EXHIBIT 10.7
ADDENDUM TO COAL BED METHANE PARTICIPATION AGREEMENT
DATED AS OF MAY 23, 2003
ADDENDUM TO COAL BED METHANE PARTICIPATION AGREEMENT
This ADDENDUM TO COAL BED METHANE PARTICIPATION AGREEMENT (this
"AMENDMENT"), dated as of May 23, 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, which was subsequently amended by the
Parties pursuant to a First Amendment to Coal Bed Methane Participation
Agreement dated as of January __, 2003, and Second Amendment to Coal Bed Methane
Participation Agreement (together, the "AGREEMENT");
WHEREAS, Article VIII-I and IX-E provide for certain options to
participate in a larger working interest in Pilot Project and in Development
Xxxxx, and that, given the final drilling date of October 31, 2005, such options
could be exercised by Dolphin after the applicable xxxxx were drilled and
completed;
WHEREAS, Article X of the Agreement creates an Area of Mutual
Agreement, pursuant to which additional projects would be jointly acquired and
developed by the Parties, but the application of the recited options to such
future projects is unclear;
WHEREAS, the Parties have determined that certain clarifications to
operation of the Agreement as to acquisitions or projects that may be undertaken
in the future are necessary and/or desirable; and
WHEREAS, the Parties now wish to state 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. The option provisions of Article VIII-I and IX-E shall
remain unchanged and shall apply to the Subject Leases and the Xxxxxxx Leases as
presently described in the Agreement, it being the intent that Dolphin's option
may be exercised as to any and all xxxxx drilled on those leases after drilling
and completion has occurred, and Dolphin shall not be required to participate in
drilling of any such well unless it elects to do so.
Future acquisitions of property shall be owned and maintained on the
same terms as the Subject Leases. To that end, Article X-C is amended and
clarified to state as follows:
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 participate in any AMI
acquisition unless the acquisition opportunity does not in its
reasonable business judgment 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. Horizon shall promptly reimburse Dolphin for
all costs and expenses associated with such acquisition, and Dolphin
shall promptly assign and convey such interests to Horizon subject to
the Carried Interest.
As to properties so acquired under the provisions of this
Article X, Dolphin shall have a continuous option for each calendar
year for a period of up to one (1) year following the close of a
calendar year, in which to participate at a "Heads Up Price" as defined
in the Agreement, for an additional 25% working interest in the xxxxx
drilled during the previous calendar year. Dolphin shall have the
additional option to be exercised if at all within two (2) years from
the close of a particular calendar year in which to participate at a
"Heads Up Price" for an additional 25% working interest in the xxxxx
drilled during the year in question. The option provided for in this
paragraph shall be continuous and shall apply annually on a calendar
year basis during the term of the Agreement. By way if illustration, if
Horizon drill ten (10) xxxxx in 2003, Dolphin may elect to participate
for a 25% working interest in those xxxxx before December 31, 2004, and
may further elect to participate for an additional 25% in the xxxxx
drilled in 2003 up to December 31, 2005. As to xxxxx drilled in
calendar 2004, Dolphin may exercise similar options by December 31,
2005 and December 31, 2006, continuing during the entire joint drilling
program of the parties.
SECTION 2. 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 3. 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 XXXXXX
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Name XXXX XXXXXX
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Title PRESIDENT
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HORIZON EXPLOITATION, INC.
By /s/ XXXXX X. XXXXXX
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Name XXXXX X. XXXXXX
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Title PRESIDENT
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