JOINT VENTURE AGREEMENT
Joint Venture Agreement (the "Agreement") made and entered into this 24th
day of May, 1999 by and between Xxxxxx Resources of California, Inc., a
California corporation ("Xxxxxx"), with an office at c/x Xxxxxx Resources, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Xxxxxx Development Corp.
a Delaware corporation ("WDC") with an office at c/x Xxxxxx Resources, Inc., 000
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Petroleum Development
Corporation, a New Mexico corporation with its principal business office in
Albuquerque, New Mexico ("PEDCO") and Xxxxxxx Petroleum Company, an Oklahoma
corporation ("Xxxxxxx") with an office at 000 Xxxx Xxxxx Xxxxxxxxx, Xxxxx 0000,
Xxxx Xxxxx, Xxxxxxxxxx 00000.
WHEREAS, Xxxxxx and Xxxxxxx individually and as authorized nominee of the
holders of up to ninety-four percent (94%) of the working interest in the oil
and gas prospects and prospective oil and gas xxxxx identified on Exhibit "A"
attached hereto (the "XX Xxxxx") as more fully described herein (collectively,
the "WTU Group") desire to form a joint venture (the "Joint Venture") in order
to conduct certain testing, horizontal and/or vertical drilling, recompletion,
workover and secondary recovery operations on XX Xxxxx located in the oil and
gas field identified as Fault Block 1 Townlot Unit, Wilmington Oil Field, Los
Angeles County, California (the "WTU") more particularly described on Exhibit
"B" hereto and made a part hereof (the "Property")(all xxxxx including the XX
Xxxxx are referred to collectively as the "Xxxxx", and all such operations
referred to collectively as the "Development Operations)";
WHEREAS, Xxxxxxx is, and shall hereafter be, the operator of the existing
Xxxxx within the WTU, subject to the terms and conditions set forth in the WTU
Operating Agreement, and shall be the Operator of the XX Xxxxx subject to the
terms and conditions set forth in this Agreement and in the WTU Operating
Agreement; and
WHEREAS, PEDCO has developed or acquired the technological expertise
necessary to supervise and conduct horizontal and vertical drilling and
completion operations; and
WHEREAS, the WDC and the WTU Group desire to make adequate provision for
the management and operations of the XX Xxxxx during, and after completion of,
the Development Operations described in Article II hereof;
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth herein, WDC and the WTU Group agree as follows:
ARTICLE I.
IDENTITY AND RELATIONSHIP OF
PARTIES AND RELATED AGREEMENTS
1.1 Xxxxxx is a California corporation, which is wholly-owned by Xxxxxx
Resources, Inc., a New York corporation ("WRI") which serves as Managing General
Partner of two or more Delaware limited partnerships (the "Drilling Funds")
formed or to be formed for the purpose of re- drilling, re-working and
completing, if appropriate, abandoned or non-producing Xxxxx located on the
Property. In addition, the Drilling Funds and WDC are or will be parties to
certain Turnkey Drilling Contracts (the "Turnkey Contracts") whereby the
Drilling Funds shall engage WDC to serve as Turnkey Contractor. As Turnkey
Contractor, WDC will be responsible for conducting the Development Operations
described in Article II of this Agreement.
1.2 Xxxxxxx shall be the Operator of the XX Xxxxx, and shall continue to be
the operator of the Xxxxx, under the terms and provisions of that certain Unit
Operating Agreement, Fault Block 1 of Townlot Unit, Wilmington Oil Field, Los
Angeles County, California, dated March 1, 1971 (the "WTU Operating Agreement").
Notwithstanding the designation of Xxxxxxx as Operator for the drilling,
completion and production operations to be conducted on the XX Xxxxx under this
Joint Venture Agreement, PEDCO shall supervise, coordinate and control the
drilling and completion operations contemplated under this Joint Venture
Agreement. PEDCO's right of supervision, of each XX Xxxxx, at such time as each
such XX Xxxxx is placed on production. PEDCO will be entitled to xxxx Xxxxxxx,
as the Operator of the XX Xxxxx, for on-site supervision time conducted by PEDCO
at standard industry rates for California during the planning and implementation
of drilling and completion operations on the XX Xxxxx, provided, that Xxxxxxx
shall process such invoices for payment by the working interest owners in the XX
Xxxxx. Xxxxxx may replace Xxxxxxx as Operator of the XX Xxxxx only for "cause".
For purposes of this Agreement, cause shall mean gross negligence, fraud or
wilful misconduct, as finally determined by a court of competent jurisdiction.
Xxxxxx shall have no right to replace or remove Xxxxxxx as operator of the
Xxxxx, except as provided in the WTU Operation Agreement.
1.3 It is the intention of the parties that this Agreement create a joint
venture by and between WRI, the Drilling Funds and the WTU Group and that the
Joint Venture be treated for tax purposes only, and for no other purpose, as a
partnership under the Internal Revenue Code of 1986, as amended (the "Code").
1.4 Each party shall have the right to take and separately dispose of its
working interest share of gross oil production in kind at the well head (prior
to treating or removal of produced water, gas, condensate, basic sediment,
sulphur or other materials) from the XX Xxxxx being developed hereby. The
parties will not jointly sell such production; although any party may delegate
authority to sell its share of production provided such authority is not a
period of time in excess of the minimum needs of the industry, and in no event
for more than one year. The respective obligations and liabilities of the
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parties shall be several, not joint or collective, and each party shall be
responsible only for its own obligations. Xxxxxx shall, within 90 days after the
end of each calendar year, cause to be prepared, a tax return for the Joint
Venture and deliver a copy thereof to the WTU Group. This tax return shall be
filed in accordance with the provisions contained in Article VI hereof.
1.5 The Joint Venture shall hereinafter be known as WRI-Xxxxxxx Venture and
shall maintain its books and records at c/x Xxxxxx Resources, Inc., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
1.6 The Joint Venture shall be dissolved upon the earliest to occur of: (i)
the election of venturers holding 51% of the Working Interest to dissolve and
wind up the affairs of the Joint Venture; (ii) retirement, withdrawal, removal
liquidation, dissolution or bankruptcy of the last remaining joint venture;
(iii) the sale, forfeiture or abandonment of all or substantially all of the
Joint Venture's interest in the XX Xxxxx; (iv) December 31, 2030; or (v) any
event causing dissolution of the Joint Venture under the California Partnership
Act.
1.7
(a) Legal title to all leases comprising the XX Xxxxx on the Property
drilled and paid for by the Joint Venture shall be for the benefit of and be the
property of the Joint Venture. However, Joint Venture properties may be held for
the benefit of the Joint Venture in the name of Xxxxxx, the Operator or their
affiliates or in the name of any nominee designated by Xxxxxx to facilitate the
development of the properties. Completed XX Xxxxx shall be held in the name of
the Joint Venture or its respective Joint Venture Partners.
(b) The WTU Group shall take such steps as are necessary in its best
judgment to render title to the XX Xxxxx on the Property to be acquired by the
Joint Venture acceptable for the purposes of the Joint Venture. No operation
shall be commenced on leases acquired by the Joint Venture unless The WTU Group
is satisfied that necessary title requirements have been satisfied. THE WTU
Group shall be free, however, to use its own judgment in waiving title
requirements and neither the WTU Group nor any of its members shall be liable to
the Drilling Funds or to the other parties for any matters of title or mistakes
of judgment; nor shall the WTU Group be deemed to be making any warranties or
representations, express or implied, as to the validity or merchantability of
the title to the leases assigned to the Joint Venture of the extent of the
interest covered thereby except as otherwise may be provided in the Turnkey
Drilling Agreements.
ARTICLE II.
DESCRIPTION OF DEVELOPMENT OPERATIONS
The Joint Venturers hereby appoint WDC or its designee to conduct the
Development Operations contemplated by this Agreement pursuant to the terms of
Section 3.2 below. "Development Operations" shall mean the vertical or
horizontal drilling and completion of the XX Xxxxx. Development Operations shall
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consist of drilling new XX Xxxxx and re-entering existing abandoned or
non-producing Xxxxx in order to rework such xxxxx and deepen and/or horizontally
drill the XX Xxxxx. Development Operations may also include, to the extent
deemed necessary or desirable by WDC: (a) running surface, intermediate or
production casing, (b) cementing, (c) perforating, (d) fracing and/or
stimulating potentially productive formations (e) installing wellhead equipment,
meter runs and oil gathering systems.
ARTICLE III.
RIGHTS AND OBLIGATIONS OF XXXXXX
3.1 Xxxxxx hereby agrees to contribute to the Joint Venture its Working
Interest in the XX Xxxxx on which Development Operations will be conducted in
accordance with Article II of this Agreement (but not in any other portion of
the WTU), provided, that such contribution shall be limited for each JV Well to
only the producing zone or zones in which the particular JV Well is completed
and from which such JV well is producing as of the time such JV Well is placed
on production. The Joint Venture shall have no right to drill any well within
the WTU other than the XX Xxxxx, and shall have no right to receive any proceeds
from the sale of oil, gas or other hydrocarbon substances produced from any Well
within WTU or produced from any producing zone or zones within any JV Well other
than the producing zone or zones in which the particular JV Well is completed
and from which such JV well is producing as of the time such JV Well is placed
on production. The Joint Venture shall not own the well bore, casing, tubing,
surface equipment or any other tangible portion of the XX Xxxxx, but rather
shall own only the right to produce oil from the producing zone or zones
contemplated in the preceding sentence. The identity of each JV Well contributed
and made subject to this Agreement is set forth on Schedule A hereto. WDC shall
pay or cause to be paid 100% of the Intangible Drilling and Development Costs
incurred under the Turnkey Contracts set forth in Section 3.2 below in the
amount of $7.5 million of Development Operations per year for a period of two
years, commencing on June 30, 1999 and ending on June 29, 2001, which shall be a
maximum commitment of $15 million in the aggregate, provided that the amounts so
expended in the first such year may be increased or decreased up to the amount
of ten percent (10%) of said $7.5 Million, as may be necessary to satisfy actual
expenditures during said period, with any such increases or decreases to be
subtracted from or added to (as the case may be) the $7.5 Million which is to be
paid in the second year. After the first year and the expenditure of $7.5
million, an oil and gas reserve estimate shall be performed by Xxxxxxxxxx
Petroleum Consultants of Midland, Texas, or a mutually agreed upon reputable
reserve engineer, certifying the value of the remaining proved, developed,
producing reserves at a 10% net present value discount (the "Producing Reserve
Report"). If the Producing Reserve Report does not indicate a value that equals
or exceeds the unrecovered portion of the previous year's cash investment for
drilling operations by WDC, and only in such event, Xxxxxx and the WDC shall
have no further obligation to drill the second $7.5 million of XX Xxxxx in the
second year, provided that in such event the Drilling Funds, WDC and PEDCO shall
forfeit and relinquish to the WTU Group all their respective rights, title and
interest granted or afforded under the terms and conditions of this Agreement in
and to all remaining undrilled XX Xxxxx.
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For purposes of this Agreement, "Intangible Drilling and Development Costs"
shall mean all expenditures made for wages, fuel, repairs, hauling and supplies,
or any of them, incident to and necessary for the drilling and recompletion of a
XX Xxxxx dn the preparation of such JV Well for the production of oil or gas,
including the costs of any drilling and development work (excluding amounts
payable only out of production, or gross or net proceeds of production, if such
amounts are depletable income to the recipient, and amounts properly allocable
to the costs of depreciable property) performed by drilling contractors under
any form of contract. Examples of such costs include amounts paid for such items
that are used (1) in such clearing of group, draining, road making, surveying
and geological works as are necessary in the preparation for drilling of a JV
Well; (2) in drilling, cementing, perforating, fracing and/or stimulating a JV
Well; and (3) in the construction of derricks, tanks, pipelines and other
physical structures as are necessary for the drilling of a JV Well and the
preparation of such JV Well for the production of oil. These expenditures in
general shall include only those drilling and development items that in
themselves do not have a salvage value. For these purposes, labor, fuel,
repairs, hauling, supplies and similar items are not considered as having
salvage value even though used in connection with the installation of physical
property which has a salvage value.
3.2 In an effort to eliminate cost overruns and insure a fixed level of
capital investment and discharge its responsibilities pursuant to Section II
hereof, the Drilling Funds have contracted with WDC, in its capacity as the
Turnkey Contractor pursuant to the Turnkey Contract. The Turnkey Contract shall
provide that all Development Operations shall be performed in a good and
workmanlike manner, and in connection with all such activities, WDC shall adhere
to the standard of care that is customary and usual in the activities of
independent oil and gas operators who are performing work of a similar nature.
The cost to drill the XX Xxxxx on a Turnkey basis shall be Actual Field Expenses
("AFE") plus a minimum of 10% (but not greater than 25%) on a JV Well to JV Well
basis as determined in the sole discretion of the WTU Group.
3.3 In order to effectuate the intention of this Agreement, Xxxxxx and
Xxxxxxx shall assign to the Joint Venture by appropriate instruments of
conveyance 100% of their Working Interest in the XX Xxxxx.
3.4 The Drilling Funds shall be entitled to receive up to an undivided 90%
Working Interest in the XX Xxxxx developed pursuant to this Agreement.
Accordingly, the Drilling Funds will be entitled to receive up to 90% of the net
Revenues from the XX Xxxxx. For purposes of this Section 3.3, "Net Revenues"
shall mean gross revenues realized from the sale of production, less all
applicable royalties, overriding royalties, encumbrances, ad valorem, severance,
excise and windfall profit taxes or other taxes on, or measured by, production,
after deducting all costs and expenses chargeable to the XX Xxxxx pursuant to
the WTU Operating Agreement.
3.5 Notwithstanding the initial well locations set forth in Exhibit "A"
hereto, in the event Xxxxxxx or Xxxxxx determines in good faith, with respect to
any proposed well location, before operations commence hereunder with respect to
such well location, based upon the production (or failure of production) of any
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other xxxxx which may have been recently drilled in the general areas of such
well location, upon discovery of leasehold problems or title defects, upon new
or revised geological or engineering surveys or reports, or upon any other
information with respect to the well location deemed relevant in the sole
judgment of Xxxxxxx or Xxxxxx, that it would not be in the best interest of the
parties hereto to drill a JV Well on such well location, then the party making
the determination shall notify the other party hereto of such determination and
the basis therefor and, unless otherwise agreed to by and between Xxxxxxx and
Xxxxxx, such JV Well shall not be drilled. If such JV Well is not drilled,
Xxxxxxx shall promptly propose a new well location (including such information
with respect thereto as Xxxxxx may reasonably request) to be substituted for
such original well location and Xxxxxx shall thereafter have the option for a
period of seven (7) business days to either reject or accept the proposed new
well location. If the new well location is rejected, Xxxxxxx shall promptly
propose another substitute well location pursuant to the provisions hereof. Once
Xxxxxx accepts a substitute well location or does not reject it within said
seven (7) day period, this Agreement shall terminate as to the original well
location and the substitute well location shall become the new JV Well location.
3.6 Xxxxxxx and WDC each have certain duties and responsibilities with
respect to the drilling and completion of the XX Xxxxx, and accordingly, shall
be entitled to have and receive any Turnkey Contract Profits (as hereinafter
defined) as follows: Xxxxxxx shall be entitled to have and receive all Turnkey
Contract Profits until: (i) Xxxxxxx has received total Turnkey Contract Profits
equal to One Million Dollars ($1,000,000), or (ii) the expiration of two (2)
years after the date of this Agreement; whichever shall first occur. For
purposes of this Section 3.6, "Turnkey Contract Profits" shall mean, as to each
JV Well, the total Turnkey Contract Price paid to WDC by the working interest
owners of the JV Well, less all costs of whatever nature to drill, equipt and
complete the JV Well, including without limitation the tangible costs to be
contributed by Xxxxxx, Xxxxxxx and the WTU Group pursuant to Articles II and IV
above, the costs of Development Operations, and the Intangible Drilling and
Development Costs.
ARTICLE IV.
RIGHTS AND OBLIGATIONS OF XXXXXXX AND THE WTU GROUP
4.1 Xxxxxxx hereby agrees to contribute to the Joint Venture its Working
Interest in the XX Xxxxx on which Development Operations will be conduced in
accordance with Article II of this Agreement (but not in any other portion of
the WTU), provided, that such contribution shall be limited for each JV Well to
only the producing zone or zones in which the particular JV Well is completed
and from which such JV well is producing as of the time such JV Well is placed
on production. The Joint Venture shall have no right to drill any well within
the WTU other than the XX Xxxxx, and shall have no right to receive any proceeds
from the sale of oil, gas or other hydrocarbon substances produced from any Well
within the WTU or produced from any producing zone or zones within any JV Well
other than the producing zone or zones in which the particular JV Well is
completed and from which such JV well is producing as of the time such JV Well
is placed on production. The Joint Venture shall not own the well bore, casing,
tubing, surface equipment or any other tangible portion of the XX Xxxxx, but
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rather shall own only the right to produce oil from the producing zone or zones
contemplated in the preceding sentence. The identity of each JV Well contributed
and made subject to this Agreement is set forth on Schedule A hereto.
4.2 The WTU Group shall contribute to the Joint Venture one hundred percent
(100%) of all the tangible lease costs, and well equipment necessary to conduct
the Development Operations including, but not limited to, casing, wellhead
equipment, meters and conventional or submersible pumps, and shall permit the
owners of working interests in the XX Xxxxx to utilize, to the extent necessary
for the operation of the XX Xxxxx, with no right of ownership, produced water
disposal facilities, gathering lines and oil storage tanks. Such costs of
equipment will include all fees, charges and expenses in connection with the
acquisition, transportation and storage of the tangible lease and well
equipment.
4.3 The WTU Group agrees that all equipment contributed pursuant to this
Article IV will, at all times, adhere to the standards of manufacture and
performance that are customary and usual for equipment vendors who are providing
equipment of a similar nature in the field where the XX Xxxxx are located.
4.4 In order to effectuate the intention of this Agreement, the WTU Group
shall also assign to the Joint Venture by appropriate instruments of conveyance
1005 of its Working Interest in the XX Xxxxx.
4.5 Through the Joint Venture, upon the Drilling Funds entering into the
Turnkey Contract, the WTU Group shall have a Working Interest equal to 10% of
the Aggregate Working Interest in the XX Xxxxx acquired by Joint Venture and
developed pursuant to this Agreement. Accordingly, the WTU Group will be
entitled to receive 10% of the Net Revenues from the Joint Venture's aggregate
interest in the XX Xxxxx. For purposes of the Section 4.5, "Net Revenues" shall
have the same meaning as set forth in Section 3.3 hereof.
ARTICLE V.
REVERSION TO THE WTU GROUP
5.1 After the Drilling Funds have received aggregate distributions equal to
capital contributed ("Payout"), the WTU Group will receive an additional
reversionary interest in order to equal 40% of the Working Interest held under
this Joint Venture Agreement and the Drilling Fund's Working Interest will be
reduced to 60%.
5.2 Notwithstanding anything contained in this Joint Venture Agreement, the
obligations of the WTU Group under paragraph 5.1 above shall be limited to its
10% Working Interest described herein.
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ARTICLE VI.
ELECTION TO BE TAXED AS A PARTNERSHIP
6.1 For Federal income taxation purposes, the parties intend that all of
the interest of the parties hereto shall be taxed pursuant to the provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code, or any similar state
statute, and each of the parties hereto agrees to elect not to be excluded from
the applicable of Subchapter K of the Code. In general, the Joint Venture will
maintain its books and records for tax and accounting purposes and make
allocations among the parties hereto in accordance with the guidelines set forth
in Sections 6.2 and 6.3 below.
6.2 A separate Capital Account shall be maintained for each party to this
Agreement as follows:
(a) The Capital Account of each Joint Venture shall be (A) credited with
the amount of cash and the fair market value of all property contributed to the
Joint Venture by such Joint Venturer, plus all income, gain, or profits of the
Joint Venture allocated to such Joint Venturer (including for purposes of this
Section income and gain exempt from tax), and (B) debited with the sum of (i)
all losses or deductions of the Joint Venture allocated to such Joint Venturer,
including for this purpose expenditures described in Sec. 705(a)(2)(G) of the
Code, and (ii) all cash and the fair market value of all other property
distributed to such Joint Venturer
(b) Notwithstanding anything to the contrary contained herein, the Capital
Account of a Joint Venturer shall be determined in all events solely in
accordance with the rules set forth in Treasury Regulation Sec.
1.704-1(b)(2)(iv) as the same may be amended or revised from time to time. To
the extent that any provision of this Agreement is inconsistent with the
requirements of Treasury Regulation Sec. 1.704-1(b)(2)(iv), such Treasury
Regulation shall control. Any references in this Agreement to the Capital
Account of a Joint Venturer shall be deemed to refer to such Capital Account as
the same may be credited or debited from time to time as set forth above.
(c) For purposes of computing the amount of any item of income, gain,
deduction, or loss to be reflected in Capital Accounts, the determination,
recognition and classification of each such item shall be the same as its
determination, recognition, and classification for Federal income tax purposes.
6.3 The parties hereto agree that with respect to the matters contemplated
by this Agreement, for book and Federal income and state income taxes, the
distributive share of the parties in each item of income, loss from abandonment
or other disposition of property and in each item of deduction for costs and
expenses and credits, including but not by way of limitation, the class of items
specifically mentioned below, shall be determined as follows:
(a) All items of income, deductions and credits arising from the sale of
oil shall be allocated to each party in accordance with its respective Working
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Interest in the XX Xxxxx, provided however, that in the event the Partnership
receives distributions in excess of its Working Interest share as the result of
the WTU Group's subordination described in Article V hereof, allocations under
this Section 6.3(a) shall be adjusted so as to take into account such additional
distributions.
(b) Production costs shall be allocated as deductions to each party in
accordance with its respective Working Interests in the XX Xxxxx.
(c) Intangible drilling and development costs shall be allocated as
deductions to each party in accordance with its respective contributions to such
costs.
(d) Depreciation on tangible lease and well equipment shall be allocated to
each party in accordance with its respective contributions to the adjusted basis
of such equipment. The term "adjusted basis" shall mean the adjusted basis as
defined in Sec. 1011 of the Code.
(e) Deductions for depletion with respect to each separate JV Well (or
combination of XX Xxxxx) subject to this Agreement shall be computed separately
by each party, rather than by the Joint Venture created by this Agreement for
Federal income tax purposes. For purposes of such computation, the adjusted
basis (as defined in Sec. 1011 of the Code) in each oil and gas property subject
to this Agreement shall be allocated to the parties in accordance with their
respective contribution to such costs. Each party hereto shall separately keep
records of its property, adjust such share of the adjusted basis for any cost or
percentage depletion allowable on such property and use such adjusted basis each
year in the computation of its gain or loss on the disposition of such property
by the parties hereto. In addition, solely for purposes of maintaining capital
accounts, the Joint Venture shall compute a simulated depletion allowance for
each property and allocate the simulated depletion among all parties in
proportion to their respective contributions to adjusted basis in each such
property.
(f) Gains and losses from each sale, abandonment or other disposition of
property (other than oil) will be allocated to the parties in such manner as to
bring the balances of the capital accounts of the parties, to the extent
possible, into the ratio of their respective Working Interests in the XX Xxxxx.
(g) Anything to the contrary notwithstanding, upon termination of this
Agreement, the assets owned by the parties pursuant to this Agreement shall be
distributed in accordance with the following rules and in the following order:
(i) Any party which has a negative balance in its capital account
after application of subparagraph (f) above shall contribute to the assets
to be distributed an amount sufficient to raise such balance to zero.
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(ii) All debts and liabilities to persons or entities other than the
parties hereto shall be paid and discharged or reserves therefor shall be
established; provided, however, that the foregoing shall not be construed
to include any repayment of any party's capital contributions or any
capital account balance of any party.
(iii) All debits and liabilities to the parties hereto shall be paid
and discharged or reserves therefore shall be established; provided,
however, that the foregoing shall not be construed to include any repayment
of any party's capital contributions or any capital account balance of any
party.
(iv) Assets shall be distributed among the parties in such manner as
will bring the balances of the capital accounts of the parties, to the
extent possible, into the ratio of their respective Working Interests in
the XX Xxxxx.
(v) All remaining assets, if any, shall be distributed among the
parties in accordance with their respective capital accounts.
6.4 The parties comprising the WTU Group agree to bear their respective
proportional shares of any fees or expenses incurred in connection with the
operations and management of the Joint Venture and the preparation and
presentation of accounting and tax information returns for the parties to this
Agreement.
ARTICLE VII.
CROSS INDEMNIFICATION
7.1 If Xxxxxx or WDC are acting as Turnkey Contractors on a JV Well or
PEDCO is supervising, coordinating and/or controlling the drilling, and/or
completion operations contemplated in Section 1.2 above, Xxxxxx and WDC and
PEDCO respectively agree to jointly and severally indemnify Xxxxxxx for any
damages incurred by their actions, or failures to act, in connection with either
Turnkey Contract or PEDCO serving as Operator on a JV Well to the extent caused
by the active or passive negligence, gross negligence or willful misconduct of
Xxxxxx, WDC or PEDCO, respectively.
7.2 Conversely, if Xxxxxxx is acting as the turnkey contractor on a JV
Well, Xxxxxxx agrees to indemnify Xxxxxx, WDC and PEDCO for any damages incurred
by its actions, or failures to ac, in connection with a turnkey contract on a JV
Well to the extent caused by the active or passive negligence, gross negligence
or willful misconduct of Xxxxxxx.
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ARTICLE VIII.
MISCELLANEOUS
8.1 Any dispute or controversy between the parties arising out of or in
connection with this Agreement shall be determined and settled by binding
arbitration in the State of California, pursuant to the rules of the American
Arbitration Association then in effect. Any award rendered in connection with
such an arbitration proceeding shall be final and binding on the respective
parties and judgment may be entered thereon by any court of competent
jurisdiction.
8.2 The Xxxxxx shall use its best efforts to maintain all geological
information provided to or acquired by it in connection with operations
hereunder in confidence and to prevent the publication or dissemination thereof
and to prevent the use of such information for any purpose other than the
furtherance of the business relationship of the parties.
8.3 All notices, demands, requests or payments provided for or given
pursuant to this Agreement must be in writing. All such notices shall be deemed
to have been properly given or served by depositing the same in the United
States Mail, registered or certified, return receipt requested, addressed to the
address set forth on the signature page of this Agreement. All notices shall be
effective as of the date set forth on the return receipt.
8.4 This Agreement and the obligations of the parties hereunder shall be
construed and enforced in accordance with the laws of the State of California.
8.5 This Agreement s hall be deemed to be jointly prepared by the parties
and any ambiguity herein shall not be construed for or against any party.
8.6 This Agreement shall be binding on and inure to the benefit of the
respective successors and assigns of the parties hereto.
8.7 Each party shall concurrently herewith, or at any time hereafter, on
the demand of the other, execute any other documents or instruments, and do or
cause to be done any other acts or things as may be necessary, desirable or
convenient to carry out the intents and purposes of this Agreement.
8.8 As used in this Agreement, the masculine, feminine or neuter gender and
the singular or plural number shall be deemed to include the other whenever the
context so requires.
8.9 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original hereof for all purposes.
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8.10 Before a Joint Venture partner may transfer its interest, it must
obtain an opinion of counsel reasonably acceptable to the remaining Joint
Venture partners that the transfer will not cause a termination of the Joint
Venture for Federal tax purposes.
IN WITNESS WHEREOF, this Joint Venture Agreement has been executed by the
parties this 24th day of May, 1999.
XXXXXX RESOURCES OF CALIFORNIA, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
XXXXXXX PETROLEUM COMPANY
By: /s/ Xxxx Xxxxxxx
-----------------------------------------
PETROLEUM DEVELOPMENT CORPORATION, INC.
By: /s/ Xxx X. Xxxxxxx
-----------------------------------------
XXXXXX RESOURCES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Chairman and Chief Executive Officer
XXXXXX DEVELOPMENT CORP.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Chairman and Chief Executive Officer
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