or other order in aid
of arbitration proceedings and the enforcement of any award. The
parties and their respective Affiliates agree that no court other than a court
sitting either in Houston, Texas will have authority or jurisdiction to enter
interim orders, including but not limited to temporary restraining orders or
temporary injunctive relief, and the parties and their respective Affiliates
shall not make any application for interim orders to any court other than a
court sitting in Houston, Texas. Without prejudice to such provisional remedies
as may be available under the jurisdiction of a court sitting in Houston, Texas,
the arbitral tribunal shall have full authority to grant provisional remedies
and to direct the parties to the arbitration to request that any court modify or
vacate any temporary or preliminary relief issued by that court, and to award
damages for the failure of any party to respect the arbitral tribunal’s orders
to that effect.
27
(j)
All notices by one party to a Dispute to another in connection
with the arbitration shall be in accordance with the provisions of Section
8.3. Additionally, Buyer has appointed CT Corporation System,
000 X. Xx. Xxxx Xx. Xxx 0000, Xxxxxx, XX 00000, as its agent for service of
process in connection with any Dispute or in connection with any application for
an interim order from a court sitting in Houston, Texas. Buyer shall
maintain the appointment and designation described in this Section 8.10(j) for
service of process in Texas for a period of one year following the expiration or
termination of this Agreement. The Parties agree that service of
process in any court proceeding of the type described in Section 8.10(h) or
Section 8.10(i)
shall be effective if sent by certified mail to the Party to be served in the
manner provided for the giving of notices in Section
8.3.
(k) The
arbitration conducted pursuant hereto shall be confidential. No party
to a Dispute shall disclose or permit the disclosure of any information about
the evidence adduced or the documents produced by another party to the Dispute
in the arbitration proceedings or about the existence, contents or results of
the proceeding, except as may be required by a Governmental Authority or by law
or a regulatory authority or as required in an action in aid of arbitration or
for enforcement of an arbitral award. Before making any disclosure
permitted by the preceding sentence, the party to the Dispute intending to make
the disclosure shall notify the other parties to the Dispute of the intended
disclosure and afford them a reasonable opportunity to protect their
interests.
Section
8.11 Confidentiality.
(a) Except
for disclosures to Affiliates, reasonable disclosures for financing purposes,
disclosures to representatives of a Party who need to know information for
purposes of performing this Agreement, disclosures to accountants, legal counsel
and other advisors or in connection with any proposed merger or acquisition
transaction involving a Party, in each case under circumstances in which the
disclosing Party takes reasonable steps to maintain confidentiality, or
disclosures for purposes of a sale or other transfer of interests directly or
indirectly to a third party; provided such third
party has executed a confidentiality agreement, or disclosures by the operator
of the Joint Interests as necessary to facilitate operations, all confidential
information, data and interpretations resulting from the activities under this
Agreement (“Confidential Data”)
shall be confidential during the term of this Agreement, except as otherwise
provided herein. The term Confidential Data does not include
information which (i) is generally available to the public, or (ii) is within a
Party’s possession prior to the date hereof; provided that the
source of such information was not known by such Party to be bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, the other Party.
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(b) Except
as provided herein or otherwise required by Law, any JOA or any Applicable
Contract (as defined in the Purchase Agreement), no Party shall distribute or
disclose any Confidential Data to third parties, the press or other media,
without the written consent of the other Party. In the event that any
Party or its representatives are requested or required (by oral questions,
interrogatories, requests for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) to disclose any
of the Confidential Data, such Party shall provide the other Party with prompt
written notice of any such request or requirement so that the other Party may
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement. If, in the absence of a protective
order or other remedy or the receipt of a waiver by the other Party, a Party or
its representatives are nonetheless legally compelled to disclose Confidential
Data to any tribunal or else stand liable for contempt or suffer other censure
or penalty, such Party or its representatives may, without liability hereunder,
disclose to such tribunal only that portion of the Confidential Data which it is
legally required to be disclosed; provided that such
Party will exercise its best reasonable efforts to preserve the confidentiality
of the Confidential Data, including by cooperating with the other Party to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Data by such
tribunal. Further, nothing contained in this Article shall preclude
any Party from making such disclosures as may be required by any applicable
federal or state securities law or regulations.
Section
8.12 Exhibits. The
exhibits referred to herein are attached hereto and incorporated herein by this
reference, and unless the context expressly requires otherwise, the exhibits are
incorporated in the definition of “Agreement.”
Section
8.13 Interpretation. It is
expressly agreed by the Parties that neither this Agreement nor any of the
Transaction Documents shall be construed against any party thereto, and no
consideration shall be given or presumption made, on the basis of who drafted
this Agreement, any Transaction Document or any provision hereof or thereof or
who supplied the form of this Agreement or any of the Transaction
Documents. Each Party agrees that this Agreement has been
purposefully drawn and correctly reflects its understanding of the transactions
contemplated by this Agreement and, therefore, waives the application of any Law
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
Section
8.14 Conflicting
Provisions. This
Agreement and the other Transaction Documents, read as a whole, set forth the
Parties’ rights, responsibilities and liabilities with respect to the
transactions contemplated by this Agreement. In the Agreement and the
Transaction Documents, and as between them, specific provisions prevail over
general provisions. In the event of a conflict between this Agreement
and the Transaction Documents, this Agreement shall control, except in the case
of the Tax Partnership Exhibit, which shall control in case of a conflict with
this Agreement or the other Transaction Documents.
Section
8.15 Entire Agreement. This
Agreement, the Transaction Documents entered into on the Effective Date and the
exhibits and schedules hereto and thereto, and any other documents delivered in
connection with this Agreement contain the entire agreement of the Parties with
respect to the subject matter hereof and supersede all previous agreements or
communications between the Parties, verbal or written, with respect to the
subject matter hereof. Each Party agrees that no other Party
(including its agents and representatives) has made any representation,
warranty, covenant or agreement to or with such party relating to this Agreement
or the transactions contemplated hereby, other than those expressly set forth in
this Agreement, the Transaction Documents, and the exhibits and schedules hereto
and thereto.
Section
8.16 Further
Assurances. The
Parties shall provide to each other such information
with respect to the transactions contemplated hereby as may be reasonably
requested and shall execute and deliver to each other such further documents and
take such further action as may be reasonably requested by any Party to
document, complete or give full effect to the terms and provisions of this
Agreement and the transactions contemplated herein.
29
Section
8.17 Memorandum. As of
the Effective Date, the Parties shall execute and deliver the Memorandum with
respect to all of the Assets. The Parties shall execute and deliver
the Memorandum from time to time as additional interests are acquired as part of
the Joint Interests.
Section
8.18 Multiple
Counterparts. This
Agreement may be executed in any number of counterparts, all of which together
shall constitute one agreement binding on the Parties. A facsimile or
email transmission of a scanned, executed counterpart of this Agreement shall be
sufficient to bind a Party to the same extent as an original.
[Signature Page Follows]
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IN WITNESS WHEREOF, this
Agreement is executed and effective as of the Effective Date first above
written.
PARTICIPANT
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ATINUM
MARCELLUS I LLC
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By:
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Name:
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Title:
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XXXXXX
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XXXXXX
EXPLORATION USA, INC.
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By:
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Name:
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Title:
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GASTAR PARENT
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Solely
for the purposes of Article V
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By:
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Name:
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Title:
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[Signature Page to
Participation Agreement]