Exhibit 10.28
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
2000 PROGRAM AGREEMENT
----------------------
This Program Agreement (this "Agreement" or the "Program") is dated as of
the 1st day of March, 2000, by and between CHENIERE ENERGY, INCORPORATED, a
Delaware corporation (hereinafter referred to as "Cheniere") and SAMSON OFFSHORE
COMPANY, an Oklahoma corporation (hereinafter referred to as "Samson"). Cheniere
and Samson may also be referred to individually herein as "Party" and
collectively as the "Parties".
ARTICLE I
Section 1.1 Intention of Parties:
The Parties desire to participate in the cost of the evaluation and the
interpretation of the 3-D seismic data (the "Fairfield Data") licensed to
Cheniere pursuant to that certain Master License Agreement dated June 9, 1999 as
supplemented by Supplement Agreement No. 1 dated June 9, 1999, (the "Master
Service Agreement") between Fairfield Industries Incorporated and Cheniere for
the mutual benefit of the Parties on the terms set forth herein. The purpose of
such evaluation and interpretation of the Fairfield Data is to generate
Prospects, as defined in Section 4.1, and to permit the negotiation of the
acquisition of oil and gas leases covering offshore blocks or portions thereof
(hereinafter referred to as "Target Blocks", whether one or more) that the
Parties agree are (i) potentially productive of oil and gas, or (ii) producing
oil and gas. No xxxxx shall be drilled under the terms of this Agreement but
rather, all drilling and all other operations on the Subject Properties, as
defined in Section 4.2, shall be conducted under the Joint Operating Agreement,
as provided for in Section 4.5.
Section 1.2 Area of Operations:
The Program shall restrict its evaluation, interpretation, and acquisition
of Target Blocks to the area covered by the Fairfield Data, which area is
outlined on Exhibit A attached hereto. Such area shall hereinafter be referred
to as "Area of Operations".
1
Section 1.3 Cheniere's Use of Data:
Cheniere shall, pursuant to the terms of this Program Agreement, evaluate
the Fairfield Data for the purpose of the generation and screening of Prospects,
as defined in Section 4.1 within the Area of Operations.
ARTICLE II
Section 2.1 Definitions:
Whenever used in this Agreement, the following terms shall have the
meanings assigned them in this Section 2.1:
"Agenda" shall have the meaning ascribed to it in Section 3.4.
"Area of Mutual Interest" ("AMI") shall have the meaning ascribed to it in
Section 7.4 and, when applicable, 4.4.
"Area of Operations" shall have the meaning ascribed to it in Section 1.2.
"Discovery Bonus" shall have the meaning ascribed to it in Section 4.6.
"Excluded Target Blocks" shall have the meaning ascribed to it in Section 4.4.
"Extended Term" shall have the meaning ascribed to it in Section 7.5.
"Fairfield Data" shall have the meaning ascribed to it in Section 1.1.
"Initial Well" shall have the meaning ascribed to it in Section 4.6.
"Participant" shall mean Samson.
"Presentation Block" shall have the meaning ascribed to it in Section 3.4.
"Program Interest" shall have the meaning ascribed to it in Section 4.6
"Program Management Fee" shall have the meaning ascribed to it in Section 5.3.
"Program Manager" shall have the meaning ascribed to it in Section 3.1.
"Prospect" shall have the meaning ascribed to it in Section 4.1.
"Related Entity" shall have the meaning ascribed to it in Section 4.4.
"Subject Property" shall have the meaning ascribed to it in Section 4.2.
"Target Blocks" shall have the meaning ascribed to it in Section 1.1.
"Target Blocks Identification Notice" shall have the meaning ascribed to it in
Section 4.1.
"Term" shall have the meaning ascribed to it in Section 6.1.
Exhibits:
A. Plat of Area of Operations, Section 1.2
B. Joint Operating Agreement, Section 4.5
C. Staffing Levels, Section 3.3
D. Blocks excluded from the AMI, Section 7.4
E. Provisions of Area of Mutual Interest, Section 4.4
2
ARTICLE III
Section 3.1 Program Manager:
Cheniere shall act as Program Manager and in such capacity shall,
subject to the terms hereof, (i) manage the evaluation and interpretation of the
Fairfield Data, and (ii) negotiate for the acquisition of Target Blocks. As the
Program Manager, Cheniere shall exercise ordinary business judgment in managing
the affairs of the Program. In the absence of fraud, intentional wrong doing or
gross negligence, Cheniere shall not be liable to the Participant for any
mistake of fact or judgment made by Cheniere in managing the Program. Cheniere
is engaged in oil and gas exploration, development and production operations,
and pipeline operations outside of the Area of Operations, and Participant
acknowledges Cheniere shall have no obligation or accountability to Participant
for any such activities that are conducted outside the Area of Operations. The
business of the Program shall be conducted under the name of Cheniere or, where
appropriate, under the names of Cheniere and Samson.
Section 3.2 Authority of Program Manager:
Subject to Section 3.3 below, the Program Manager shall have the power
and authority to take such action from time to time as it may deem to be
necessary, appropriate, or convenient in connection with the management and
conduct of the business and affairs of the Program, including without limitation
the power (i) to acquire or lease equipment required to evaluate and interpret
the Fairfield Data, (ii) to employ, retain or otherwise secure personnel or
third party consultants to evaluate and interpret said Fairfield Data, (iii) to
incur such other expenses associated with evaluating and interpreting said
Fairfield Data as may, in its judgment, be necessary, (iv) to incur expenses
associated in the negotiation for and acquisition of Target Blocks, and (v) to
negotiate for the acquisition of Target Blocks by farm-ins or otherwise.
Section 3.3 Requirements of Program Manager:
The Program Manager shall devote such time, attention, and business
capacity to the affairs of the Program as may be necessary as more fully set
forth herein. The Program Manager shall furnish office space, clerical and
administrative assistance, and such other support staff as needed. The Program
Manager shall provide geologists and geophysicists and the equipment required to
interpret the Fairfield Data and shall make available its drilling and reservoir
engineering staff and its land staff to the Program at the staffing levels set
forth on Exhibit C hereto. All costs associated with the matters set forth in
Section 3.2 and Section 3.3 (except as set forth below) shall be covered by the
Program Management Fee provided for in Section 5.2, and Program Manager will not
be entitled to any reimbursement for the costs incurred by it in providing any
of the matters set forth in this Section. [*]
3
Section 3.4 Reports:
During the Term of the Program, and at least five (5) days prior to
such meeting provided for in Section 4.3. Program Manager shall provide
Participant with a written report containing an "Agenda" setting forth a listing
of all blocks to be reviewed at the meeting (the "Presentation Blocks") and
summarizing the Program's activities, evaluations, drilling operations and
related matters, together with such information (including copies of technical
data) regarding the Program and its activities and interests as is available to
Program Manager to the extent not prohibited by license agreements and as
reasonably requested by Participant. During ordinary business hours,
Participant or its authorized representatives shall have access, in Program
Manager's offices, to all of the Program's books, records and materials, and
geophysical surveys (including the Fairfield Data subject to the limitations in
the Master Services Agreement). In the event the Agenda is not an accurate
representation of the blocks actually reviewed at the meeting, the Parties shall
execute a mutually agreeable amendment of the Agenda reflecting all Presentation
Blocks actually reviewed at the meeting.
ARTICLE IV
Section 4.1 Identification of Target Blocks:
When during the Term hereof the Program Manager identifies offshore
blocks that Program Manager believes contain economically viable Prospects (as
defined below), the Program Manager shall provide written notice to Participant,
(the "Target Blocks Identification Notice") which shall (i) identify the owner
and the location of the offshore blocks necessary to control the Prospect, as
defined below, not to exceed in size four (4) offshore blocks, (the "Target
Blocks") and (ii) designate the date and time Program Manager will meet jointly
with Participant at the offices of Program Manager to discuss the specific
details relating to such Target Blocks. Said notice shall be given not less
than five (5) working days prior to the proposed meeting.
At such meeting, the Program Manager shall discuss with Participant
the specific details of the Prospect (as defined herein below) located on the
Target Blocks and shall allow Participant to examine all relevant geological and
geophysical data, interpretations, and other information in the possession of
Program Manager that pertains to such Prospects subject to the limitations on
the use of the Fairfield Data set forth in the Master Service Agreement.
"Prospect" as used herein shall consist of the entire geologic confines of the
potential development area, located on the Target Blocks, as defined by the
structure and/or stratigraphy,
4
without limitation in depth. The Program Manager shall also provide to
Participant the following information:
(i) geological and geophysical information including the Program's
most recent reports, interpretations and maps;
(ii) a land summary and plats and any agreements associated therewith;
(iii) an itemized list of the estimated acquisition costs and the
geological and geophysical cost allocable to such Target Blocks.
(iv) the preliminary estimate of the cost of any Exploratory Well for
such Prospect;
(v) a preliminary estimate of the costs to be incurred in connection
with platforms, facilities and development well(s) for such Prospect;
(vi) The Program Manager's reserve estimate and economic analysis,
which shall be provided for informational purposes only and without liability to
Program Manager and with the understanding that Participant will prepare its own
reserve estimate and economic analysis and satisfy itself as to the economics of
the Prospect.
(vii) The terms on which the Program Manager estimates the leases,
farm-outs or other drilling rights can or may be acquired, including the amount
of bonus (if any), well obligation, net revenue interest and working interest,
both before and after payout.
Section 4.2 Participant's Election to Participate in Target Blocks:
Participant shall have fifteen (15) working days after the meeting
held pursuant to Section 4.1 above in which to review in the Program Manager's
office the data referred to in Section 4.1. Failure of Participant to timely
review such data shall be deemed an election by such Participant to exclude from
the Program the Target Blocks identified in the Program Manager's notice;
provided, however, that Participant may waive its right to review the data and
may elect to include such Target Blocks in the Program by giving written notice
to Cheniere to such effect within said fifteen (15)-day period. Within twenty-
five (25) working days after the meeting referred to in the first sentence of
this Section, Participant shall indicate to Program Manager its election to
either include or exclude such Target Blocks in the Program. All such elections
shall be as to all depths. Such election shall be in writing. If Participant
fails to timely elect to include such Target Blocks in the Program, such failure
shall be deemed an election to exclude such Target Blocks from the Program.
If Participant elects to include such Target Blocks in the Program, the Program
Manager shall proceed with its efforts to negotiate for the acquisition of
leases, farm-out agreements or other drilling rights covering such Target Blocks
and if successful, such leases, farm-out agreements or drilling rights
(hereinafter referred to as "Subject Property") shall be acquired by the Parties
for the consideration and in the proportions set forth in Section 4.6, subject
in all cases to the provisions of Section 4.7.
Section 4.3 Meetings
During the Term of the Program, the Parties shall hold a meeting the
first Friday of each calendar month to review the status of all Program
business.
5
Section 4.4 Effect of Participant's Election:
The Participant's election or failure to timely elect with respect to
Target Blocks has the following consequences:
(i) If Participant elects or is deemed to have elected to exclude Target
Blocks from the Program (taking into account the additional election provided
for in Section 4.7) (the "Excluded Target Blocks"), Participant and its
officers, employees, directors and any Related Entity shall thereafter have no
right, for a period of eighteen (18) months following such election or deemed
election, to acquire an interest in such Excluded Target Blocks, directly or
indirectly. If Participant does acquire an interest in such Excluded Target
Blocks it shall so notify Cheniere and shall offer 100% of such interest to
Cheniere, and Cheniere may acquire such interest by reimbursing Participant its
purchase price. Cheniere may, individually or in concert with others, acquire
an interest in said Excluded Target Blocks, and in such case have no obligation
to Participant other than under Section 4.7 hereof. The term "Related Entity,"
as used herein, shall mean any corporation, partnership, trust or other entity
which, on the date of the election provided for in Section 4.2, Participant
controls, or which, as of the date of said election, is owned at least 50%,
directly or indirectly, by Participant.
(ii) If Participant timely elects under Section 4.2 to include Target
Blocks in the Program, the Area of Mutual Interest provisions set forth on
Exhibit E hereto shall be applicable to the Target Blocks effective as of the
date of such election. If the Target Blocks or a portion of them are acquired,
said Area of Mutual Interest shall remain in force and effect as to such Target
Blocks for as long as both Parties own an interest within said Area of Mutual
Interest. If the Target Blocks is not acquired said Area of Mutual Interest
shall terminate at the later of (i) eighteen (18) months from the date of such
election by Participant or (ii) the termination of the Area of Mutual Interest
provided for in Section 7.4.
Section 4.5 Title; Joint Operating Agreement; Area of Mutual Interest:
If title to a Subject Property is acquired in the name of the Program
Manager or of any other Party, the Non Acquiring Party shall be assigned upon
its request its respective share of the acquired Subject Property subject to
payment by such Non Acquiring Party of its stipulated share of the acquisition
costs of such Subject Property as set forth in Section 4.6 as applicable. Each
Subject Property shall be subject to a Joint Operating Agreement in the form
attached hereto as Exhibit "B" which names Cheniere Energy, Inc. as Operator,
unless such is acquired subject to an existing Joint Operating Agreement naming
a third party as Operator. A separate Joint Operating Agreement shall be
executed for each Subject Property and shall be deemed to be effective the day
the Subject Property is acquired. Each Party shall have the right to participate
or not participate in the exploration and/or development of a Subject Property
in accordance with
6
the terms of the Joint Operating Agreement. In the event Cheniere elects to
dispose of more than 50% of its initial interest in a Subject Property, or, in
the event it elects to resign as Operator under the Joint Operating Agreement,
Cheniere shall notify Participant of its intent and, if requested, will vote for
or support Participant as Operator.
If the farmout agreement or other agreement pursuant to which the
Program acquires drilling rights provides that a Joint Operating Agreement other
than that provided for herein shall govern operations on a Subject Property, the
Parties agree the Area of Mutual Interest provided for in Section 4.4 applicable
to such Subject Property shall nonetheless remain in effect in accordance with
its terms.
7
Section 4.6 Program Interests; Acquisition Costs; Burdens
A. All rights in and to the Target Blocks and all Subject Property
acquired pursuant to this Agreement, not including the Excluded Target Blocks,
shall be owned 50% by Samson and 50% by Cheniere.
B. All costs, as set forth below, of Target Blocks shall be borne [*]
by Samson and [*] by Cheniere.
(i) Lease bonuses, rentals, and option payments (the acquisition
costs)
(ii) The costs of drilling the Initial Well, as defined below, to
casing point, limited to the original AFE containing a 15% contingency. "Initial
Well" is defined as the first well, and any substitutes therefore, drilled on
each Subject Property.
X. Xxxxxx shall bear fifty percent (50%) of the following overriding
royalties on all Presentation Blocks:
(i) A 2% of 8/8th overriding royalty payable to the Cheniere staff,
which override is reduced in proportion to the Program Interest, as defined
below;
(ii) A [*] overriding royalty due under [*].
X. Xxxxxx shall also pay to Cheniere a discovery bonus (the
"Discovery Bonus") in the amount of $100,000 for a discovery of 30 BCFE or
greater, but less than 40 BCFE (computed at one barrel of oil equals 6 MCF of
natural gas) attributable to the interest of the Program, as defined below, or
$150,000 for a discovery of 40 BCFE or greater (computed at one barrel of oil
equals 6 MCF of natural gas), attributable to the interest of the Program,
defined below, based on proved reserves reflected on the reserve report of Xxxxx
Xxxxx prepared as of one year after commencement of production and payable
within 90 days after receipt of such reserve report. The interest of the Program
(sometimes referred to as the Program Interest) shall consist of the initial
working interests of Cheniere and Samson, less any back-in due a farming-out
party.
Section 4.7 Change of Election by Participant
If the Program Manager is able to acquire the leases, farm-out agreements or
drilling rights as described in the Target Blocks Identification Notice but the
terms of such acquisition are materially different than estimated in the Target
Blocks Identification Notice, the Program Manager shall so notify Participant,
specifying the differences and advising Participant it has ten (10) days to
change its election with respect to such Target Blocks. A difference of more
than 10% in any one of the following factors shall be deemed to be material for
the purposes of this
8
paragraph: lease acquisition cost and rentals, net revenue interest, working
interest, or the AFE for the Initial Well dry hole cost.
Section 4.8. Change of Election by Program Manager
Program Manager may elect, for any reason, to not acquire an interest in a
Presentation Block, in which case, if Participant elects to proceed with the
acquisition of the same, [*].
ARTICLE V
Section 5.1 Liabilities
The obligation and liability of the Parties, with respect to any and all
liabilities in connection with the business of the Program, exclusive of the
costs related to services performed pursuant to Sections 3.2 and 3.3, but
specifically inclusive of the costs incurred pursuant to the last sentence of
Section 3.3, shall be as follows:
Samson 50%
Cheniere 50%
---
100%
9
Section 5.2 Program Management Fee:
Participant shall pay the Program Manager a Program Management Fee for
managing the Program and providing the services set forth in Section 3.2 and
Section 3.3 above (exclusive of the last sentence of Section 3.3). The amount
of the Program Management Fee shall be $4,140,000 payable in 18 monthly
installments of $230,000 each, the first installment being due five days after
execution of this Agreement and thereafter payable on the first day of each
month, with the final installment being due August 1, 2001.
Section 5.3 Failure to Pay, Failure to Perform:
In the event Participant fails to timely pay the Program Manager Fee pursuant
to Section 5.2, Program Manager shall give such Party written notice of such
failure and, unless, the fees are paid within fifteen (15) days following
receipt of such notice, such Party shall be deemed to be in default (the
"Default") of its obligations hereunder. In addition to all other remedies
available at law or in equity, the defaulting Party shall forfeit all of its
rights in and to the Program and any Prospects, potential Prospects and Target
Blocks, but shall not forfeit its interest in any Subject Properties.
In the event the Program Manager fails to perform its Program obligations
set forth herein, the Participant shall give the Program Manager written notice
of such failure and, unless the Program Manager cures such failure within
fifteen (15) days following receipt of such notice, the Program Manager shall be
deemed to be in default of its obligations hereunder. Upon such default, the
Participant shall no longer be subject to its obligations, duties and
liabilities assumed hereunder and shall further retain all other remedies
available at law or in equity.
Section 5.4 Books and Records:
The Program Manager shall keep or cause to be kept adequate books and records
reflecting all financial activities of the Program in accordance with generally
accepted accounting procedures. Such books and records shall be available for
inspection and audit by Participant or their duly authorized representatives (at
the expense of Participant) during business hours at the office of the Program
Manager; provided, however, the Program Manager shall not be required to
maintain any such books or records for a period in excess of six (6) years from
the date of preparation or receipt thereof. Prior to disposing of any books or
records, the Program Manager shall give notice of its intent to dispose or
destroy the same to Participant who may within fifteen (15) days of such notice
elect to take possession of said books and records. Said records shall be
immediately delivered by the Program Manager to said Participant at
Participant's cost and expense. The Program Manager shall not, without the
prior written consent of Participants, make, execute or deliver an assignment
for the benefit of creditors or
10
contract to sell, mortgage or otherwise dispose or encumber any Subject Property
or assets which were acquired whole or in part with funds provided by
Participant.
ARTICLE VI
Section 6.1 Term of Program:
The term of this Agreement (the "Term") shall be for a period of eighteen (18)
months commencing effective as of March 1, 2000 and terminating on August 31,
2001.
ARTICLE VII
Section 7.1 Samson's Representations:
Samson hereby represents, warrants and agrees that it has the right, power and
authority to enter into this Agreement, to become a Party and to perform its
obligations hereunder, and that this Agreement is a legal, valid and binding
obligation of Samson. Samson warrants with respect to its execution of this
Agreement and its acquisition of any interest in the Subject Property as
follows:
(i) Samson is able to bear the economic risk of its investment in the
Program. Samson has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of this
investment. Samson recognizes that investment in the Program involves a high
degree of risk.
(ii) Samson has had an opportunity to ask questions of and to receive
answers from the Program Manager, or a person or persons on its behalf,
concerning the terms and conditions of this investment, and all documents,
records, books and other information pertaining to the investment in the Program
and/or Subject Properties.
(iii) The Interest will not be sold or transferred by Samson in
violation of the Securities Act of 1993 (the "Act"), and the financial condition
of Samson is such that it is able to hold the Interest for an indefinite period
of time. Samson is aware that the offering and sale of the Interest has not been
registered under the Act, that the Interest must be held indefinitely unless it
is subsequently registered or an exemption from such registration is available
and that neither the Program Manager nor the Program is under any obligation to
register the Interest nor does it have any present intention to do so;
(iv) Samson is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated by Securities and Exchange Commission under the
Act.
11
(v) Samson is qualified with the Minerals Management Service to hold
title to federal offshore leases in the Gulf of Mexico.
(vi) Samson is fully aware of the terms of the Master License Agreement
(exclusive of Supplement Agreement No. 1 dated June 9, 1999) to be utilized in
the granting of all Licenses covering the Fairfield Data under the terms of the
agreements relating to the same specified in Section 1.1 hereof. In compliance
with the provisions of the Master License Agreement, Cheniere and Samson have
executed contemporaneously herewith an acknowledgment to Fairfield Industries
Incorporated that Cheniere has fully advised Samson of the restrictions on the
use of the Fairfield Data.
Section 7.2 Cheniere's Representations:
Cheniere hereby represents, warrants and agrees that it has the right, power
and authority to enter into this Agreement, to become a Party and to perform its
obligations hereunder, and that this Agreement is a legal, valid and binding
obligation of Cheniere. Cheniere also warrants with respect to its execution of
this Agreement and its acquisition of any interest in the Subject Property as
follows:
(i) Cheniere is able to bear the economic risk of its investment in the
Program. Cheniere has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of this
investment. Cheniere recognizes that investment in the Program involves a high
degree of risk.
(ii) The Interest will not be sold or transferred by Cheniere in
violation of the Securities Act of 1993 (the "Act"), and the financial condition
of Cheniere is such that it is able to hold the Interest for an indefinite
period of time. Cheniere is aware that the offering and sale of the Interest has
not been registered under the Act, that the Interest must be held indefinitely
unless it is subsequently registered or an exemption from such registration is
available and that neither the Program Manager nor the Program is under any
obligation to register the Interest nor does it have any present intention to do
so;
(iii) Cheniere is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by Securities and Exchange Commission under
the Act.
(iv) Cheniere is qualified with the Minerals Management Service to hold
title to federal offshore leases in the Gulf of Mexico.
(v) The Master Service Agreement is in full force and effect and neither
Fairfield nor the Program Manager is in breach of same. The Supplement Agreement
No. 1 dated June 9, 1999 contains no provisions, other than those taken into
account herein, that have or could have an adverse economic consequence to the
Program.
12
(vi) Cheniere has fully advised Samson of the restrictions on the use of
the Fairfield Data.
Section 7.3 Confidentiality
Neither the financial terms of this Agreement nor any geophysical, geological,
engineering, technical, production, test or other data resulting from the
conduct of the business of the Program shall be given to or made available to
any person or entity which is not a Party or a director, officer or employee of
a Party, unless otherwise agreed to by the Parties, except that this prohibition
shall not apply to disclosure to the parent or any affiliated corporation of any
Party and shall not apply to a disclosure of information, including press
releases and public notices, which is (i) required by any stock exchange on
which the shares of Party and/or its parent company are listed, (ii) required
for the purpose of review by private engineering firm(s) for purposes of
preparing reservoir and other similar evaluations or for purposes of obtaining
financing from a reputable financial institution, (iii) required by a private
geological or geophysical consultant for purposes of preparing a technical
evaluation of a Prospect, (iv) required by a pipeline in connection with
negotiations for a gas purchase contract, (v) required in order to comply with
the provisions of this Agreement, (vi) made to a third party to whom any Party
desires to sell all or a portion of its interest in a Subject Property, provided
that in all cases above the recipient of any such information shall have first
agreed in writing to keep such information confidential. Notwithstanding
anything to the contrary expressed or implied herein, the Program Manager is
authorized and directed to furnish or to make disclosure of any information as
may be necessary to comply with the rules and regulations of governmental
authorities having jurisdiction in the Subject Properties.
Section 7.4 Area of Mutual Interest; Non-Competition Obligation:
A. Effective as of the date of this Agreement, the Parties establish an Area
of Mutual Interest ("AMI") consisting of the entirety of the Area of Operation
less and except the excluded blocks specified on Exhibit D attached hereto.
Said AMI shall terminate six (6) months after the expiration of the Term or, as
to lease sale blocks only, after the final award of leases that have been bid on
by either of the Parties at the first Federal Offshore Louisiana Lease Sale
after the expiration of the Term but, in any event, twelve (12) months after the
expiration of the Term. During the term of the AMI, if either Party (the
"Acquiring Party") acquires a lease, farm-out, or drilling right in the AMI, it
shall immediately notify the other Party, (the "Non-Acquiring Party"), which
notice shall specify the interest acquired and the terms of the acquisition,
including the cost of acquisition. The notice shall contain an offer to present
the technical data relating to the acquisition at a specified time not less than
five (5) business days or more than ten (10) business days after the date of the
notice. The Non-Acquiring Party shall have ten (10) business days after the
date for the presentation of the technical data to make the election provided in
this section. If Samson is the Non-Acquiring Party it shall have the election
to acquire 50% of said interest on the terms set forth in Section 4.6. If
Cheniere is the Non-
13
Acquiring Party it shall have the election to acquire 50% of said interest by
paying [*] of the acquisition costs as set forth in Section 4.6 and the Initial
Well shall be drilled pursuant to Section 4.6.
B. Notwithstanding Section 7.4 A, if either Party acquires a producing
field (as defined below) in the Area of Mutual Interest, the following shall
apply to interests acquired within the Area of Mutual Interest:
The Acquiring Party shall offer the other Party (the Non Acquiring
Party) 50% of the interest acquired in exchange for payment by the Non-Acquiring
Party of 50% of the fairly allocated cost of acquisition and the Initial Well
thereon shall be drilled on a non-promoted, heads-up basis. Additionally, the
Non-Acquiring Party shall reimburse the Acquiring Party for 50% of its direct
third party out-of-pocket costs incurred in connection with such acquisition.
Notwithstanding Section 4.5, the Acquiring Party shall have the right to be
Operator.
For the purposes of this Section 7.4.B, an interest shall be deemed to
be a producing field if it has not been previously designated as a Target Block
and if:
(a) one or more of the blocks comprising the field has existing
producing xxxxx, xxxxx capable of production or proved oil and/or gas
reserves; and
(b) the fairly allocated valuation of the field, after deducting any
contingent liabilities for well plugging, platform and pipeline removal and
ocean bottom clean-up, is more than $2,000,000.
If the parties cannot agree on (a) or (b) above, the Non-Acquiring
Party may challenge, in which case the determination of (a) and (b) shall
be made by Xxxxx Xxxxx at the cost of the Non-Acquiring Party. Such
determination by Xxxxx Xxxxx shall not determine the purchase price to be
paid by the Non-Acquiring Party, which shall be based on the Acquiring
Party's fairly allocated valuation.
The Xxxxx Xxxxx evaluation shall utilize the average of the ensuing
twelve months closing NYMEX future prices in existence on the effective
date of the acquisition, appropropriate costs and a 10% discounted present
value.
C. Notwithstanding the provisions of Section 7.4 A. above, if
Participant acquires an interest in an industry generated prospect on a promoted
basis without having solicitated such interest, Participant shall offer Program
Manager a 50% interest in such interest in exchange for payment by Program
Manager of 50% of the fairly allocated cost of acquisition and the Initial Well
thereon shall be drilled on a non-promoted, heads-up basis. The foregoing
sentence shall apply to only the first six (6) such prospects acquired by the
Participant. For each such prospect after the first six (6) such prospects
acquired by the Participant, the Program Manager shall be offered a 50% interest
in such prospect in exchange for payment by the Program Manager of 50% of the
fairly allocated cost of acquisition and the Initial Well thereon shall be
drilled pursuant to Section 4.6.
14
D. Nothing herein contained shall prohibit or restrict either Party from
conducting oil and gas exploration, development or production operations,
pipeline operations or any other business for its own account that:
(i) is located outside the Area of Operations, or is excluded therefrom
by Exhibit D, or
(ii) relates to properties that were excluded from the Program by the
other Party as a result of its actions or inaction hereunder, and in any such
event, such Party shall have no obligation or accountability to the other Party
for any such activities.
E. In the event of conflict between the provisions of Section 7.4 and
Sections 4.4, the provisions of Section 4.4 shall control.
Section 7.5 Winding Up:
For a period of six (6) months beginning September 1, 2001, and
terminating February 28, 2002 (the "Extended Term"), the Program Manager, when
it identifies offshore blocks that it believes contain economically viable
Prospects, shall give Participant a Target Blocks Identification Notice pursuant
to Section 4.1. The first such Target Blocks Identification Notice shall be
delivered to Participant within ten (10) working days after the end of the Term.
The following terms shall govern the respective rights and obligations of the
Parties during such Extended Term with respect to such Target Blocks:
(i) All of the provisions of Article IV hereof shall be applicable
during such Extended Term to such Target Blocks except as set forth in this
Section 7.5.
(ii) No Program Management fee shall be payable during the Extended
Term. Instead, Participant shall pay a $25,000 prospect fee at the time it
elects to participate in a Target Blocks and an additional $75,000 fee at the
time the drill site on the Target Blocks becomes a Subject Property. The $75,000
fee shall be proportionately reduced in the event less than a full 100% working
interest is acquired by the Program in the Target Blocks.
(iii) The Extended Term shall, as to lease sale blocks only, continue
until after the final award of leases that have been bid on by either Party at
the next Federal Offshore Louisiana Lease Sale after the expiration of the Term,
or six (6) months after the Term, whichever is later, but in no event longer
than twelve (12) months from the expiration of the Term.
Section 7.6 Assignment by the Parties:
Neither Party may sell, assign, convey or otherwise transfer its
interest in the Program to any party other than a Related Party without the
written consent of the other Party. Each Party
15
may sell its interest in the Subject Properties, however, such sale shall not
relieve the selling party of its obligations under this Agreement, the Joint
Operating Agreement, or any other agreements, contracts and obligations
applicable to the Subject Properties at the time the same are conveyed, and
provided further that if the interest of a Party in the Subject Properties
becomes owned by five (5) or more Parties, the owners of said interests agree,
upon request by Program Manager, to appoint a single nominee or representative
for all such owners.
Section 7.7 Successors and Assigns:
Subject to the provisions of Section 7.6, the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the heirs,
successors, personal and legal representatives, and assigns of the Parties.
ARTICLE VIII
Section 8.1 Notices
All notices or other communications required or permitted to be given pursuant
to this Agreement shall be in writing and shall be considered as received when
deposited in the U.S. Mail, postage prepaid, and transmitted by facsimile
transmission. All notices shall be addressed to the Parties at their respective
addresses and facsimile numbers set forth below or at such other addresses and
facsimile numbers as may have been theretofore specified by written notice
delivered in accordance herewith.
If to Cheniere:
Cheniere Energy, Inc.
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxx X. Xxxxxxxxx
Fax (000) 000-0000
If to Samson:
Samson Offshore Company
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
16
Attn: Xxxx Xxxxxxxxx
Fax (000) 000-0000
Section 8.2 Individual Obligations:
The obligations, duties, and liabilities of the Parties shall be several and
not joint or collective; and nothing contained herein is intended to create, nor
shall ever be construed as creating, a partnership of any kind, joint venture,
association, or other character of business entity recognizable in law for any
purpose.
Section 8.3 Waiver
Neither failure nor any delay on the part of any Party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, or of any
other right, power or remedy; nor shall any single or partial exercise of any
right, power or remedy preclude any further or other exercise thereof, or the
exercise of any other right, power or remedy. No waiver of any of the
provisions of this Agreement shall be valid unless it is in writing and signed
by the party against whom it is sought to be enforced, nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
Notwithstanding the foregoing, acceptance by Program Manager of a late payment
shall constitute a waiver of the default created by a Participant's failure to
make timely payment.
Section 8.4 Law Governing:
This Agreement shall be governed by and construed in accordance with the laws
of The State of Texas.
Section 8.5 Controlling Documents:
In the event of a conflict between the terms of this Agreement and the terms
of any of the Exhibits attached hereto, the terms of this Agreement shall
control.
Section 8.6 Press Releases
No public announcement or statement regarding the matters contained in this
Agreement
17
or any of the xxxxx drilled hereunder shall be made or released without the
approval of the Parties hereto or those Parties participating in the operation
which is the subject of such public announcement or statement. No public
announcement or statements about a specific well shall be made until all testing
in a well is completed. Any proposed public announcement or statement regarding
a specific well shall contain at a minimum the following information:
a. Name of well
b. OCS block
c. Location of well
c. Tested interval(s)
d. Test results
e. Development/confirmation plans, if appropriate
f. Participants and percentages
g. Acreage controlled, if appropriate
Either Party may elect to exclude its name from a proposed public
announcement or statement and thus remove itself from the approval process.
Program Manager will coordinate the approvals of any proposed public
announcement or statement, unless Program Manager has elected to be excluded
from any such proposed public announcement or statement, in which case the
Party proposing such public announcement or statement shall coordinate such
approval process. Notwithstanding anything herein to the contrary, Program
Manager may make such public announcements as it deems appropriate in the event
of an emergency or imminent harm to people, property or environment without
prior consultation with Participant. In addition, any Party may make such
public announcements as required by the SEC or other governmental agency,
without consultation with the other Party, but shall furnish a copy of such
release to the other Party at the time such release is made.
Section 8.7 Severability:
In the event any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
provision of this Agreement, which other provisions shall remain in full force
and effect.
18
Section 8.8 Entire Agreement:
This Agreement constitutes the entire agreement between the parties hereto
with respect to the transactions described herein, superseding all prior
negotiations, discussions, agreements and understandings, whether oral or
written, relating to such subject matter. This Agreement may not be amended and
no rights hereunder may be waived except by a written document signed by the
duly authorized representative of the party to be charged with such amendment or
waiver. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided. Each party acknowledges that it has read and understands
the terms of this Agreement and has had the opportunity to consult with legal
counsel of its choice concerning the meaning and effect thereof. Neither party
has relied upon the other party or its counsel or advisers with respect to the
meaning or effect of such an agreement or provision.
Section 8.9 Surviving Obligations:
In addition to the specified terms of the Areas of Mutual Interest and Non-
Competition Agreement provided for in Sections 4.4 and 7.4, the provisions of
Sections 5.4, 7.1, 7.2, 7.3, 7.5 and 8.6 shall survive the expiration of the
Extended Term and remain binding obligations of the parties.
Section 8.10 Counterparts:
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original for all purposes.
19
In witness whereof, this Agreement is executed the 10th day of March, 2000,
effective as of the date first hereinabove set forth.
WITNESSES: CHENIERE ENERGY INCORPORATED
_________________________ _______________________________
BY: XXXXXXX X. XXXXXX
TITLE: President, Chief Executive Officer
SAMSON OFFSHORE COMPANY
_________________________ _______________________________
BY: XXXXXX X. XXXXXX
TITLE: Attorney-in-Fact
20
