EXHIBIT 10.3
COAL BED METHANE PARTICIPATION AGREEMENT DATED AS OF
OCTOER 1, 2002, AS AMENDED
COAL BED METHANE PARTICIPATION AGREEMENT
This Coal Bed Methane Participation Agreement (this "Agreement") is
made and entered into by and between Dolphin Energy Corporation, a Nevada
corporation ("Dolphin") and Horizon Exploitation, Inc., a Colorado corporation
("Horizon"), effective as of October 1, 2002 (the "Effective Date"). The
foregoing entities may be referred to herein collectively as "Parties" and
individually as a "Party".
I
RECITALS
A. Pursuant to the terms of the Lease Agreement (as defined herein) and to
the extent set forth therein, Dolphin owns the right to purchase five
(5) existing coal bed methane xxxxx located in Sheridan County, Wyoming
("Purchased Xxxxx"), and the right to acquire additional interests in
oil and gas leases on which such xxxxx are located by drilling
additional coal bed methane xxxxx and paying certain Well Location Fees
(as defined below).
B. Horizon desires to develop coal bed methane reserves in coal bed seams
in the area of the Subject Leases (as defined herein), and, to that
end, further desires to participate in the acquisition of the Well
Assets (as defined herein) and an interest in the Subject Leases, on
the terms and conditions hereinafter stated.
C. Dolphin desires to develop its interest in the Subject Leases and the
Well Assets with Horizon, and to allow Horizon to participate therein
with Dolphin, also on the terms and conditions hereinafter stated.
II
AGREEMENT
In order to accomplish the foregoing objectives, and in consideration
of the mutual rights, benefits, obligations, and legal detriments afforded the
Parties hereunder, Dolphin and Horizon do hereby agree to, ratify and adopt the
following terms.
III
DEFINITIONS
The capitalized terms used in this Agreement shall have the following
definitions:
"Affiliate" of a Party shall mean a company, partnership or other legal
entity that controls such Party, is controlled by such Party, or which is
controlled by an entity that controls such Party. Control means the ownership,
directly or indirectly, of 50% or more of the shares or other ownership interest
of a company, partnership or other legal entity OR the possession of day-to-day
management authority in a company, partnership or other legal entity.
"AMI" shall mean the area of mutual interest and of non-competition for
which provision is herein made as defined on Exhibit D attached hereto and
incorporated herein by reference.
"Xxxxxxx Agreement" shall mean that certain Assignment of Oil and Gas
Leases Reserving a Net Profits Interest, dated August 28, 2002, between Dolphin
and Xxx Xxxx, LLC.
"Xxxxxxx Fee" shall mean the fee of Three Hundred Ninety-Six Thousand
Dollars ($396,000) required to be paid by Dolphin to Xxx Xxxx, LLC under the
ultimate paragraph of the Xxxxxxx Agreement.
"Xxxxxxx Leases" shall mean the oil and gas leases described on Exhibit
C attached hereto and incorporated herein by reference.
"Carried Interest" shall mean an undivided fifteen percent (15%) of the
Leasehold Interest, subject to Proportionate Reduction, represented by the
applicable Subject Lease to which a Carried Interest pertains hereunder, which
shall be free and clear of any cost, risk or expense associated with the
drilling and completion as well as the recompletion (or other Subsequent
Operations) directly associated with establishing new production in the
shallower coals of the Well in the Target Horizon as well as equipping the Well
to the point of first connection to the gathering system pipeline to which a
well is connected on the Subject Lease. The Carried Interest applies to the five
(5) coal bed natural gas xxxxx included among the Well Assets, the Pilot Xxxxx
and any Option Xxxxx contemplated hereunder, including any recompletions (or
other Subsequent Operations) directly associated with the establishing new
production in the shallower coals in the same wellbore, but specifically
excluding any plugging and abandonment operations with respect to any Xxxxx.
Except to extent of expenses subject to the Carried Interest, Dolphin and
Horizon shall otherwise be subject to the terms of any applicable JOA governing
operations under the Subject Leases.
"CMB" shall mean coal bed methane gas and related hydrocarbons, if any,
produced from coal seams under this Agreement, and specifically from geologic
strata from the surface to the depth of 2,300 feet, or the stratigraphic
equivalent of the base of the Fort Union Formation, whichever is the greater
depth.
"coal bed methane" shall mean CBM.
"Contract Operator" shall mean Crusader Resources, LLC, a Colorado
limited liability company.
"Contract Operatorship Well Fee" shall mean the $5,000.00 per Well fee
to be paid to the Contract Operator pursuant to Article VII.D and Article IX.A
hereunder.
"Development Program" shall mean the drilling and completion of Option
Xxxxx, the construction of gathering systems and such other facilities as may be
necessary or convenient for the production and sale of coal bed methane natural
gas produced from the Subject Leases hereunder as provided in Article IX hereof.
"Force Majeure" shall mean any Act of God, including, but not limited
to, lightning, earthquakes, fires, floods, or tornadoes; strikes, lockouts or
other industrial disturbance; act of the public enemy; wars; riots; epidemics;
lack of any necessary licenses, approvals or permits or delay in obtaining
licenses, approvals or permits from a Regulatory Agency; direct injunction,
prohibition, delay or interruption by acts, order, regulations or requirements
from a Regulatory Agency; or other events beyond the reasonable control of the
Party whose obligations hereunder are effected by such event.
"Infill Xxxxx" shall mean the second well drilled on any eighty acre
(or other prescribed) drill site spacing unit.
"JOA" shall mean any Joint Operating Agreement for which provision is
made in Article VI.D hereof.
"Lease Agreement" shall mean that certain Lease Acquisition and
Drilling Agreement dated effective September 30, 2002, by and between Pioneer
Oil, LLC and Dolphin, pertaining to the Project and the Subject Leases.
"Leasehold Interest" shall mean the operating interest in a Subject
Lease and shall, for all purposes herein, be deemed to be identical to the term
"Working Interest."
"Net Revenue Interest" shall mean the proportionate share of revenues
from the sale of production of oil and gas or the in-kind equivalent thereof
produced from the Subject Leases.
"Oil and Gas" shall mean oil, gas (including coal bed methane natural
gas) and other hydrocarbons.
"Option Well" shall mean any gas well drilled under Article IX hereof
as part of the Development Program.
"Pilot Program" shall mean drilling and completion as well as the
recompletion (or other Subsequent Operations) directly associated with
establishing new production in the shallower coals in the Target Horizon of the
Pilot Xxxxx, and the process of evaluation of the results of such Xxxxx and
other relevant factors, to assess the economic parameters of the Project.
"Pilot Xxxxx" shall mean those coal bed methane Xxxxx drilled pursuant
to Article VIII hereof to test coals in the Target Horizon.
"Project" shall mean evaluation of and development of the Well Assets
and Subject Leases for the production of CBM as contemplated by this Agreement.
"Proportionate Reduction" shall mean, with respect to any Working
Interest or Carried Interest, the proportion that a particular Leasehold
Interest bears to the entire mineral estate, and in the proportion that the
undivided interest in any particular Leasehold Interest bears to the entire
interest in a Subject Lease and shall mean, with respect to Net Revenue Interest
or an overriding royalty interest, the proportion that revenue attributable to a
particular leasehold, royalty, overriding royalty, or other real property
interest bears to the entire revenue attributable to a Subject Lease.
"Purchased Xxxxx" shall be the five (5) existing coal bed methane xxxxx
on the Subject Leases.
"Regulatory Agency" means the applicable governmental agency of the
United States of America, the State of Wyoming, or any political subdivision of
either of them with jurisdiction over the matters contemplated hereunder and
covered hereunder, including without limitation the United States Department of
the Interior, Bureau of Land Management, United States Environmental Protection
Agency, the Wyoming Oil and Gas Conservation Commission, and the Wyoming
Department of Environmental Quality.
"Subject Leases" shall mean such oil and gas leases described on
Exhibit A attached hereto and incorporated herein by reference.
"Subsequent Operations" shall have the meaning ascribed thereto in the
applicable JOA.
"Target Horizon" shall mean the geologic strata targeted as being
prospective for commercial CBM reserves from the surface to the depth of 2,300
feet, or the stratigraphic equivalent of the base of the Fort Union Formation,
whichever is the greater depth.
"Term" has the meaning ascribed thereto in Article XIII herein.
"Well Assets" shall mean the five (5) existing coal bed methane xxxxx
to be purchased hereunder, described on Exhibit B attached hereto and
incorporated herein by reference, together with the facilities, equipment,
rights-of-way, permits, personal property and contract rights associated
therewith.
"Well Location Fee" shall mean the fee paid by Horizon to Dolphin as
prescribed in Article VIII.D and Article IX.A below.
"Xxxxx" shall mean all coal bed methane xxxxx purchased hereunder as
part of the Well Assets as well as all xxxxx drilled pursuant to this Agreement.
"Working Interest" shall mean the operating interest in a Subject Lease
and shall, for all purposes herein, be deemed to be identical to the term
"Leasehold Interest".
IV
REPRESENTATIONS BY HORIZON
Horizon represents and warrants to Dolphin that:
A. It is organized and in good standing in the State of Colorado.
B. It has the corporate power and authority to enter into this Agreement
and the transactions contemplated hereunder.
C. Execution and delivery of this document and the consummation of the
transactions contemplated hereunder will have been duly authorized, and
will not result in any conflict with or breach of or default under any
other obligation to which it may be bound.
D. This Agreement is binding and enforceable in accordance with its terms.
E. It has not engaged any broker, finder or financial advisor for this
transaction for which Dolphin would be liable for any fees or other
compensation or otherwise.
V
REPRESENTATIONS BY DOLPHIN
Dolphin represents and warrants to Horizon that:
A. It is duly organized and in good standing in the State of Nevada.
B. It is authorized to do business in the State of Wyoming.
C. It has the corporate power and authority to enter into this Agreement
and the transactions contemplated hereunder.
D. Execution and delivery of this document and the consummation of this
transaction and performance hereunder will have been duly authorized,
and will not result in any conflict with or breach of or default under
any other obligation to which it may be bound.
E. This Agreement is binding and enforceable in accordance with its terms.
F. It has not engaged any broker, finder or financial advisor for this
transaction for which Horizon would be liable for any fees or other
compensation or otherwise.
VI
DUE DILIGENCE AND COMMITMENT
A. For a period of forty-five (45) days from the Effective Date hereof,
the Parties agree to promptly conduct a joint due diligence
investigation of the Well Assets and the Subject Leases and to
cooperate fully toward a complete evaluation of the Project
satisfactory to both Parties. In the conduct of such review, each
Party shall retain, at its sole cost, risk and expense, its own legal
counsel and such technical and other consultants as it deems necessary.
Such evaluation shall be concluded within the recited due diligence
time period.
B. Within fifteen (15) days of completion of the review provided for in
the preceding paragraph, each Party shall notify the other Party in
writing of its election to participate in the Project on the terms set
forth herein, or to decline to do so. In the event that neither Dolphin
or Horizon should elect to participate in the Project, this Agreement
shall terminate as to both Parties, and, subject to the provisions of
Article XIII, neither Party shall have any further rights or
obligations under this Agreement. In the event that only one Party
elects to participate, all rights, titles, interests, benefits and
burdens associated with the Project, including the right to pursue the
Project in accordance with the Lease Agreement and the Xxxxxxx
Agreement, shall become vested solely in the Party electing to
participate in the Project, and, subject to the provisions of Article
XIII, the other Party shall have no further rights or obligations under
this Agreement. In the event that both Parties elect to participate,
their respective elections shall be deemed a commitment to participate
in the Project that is binding on each Party under the terms and
conditions set forth herein. In the event that Dolphin elects to
participate, it shall have the option to elect to participate for a
Working Interest of not less than 1% nor greater than 50%. In the event
that Horizon elects to participate, it shall be required to purchase
the balance of the Working Interest Dolphin does not elect to acquire.
Failure to timely elect shall be deemed an election not to participate.
C. Within ten (10) days of its election to participate in the Project,
Horizon shall deliver to Dolphin or its designee, by cashier's check,
wire transfer or other immediately available funds, the sum of One
Hundred Thousand Dollars ($100,000.00), provided that such funds are
available to Horizon, in which event such funds shall be paid to
Dolphin when available to Horizon, but in no event later than three (3)
days prior to the date due to Pioneer Oil, LLC under the Lease
Agreement. It is intended that such funds represent the commitment fee
referenced in Article III of the Lease Agreement, and, to that end,
shall be in turn be delivered to Pioneer Oil, LLC to secure the rights
of the Parties to develop the Project under the terms hereof.
D. Within ten (10) days of the election of both Parties to participate in
the Project, the Parties shall enter into a mutually agreeable joint
operating agreement ("JOA") on AAPL Form 610, which, among other
things, shall provide for electing joint loss of title, insurance
provisions meeting industry standard, XXXXX accounting procedure with
drilling rates per Well of One Thousand Dollars ($1,000.00) per day,
and producing rates per Well of Six Hundred Dollars ($600.00) per
month, a gas balancing agreement on RMMLF Form 6 with cash balancing,
preferential rights stricken, nonconsent penalty of 300%, and such
other terms as the Parties shall in good faith adopt. Dolphin shall be
designated as operator thereunder.
VII
PURCHASE OF WELL ASSETS AND XXXXXXX LEASES
A. If Horizon elects to participate in the Project, on or before March 31,
2003, Horizon shall deliver to Dolphin by cashiers check, wire transfer
or other immediately available funds, the sum of Five Hundred Thousand
Dollars ($500,000.00). It is intended that such funds represent the
purchase price for the Well Assets referenced in Article IV of the
Lease Agreement, and, to that end, shall
be in turn delivered to Pioneer Oil, LLC to secure the rights of the
Parties to own the Well Assets and to develop the Project under the
terms hereof.
B. Within ten (10) days of closing on the Well Assets under the Lease
Agreement, Dolphin will assign and convey to Horizon all of Dolphin's
right, title and interest in and to the Well Assets acquired under the
Lease Agreement and subject to the terms thereof, effective January 1,
2003, except and reserving unto Dolphin the Carried Interest.
C. All allocations and adjustments to the purchase price provided for in
Article IV of the Lease Agreement shall, in turn, be effectuated by the
Parties to the effect that, with the exception of the Carried Interest,
Horizon shall enjoy the same benefits and suffer the same liabilities
concerning the Well Assets as are allocated to Dolphin under the terms
of the Lease Agreement.
D. Dolphin shall cause the Xxxxxxx Fee to be paid to Xxx Xxxx, LLC prior
to August 1, 2003, for which payment Dolphin shall have sole liability
hereunder. Within ten (10) days of closing on the Xxxxxxx Agreement,
Dolphin will assign and convey to Horizon all of Dolphin's right, title
and interest in and to the Xxxxxxx Leases acquired under the Xxxxxxx
Agreement and subject to the terms thereof, except and reserving unto
Dolphin the Carried Interest.
E. In the event Dolphin does not cause the Xxxxxxx Fee to be paid to Xxx
Xxxx, LLC prior to August 1, 2003, Horizon shall have the right, but
not the obligation, to pay the Xxxxxxx Fee and assume all rights and
liabilities under the Xxxxxxx Agreement, in which event (i) Dolphin
shall automatically forfeit any claim or right it might otherwise have
to the options to participate in the Xxxxxxx Leases set forth in
Article VIII.I and Article IX.E; (ii) any lands or related mineral
rights covered by the Xxxxxxx Leases shall automatically be removed
from the definition of AMI for all purposes under this Agreement; and
(iii) the term Subject Leases as used hereunder shall thereafter be
deemed not to include the Xxxxxxx Leases, notwithstanding anything set
forth herein to the contrary.
VIII
PILOT PROGRAM AND SUBSEQUENT ELECTIONS
A. Pursuant to the terms of the Subject Leases, Lease Agreement and the
applicable JOA, Dolphin shall diligently drill or cause to be drilled
up to sixty (60) Pilot Xxxxx to the Target Horizon. Upon reaching the
total depth so drilled, each Pilot Well will be either completed to the
gathering system pipeline or plugged and abandoned as a dry hole in
accordance with applicable laws and regulations. The Parties will
consult with each other as to the location of each Pilot Well, the
timing of drilling, and the anticipated and completed depth of the
Target Horizon, but the final decision in the absence of such agreement
will be in the sole and complete discretion of Dolphin, provided that
in any event Dolphin shall complete twenty-five (25) of the Pilot Xxxxx
no later than October 1, 2003, and that any funds held in escrow
pursuant to Article V.A. of the Lease Agreement will be disbursed in
accordance with the Lease Agreement as necessary to cover costs and
expenses associated with such Pilot Xxxxx. Dolphin shall complete all
of the Pilot Xxxxx which it is required to drill or elects to drill in
compliance with the terms of Article V of the Lease Agreement and the
applicable JOA.
B. No later than May 1, 2003, Horizon will tender to Dolphin by cashiers
check or wire transfer or other immediately available funds, the sum of
One Million Six Hundred Fifty Thousand Dollars ($1,650,000.00), plus
the estimated amount to drill and complete the thirty (30) Pilot Xxxxx.
It is the intention of the Parties that $1,500,000.00 of the funds so
delivered shall represent the Well Location Fee provided for in Article
V of the Lease Agreement, and will in turn be paid to Pioneer Oil, LLC
in accordance with said Article V of the Lease Agreement, and that One
Hundred Fifty Thousand Dollars ($150,000.00) of the Funds so delivered
shall represent the Contract Operatorship Well Fees of Five Thousand
Dollars ($5,000.00) per Well provided for in Article VIII.D and Article
IX.A of this Agreement, and will in turn be paid to the Contract
Operator in accordance with said Articles VIII.D and IX.A. of this
Agreement. In the event that Dolphin is entitled to the return of any
such fees or escrow amounts under the terms of the Lease Agreement,
Dolphin agrees to share such monies, if any, in proportion to the
respective Working Interests (excluding any Carried Interest) owned by
Dolphin and Horizon.
C. Within ten (10) days of receipt of the assignment of interest earned by
Dolphin by drilling, testing, logging, completing, recompleting,
reworking, deepening and/or sidetracking the Pilot Xxxxx for which
provision is made in Article VI of the Lease Agreement, Dolphin will
assign and convey to Horizon all of its right, title and interest in
and to the Subject Leases, insofar as they pertain to the drill site
spacing unit for any Well so drilled and any other acreage earned as a
result of such drilling operations to all depths covered by the Subject
Leases. Dolphin shall except and reserve the Carried Working Interest
unto itself, its successors and assigns. Such assignment shall be
subject only to: (1) royalties, overriding royalties and other burdens
in effect and of record as of the Effective Date, (2) the Carried
Interest, and (3) an overriding royalty of 2% of 8/8ths, subject to
Proportionate Reduction and such further reduction as may be necessary
to ensure that the Net Revenue Interest in the Subject Leases to be so
delivered to Horizon will not be less than Seventy-Eight Percent (78%),
subject to Proportionate Reduction.
D. Notwithstanding the foregoing, Dolphin may, in its sole discretion,
drill a total of two (2) Xxxxx to different coal seams on each eighty
acre drill site spacing unit as permitted by the applicable well
spacing regulations. Horizon shall pay Dolphin a Well Location Fee of
Thirty Thousand Dollars ($30,000.00) for each Pilot Well and Seventeen
Thousand Five Hundred Dollars ($17,500.00) for any Well constituting
the second Well in the spacing unit, including any completions and
recompletions (or other Subsequent Operations) directly associated with
establishing new production in the shallower coals of the Well in the
Target Horizon; provided, however, that in no event shall the total
fees to be paid by Horizon to Dolphin hereunder for any eighty acre
spacing unit exceed Forty-Seven Thousand Five Hundred Dollars
($47,000.00) for two Xxxxx, in each case including any completions,
recompletions, or other Subsequent Operations and including any Well
Location Fees prescribed under Article IX.A below. Dolphin shall be
solely liable for payment of any similar fees to Pioneer Oil, LLC under
the Lease Agreement and for the Contract Operatorship Well Fee of
$5,000.00 per Well payable to Contract Operator and/or other service
providers.
E. Except as to any Working Interest in which Dolphin elected to
participate under Article VI.B as may be purchased by Dolphin under
sub-article I of this Article VIII, Horizon shall be liable and
responsible to Dolphin as operator for the entire cost of drilling and
completion operations on the
Pilot Xxxxx as well as for Subsequent Operations (including fees
payable to Contract Operator). Dolphin shall xxxx Horizon for such
costs and expenses, and Horizon shall pay such costs to Dolphin,
pursuant to the terms of the JOA.
F. All geologic, engineering, land and other data pertaining to the Pilot
Program shall be shared between the Parties upon request, it being the
intent that both Parties shall be provided sufficient information to
allow each of them to make an informed evaluation and decision as to
the success of the Pilot Program and the viability of the proposed
Development Program.
G. Within thirty (30) days of cement of casing of the last of the Xxxxx to
be included in the Pilot Program, each Party shall elect in writing
whether or not it chooses to proceed with the Development Program on
the terms and conditions hereinafter stated. Failure to timely elect
shall be deemed an election to not participate.
H. In the event that neither Party should elect to participate in the
Development Program, this Agreement shall terminate, and, except as
provided in Article XIII, neither Party shall have any further rights
or obligations under this Agreement other than those rights or
obligations which have already accrued as of the date of such
termination; provided, however, that if one Party elects to participate
and the other Party does not, any rights, titles, interests, benefits
and burdens associated with the Project that have not as of such date
already been assigned or allocated to one of the Parties in accordance
with this Agreement shall be vested solely in the Party electing to
pursue the Project, including without limitation the right to pursue
the Project in accordance with the Lease Agreement and the Xxxxxxx
Agreement. In the event that both Parties elect to participate in the
Development Program, that election shall be deemed a commitment to
participate in the Development Program and the remainder of the Project
shall be binding on both Parties under the terms and conditions set
forth herein.
I. For a period of up to one (1) year following the completion of the
Pilot Program, Dolphin shall have the option to participate, at the
"Heads Up Price" as described herein, in all of the Subject Leases for
an additional Working Interest of up to Twenty-Five Percent (25%). At
any time following the date that is one (1) year following the
completion of the Pilot Program, but no later than two (2) years after
completion of the Pilot Program, Dolphin shall have the option to
participate, at the "Heads-Up Price" described below, in any of the
Subject Leases for an additional Working Interest of up to Fifty
Percent (50%). For purposes of this Agreement, the "Heads-Up Price"
shall mean 25% or 50%, as applicable, of all direct costs and expenses
incurred by Horizon under this Agreement with respect to the Subject
Leases, the Well Assets, and all Xxxxx drilled under the Pilot Program,
including Infill Xxxxx. Regardless of whether Dolphin elects to acquire
any additional Working Interest, the Carried Interest shall still apply
to the Pilot Program if Dolphin has elected to participate in the Pilot
Program.
IX
DEVELOPMENT PROGRAM
A. In the event that both Parties have elected to participate in the Pilot
Program and elected to participate in the Development Program, the
Parties shall consult with each other as to location
and timing, but in the absence of agreement, Dolphin shall be
authorized, in its sole judgement, to drill the Option Xxxxx to test
the coals at the Target Horizon, with each such Well to be drilled and
completed and connected to the gathering system pipeline no later than
October 31, 2005. Within ten (10) days of notification that Dolphin
intends to drill a particular Option Well, Horizon shall pay to Dolphin
the sum of Thirty Thousand Dollars ($30,000.00) per Well if the Option
Well is the first Well on the spacing unit and Seventeen Thousand Five
Hundred Dollars ($17,500.00) per Well if the Option Well is the second
Well on the spacing unit, including any completions and any
recompletions (or other Subsequent Operations) directly associated with
establishing new production in shallower coals of the Target Horizon in
the Well, and in each case including any Well Location Fees prescribed
under Article VIII.D above and subject to the Well Location Fee
limitations set forth in said Article VIII.D above. Dolphin shall, in
turn, be responsible for paying all similar fees: (i) to Pioneer under
the Lease Agreement; (ii) to Dolphin for the Option Xxxxx under the
Xxxxxxx Leases; and (iii) to the Contract Operator (with regard to the
Five Thousand Dollars ($5,000.00) per Well Contract Operatorship Fee
for all Pilot Xxxxx and Option Xxxxx drilled hereunder); provided,
however, that in no event shall the Contract Operator be entitled to
receive more than Ten Thousand Dollars ($10,000.00) per spacing unit
for the drilling of two Xxxxx, including any completions and
recompletions (or other Subsequent Operations) directly associated with
establishing new production in the shallower coals in the Target
Horizon of the Well. Each such Well shall be diligently drilled as
provided in accordance with Article VII.A of the Lease Agreement so as
to allow Dolphin to earn an assignment of the eighty acre drill site
spacing unit therefor as set forth in Article VII.D of the Lease
Agreement as well as to satisfy the terms of the Subject Leases,
including without limitation as and when necessary to satisfy drilling
commitments, retain lease acreage or prevent the expiration of the
Subject Leases, regardless of whether the Pilot Program has been
completed, the Development Program has been commenced, or as otherwise
may be provided or interpreted to the contrary hereunder. Drilling of
the Option Xxxxx shall be performed at such locations, at such times,
and under such conditions as Dolphin shall in its sole judgement deem
advisable, subject to the Subject Leases and the Lease Agreement.
B. Except to the extent otherwise provided herein, all drilling and
completion operations on the Option Xxxxx, including applicable
Subsequent Operations, shall be conducted under the terms of the
applicable JOA, and the costs and expenses of all such drilling and
completion operations, including applicable Subsequent Operations, in
which both Parties elect to participate shall be paid by Horizon in
accordance with the terms of the Carried Interest and by both Dolphin
and Horizon under any election to participate for a Working Interest
made hereunder.
C. With respect to each Option Well or Subsequent Operation thereon in
which Horizon drills hereunder, either as a producer or as a dry hole,
Dolphin will, within ten (10) days of completion as a producer or
determination that the Well is a dry hole or contemporaneously with any
such assignment to Dolphin, assign and convey to Horizon all of its
right, title and interest in and to the Subject Leases insofar as it
pertains to the drill site spacing unit for such Well and any other
acreage earned as a result of such drilling and completion operations
to all depths covered by the Subject Leases. Such assignment and
conveyance shall be on such form as is acceptable to counsel for
Horizon, and shall be subject to reservation of the Carried Interest
and to such burdens as are specified above for Pilot Xxxxx.
D. Notwithstanding the foregoing, Dolphin and Horizon may drill two Option
Xxxxx to different coal seams on each eighty acre (or other such other
amount of acreage prescribed by the applicable governmental agency or
applicable law) drill site spacing unit as permitted by the applicable
well spacing regulations. The Parties may recomplete any existing Well
to a different coal seam, provided that any such recompletion may occur
only if it is demonstrated, according to generally accepted standards
in the North American coal bed methane industry, that continuing to
operate such Well at the depth at which such Well is being operated at
the time of any such decision will no longer be commercially
reasonable.
E. As to the Option Xxxxx, Dolphin may at any time, as a one-time election
exercisable in its sole discretion for a period of up to one (1) year
after commencement of the Development Program, elect to participate in
all Option Xxxxx drilled hereunder during said one (1) year period as
well as have the opportunity to participate for the same Working
Interest share of all Option Xxxxx drilled after said one (1) year
period, which participation shall be on a Heads-Up Price basis payable
upon initial election and contemporaneously on a well-by-well basis
thereafter, for up to an undivided twenty-five percent (25%) Working
Interest therein. Dolphin shall pay the proportionate share of all
direct costs and expenses for each Option Well in which it elects to
participate under the terms of the JOA attributable to the Working
Interest with respect to which such election is made.
X
AREA OF MUTUAL INTEREST
A. In the event that either Party shall acquire, directly or indirectly,
in its own name or through an Affiliate, by purchase, merger or
otherwise, any interest in CBM leases, other CBM rights, non-cost
bearing interests or otherwise pertaining to or concerning CBM in the
AMI, the acquiring Party shall offer the other Party the option to
participate in such acquisition. This option shall apply to an entire
acquisition in which any part thereof is located within the AMI, but
shall only apply if the other Party has elected to participate in the
Pilot Program (if such interests are acquired during the Pilot Program)
and during or after the completion of the Development Program (if such
acquisition is made during the Development Program).
B. If Horizon is the acquiring Party, it shall, within ten (10) days of
having made such acquisition, advise Dolphin of its acquisition,
setting forth all applicable terms and conditions pertaining to its
acquisition. Dolphin shall have fifteen (15) days in which to elect in
writing to participate in such acquisition on the terms stated in the
agreement pertaining to such acquisition. In the event that Dolphin
should elect not to participate in such acquisition, it shall have no
further interest in the acquisition made by Horizon. In the event that
Dolphin shall elect to participate in such acquisition, Horizon shall
assign and convey the Carried Interest in the acquisition to Dolphin
without further consideration from Dolphin, and Dolphin agrees to
provide services as operator commensurate with the services provided
hereunder with respect to all other Xxxxx drilled hereunder.
Notwithstanding the foregoing, Dolphin shall not be required to
participate in any AMI acquisition which does not in its reasonable
business judgement meet economic parameters it may establish from time
to time in its sole discretion for itself or by any Affiliate that may
be participating in the Project.
C. If Dolphin is the acquiring Party, it shall, within ten (10) days of
having made such acquisition, advise Horizon of its acquisition,
setting forth all applicable terms and conditions pertaining to its
acquisition. Horizon shall have fifteen (15) days in which to elect in
writing to participate in such acquisition on the terms stated in the
agreement pertaining to such acquisition, in which event Dolphin shall
elect to retain a Working Interest of not less than 1% nor more than
50% (or the rights to earn the same, as may be applicable) will assign
and convey the balance of its entire interest in such acquisition to
Horizon, subject to reservation of the Carried Interest.
Notwithstanding the foregoing, Horizon shall participate in any AMI
acquisition unless the acquisition opportunity does not in its
reasonable business judgement meet economic parameters, including
without limitation a net present value rate of return between 17.5% and
20%, it may establish from time to time in its sole discretion for
itself or by any Affiliate that may be participating in the Project and
that are otherwise comparable to the technical and commercial
projections available to Horizon under the terms of other agreements to
which Horizon is a party.
XI
NOTICES
All notifications to be delivered hereunder shall be made as follows:
Horizon Exploitation, Inc.
c/o Xxxxx Xxxxxx
0 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Dolphin Energy Corporation
0000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
XII
CONFIDENTIALITY
A. The Parties agree that the terms and conditions of this Agreement and
all information and data acquired or obtained by any Party in respect
of the Project shall be considered confidential and shall not be
disclosed during the term of the Agreement to any person or entity not
a Party to this Agreement, except:
(1) to an Affiliate, provided such Affiliate maintains
confidentiality as provided in this Article XII;
(2) to a governmental agency or other entity when
required by this Agreement;
(3) to the extent such data and information is required
to be furnished in compliance with any applicable
laws or regulations, or pursuant to any legal
proceedings or because of any order of any court
binding upon a Party;
(4) to prospective or actual contractors, consultants and
attorneys employed by any Party where disclosure of
such data or information is essential to such
contractor's, consultant's or attorney's work;
(5) to a bona fide prospective transferee of a Party's
interest in all or any portion of the Project
(including an entity with whom a Party or its
Affiliates are conducting bona fide negotiations
directed toward a merger, consolidation or the sale
of a majority of its or an Affiliate's shares);
(6) to a bank or other company to the extent appropriate
to a Party arranging for funding;
(7) to the extent such data and information must be
disclosed pursuant to any rules or requirements of
any government or stock exchange having jurisdiction
over such Party, or its Affiliates; or
(8) any data or information which, through no fault of a
Party, becomes a part of the public domain;
provided, however, that, notwithstanding the foregoing, Dolphin and
Horizon shall be expressly permitted to disclose information as set
forth in Articles XII.B, XII.C and XII.D.
B. In the event of an emergency involving extensive property damage,
operations failure, loss of human life, or other clear emergency,
either Party is deemed to be authorized to furnish such minimal,
strictly factual information as is necessary to satisfy the legitimate
public interest on the part of the press and duly constituted
authorities. If time does not permit obtaining prior approval from the
other Party, either Party shall promptly advise the other Party of the
information so furnished. Nothing herein contained shall preclude any
Party from making such disclosures as may be, in that Party's sole
judgement, required by any federal or state law or regulation or by any
stock exchange on which the shares of the Party and/or its parent
company are listed; provided, however, that such Party shall provide
each other Party with prior written notice of any such required
disclosure, which disclosure shall be deemed to authorize each other
Party to make a similar disclosure at any time after such initial
required disclosure has been made to the public and/or as is otherwise
required, and provided further that such other Party shall maintain the
confidentiality of the intent of such other Party to make such a
disclosure as well as the content thereof prior to such initial
required disclosure.
C. The Parties will consult with each other with regard to all publicity,
including any press or other media releases regarding activities
undertaken in connection with this Agreement. Unless data or
information must be disclosed pursuant to any rules or requirements of
any government or stock exchange having jurisdiction over a Party or
its Affiliates, no Party shall issue a media release nor distribute any
information or photographs concerning operations hereunder to the press
or other media without the prior written approval of the other Party,
which shall not be unreasonably withheld. If a Party requests consent
to make a press or media release, but does not receive a written
response from the other Party either consenting or withholding consent
for a period of three (3) days after its request, then the other Party
shall be deemed to have consented to the release.
D. The Parties acknowledge and agree that either Party will disclose
certain information concerning the business operations contemplated
hereunder as well as the essential terms and conditions of this
Agreement. Disclosures under this Article XII.D will be subject to the
conditions set forth in Article XII.C.
XIII
TERM AND TERMINATION
A. The Term of this Agreement shall commence as of the Effective Date and
shall continue for a period of four (4) years thereafter, unless
earlier terminated under Article XIII.B herein.
B. Unless and to the extent excused by events of Force Majeure or as
otherwise mutually agreed by the Parties, this Agreement shall
terminate upon the occurrence of one of the following events:
(1) the occurrence of any event for which termination is
expressly provided as a consequence elsewhere in this
Agreement;
(2) if either Party files a voluntary petition in
bankruptcy, has an involuntary petition in bankruptcy
filed against it, is adjudicated to be insolvent, or
has a receiver appointed for its business affairs
(individually or collectively, a "Bankruptcy Event"),
then the other Party may, in its sole discretion, (i)
terminate this Agreement upon twenty (20) days as to
the drilling of any future Xxxxx contemplated
hereunder and/or (ii) seek appointment of itself or
a third party as operator under the JOA, subject to
the terms of any applicable JOA; provided, however,
that this provision shall not apply if such
Bankruptcy Event is removed within such 20-day
period;
(3) if either Horizon, Dolphin or the Contract Operator
ceases to actively conduct business, maintain its
entity status in good standing in the states in which
it is licensed to do business, is voluntarily or
involuntarily dissolved, or is removed or otherwise
not permitted to act as operator or Contract
Operator; or
(4) by mutual agreement of Dolphin and Horizon;
with the date as to which any of such events shall be deemed to have
occurred being the Termination Date.
If this Agreement is terminated pursuant to any of the foregoing
clauses (1), (2), (3), or (4) Horizon and Dolphin shall be liable to
each other for the performance of their respective obligations under
this Agreement in connection with all events, acts and omissions
occurring or commencing prior to the Termination Date as well as for
all obligations accruing after the Termination Date in respect of any
Xxxxx commenced prior to the Termination Date. Horizon will have no
obligation to Dolphin under this Agreement in connection with Xxxxx
that have not yet been commenced.
C. The obligations of the Parties under Article X as well as under Article
XII shall survive the termination of this Agreement for a period of one
(1) year after the Termination Date.
XIV
INTERNAL REVENUE CODE ELECTION
This Agreement is not intended to create, and shall not be construed to
create, a partnership between Dolphin and Horizon or an association for profit
between or among the Parties. Notwith- standing any provision herein that the
rights and liabilities hereunder are several and not joint or collective, or
that this Agreement and operations hereunder shall not constitute a partnership,
if, for federal income tax purposes, this Agreement and the operations hereunder
are regarded as a partnership, each Party hereby 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 (the "Code") as
permitted and authorized by Code Section 761 and the regulations promulgated
thereunder. Dolphin is authorized and directed to execute on behalf of Horizon
such evidence of this election as may be required by the Secretary of the
Treasury of the United States or the United States Internal Revenue Service (the
"IRS"), including specifically, but not by way of limitation, all of the
returns, statements, and the data required by Treasury Regulation 1.761. Should
there be any requirement that each Party hereby affected to give further
evidence of this election, each such Party shall execute such documents and
furnish such other evidence as may be required by the IRS or as may be necessary
to evidence this election. No such Party shall give any notices or take any
other action inconsistent with the election made hereby. If any present or
future income tax laws of Wyoming or any future income tax laws of the United
States contain provisions similar to those in Subchapter "K", Chapter 1,
Subtitle "A", of the Code, under which an election similar to that provided by
Section 761 of the Code is permitted, each Party hereby affected shall make such
election as may be permitted or required by such laws.
XV
GENERAL PROVISIONS
A. This Agreement will be binding upon the Parties, and their respective
heirs, successors and assigns, and shall be deemed a covenant running
with the land of the Subject Leases.
B. No waiver by any Party of any one or more defaults by another Party in
the performance of his Agreement shall operate or be construed as a
waiver of any future default or defaults by the same Party, whether of
a like or of a different character. Except as expressly provided in
this Agreement, no Party shall be deemed to have waived, released or
modified any of its rights under this Agreement, unless such Party
expressly stated, in writing, that it does waive, release or modify
such right.
C. If and for so long as any provision of this Agreement shall be deemed
invalid for any reason whatsoever, such invalidity shall not affect the
validity or operation of any other provision of this Agreement, except
insofar and only insofar as shall be necessary to give effect to the
construction of such invalidity, and any such invalid provision shall
be deemed severed from this Agreement without affecting the validity of
the balance of this Agreement.
D. This Agreement represents the entire agreement of the Parties, all
previous agreements and communications having been merged and
integrated into the terms hereof.
E. Each Party shall, at its sole cost, risk, and expense, prepare and
submit any and all filings in relation to this Agreement required of
such Party by any governmental agency having jurisdiction. Each Party
shall in a timely fashion provide the other Parties with copies of all
such filings made by the Party.
F. The captions and heading of this Agreement are for convenience only and
shall not be considered a part of or affect the construction or
interpretation of any provisions of this Agreement.
G. In connection with this Agreement and the transactions contemplated by
it, each Party will exercise its discretion as contemplated hereunder
in good faith as a prudent operator and/or as a sophisticated oil and
gas investor and as otherwise required by applicable law and
contractual obligations and will cooperate with each other and with
third parties to execute and deliver, or secure the execution and
delivery of, any additional documents and instruments as well as
perform any additional acts that may be necessary or appropriate to
effectuate and perform the provisions of this Agreement and those
transactions.
H. This Agreement shall be governed by, construed, interpreted and applied
in accordance with the laws of the State of Wyoming, excluding any
choice of law rules which would refer the matter to the laws of another
jurisdiction.
I. Both Dolphin and Horizon submit to the jurisdiction of the courts of
Wyoming (as well as the federal courts sitting in Wyoming) for the
purpose of finally resolving any dispute, controversy or claim arising
out of or in relation to or in connection with this Agreement or the
operations carried out under this Agreement, including without
limitation any dispute as to the construction, validity,
interpretation, enforceability or breach of this Agreement. A Party's
submission to the jurisdiction of these courts in accordance with the
foregoing shall not, however, limit the right of such Party to
institute any legal action or proceeding for the enforcement of any
order or judgment of such courts in any other court having
jurisdiction.
J. Neither Party may assign all or any part of its right or obligations
under this Agreement without the prior written consent of the other
Party, which consent may be reasonably withheld for any reason in its
sole reasonable discretion; PROVIDED, HOWEVER, THAT EITHER PARTY MAY,
AT ANY TIME BEFORE DELIVERY OF ITS ARTICLE VI.B ELECTION TO
PARTICIPATE, ON A ONE-TIME BASIS, ASSIGN ALL OF ITS RIGHTS AND
OBLIGATIONS TO AN AFFILIATE WITHOUT OBTAINING ANY CONSENT FROM THE
OTHER PARTY.
K. This Agreement may be executed in counterparts, each of which executed
instrument shall constitute a duplicate original for all purposes
herein.
L. In the event of any conflict or ambiguity in any of the terms or
conditions of the Subject Leases, the Lease Agreement, this Agreement
that cannot be reconciled or applied solely in the context of the
business and contractual dealings of the Parties without regard to the
priority between and among any of the Parties and any third party, and
the including any Exhibits thereto, the following order of precedence
shall apply: (i) the Subject Leases; (ii) the Lease Agreement; (iii)
this Agreement; (iv) the Exhibits to this Agreement; (v) the JOA; and
(vi) the pertinent exhibits to the JOA.
IN WITNESS WHEREOF, the duly authorized officers or representatives of
the Parties have executed this Agreement on the dates written below to be
effective as of the Effective Date.
Date: OCT. 31, 2002 Dolphin Energy Corporation
-------------------------------
By: /S/ XXXX XXXXXX
-------------------------------
Date: 10-31-02 Horizon Exploitation, Inc.
---------------------------------
By: /S/ XXXXX XXXXXX
-------------------------------
State of FLORIDA
--------------------------
County of MIAMI-DADE
The foregoing instrument was acknowledged before me this 31 day of
October, 2002, by XXXX XXXXXX as PRESIDENT of Dolphin Energy Corporation.
/S/ XXXXXX XXXX
-----------------------------------------
Notary Public
My Commission Expires: 11/29/05
----------------------
XXXXXX XXXX
Notary Public - State of Florida
My Comm. Expires Nov 29, 2005
Commission # DD 075278
State of UT
------------------------------
NOTARY PUBLIC
County of SALT LAKE CITY XXXXXXX X. XXXXX
-------------------- 3247 So. 0000 X.
Xxxx Xxxxxx Xxxx, XX 00000
COMMISSION EXPIRES
NOV. 8, 2004
STATE OF UTAH
The foregoing instrument was acknowledged before me this 31st day of
October, 2002, by XXXXX XXXXXX as PRESIDENT of Horizon Exploitation, Inc.
/S/ XXXXXXX X. XXXXX
-----------------------------------------
Notary Public
My Commission Expires: NOVEMBER 8, 2004
BMcK DRAFT DATED JANUARY 2, 2003
FIRST AMENDMENT TO COAL BED METHANE PARTICIPATION AGREEMENT
This FIRST AMENDMENT TO COAL BED METHANE PARTICIPATION AREEMENT (this
"AMENDMENT"), dated as of January ___, 2003, is made by and between Dolphin
Energy Corporation, a Nevada corporation ("DOLPHIN"), and Horizon Exploitation,
Inc. a Colorado corporation ("HORIZON"). The foregoing entities may be referred
to herein collectively as the "Parties" and individually as a "Party."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, effective as of October 1, 2002, the Parties entered into a
Coal Bed Methane Participation Agreement (the "AGREEMENT");
WHEREAS, the Parties determined during the course of the due diligence
process provided for in Article VI of the Agreement that certain changes to the
Agreement were necessary and/or desirable; and
WHEREAS, the parties now wish to amend the terms and conditions of the
Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the Parties hereby
agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, all capitalized terms
used but not defined in this Amendment shall have the meanings given them in the
Agreement.
SECTION 2. AMENDMENT OF THE AGREEMENT. The Agreement is hereby amended as
follows:
(a) All references to "2,300 feet" in the definitions of CBM
and Target Horizon and in Exhibit D are hereby deleted and replaced with "3,000
feet (or, for the Xxxxxxx Leases, 2,500 feet)".
(b) Section VI.A of the Agreement is hereby deleted in its
entirety and replaced with the following:
The Parties agree to promptly conduct a joint due diligence
investigation of the Well Assets and the Subject Leases and
to cooperate fully toward a complete evaluation of the Project
satisfactory to both Parties. In the conduct of such review,
each Party shall retain, at its sole cost, risk and expense,
its own legal counsel and such technical and other consultants
as it deems necessary. Such evaluation shall be concluded
prior to January 31, 2003.
(c) Section VI.B of the Agreement is hereby amended by
striking the first sentence thereof and substituting the following:
On or prior to January 31, 2003, each Party shall notify the
other Party in writing of its election to participate in the
Project on the terms set forth herein, or to decline to do so.
(d) Section VI.C of the Agreement is hereby deleted in its
entirety and replaced with the following:
Within ten (10) days of its election to participate in the
Project, Horizon shall deliver to Dolphin or its designee,
by cashier's check, wire transfer or other immediately
available funds, the sum of One Hundred Thousand Dollars
($100,000.00), provided that such funds are available to
Horizon. In the event that such funds are not then available
to Horizon, such funds shall be paid to Dolphin within five
(5) days of the date such funds become available to Horizon.
SECTION 3. VALIDITY OF AGREEMENT. Notwithstanding any provision of the Agreement
in effect prior to the date hereof, the Parties hereby agree that the Agreement
has not been terminated and is in full force and effect as of the date hereof.
SECTION 4. NO FURTHER AMENDMENT OR NOVATION. Except as set forth in this
Amendment, all terms and conditions of the Agreement remain unchanged. The
Parties hereby ratify and confirm the Agreement as amended hereby. Except to
the extent expressly set forth herein, the Agreement has not been amended,
modified or supplemented and is in full force and effect. The execution and
delivery of this Amendment does not constitute a novation, amendment, payment,
satisfaction or extinction of any obligations under the Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed and delivered as of the date first above written.
DOLPHIN ENERGY CORPORATION
By: /s/ XXXX X. XXXXXX
---------------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
HORIZON EXPLOITATION, INC.
By:
---------------------------------------------
Name:
Title:
SECOND AMENDMENT TO COAL BED METHANE PARTICIPATION AGREEMENT
This Second Amendment to Coal Bed Methane Participation Agreement ("Amendment")
is made and entered into the day and year hereinafter stated, by and between
Dolphin Energy Corporation, a Nevada corporation ("Dolphin"), and Horizon
Exploitation, Inc., a Colorado corporation ("Horizon"), effective February 1,
2003 ("Amendment Effective Date"). The foregoing entities may be referred to
herein collectively as "Parties" and individually as a "Party".
I
RECITALS
A. The Parties have entered into Coal Bed Methane Participation Agreement
dated effective October 1, 2002, providing for purchase of certain gas
xxxxx, and for joint drilling and production of coal bed methane, all
on oil and gas leases located in Sheridan County, Wyoming. That
contract has been amended by First Amendment to Coal Bed Methane
Participation Agreement between the Parties, dated on January 2, 2003
(such October 1, 2002 agreement, as amended on January 2, 2003, the
"Coal Bed Agreement").
B. The Coal Bed Agreement further pertains to that certain Lease
Acquisition and Drilling Agreement between Pioneer Oil, LLC, and
Dolphin, dated effective September 30, 2002, which agreement has been
amended in several significant respects ("Lease Agreement"), which in
turn require amendment to the Coal Bed Agreement.
C. The Parties desire to amend the Coal Bed Agreement to more accurately
reflect the amended obligations of Dolphin under the Lease Agreement,
and to allow for proper funding of Horizon's obligations under the Coal
Bed Agreement, and to better reflect the timing of the capital being
raised by the ultimate investors in Horizon.
II
AGREEMENT
Now, for and in consideration of the mutual rights and benefits and obligations
and legal detriments afforded the Parties, hereunder, Dolphin and Horizon do
hereby agree to amend the Coal Bed Agreement, in the following respects:
III
AMENDMENTS
SECTION 1: Article III is amended by addition fo the following:
"Commitment Letter" shall mean the letter of commitment from
Horizon to Dolphin referenced in Article VI-B.
SECTION 2: The first sentence of Article VI-B is amended to state as
follows:
Horizon shall have until the close of business May 15, 2003,
MST (or such later date as may be agreed to by the parties
hereto in writing) in which to elect to participate in the
Project. Should Horizon, at is sole option and discretion,
elect to participate in the Project, Horizon will issue a
Commitment Letter to Dolphin evidencing such election.
Notwithstanding any provision of the Coal Bed Agreement as
herein amended, prior to the date such Commitment Letter is
issued by Horizon, the parties will use their best efforts to
agree upon the applicable dates for payment and drilling
obligations in the Coal Bed Agreement, and that Commitment
Letter will set forth the mutually agreed dates by which the
payment and drilling obligations provided for in the Coal Bed
Agreement will be implemented. In the event that neither . .
. In the event that only one Party elects to participate, all
rights, titles, and interests, benefits and burdens
associated with the Project, including the right to pursue
the Project in accordance with the Lease Agreement and the
Xxxxxxx Agreement, shall become vested in the Party electing
to participate in the Project, and, the other Party shall
have no further rights or obligations under this Agreement,
provided that both Parties shall continue to be bound by the
provisions of the AMI for the time period indicated in
Article XIII.
SECTION 3: Article VI-C is amended by addition of the following:
The Parties further recognize that an additional $100,000 fee
will be paid by Dolphin to Pioneer on or before the dates
specified in the Commitment Letter. It is intended that such
funds represent the additional fee reference in the Lease
Agreement, as amended and, to that end, shall be in turn
delivered to Pioneer Oil, LLC or reimbursed to Dolphin as the
case may be.
SECTION 4: The first sentence of Article VII-A is amended and restated as
follows:
If Horizon elects to participate in the Project, on or before
the date specified in the Commitment Letter, Horizon shall
deliver to Dolphin by cashiers check, wire transfer, or other
immediately available funds, the sum of Five Hundred Thousand
Dollars ($500,000). It is intended . . .
SECTION 5: Section VII-B is amended and restated as follows:
Within ten (10) days of closing on the Well Assets; under the
Lease Agreement, Dolphin will assign and convey to Horizon
all of Dolphin's right, title and interest in and to the Well
Assets acquired under the Lease Agreement and subject to the
terms thereof, effective on the day specified in the
Commitment Letter, except and reserving unto Dolphin the
Carried Working Interest.
SECTION 6: The first sentence of Article VIII-B is amended and restated as
follows:
No later than the date specified in the Commitment Letter,
Horizon will tender the Dolphin by cashiers check or wire
transfer or other immediately available funds, the sum of One
Million Six Hundred Fifty Thousand Dollars ($1,650,000), plus
the estimated amount to drill and complete thirty (30) pilot
xxxxx . . .
SECTION 7: The first phrase of Article VIII-H is amended and restated as
follows:
In the event that neither Party should elect to participate
in the Development Program, the Agreement shall terminate,
and neither Party shall have any further rights or
obligations under this Agreement other than those rights or
obligations which have already accrued as of the date of such
termination, provided that both Parties shall continue to be
bound by the provisions of the AMI for the time period
indicted in Article XIII.
SECTION 8: The second sentence of Article X-A is amended and restated as
follows:
This opinion shall apply to an entire acquisition in which
any part thereof is located within the AMI.
B. If Horizon . . .
SECTION 9: Article X is further amended by addition of Article X-D, as
follows:
The provisions of this Article X, Area of Mutual Interest, be
in effect beginning October 1, 2002, and shall remain in
effect to February 1, 2005, at which time the provisions of
this Article will terminate, and, the provisions of Article X
will survive termination of this Amended Agreement for that
time period. Further, the provisions of this Article X shall
apply for the time period indicated, whether or not either or
both parties elect to continue with the Project at any point
in time, and such provisions are deemed amended accordingly.
SECTION 10: Article XIII-C is amended and restated as follows:
The obligations of the Parties under Article XII shall
survive the termination of this Agreement for a period one
(1) year after the Termination Date.
SECTION 11: Unless otherwise defined herein, all capitalized terms used but
not defined in this Amendment shall have the meanings given them in the Coal Bed
Agreement.
SECTION 12: Notwithstanding any provision of the Coal Bed Agreement in effect
prior to the date hereof, the Parties hereby agree that the Coal Bed Agreement
has not been terminated and is in full force and effect as of the date hereof.
SECTION 13: Except as set forth in this Agreement (especially as set forth in
Section 2 above), all terms and conditions of the Coal Bed Agreement remain
unchanged. The Parties hereby ratify and confirm the Coal Bed Agreement, as
amended hereby.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed and delivered as of the date first above written.
DOLPHIN ENERGY CORPORATION
By /s/ XXXX XXXXXX
----------------------------------------------
Name XXXX XXXXXX
----------------------------------------------
Title PRESIDENT
----------------------------------------------
HORIZON EXPLOITATION, INC.
By
----------------------------------------------
Name
----------------------------------------------
Title
----------------------------------------------
/s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx
Commission #
Expires Jan. 27, 2005
Bonded Thru
Atlantic Bonding Co., Inc.
