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EXHIBIT 10.34
GEOPHYSICAL EXPLORATION AGREEMENT
SOUTHWEST DANBURY PROJECT
BRAZORIA COUNTY, TEXAS
This Geophysical Exploration Agreement (this "Agreement"), dated
effective as of the 1st day of July, 1996, is by and among UNEXCO, INC.
("UNEXCO") and ▇▇▇▇▇▇▇ OIL & GAS, L.P. ("BOG") (UNEXCO and BOG are sometimes
referred to herein individually as a "Participant" and collectively as the
"Participants" or individually as a "Party" and collectively as the "Parties").
RECITALS:
1. BOG and UNEXCO have identified an area (the "Program Area") in
Brazoria County, Texas, being more particularly identified and described in
Part One of Exhibit A, attached hereto and made a part hereof, which the
Parties believe to be prospective for oil and gas exploration and production.
2. UNEXCO and Apache Corporation ("Apache") have entered into
that certain S.W. Danbury Exploration Agreement (the "Apache Agreement") dated
as of July 28, 1996, and concerning the exploration and development of the
Program Area.
3. Under instrument dated as of March 8, 1996 (the "Cinnabar
Agreement"), UNEXCO reached agreement with Cinnabar Investments Corporation
("Cinnabar") concerning the exploration of the Program Area.
4. Under that certain Basic Agreement for Geophysical Services
dated March 19, 1996 (herein called the "Basic USA Agreement"), as supplemented
under that certain Supplemental Agreement No. 7 (the "USA Supplement") dated
October 2, 1996, each by and between UNEXCO and USA, USA undertakes to acquire,
on behalf of UNEXCO and BOG, 3-D seismic data covering all or part of the
Program Area (the Basic USA Agreement, as supplemented by the USA Supplement,
is herein called the "USA Agreement", and a copy of same as attached hereto as
Exhibit G), all at USA's actual cost.
5. Under the "UST Agreement," as hereinafter defined, UST
undertakes to process on behalf of UNEXCO and BOG 3-D seismic data covering all
or part of the Program Area, as directed by BOG and UNEXCO, all at UST's actual
cost.
6. Each of BOG and UNEXCO may own existing licenses or permits to
conduct seismic or other geophysical operations on, under or across the Program
Area (the "Existing Permits"), option agreements to acquire oil and gas leases
(the "Existing Options"), oil and gas leases (the "Existing Leases") and other
agreements to earn or obtain interests in oil and gas leases, mineral
interests, royalty interests or other interests in oil, gas or other
hydrocarbons (the "Existing Farm-Ins"), including, without limitation the
Apache Agreement, covering portions of the Program Area (the Existing Permits,
Existing Options, Existing Leases and Existing Farm-Ins being described in
Exhibit B hereto), and BOG and UNEXCO anticipate that additional licenses or
permits to conduct seismic or other geophysical operations on, under or across
the Program Area (such licenses and permits, together with the Existing
Permits, being herein referred to as "Permits"), options to acquire oil and gas
leases (such options and the Existing Options being herein referred to as
"Options"), oil and gas leases (such leases and the Existing Leases being
herein referred to as "Leases"), and other agreements to obtain interests in
oil and gas leases, mineral interests, royalty interests or other interests in
oil, gas or other hydrocarbons (such agreements and the Existing Farm-Ins being
referred to herein as "Farm-Ins") may in accordance herewith be obtained in the
future covering all or any portion of the Program Area.
7. The Participants have reached an agreement with respect to
certain matters concerning the ownership and operation of Permits, Options,
Leases and Farm-Ins, taking into due account the USA Agreement, the UST
Agreement, the Apache Agreement and the Cinnabar Agreement.
8. The Participants have also reached an agreement with respect
to the exploration, development and evaluation by them of the Program Area,
taking into due account the USA Agreement, the UST Agreement, the Apache
Agreement and the Cinnabar Agreement.
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DEFINITIONS:
"Acquired Interests" means any Permits, Options, Leases or Farm-ins acquired by
one of the Parties hereto during the term hereof, insofar and only insofar as
any of same cover or relate to lands within the AMI; Acquired Interests shall
not include any Existing Permit, Existing Option, Existing Lease or Existing
Farm-In.
"Affiliate" means, as to any particular Party, all of the officers and
employees of such Party and any other person or entity which either: (a) owns
more than twenty percent (20%) of the total voting equity of the Party; (b) has
one or more employees or officers which are also employees or officers of the
Party; or (c) the Party owns more than twenty percent (20%) of the total voting
equity of such entity.
"Apache" has the meaning assigned to it in the Recitals set out above.
"Apache Agreement" has the meaning assigned to it in the Recitals set out
above.
"Apache Survey data" means all data supplied to UNEXCO and/or BOG under Article
4.A. of the Apache Agreement.
"Cinnabar" has the meaning assigned to it in the Recitals set out above.
"Cinnabar Agreement" has the meaning assigned to it in the Recitals set out
above.
"Completion Date" means the date of completion of processing of interpretable
and acceptable Program Data.
"Direct Charges" means actual, appropriate and reasonable out-of-pocket costs
and expenses paid to third parties who are not Affiliates; provided that such
Affiliate limitation does not apply to any USA Shoot Costs payable to USA under
the USA Agreement or to any Processing Costs payable to UST under the UST
Agreement.
"Existing Farm-ins" has the meaning assigned to it in the Recitals set out
above.
"Existing Leases" has the meaning assigned to it in the Recitals set out above.
"Existing Options" has the meaning assigned to it in the Recitals set out
above.
"Existing Permits" has the meaning assigned to it in the Recitals set out
above.
"Farm-ins" has the meaning assigned to it in the Recitals set out above.
"Geophysical Program" has the meaning assigned to it in Section 2.1.
"Geophysical Program Costs" means the sum of (a) the USA Shoot Costs, (b) any
Processing Costs, (c) any Permitting Costs, and (d) any Reproduction Costs.
"Leases" has the meaning assigned to it in the Recitals set out above.
"Options" has the meaning assigned to it in the Recitals set out above.
"Permits" has the meaning assigned to it in the Recitals set out above.
"Permitting Costs" means any Direct Charges (including without limitation any
bonus payments or, to the extent only approved by BOG, surface damage payments)
incurred in securing, extending or maintaining Permits, Options, Leases, or
Farm-ins necessary or appropriate to allow USA to conduct the Geophysical
Program.
"Processed Data" has the meaning assigned to it in subsection 2.1(c) hereof.
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"Processing Costs" shall mean any Direct Charges payable to UST under the UST
Agreement for processing the Program Data, it being understood that such Direct
Charges are to be billed at the rates quoted for UNEXCO in the UST Agreement.
Notwithstanding any provision hereof to the contrary, under no circumstances
shall Processing Costs ever exceed the amount then (i.e., at the time of
processing) being assessed by Veritas Geophysical, Ltd. ("Veritas") for similar
work performed by Veritas for BOG.
"Program Area" has the meaning assigned to it in the Recitals set out above.
"Program Data" means any and all data or other related information secured or
acquired in the conduct of the Geophysical Program, including without
limitation any 3-D seismic data, logs, survey and shotpoint and receiver maps,
tapes, and reproducibles; the Program Data shall include the Processed Data,
once in existence, but the Program Data shall in no event include any
interpretations of the Program Data.
"Reproduction Costs" means any Direct Charges incurred in copying or otherwise
reproducing any Program Data, Processed Data and/or interpretations thereof; in
no event shall Reproduction Costs be charged to the extent they are already
considered in the Processing Costs or the USA Shoot Costs.
"3-D" means three dimensional.
"USA" means Universal Seismic Acquisition, Inc.
"USA Agreement" has the meaning assigned to it in the Recitals set out above.
"USA Shoot Costs" means the lesser of (a) the actual and reasonable costs
incurred in the field by USA in conducting the 3-D survey that makes up a part
of the Geophysical Program, to the extent such costs are attributable to the
allocable time spent by employees and/or leased or owned equipment of USA, and
(b) the sum of any Direct Charges payable to USA under Section IV, V and VI of
the USA Supplement; provided that under no circumstances shall USA Shoot Costs
include any costs otherwise included in Geophysical Program Costs, or otherwise
exceed an average of $36,500.00 per square mile.
"UST" means Universal Seismic Technologies, Inc.
"UST Agreement" means that certain letter agreement executed by UST on October
1,1996, and accepted by UNEXCO on October 2, 1996, relating to bid #61001DCA, a
copy of which is attached hereto as Exhibit H.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I.
RELATIONSHIP OF PARTIES
Section 1.1. No Partnership. The liabilities of the Parties
hereunder shall be several, not joint or collective. It is not the intention
of the Parties to create, nor shall this Agreement be deemed as creating, a
joint venture or a mining, tax or other partnership or association or to render
the Parties liable as partners. However, if for federal income tax purposes,
this Agreement and the operations hereunder are regarded as a partnership, each
Party thereby affected elects to be excluded from the application of all of the
provisions of Subchapter "K," Chapter 1, Subtitle "A," of the Internal Revenue
Code of 1986, as amended (hereinafter referred to as the "Code"), as permitted
and authorized by Section 761 of the Code and the regulations promulgated
thereunder. Should there be any requirement that each Party hereby affected
give further evidence of this election, each such Party shall execute such
documents and furnish such other evidence as may be required by the Federal
Internal Revenue Service or as may be necessary to evidence this election. No
Party shall give any notice or take any other action
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inconsistent with the election made hereby. In making the foregoing election,
each Party states that the income derived by such Party from operations
hereunder can be adequately determined without the computation of partnership
taxable income.
Section 1.2. Third Party Claims and Liability. In the event any
third party (to include any governmental authority) claim or suit arising,
directly or indirectly out of this Agreement or any interest acquired or
operation conducted pursuant hereto is made against any Party, such Party shall
immediately notify all other Parties.
ARTICLE II.
EVALUATION PROGRAM
Section 2.1. Scope and Conduct of Program.
(a) Design. The Participants have agreed that a 3-D geophysical
survey (the "Geophysical Program") will be conducted to cover all or part of
the Program Area. BOG and UNEXCO have reached mutual agreement on the design
of the Geophysical Program, and subject to the rights afforded Apache under the
Apache Agreement, the scope and parameters of the Geophysical Program are set
out in Exhibit I hereto.
(b) Conduct. UNEXCO will conduct or will cause USA to conduct, or
supervise third parties in conducting, the Geophysical Program. In satisfying
its obligations hereunder to conduct (or cause to be conducted) the 3-D survey,
UNEXCO shall itself follow, or cause USA to follow, the parameters set forth in
Exhibit I hereto.
(c) Processing of Program Data. UNEXCO shall process, or shall cause
UST to process, the Program Data into migrated seismic sections in a SEGY
format capable of being loaded on BOG's 3-D work stations. At a minimum,
UNEXCO will comply, or will cause UST to comply, with the basic processing
parameters set out in Exhibit I.
(d) Processing and/or Reprocessing of the Apache Survey data. UNEXCO
shall be responsible for processing and/or reprocessing, or for causing UST to
process or reprocess the seismic field data included in the Apache Survey data
in a SEGY format capable of being loaded on BOG's 3-D work stations. At a
minimum, UNEXCO will comply, or will cause UST to comply, with the basic
processing parameters set out in Exhibit I.
(e) Completion Date. The Parties agree that "completion of
processing of interpretable and acceptable Program Data" (and thus the
Completion Date) shall be deemed to occur when final processed, migrated
seismic sections of the Program Data and the Apache Survey data (herein
collectively called the "Processed Data") have been delivered to BOG in SEGY
format capable of being loaded on BOG's 3-D work stations.
(f) Interpretation of Program Data. UNEXCO or UST shall supply to
BOG the Processed Data. BOG shall then be responsible for interpreting, free
of charge other than Direct Charges, the Processed Data on its 3-D work
stations, and BOG will provide to UNEXCO and, to the extent necessary or
appropriate under the Cinnabar Agreement, to Cinnabar, copies of all resulting
final interpretations of the Processed Data. It is hereby recognized by the
Parties that UNEXCO and Cinnabar each has expertise in interpreting seismic
data and specific knowledge of the geology of this prospect, and BOG shall meet
with UNEXCO and Cinnabar at reasonable times in BOG's offices to prepare and
discuss interpretation of the Processed Data.
Section 2.2. Ownership, Use and Disclosure of Program Data.
(a) Ownership. The Program Data shall be owned jointly by the
Participants in the following percentages (hereinafter referred to as such
Participants' "Ownership Interests"):
Participant Percentage
----------- ----------
BOG 50%
UNEXCO 50%.
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The Ownership Interest of each of BOG and UNEXCO in the Program Data shall be
subject to any license or joint ownership rights in such Program Data afforded
to Apache under the Apache Agreement. Provided such Participant has paid its
share of the Geophysical Program Costs (if such Participant is responsible for
such costs as provided in Section 2.3), and subject to any restrictions that
may be contained in any applicable license or other agreements, upon request,
each Participant shall receive copies of the Program Data.
(b) Use, Disclosure and Transfer of Program Data. Each of BOG and
UNEXCO has the right to use the Program Data and any interpretations thereof
for its own internal purposes in connection with its exploration and
development of the Program Area. No Participant shall sell, license, trade,
exchange or otherwise disclose the Program Data or any interpretations thereof
to any third party within two (2) years of the Completion Date without prior
written consent from the other Participant, except that each Participant may
disclose, license, trade, exchange or otherwise transfer ownership rights to or
interests in the Program Data and any interpretations thereof at any time
without the consent of the other Participant to (i) Cinnabar, as contemplated
in the Cinnabar Agreement, or Apache, as contemplated in the Apache Agreement,
(ii) third parties engaged in bona fide negotiations with the disclosing
Participant concerning the acquisition from such third-party of an interest in
or the right to participate in the exploration and/or development of all or
parts of interests owned by such third-party and located within the Program
Area, (iii) third parties that have entered into bona fide negotiations for
participation with the disclosing Participant in the exploration and/or
development of all or parts of the Program Area with an interest in the
disclosing Participant's Ownership Interest in Permits, Leases, Options and/or
Farm-Ins, (iv) third parties that have entered into an agreement through which
they are participating with the disclosing Participant in the exploration
and/or development of all or parts of the Program Area with an interest in the
disclosing Participant's Ownership Interest in Permits, Leases, Options and/or
Farm-Ins, (v) third parties that have invested in, or that are engaged in bona
fide discussions concerning investing in, the disclosing Participant's
exploration and/or development operations within the Program Area, or (vi)
third parties that are hired by a Participant as a consultant to help or
facilitate such Participant's efforts in analyzing or interpreting the Program
Data; provided, however, that the disclosing Participant must cause all third
parties that are described in (ii), (iii), (iv), (v) or (vi) above, to which
the Program Data and/or interpretations are to be disclosed prior to the
expiration of such two year period, to execute a confidentiality agreement in
the form attached hereto as Exhibit D covering the acreage which is covered by
the Program Data that is to be disclosed and naming all of the Participants as
"Offeror" in such confidentiality agreement, prior to the third party's review
of the Program Data or interpretations. Any cash proceeds resulting from any
sale, license, trade or exchange of the Program Data which occurs within five
(5) years from the effective date of this Agreement shall be divided among the
Participants in accordance with their percentage Ownership Interest (as set
forth in the table contained in Section 2.2(a) above). In the event that any
Participant sells, trades or exchanges any part of the Program Data after the
expiration of such five (5) year period, such Participant shall have the right
to retain all of the proceeds resulting from such sale, trade or exchange.
The Participants recognize and agree that in the event that a Participant
assigns to a third-party all or part of its Ownership Interest under this
Agreement, including all or part of its Ownership Interest in any Permits,
Options, Leases, Farm-Ins, and such third party also receives part of such
Participants' Ownership Interest in all or part of the Program Data as part of
such transaction, the other Participants hereto shall not be entitled to any
part of the consideration received from the third-party pursuant to the
transaction and such assignment shall not be deemed to be a sale, trade or
exchange of the Program Data for purposes of this subsection 2.2(b). If any
Party is aware that any Participant has not paid for its proportionate part of
the Geophysical Program Costs in accordance with the terms of Section 2.3
below, such Party shall not intentionally disclose the Program Data or any
interpretations thereof to the non-paying Participant without the consent of
all other Participants hereto.
Section 2.3. Payment of Costs of Geophysical Program. Except as
expressly provided otherwise herein, each of the Participants shall pay their
Ownership Interest (as set forth in the table contained in Section 2.2(a)
above) share of all Geophysical Program Costs. BOG shall invoice UNEXCO for
UNEXCO's fifty percent (50%) share of all Geophysical Program Costs properly
incurred by BOG in accordance with this Agreement as such costs are incurred;
UNEXCO shall have fifteen (15) days from receipt of the invoice to forward BOG
payment in
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full. UNEXCO shall invoice BOG for BOG's fifty percent (50%) share of any
Geophysical Program Costs properly incurred by UNEXCO in accordance with this
Agreement as such costs are incurred; BOG shall have fifteen (15) business days
from receipt of the invoice to forward UNEXCO payment in full. Notwithstanding
any provision hereof to the contrary, any costs associated with the actual
conduct of the 3-D Survey, other than USA Shoot Costs, shall be borne and paid
by UNEXCO.
Section 2.4. Disclaimer of Warranties. The Parties understand
that BOG will use reasonable efforts to provide good quality interpretation of
such Program Data; however, BOG AND ITS OFFICERS, EMPLOYEES, AGENTS, AFFILIATES
AND SHAREHOLDERS (hereinafter collectively referred to as the "BOG GROUP") MAKE
NO REPRESENTATIONS OR WARRANTIES OF ANY KIND AS TO THE INTERPRETATIONS,
INCLUDING WITHOUT LIMITATION, THEIR FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY OR ACCURACY, AND THE BOG GROUP HEREBY DISCLAIMS ANY AND ALL
SUCH REPRESENTATIONS OR WARRANTIES, AND ANY USE OF THE INTERPRETATIONS BY THE
PARTIES OR THEIR SUCCESSORS OR ASSIGNS, OR ANY ACTION TAKEN BY THE PARTIES OR
THEIR SUCCESSORS OR ASSIGNS SHALL BE BASED SOLELY ON THEIR OWN JUDGMENT, AND
NEITHER THE BOG GROUP OR THEIR SUCCESSORS OR ASSIGNS, SHALL BE LIABLE OR
RESPONSIBLE TO THE OTHER PARTIES OR THEIR SUCCESSORS OR ASSIGNS FOR ANY LOSS,
COST, DAMAGES, OR EXPENSE WHATSOEVER, INCLUDING INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCURRED OR SUSTAINED AS A RESULT OF THE USE OF OR RELIANCE UPON THE
INTERPRETATIONS, REGARDLESS OF WHETHER OR NOT SUCH LOSS, COST, DAMAGE OR
EXPENSE IS FOUND TO RESULT IN WHOLE OR IN PART FROM THE SOLE OR CONCURRENT
NEGLIGENCE OR OTHER FAULT OF ANY MEMBER OF THE BOG GROUP. The Parties
understand that UNEXCO will use reasonable efforts to provide good quality
interpretation of such Program Data; however, UNEXCO AND ITS OFFICERS,
EMPLOYEES, AGENTS, AFFILIATES AND SHAREHOLDERS (hereinafter collectively
referred to as the "UNEXCO GROUP") MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY
KIND AS TO THE INTERPRETATIONS, INCLUDING WITHOUT LIMITATION, THEIR FITNESS FOR
A PARTICULAR PURPOSE, MERCHANTABILITY OR ACCURACY, AND THE UNEXCO GROUP HEREBY
DISCLAIMS ANY AND ALL SUCH REPRESENTATIONS OR WARRANTIES, AND ANY USE OF THE
INTERPRETATIONS BY THE PARTIES OR THEIR SUCCESSORS OR ASSIGNS, OR ANY ACTION
TAKEN BY THE PARTIES OR THEIR SUCCESSORS OR ASSIGNS SHALL BE BASED SOLELY ON
THEIR OWN JUDGMENT, AND NEITHER THE UNEXCO GROUP OR THEIR SUCCESSORS OR
ASSIGNS, SHALL BE LIABLE OR RESPONSIBLE TO THE OTHER PARTIES OR THEIR
SUCCESSORS OR ASSIGNS FOR ANY LOSS, COST, DAMAGES, OR EXPENSE WHATSOEVER,
INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCURRED OR SUSTAINED AS A
RESULT OF THE USE OF OR RELIANCE UPON THE INTERPRETATIONS, REGARDLESS OF
WHETHER OR NOT SUCH LOSS, COST, DAMAGE OR EXPENSE IS FOUND TO RESULT IN WHOLE
OR IN PART FROM THE SOLE OR CONCURRENT NEGLIGENCE OR OTHER FAULT OF ANY MEMBER
OF THE UNEXCO GROUP.
ARTICLE III.
AREA OF MUTUAL INTEREST
Section 3.1. Establishing an Area of Mutual Interest.
(a) The Participants have agreed to establish an Area of Mutual
Interest ("AMI") which shall initially encompass all of the land located in the
Program Area. However, as of the Completion Date, the AMI shall be deemed to
be modified to thereafter include only those parcels of land within the Program
Area which are covered by the 3-D seismic survey conducted as part of the
Geophysical Program. The AMI shall remain in force for a period of five (5)
years from the date of this Agreement, unless sooner terminated by mutual
agreement of the Participants.
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(b) The Participants agree that for purposes of this Agreement the
acreage or lands that are "covered by the 3-D seismic survey conducted as part
of the Geophysical Program" shall include all lands within the Program Area
that are located within the outside perimeter of the area that is depicted on
the final bin/fold map resulting from the Geophysical Program which is provided
by the seismic processor. Within sixty (60) days after the Completion Date,
BOG shall prepare a legal description of the acreage which is covered by the
3-D seismic survey and the Participants agree that such legal description shall
definitively and for all purposes hereof constitute the AMI, effective as of
the Completion Date. BOG shall use reasonable efforts to cause the legal
description to depict the outside perimeter of the area that is depicted on the
final bin/fold map provided by the seismic processor; however, the Parties
recognize that in order to provide a legal description of the area covered by
the 3-D seismic survey, BOG shall not be required to have a survey conducted on
the ground and may approximate, in its sole and reasonable discretion, the
location of the outside perimeter depicted on the final bin/fold map for
purposes of aiding BOG in the preparation of the legal description.
Section 3.2. Payment for and Ownership of Options, Farm-Ins and
Leases.
(a) All costs incurred prior to the execution of this Agreement in
acquiring, extending and maintaining the Existing Permits, Existing Options,
Existing Leases and Existing Farm-Ins shall be paid for by the Participants in
accordance with their Ownership Interests (as set forth in the table contained
in Section 2.2(a) above).
(b) BOG shall, to the extent it deems necessary or advisable, secure
or extend any Permits, Options, Leases or Farm-ins as may be necessary or
appropriate to allow USA to conduct the Geophysical Program (herein called the
"Seismic Access Instruments"), and any Permitting Costs incurred by BOG in so
doing shall, notwithstanding the election procedures set forth in Section 3.3
and/or Section 3.4, below, be paid for by the Participants in accordance with
their Ownership Interests, as set forth in the table contained in Section
2.2(a), above).
(c) Subject to the election procedures contained in Sections 3.3 and
3.4 below and further subject to the rights of Apache under the Apache
Agreement, all other costs incurred in acquiring and maintaining Permits,
Leases, Options and Farm-Ins located within the AMI during the term of this
Agreement shall be paid for by the Participants in accordance with their
Ownership Interests therein.
(d) All Existing Permits, Existing Options, Existing Leases and
Existing Farm-Ins shall be owned by the Participants in accordance with their
Ownership Interests. Subject to the election procedures contained in Sections
3.3 and 3.4 below and further subject to the rights of Apache under the Apache
Agreement, all other Options, Leases and Farm-Ins acquired by the Participants
within the AMI during the term of this Agreement shall also be owned by the
Participants in accordance with their undivided Ownership Interests. However,
unless a Participant requests prior record assignment of its interest in the
Leases, Permits, Options or Farm-Ins, record title to all Permits, Options,
Leases and Farm-Ins shall remain in the Participant originally acquiring same
until such time as the acreage covered by such Options, Permits, Leases and
Farm-Ins is to be included within a drilling and/or proration unit of a well
that is to be drilled within the AMI as provided in Section 5.5 below.
(e) Within fifteen (15) days from receipt of an invoice from any
Party hereto or a third party, each Party shall pay in full the balance of any
amounts due for their share of the costs of acquiring or maintaining Options,
Leases or Farm-Ins. Concurrent with their execution of this Agreement the
Parties shall reimburse the acquiring Party for their Ownership Interest share
of all of the third-party costs incurred prior to the execution of this
Agreement in acquiring and maintaining Existing Options, Existing Leases and
Existing Farm-Ins; an invoice setting out these costs shall have been provided
to UNEXCO prior to its execution thereof.
Section 3.3. Notification and Response Procedures. Should any
Participant own on the date hereof, or hereafter acquire or propose to acquire
at any time prior to the date the AMI terminates hereunder, by purchase,
exchange, gift or otherwise, Acquired Interests, such Participant (the
"Acquiring Party") shall notify the other Parties, in writing, of such
acquisition
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or proposed acquisition and the initial consideration paid or to be paid for
the Acquired Interest. Each non-acquiring Participant shall, within thirty
(30) days after receipt of such a notice from the Acquiring Party, notify the
Acquiring Party, in writing, whether it wishes to participate in such
acquisition; provided that failure to respond within the time and in the manner
set forth above shall be deemed to be an election to not participate in such
acquisition. However, if a non-acquiring Participant reasonably desires
additional information with respect to an Acquired Interest before it makes its
election whether or not to participate in the acquisition of an Acquired
Interest, such Participant may notify the Acquiring Party in writing within
fifteen (15) days of its receipt of the Acquiring Party's notice, detailing in
such notice to the Acquiring Party the additional information reasonably
desired by such non-acquiring Participant, and such non-acquiring Participant
shall have fifteen (15) days from the date of its receipt of the additional
information it has reasonably requested from the Acquiring Party in which to
make its election whether to participate in the acquisition of the Acquired
Interest. Anything to the contrary contained herein notwithstanding, a sale,
exchange, gift or other transfer of any part of a Participant's Ownership
Interest share in any Leases, Permits, Options or Farm-ins to any other
Participant hereto shall not be deemed to be an Acquired Interest for purposes
of this Section 3.3 and this Section 3.3 shall not apply to any such
assignment, exchange, gift, sale or other transfer.
Section 3.4. Effect of a Participant's Election Regarding
Participation. Should all of the Participants elect to participate in an
acquisition of an Acquired Interest, upon payment of its share of the
acquisition costs, each Participant shall own, subject to the rights of Apache
under the Apache Agreement, its Ownership Interest share of the Acquired
Interest. However, unless a Participant requests prior record assignment of
its interest in the Acquired Interest, record title to all Acquired Interests
shall remain in the Participant originally acquiring same until such time as
the acreage covered by such Acquired Interests have been included within the
drilling and/or proration unit for a proposed well as provided in Section 5.5
below. If any Participant elects not to participate in such acquisition, the
Ownership Interests for the Participants electing to participate shall, unless
all of the Participants electing to participate agree otherwise and subject to
the rights of Apache under the Apache Agreement, be the percentage determined
by dividing, for each participating Participant, the Ownership Interest
otherwise applicable (if all Participants had participated) to such
participating Participant by the total Ownership Interests for all
participating Parties. The Participants that acquire part of a
non-participating Party's Ownership Interest in an Acquired Interest shall be
responsible for a proportionate share (being in the proportion that the
percentage of such non-participating Participant's Ownership Interest that is
acquired by such Participant bears to such non-participating Participant's
original total Ownership Interest) of such non-participating Participant's
share of the costs of such Acquired Interest.
Section 3.5. Exercise of Options. Should any Participant propose
to exercise an Option with respect to some or all of the lands covered thereby,
such Participant shall notify the other Participants owning an interest in such
Option in the same manner as provided for in Section 3.3 above with respect to
acquisitions of Acquired Interests, and each Participant owning an interest in
the Option shall elect to participate or to not participate in the exercise of
such Option in the same manner as provided in Sections 3.3 and 3.4 with respect
to elections to participate or to not participate in the acquisition of
Acquired Interests and the Participant proposing the exercise of the Option
shall be deemed to be the "Acquiring Party" under those Sections. The effect
of a Participant's election to participate in such an exercise of an Option,
and the payment of costs and the ownership of interests in the Leases acquired
pursuant to such exercise, shall be handled in the same manner as provided in
Sections 3.3 and 3.4 with respect to elections to participate or not
participate in acquisitions of Acquired Interests. Notwithstanding the
foregoing, should any Participant having the right to participate in such
exercise furnish notice (within the time provided for written notice with
respect to such an election) to the Acquiring Party that it wishes to defer
exercise of such Option, and should it be possible under the terms of the
Option to defer such exercise without any loss of costs or rights, the
Acquiring Party shall withdraw its proposal to exercise such Option.
Notwithstanding anything to the contrary contained herein, if a Participant has
not elected to participate in the acquisition of an acquired Option as provided
in Section 3.4, such Participant shall not have the right to participate in the
exercise of such Option and shall own no interest in the Leases resulting from
the exercise of such Option.
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Section 3.6. Election as to Participation in Maintenance or
Extension Costs. In the event maintenance or extension costs are incurred with
respect to a Permit, Lease, Option or Farm-In, each Participant that owns an
Ownership Interest in such Lease, Option or Farm-In shall have the right to
elect whether to participate in such maintenance or extension cost for the
Lease, Option or Farm-In utilizing the same procedures set forth in Sections
3.3 and 3.4 above for Acquired Interests; provided, however, that in the event
that a Participant elects not to participate in a maintenance or extension
cost, such Participant shall, subject to the rights of Apache under the Apache
Agreement, promptly relinquish and assign to the Participants participating in
such maintenance or extension cost (in proportion to their relative Ownership
Interests) all of such non-participating Participant's Ownership Interest in
the interests in the Lease, Option or Farm-In that would have been relinquished
or lost if the maintenance or extension cost had not been paid.
Section 3.7. Apache Agreement. As noted elsewhere in this Article
III, the right of BOG and UNEXCO in any Acquired Interest are subject to the
"AMI" created under Article XV.II. of any Operating Agreement executed under
the Apache Agreement, and to the rights afforded Apache thereunder.
Section 3.8. Joint Shoot Agreements. The Participants recognize
that, in planning the Geophysical Program, one or more Participants may have
encountered, and may in the future encounter, third parties that own mineral or
leasehold interests (hereinafter sometimes referred to as "Third-Party Owners")
within the Program Area that are unwilling to farm-out, lease or option their
interests or grant seismic permits under terms and conditions that the
Participant finds acceptable. In its efforts to obtain (or allow USA to
obtain) good quality Program Data across the Program Area, a Participant may in
the future enter into, but has not heretofore entered into, agreements
(hereinafter referred to as "Joint Shoot Agreements") with some of such
Third-Party Owners whereby one or more Participants agrees to cause the
Geophysical Program to be conducted across such Third Party Owner's acreage at
no cost to the Participants. Under the terms of such Joint Shoot Agreements,
the Third-Party Owner may receive copies of the seismic data and/or
interpretations relating to such Third-Party Owner's acreage as well as some
additional tail acreage located adjacent to the Third-Party Owner's acreage and
located within the Program Area and the Participants hereto will be entitled to
receive and review copies of the seismic data that is obtained across the
Third-Party Owner's acreage. Though the Participants will be entitled to
receive copies of and review the seismic data obtained over such Third-Party
Owner's acreage as provided above, the Joint Shoot Agreements may provide that
such Third-Party Owner shall own the seismic data covering its acreage and the
Participants may be subject to confidentiality requirements with respect to
such seismic data covering the Third-Party Owner's acreage. In any future such
Joint Shoot Agreements, BOG shall require that for a minimum of one year from
the date thereof, the Third-Party Owner and its successors and assigns will not
compete with the Participants within the tail acreage over which such
Third-Party Owner receives seismic data and BOG may be required to agree that
the Participants and their successors and assigns shall not compete with such
Third-Party Owner within such Third-Party Owner's acreage even though such
acreage is located within the Program Area and AMI hereunder.
ARTICLE IV.
PROSPECT DESIGNATION AND PARTICIPATION
Section 4.1. Prospect Designation. Upon completion of the initial
interpretation of the Program Data, the Participants will meet to review the
interpretations and delineate prospects (hereinafter individually referred to
as a "Prospect Area") for exploration and development within the AMI. The
Participants shall attempt to agree on 1) the number of Prospect Areas, and 2)
the acreage to be included in each Prospect Area. As to all Prospect Areas
proposed and agreed upon by all of the Participants in the initial meeting,
such Prospect Areas shall be deemed to be designated and the Participants shall
document their agreement in writing in the form attached hereto as Exhibit C.
Any Prospect Area proposed at the initial meeting which is not agreed to by the
Participants may be re-submitted by any Party utilizing the procedures
contained in Section 4.2 below.
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Section 4.2. Additional Proposals by Participants for Prospect
Areas. After the meeting described in Section 4.1 above, any Party hereto may
propose (hereinafter referred to as the "Proposing Party") that a portion of
the AMI be designated as a Prospect Area by giving written notice to the other
Participants, which notice shall contain 1) the proposed location for the
initial well on the Prospect Area, and 2) the acreage which such Party would
include in the Prospect Area. The acreage proposed to be included in a
Prospect Area shall not include any acreage included within a previously
designated Prospect Area.
Section 4.3. Response to a Prospect Area Proposal. Each Party
desiring to participate in a Prospect Area proposed by another Party under
Section 4.2 shall notify such Proposing Party, in writing, within thirty (30)
days after its receipt of such proposal, or sooner if an Option, Lease or
Farm-In is expiring (but in no event shall a Party be required to respond in
less than 48 hours), of its election to participate in the proposed Prospect
Area and stating whether or not such Party agrees with the acreage being
proposed for inclusion in the Prospect Area by the Proposing Party; an election
to participate in a Prospect Area which contains no statement as to whether the
Party agrees with the acreage proposed for inclusion in the Prospect Area shall
be deemed agreement to the acreage proposed for inclusion in the Prospect Area.
A Party who elects not to participate in the Prospect Area and who disagrees
with the acreage proposed to be included in the Prospect Area shall give notice
of such disagreement to the Proposing Party within the time and in the manner
provided above for elections to participate. A Party failing to respond,
within the time and in the manner provided above, to a proposal for a Prospect
Area, or a Party responding and electing to not participate in a Prospect Area
but making no statement as to whether it agrees with the acreage proposed to be
included in the Prospect Area, will be deemed to have elected not to
participate in the Prospect Area and to have agreed to the acreage proposed to
be included in the Prospect Area. If no Party disagrees with the acreage
proposed to be included in the proposed Prospect Area, such Prospect Area shall
be deemed to be designated and the Participants that have elected to
participate therein shall have the right to explore and/or develop such
Prospect Area to the exclusion of the Participants that have elected (or have
been deemed to have elected) not to participate in the Prospect Area. If no
other Participants elect to participate with the Proposing Party in a
designated Prospect Area, the Proposing Party shall have the right to develop
the Prospect Area for its own account in accordance with the terms of Section
4.6 hereof.
Section 4.4. Determining Prospect Area Disagreements. If, with
respect to a Prospect Area proposed under Section 4.1 or 4.2, there is
disagreement concerning the lands to be included in the Prospect Area, the
Participants shall, for a period of ten (10) days after the expiration of the
response period described in Section 4.3 above, attempt to agree upon the lands
to be included in the Prospect Area and, failing to reach such agreement within
such time, the Prospect Area shall be deemed to be designated and the lands
included in the Prospect Area shall consist of a 640 acre tract in the form of
a square with the proposed location for the initial well being located in the
center of the tract and the east and west boundary lines of such square running
due north and south. Provided, further, any such Prospect Area determined
pursuant to this Section 4.4 shall not include any acreage included within a
previously designated Prospect Area unless all of the Participants agree to
amend the acreage included within the previously designated Prospect Area. In
the event of such a Prospect Area disagreement, once the acreage to be included
within the Prospect Area has been resolved and the Prospect Area has been
designated in accordance with this Section 4.4, the Proposing Party must give
all of the Participants notice of the acreage included within the Prospect Area
and each of the Participants shall notify the Proposing Party, in writing,
within fifteen (15) days after its receipt of such notice, or sooner, if an
Option, Lease or Farm-In is expiring, of its election to participate in the
Prospect Area.
Section 4.5. Participation of the Participants. With respect to
each Prospect Area proposed under Section 4.1 or 4.2, the participation of the
Participants therein shall be (unless all Participants agree otherwise) in
accordance with the terms set forth in Article II above, provided that if fewer
than all Participants participate in any Prospect Area, the participation of
each of the Participants participating therein shall be in the percentage
ownership interest in which such Participants agree to participate. If fewer
than all of the Participants elect to participate and if the participating
Participants are unable to agree upon the percentages in which they will
participate
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(each Party electing to participate will be deemed to have agreed to
participate with the percentage Ownership Interest set forth for such Party in
the table contained in Section 2.2(a) above, but each Party will have no
obligation to participate for a larger interest) within 60 days after the date
of such Prospect Area proposal, the proposal for such Prospect Area will be
deemed withdrawn. In the event that a Party elects not to participate in a
designated Prospect Area as aforesaid, for a period of five years from and
after the date hereof, such Party shall not compete within such Prospect Area
with the Participants which have elected to participate in the Prospect Area,
by owning or acquiring, directly or indirectly, through any agents,
representatives or Affiliates, any mineral, leasehold or royalty interests
within the Prospect Area. Anything to the contrary contained in this Article
IV notwithstanding, in the event that a Party has elected not to participate in
an Acquired Interest that is included within a Prospect Area, such Party shall
not be entitled to receive an assignment in or otherwise participate in such
Acquired Interest even though it is included within a Prospect Area in which
such Party has elected to participate, except as to such Party's proportionate
share of any interest in the Acquired Interest that has been relinquished by a
Party that has elected not to participate in the applicable Prospect Area.
Section 4.6. Relinquishment of Interests by Non-Participating
Participants. If a Party agrees or elects (or is deemed to have elected) not
to participate in a particular Prospect Area, then, such Party shall relinquish
and assign (without reimbursement for any costs) all interest, other than
rights to Program Data and/or the Apache Survey data, in such Prospect Area
(including, without limitation, rights under Options, Leases and Farm-Ins
insofar as they cover the Prospect Area) to the Participants electing to
participate in such designated Prospect Area in the proportions set forth in
Section 4.5 above.
Section 4.7. Operating Agreements. The Participants agree that,
except as provided expressly otherwise herein, operations on each Prospect Area
shall be governed by the terms of the Operating Agreement which is in the form
attached hereto as Exhibit F (the "Operating Agreement") and the Participants
electing to participate in the Prospect Area shall be deemed subject to the
terms of such Operating Agreement, insofar as it covers the Prospect Area.
Section 4.8. Cinnabar Override and Fee. The Participants
expressly recognize and agree that certain of their interests in the Program
Area and AMI are, or shall be, proportionately subject to an overriding royalty
in favor of Cinnabar pursuant to the terms of the Cinnabar Agreement. In
addition, BOG agrees to reimburse UNEXCO for BOG's 50% share of the initial
$12,500 payment actually made to Cinnabar pursuant to the Cinnabar Agreement
within 15 days after receipt from UNEXCO of a written invoice for such amount,
and BOG agrees to reimburse UNEXCO for BOG's 50% share of the second and final
$12,500 payment actually made to Cinnabar pursuant to the Cinnabar Agreement
within 15 days after receipt from UNEXCO of written request for same. UNEXCO
shall not amend or modify the Cinnabar Agreement without first securing the
consent of BOG, which consent may be granted or denied in the sole and absolute
discretion of BOG.
Section 4.9. Lease Burdens. No Party hereto shall burden or
encumber any other Party's legal or equitable interest in a Permit, Lease,
Option or Farm-In with any overriding royalty, production payment, mortgage,
security interest or other burden except as provided in Sections 4.8 above,
without the consent of the other Participants; provided, however, that in its
efforts to obtain a Lease, Option or Farm-In from a third-party, a Party
hereto may burden such Lease, Option or Farm-In with a royalty, overriding
royalty, production payment or other similar burden (other than a lien or
security interest), or acquire such interest subject to reservation of such a
burden, in favor of a third party owning such Lease, Option or Farm-In (farmor,
mineral owner, assignor, lessee or lessor) in such Party's reasonable efforts
to obtain the Lease, Option or Farm-In. If any Party hereto burdens or
encumbers its own Ownership Interest, whether legal or beneficial, vested or
contingent, in any Option, Lease or Farm-In with any overriding royalty,
production payment, lien, security interest or other burden (hereinafter
referred to as "Subsequently Created Burdens") except as provided in this
Section 4.9 or in Section 4.8 above, and such Party is thereafter required
under the terms of this Agreement, or the applicable Operating Agreement, to
assign or relinquish to any other Party or Participants, all or a portion of
its Ownership Interest and/or the production attributable thereto, said other
Party or Participants shall receive such assignment and/or production free and
clear of such Subsequently Created
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Burdens and such Party shall indemnify and hold harmless the Party or
Participants entitled to the assignment or forfeiture from any and all claims
and demands for payment asserted by owners of such Subsequently Created
Burdens.
ARTICLE V.
DRILLING OPERATIONS
Section 5.1. Drilling Operations.
(a) A Party's election to participate in a Prospect Area in
accordance with the terms of Article IV above does not constitute a commitment
to participate in the drilling of a well within the Prospect Area. Any Party
that has participated in a Prospect Area may propose the drilling of the
initial well (being the first well drilled by any of the Participants within
the applicable Prospect Area and being hereinafter referred to as an "Initial
Well") or any subsequent well (being any well drilled within a Prospect Area
following the drilling of the Initial Well and being hereinafter referred to as
a "Subsequent Well") within the Prospect Area in accordance with the procedures
set forth in the Operating Agreement.
(b) In the event that a Party elects not to participate in the
drilling of the Initial Well proposed and drilled within the Prospect Area,
anything to the contrary contained in the applicable (or deemed applicable)
Operating Agreement to the contrary, such Party (i) must permanently relinquish
and assign (without reimbursement for costs) all of its right, title and
interest in the applicable Prospect Area to the Participants participating in
the drilling of such Initial Well (in the ratio that each participating Party's
leasehold working interest in the acreage included within the drilling and/or
proration unit for such Initial Well bears to the total of the leasehold
working interests of all of the Participants hereto participating in the
operation), (ii) shall no longer (as of the date it elects not to participate
in the drilling of the Initial Well) be deemed a party to the Operating
Agreement for such Prospect Area, and (iii) shall not own or acquire any
mineral, leasehold, royalty or other interest in oil, gas and/or other minerals
within such Prospect Area for a period of five (5) years from the date of this
Agreement.
(c) In the event that a Party has participated in the drilling of
the Initial Well drilled within a Prospect Area but such Party does not
participate in the drilling of any Subsequent Well within such Prospect Area,
such Party (i) must permanently relinquish (without reimbursement for costs)
and assign all of its right, title and interest in the drilling and/or
proration unit for such Subsequent Well to the Participants participating in
the drilling of such Subsequent Well (in the ratio that each participating
Party's leasehold working interest in the acreage included within the drilling
and/or proration unit for such Subsequent Well bears to the total of the
leasehold working interests of all of the Participants hereto participating in
the operation), (ii) shall permanently relinquish (as of the date it elects not
to participate in the drilling of such Subsequent Well) all of its rights and
interests under the applicable Operating Agreement insofar as it covers the
relinquished drilling and/or proration unit, and (iii) shall not own or acquire
any mineral, leasehold, royalty or other interest in oil, gas and/or other
minerals within the drilling and/or proration unit for such Subsequent Well for
a period of five (5) years from the date of this Agreement.
(d) In the event that a Party has participated in the drilling of
the Initial Well or any Subsequent Well within a Prospect Area and then elects
not to participate in a completion operation proposed for such well, such Party
(i) must permanently relinquish (without reimbursement for costs) and assign
all of its right, title and interest in the completed formation within the
drilling and/or proration unit for such well and all of the production which
may be obtained from such completed formation within that well to the
Participants participating in such completion of such formation (in the ratio
that each participating Party's leasehold working interest in the acreage
included within the drilling and/or proration unit for such well bears to the
total of the leasehold working interests of all of the Participants hereto
participating in the operation), (ii) shall relinquish (as of the date it
elects not to participate in the completion operation) all of its rights and
interests under the applicable Operating Agreement insofar as it covers the
relinquished completed formation within the drilling and/or proration unit for
such well, and (iii) shall not own or acquire any mineral, leasehold, royalty
or other interest in oil, gas
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and/or other minerals located within the completed formation within the
drilling and/or proration unit for such well for a period of five (5) years
form the date of this Agreement. If a Party has elected to participate in the
drilling of a well and then elects not to participate in a proposed completion
operation within the well, but then subsequently participates in the completion
of another formation within the same well, such Party will be obligated to pay
for its proportionate share of the completion operation costs which were
previously incurred in completing the other formation in accordance with the
drilling footage ratio method set forth in ▇▇▇▇▇ Bulletin No. 2 in paragraph
B.1(b) for intangible costs and in paragraphs B.1 and B.2 for tangible costs.
(e) If there is no drilling or proration unit for a well or if
there is no other allocation for spacing or allowable purposes, then to the
extent practicable, an area in the form of a square within the Prospect Area
with the well being located in the center thereof of six hundred and forty
(640) acres around a gas well and eighty (80) acres around an oil well, shall
be deemed to be the drilling or proration unit for such well, in either event
with the east and west boundary lines of such square running as nearly as
possible due north and south; provided, however, that it is the Participants'
intent that the relinquishment and assignment of interests provided for in this
Section 5.1 for failure to participate in the drilling of a Subsequent Well or
a completion operation apply to all and only all of the leasehold interests,
mineral interests and production that are allocated to the relevant well (or
completed formation) and the Participants hereto agree that in the event that
such allocation changes in the future, the Participants shall execute any
future or further relinquishment instruments or other documentation that is
necessary to effectuate that intent.
(f) Any well drilled to replace a well drilled within a Prospect
Area because of drilling or mechanical difficulties incurred in the drilling of
such well shall be deemed to be the same well for purposes of the
relinquishment and assignment provisions of this Section 5.1; provided,
however, that only the Participants that participated in the original drilling
of the well shall have the right to participate in the drilling of a
replacement well for such well.
(g) In the event of any required relinquishment and assignment of
interests as provided in this Section 5.1, the relinquishing Party shall
promptly execute all conveyance instruments necessary to effectuate such
relinquishment and assignment.
Section 5.2. Designation of Initial Operator. It is agreed and
understood that Apache is designated as the initial operator in the Operating
Agreement.
Section 5.3. AMI for Prospect Area. Commencing with the
establishment of a Prospect Area, such Prospect Area shall from that time
forward no longer be subject to the AMI provided for in Section 3.1 above and
shall thereafter be considered covered instead by a new Prospect Area AMI. The
new Prospect Area AMI (i) is binding on the Participants participating in such
Prospect Area, (ii) consists of such Prospect Area, (iii) lasts until the later
to occur of three (3) years from the date hereof or the date that the Operating
Agreement for such Prospect Area terminates, and (iv) is governed by the same
terms set forth in Sections 3.2, 3.3, 3.4, 3.5, 3.6, 4.8 and 4.9 with the
participation percentages of the Participants being in accordance with their
ownership interest in the Leases, Options and Farm-Ins located within the
Prospect Area; provided, however, that in the event that a Party has elected
not to participate in the Prospect Area or the drilling of the Initial Well
within such Prospect Area, such Party shall not own or acquire any interest in
that part of any Acquired Interest that is located within such Prospect Area.
Any portion of the AMI not designated as a Prospect Area shall continue to be
subject to the AMI provided for in Article III above.
Section 5.4. Assignment of Ownership Interests in Leases, Options
and Farm-Ins. Unless such assignment is not permitted under the terms of the
applicable Option, Lease or Farm-In, the Participants agree that each Party's
Ownership Interest (as such Ownership Interest is subject to change in
accordance with the provisions hereof and subject to the rights afforded Apache
under the Apache Agreement) in each Lease, Option or Farm-In shall be assigned
to the Participants utilizing the form of assignment which is attached hereto
as Exhibit E prior to the commencement of drilling operations for any well
which includes all or part of the acreage that is covered by the Option, Lease
or Farm- in in the drilling and/or proration unit for such well. In
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addition to the above, following the expiration of the AMI hereunder and
subject to the forfeiture provisions herein contained and the rights afforded
Apache under the Apache Agreement, the Participants shall be assigned their
Ownership Interests in any Options, Leases or Farm-Ins which have not already
been assigned to the Participants.
Section 5.5. Drilling Costs. Subject to the terms of the
Operating Agreement and Section 5.1 above, the Participants shall pay for all
drilling, completion and workover costs in proportion to their working interest
in each well, as determined by the Participants Ownership Interests in the
Leases, Options and Farm-Ins included within the drilling and proration unit
for such well.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Assignments. Any Participant hereto may assign all
or any part of its interest under the terms of this Agreement. This Agreement
shall be binding upon and inure to the benefit of the Participants hereto and
their respective successors and their respective assigns of rights hereunder;
provided, however, that the conveyance or assignment instrument vesting such
assignee with all or part of such interests must expressly provide that the
assignment or conveyance is made subject to the terms and conditions contained
in this Agreement. In addition, in any such assignment or conveyance, the
assignee shall expressly agree to assume and be responsible for any
liabilities, damages, obligations, covenants and agreements arising from and
after the date of such assignment or conveyance, in relation to or otherwise
out of the properties, rights and interests that are the subject of this
Agreement and/or such assignment or conveyance, and the assignor shall remain
responsible for any of the foregoing arising prior to the date of such
assignment or conveyance. Any subsequent assignment or conveyance shall
likewise contain express language so allocating responsibility as between
assignor and assignee. Unless (and then only to the extent that) this
Agreement is itself assigned at the same time, the benefits of this Agreement
shall not run with an assignment of a Participant's interests in the Options,
Leases or Farm-Ins, or any other rights in lands within the Program Area, but
the assigned interest shall be subject to the terms of this Agreement.
Section 6.2. Affiliate's Actions. The Parties hereto agree that
the provisions of Sections 2.2, 3.1, 3.2, 3.3, 3.4, 4.5, 4.8, 4.9, 5.1 and 5.4
above shall be binding upon their Affiliates. As such, the Parties hereto
agree that if any of their Affiliates disclose information which is
confidential pursuant to the terms of Section 2.2(b) of this Agreement or
acquire interests of any kind within the AMI hereunder, such Party shall be
deemed to have disclosed such information or acquired the interest itself,
shall be responsible to the other Parties hereunder for such acts, and must
cause its Affiliate to offer any interests that have been acquired by its
Affiliate to the other Parties hereto in accordance with the provisions
referenced in this Section 6.2.
Section 6.3. Notices. All notices and other communications
required or permitted under this Agreement shall be in writing, and unless
otherwise specifically provided, shall be delivered personally, or by mail,
telecopier or delivery service, to the addresses set forth opposite the
signatures of the Parties below, and shall be considered delivered upon the
date of receipt. Each Party may specify its proper address or any other post
office address within the continental limits of the United States by giving
notice to other Parties, in the manner provided in this section, at least ten
(10) days prior to the effective date of such change of address.
Section 6.4. Merger. This Agreement supersedes any and all prior
and existing agreements, whether oral or in writing, between the Parties hereto
with respect to the subject matter hereof and contains all of the covenants and
agreements between the Parties with respect to the subject matter hereof. Each
Party acknowledges that no Party to this Agreement or anyone on their behalf
has made any representations, inducements, promises or agreements, orally or
otherwise, relating to the subject matter of this Agreement that are not
embodied herein.
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Section 6.5. Limitation of Actions. No claim may be asserted by
any Party against any other Party hereto with respect to any event, act or
omission that occurred more than two (2) years prior to such claim being
asserted.
Section 6.6. Right to Specific Performance. Each Party
acknowledges (i) that its obligations under this Agreement are unique and (ii)
that the other Parties would be irreparably damaged and would not have an
adequate remedy at law for damages if such Party defaults in its obligations
hereunder. Each Party expressly waives the defense that a remedy in damages
will be adequate. If any Party should default in its obligations hereunder,
each non-defaulting Party, in addition to any other available rights or
remedies, may ▇▇▇ in equity for specific performance or injunctive relief.
Section 6.7. Right to Recoup Legal Fees. In the event that any
Party files a lawsuit against any other Party hereto related in any way to this
Agreement and one of such Parties receives a final judgment in its favor as to
all of the claims which are made in such lawsuit, such prevailing Party shall
be reimbursed by the losing Party for all reasonable legal costs (including
without limitation attorneys' fees and court costs) and expenses which have
been incurred by such prevailing Party in such lawsuit. In such event, the
amount of reasonable legal costs to be awarded to the prevailing Party shall be
determined by the same court which renders the judgment on the Parties' claims.
Section 6.8. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be binding upon the signing Party or
Parties thereto as fully as if all Parties had executed one instrument, and all
of such counterparts shall constitute one and the same instrument. If
counterparts of this Agreement are executed, the signatures of the Parties, as
affixed hereto, may be combined in and treated and given effect for all
purposes as a single instrument. However, anything to the contrary contained
herein notwithstanding, this Agreement shall not be binding upon any Party
hereto unless and until all of the Parties sign a counterpart thereof.
Section 6.9 Other Agreements. Neither Party will modify, amend,
extend or terminate the USA Agreement, the UST Agreement, the Apache Agreement
or the Cinnabar Agreement without first securing the written consent of the
other Party hereto, which consent may be granted or withheld in the sole and
absolute discretion of such Party.
This Agreement is executed by the Parties on the dates set forth
opposite their respective signatures below, but is effective for all purposes
as of the date first set forth above.
Address: ▇▇▇▇▇▇▇ OIL & GAS, L.P.,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ by ▇▇▇▇▇▇▇ Exploration Company,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ its Managing General Partner
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Date: January 3, 1997 By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------- -----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Executive Vice President
Address: UNEXCO, INC.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Date: 1/6/97 Vice President
----------------------------
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LIST OF EXHIBITS
Exhibit A -- Program Area
Exhibit B -- Existing Permits, Existing Options, Existing Leases and Existing
Farm-Ins
Exhibit C -- Agreement as to Prospect Areas
Exhibit D -- Form Confidentiality Agreement
Exhibit E -- Form of Assignment
Exhibit F -- Joint Operating Agreement
Exhibit G -- USA Agreement
Exhibit H -- UST Agreement
Exhibit I -- Parameters of 3-D survey
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