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 Gas, Inc., a Colorado corporation
("Horizon"), effective as of November 2, 2004 (the "Effective Date");
WITNESSETH:
WHEREAS, pursuant to the terms of the "Subject Leases" (as defined herein) and
to the extent set forth therein, Dolphin owns existing "Xxxxx" (as defined
herein) located in Wyoming and has the right to acquire additional interests in
the Subject Leases by drilling additional Xxxxx;
WHEREAS, Horizon desires to expend up to U.S. $30,000,000 in order to develop
coal bed methane reserves in the State of Wyoming and, to that end, desires to
participate initially in a "Drilling Program" (as defined herein) allowing
expenditures of up to U.S. $13,000,000 in the drilling of Xxxxx on the Subject
Leases and acquiring of interests therein, on the terms and conditions
hereinafter stated;
WHEREAS, Dolphin is willing to develop its interests in the Subject Leases with
Horizon and to allow Horizon to participate therein with Dolphin on the terms
and conditions hereinafter stated; and
WHEREAS, after the Drilling Program and dependent upon "Available Acreage" (as
defined herein) and other factors, Dolphin is willing to participate up to a
potential maximum of U.S. $17,000,000 with Horizon in developing additional coal
bed methane reserves by drilling Xxxxx on Available Acreage and acquiring
interests in relevant leases;
NOW, THEREFORE, in consideration of the mutual premises and terms set
forth hereinafter, the parties hereto agree as follows:
I.
DEFINITIONS
The capitalized terms used in this Agreement shall have the following
definitions:
1.1 "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.
1.2 "Available Acreage" shall mean leased acreage other than the Program
Acreage located in Sheridan County, Wyoming in which Dolphin has a working
interest, of which Dolphin is the operator and in which Dolphin may assign
a working interest to Horizon free and clear of any liens and encumbrances.
1.3 "Carried Interest" shall mean a Working Interest equal to an undivided
percentage of a One Hundred Percent (100%) Working Interest in any Well and
lease assigned by Dolphin to Horizon, such undivided percentage being
determined by multiplying ninety percent (90%) times Dolphin's Working
Interest times twenty-five percent (25%) and with respect to which Horizon
shall be responsible for any costs, 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 subject Well in the Target Horizon as well as
equipping such 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 all Xxxxx contemplated hereunder, including any
recompletions (or other Subsequent Operations) directly associated with
establishing new production in the shallower coals in the same wellbore,
but specifically excluding any plugging and abandonment operations with
respect
to any Xxxxx. The Carried Interest with respect to a particular Well shall
terminate when that Well is connected to the gathering system pipeline and
would be revived with respect to any Subsequent Operations as provided in
this Section 1.3 above. Except to the 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.
1.4 "CBM" shall mean coal bed gas and related hydrocarbons, if any, produced
from coal seams under this Agreement and specifically from geologic strata
from the surface to the depth provided in the relevant leases.
1.5 "Coal Bed Methane" shall mean CBM.
1.6 "Contract Operator" shall mean the operator engaged by Dolphin to conduct
operations on the Subject Leases.
1.7 "Drilling Program" shall mean the drilling and completion of Xxxxx on the
Program Acreage and the construction of gathering systems and such other
facilities as may be necessary or convenient for the production and sale of
CBM produced from such Xxxxx.
1.8 "Force Majeure" shall mean any act of God, including, but not limited to,
lightning, earthquakes, fires, floods, or tornadoes; strikes, lockouts or
other industrial disturbances; acts 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, orders, regulations
or requirements from a Regulatory Agency; or other events beyond the
reasonable control of the party whose obligations hereunder are affected by
such event.
1.9 "JOA" shall mean any Joint Operating Agreement for which provision is made
herein
1.10 "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."
1.11 "Liens and Encumbrances" shall mean mortgages, deeds of trust, security
agreements, financing statements or other instruments which constitute a
charge, security interest or encumbrance imposed upon the Leasehold
Interest in any of the Subject Leases in favor of a third party.
1.12 "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.
1.13 "Oil and Gas" shall mean oil and gas (including CBM) and other
hydrocarbons.
1.14 "Program Acreage" shall mean that portion of the lands and Subject Leases
described on Exhibit A hereto, which Dolphin and Horizon agree should be
part of the Drilling Program, and which Dolphin will reserve for Horizon
through August 15, 2005.
1.15 "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 a 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.
1.16 "Regulatory Agency" means the applicable governmental agencies of the
United States of America or 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
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Agency, the Wyoming Oil and Gas Conservation Commission, and the Wyoming
Department of Environmental Quality.
1.17 "Second Program" shall mean the drilling and completion of Xxxxx on the
Second Program Acreage and the construction of gathering systems and such
other facilities as may be necessary or convenient for the production and
sale of CBM produced from such Xxxxx.
1.18 "Second Program Acreage" shall mean that portion of Available Acreage which
Dolphin and Horizon agree should be part of the Second Program.
1.19 "Subject Leases" shall mean such oil and gas leases described on Exhibit A
attached hereto and covering the Program Acreage.
1.20 "Subsequent Operations" shall have the meaning ascribed thereto in the
applicable JOA.
1.21 "Target Horizon" shall mean the geologic strata targeted as being
prospective for commercial CBM reserves from the surface to the depth
provided in the relevant leases.
1.22 "Trustee" shall mean either a manager of Horizon Gas, Inc. a Colorado
corporation, or the escrow agent for any limited partnership which is an
affiliate of Horizon Gas, Inc. and to which Horizon Gas, Inc. has assigned
rights hereunder.
1.23 "Term" has the meaning ascribed herein.
1.24 "Well Location Fee" shall mean the U.S. $20,000 fee paid by Horizon to
Dolphin as prescribed herein below. The Well Location Fee shall be subject
to Proportionate Reduction.
1.25 "Xxxxx" shall mean all coal bed methane xxxxx drilled pursuant to this
Agreement.
1.26 "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."
II.
REPRESENTATIONS BY HORIZON
Horizon represents and warrants to Dolphin that:
2.1 It is organized and in good standing in the State of Colorado.
2.2 It has the corporate power and authority to enter into this Agreement and
the transactions contemplated hereunder.
2.3 Execution and delivery of this Agreement 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.
2.4 This Agreement is binding and enforceable in accordance with its terms.
2.5 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.
III.
REPRESENTATIONS BY DOLPHIN
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Dolphin represents and warrants to Horizon that:
3.1 It is duly organized and in good standing in the State of Nevada.
3.2 It is authorized to do business in the State of Wyoming.
3.3 It has the corporate power and authority to enter into this Agreement and
the transactions contemplated hereunder.
3.4 Execution and delivery of this Agreement 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.
3.5 This Agreement is binding and enforceable in accordance with its terms.
3.6 It has not engaged any broker, finder or financial advisor for this
transactions for which Horizon would be liable for any fees or other
compensation or otherwise.
3.7 Any Working Interest in the Subject Leases which it assigns to Horizon
shall be free and clear of any and all Liens and Encumbrances created by,
through or under it. It is understood that the Subject Leases are subject
to liens as of the date hereof and that Dolphin will attempt to obtain
releases of those liens prior to the completion of due diligence by
Horizon.
IV
DUE DILIGENCE AND COMMITMENT
4.1 For a period of up to sixty (60) days from the Effective Date hereof,
Dolphin agrees to cooperate with Horizon in a due diligence investigation
of the Program Acreage and the Subject Leases and to cooperate fully toward
a complete evaluation of the Drilling Program satisfactory to both parties.
In addition, Dolphin will identify for Horizon a minimum of 32 sites, which
will be drilled in the Drilling Program. In the conduct of such review,
Horizon 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.
4.2 Within fifteen (15) days of completion of the review provided for in the
preceding paragraph, Horizon shall notify Dolphin in writing of its
election to participate in the Drilling Program on the terms set forth
herein or to decline to do so. In the event that Horizon elects not to
participate in the Drilling Program, this Agreement shall terminate as to
both parties, and, subject to the provisions hereof, neither party shall
have any 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 Drilling Program, which shall be
binding on both parties under the terms and conditions set forth herein.
Failure to timely elect shall be deemed an election not to participate.
4.3 Within ten (10) days of the election of Horizon to participate in the
Drilling Program, the parties shall enter into JOA on AAPL Form 610, which,
among other things, shall provide for electing joint loss of title,
insurance provisions meeting industry standards, 1984 XXXXX Accounting
Procedure with drilling and producing rates competitive with those charged
in the area, a gas balancing agreement with volumetric 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. Horizon shall have the right to review and audit
all of Dolphin's accounting records in accordance with the XXXXX Accounting
Procedure attached as Exhibit C to the JOA.
V
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COSTS
5.1 If Horizon elects to participate in the Drilling Program, Horizon shall,
within fifteen (15) days of completion of the review provided for in
Section 4.1 above and receipt of notice from Dolphin that it has received
drilling permits for three Xxxxx on the Program Acreage, cause to be
delivered to Dolphin a statement by the Trustee that Horizon has on account
in immediately available funds a minimum sum of U.S. $517,000, which amount
is ninety percent (90%) of the estimated amount to drill, complete and
operate three Xxxxx through de-watering.
The estimated costs are determined by multiplying ninety percent (90%)
times the sum of the estimated costs of drilling a Well ($150,000), the
Well Location Fee ($20,000 per Well), and the estimated cost of operations
through de-watering ($20,000). The actual costs to Horizon shall be
adjusted to reflect the true costs associated with each Well when those
costs are determined and verified and Horizon will cause payments to be
made to Dolphin in accordance with the JOA and Accounting Procedures. In
the event Horizon is unable to pay such adjusted costs, its Working
Interest in the Xxxxx will be reduced proportionately.
5.2 After Horizon has met its requirements under Section 5.1 above, it may
elect on a Well by Well basis to participate in the drilling of additional
Xxxxx in the Drilling Program. Within ten (10) days of notification by
Dolphin that it intends to drill a Well in the Drilling Program and that it
has a drilling permit, Horizon shall cause the Trustee to notify Dolphin
that Horizon has available in immediately payable funds the sum of U.S.
$171,000, and Horizon shall make payments to Dolphin as provided in Section
5.1 above.
5.3 With the exception of the Carried Interest and to the extent of its Working
Interest, Horizon shall enjoy the same benefits and suffer the same
liabilities concerning the Xxxxx as Dolphin.
VI
DRILLING PROGRAM
6.1 The Program Acreage identified and reserved by Dolphin shall consist of a
minimum of thirty-two (32) drill site spacing units with the expectation of
being able to drill two (2) Xxxxx per spacing unit for a total of
sixty-four (64) Xxxxx. Dolphin shall drill a Well at each legal location
where drilling is feasible. Upon reaching the total depth so drilled, each
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 Well, the timing and feasibility of drilling, and the anticipated
completion depth of the Target Horizon. The final decision in the absence
of such agreement will be made in accordance with the JOA.
6.2 Within ten (10) days of receipt of any payments provided in Sections 5.1
and 5.2 above, Dolphin will assign and convey to Horizon sixty - seven and
one - half percent (67.5%) of its Working 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, and Dolphin shall
except and reserve the Carried Working Interest unto itself, its successors
and assigns. Accordingly, although Horizon's Working Interest in the drill
site spacing unit for any Well will be sixty-seven and one-half percent
(67.5%) of Dolphin's Working Interest for such drill site spacing unit
prior to assignment hereunder, Horizon will bear ninety percent (90%) of
the costs attributable to the combined Working Interests of Dolphin and
Horizon in such drill site spacing unit and Well until the Carried Interest
is extinguished. Such assignment shall be on a form acceptable to counsel
for Horizon and 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, all of which shall be subject to Proportionate Reduction. The
parties specifically agree that the Net Revenue Interest to be so delivered
to Horizon will not be less than Seventy-Five Percent (75%), subject to
Proportionate Reduction.
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6.3 Dolphin may, in its sole discretion, drill more than one Well to different
coal seams on each eighty (80) acre drill site spacing unit as permitted by
the applicable well spacing regulations Subject to Proportionate Reduction,
Horizon shall pay Dolphin a Well Location Fee of $20,000.00 for each Well,
including any recompletion or other Subsequent Operations, provided that
the total of Well Location Fees paid with respect to any particular eighty
(80) acre drill site spacing unit may not exceed $40,000, as proportionally
reduced. Dolphin shall be solely liable for payment of any finder's fee or
well location fees payable to Contract Operator and/or other service
providers.
6.4 Except as to any Working Interest in which Horizon elected to participate
and which may be subsequently purchased by Dolphin, Horizon shall be liable
and responsible to Dolphin as operator to the extent of its Working
Interest for the entire cost of drilling, testing and completion operations
on Xxxxx as well as for Subsequent Operations and operating expenses
(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.
6.5 All geologic, engineering, land and other data pertaining to the Drilling
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 Subsequent
Operations.
VII
SUBSEQUENT ELECTIONS
7.1 If on or before February 28, 2005, Horizon has obtained funding for and
committed a minimum of U.S. $4,000,000 to the Drilling Program, Dolphin
will, not later than March 31, 2005 propose the Second Program and,
provided that it has sufficient Available Acreage at the time of such
proposal, reserve the Second Program Acreage through December 31, 2005.
The Second Program Acreage shall consist of enough acreage and drilling
sites to permit Horizon to expend up to U.S. $17,000,000 in the Second
Program unless Horizon requests a smaller program or unless there is not
adequate Available Acreage. If Horizon has not been successful in raising
enough funds in order to commit U.S. $4,000,000 to the Drilling Program by
February 28, 2005, Dolphin will not reserve any acreage for the Second
Program and Horizon's participation in the Second Program will be
determined in accordance with Section 7.3 below.
7.2 In the event that the Second Program is determined in accordance with
Section 7.1 above, it may be subsequently reduced if, (i) by August 15,
2005, Horizon has not committed U.S. $13,000,000 to the Drilling Program
or (ii) Horizon requests a reduction in its commitment to the Second
Program or (iii) Horizon is unsuccessful in raising adequate capital by
December 31, 2005, to meet its then commitment in the Second Program. In
the first instance, if Horizon's commitment to the Drilling Program is
less than U.S. $13,000,000, Dolphin may reduce the Second Program Acreage
to an amount sufficient for Horizon to expend up to the amount expended in
the Drilling Program. In the last instance, Horizon and Dolphin shall
consult to determine the scope of a realistic Second Program.
7.3 If the Second Program is not determined in accordance with Section 7.1
above, within thirty (30) days of cementing of casing of the last Well in
the Drilling Program, Horizon shall elect in writing whether or not it
chooses to proceed with the Second Program and, if so, the number of Xxxxx
it is willing to fund in the Second Program. Within twenty (20) days of
receipt of Horizon's election, Dolphin shall advise Horizon with regard to
the Available Acreage, if any, for the Second Program. If Dolphin has
Available Acreage, it shall propose the Second Program, provided that
Dolphin shall not be obligated to provide more drilling locations for the
Second Program than were funded by Horizon in the Drilling Program, nor
will Dolphin be required to provide more drilling locations than would be
required to cause Horizon's funding the Drilling to exceed Thirty Million
Dollars (U.S. $30,000,000).
7.4 For a period of up to sixty (60) days from the date when Dolphin proposes
the Second Program to Horizon, including the designation of the Second
Program Acreage that will be subject to the Second
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Program, Dolphin agrees to cooperate with Horizon in a due diligence
investigation of the leases covering the designated Available Acreage and
to cooperate fully toward a complete evaluation of the Second Program
satisfactory to both parties. In the conduct of such review, Horizon 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.
7.5 Within fifteen (15) days of completion of the review provided for in the
preceding paragraph, Horizon shall notify Dolphin in writing of its
election to participate in the Second Program on the terms set forth
herein, or decline to do so. In the event that Horizon elects not to
participate in the Second Program, this Agreement shall terminate as to
both parties, and, subject to the provisions hereof, neither party shall
have any further rights or obligations under this Agreement other than as
may remain with respect to the Drilling Program. In the event that only
Dolphin elects to participate, all rights, titles, interests, benefits and
burdens associated with the Second Program shall become vested solely in
Dolphin. In the event that both parties elect to participate, their
respective elections shall be deemed a commitment to participate in the
Second Program, which shall be binding on both parties under the terms and
conditions set forth herein. Failure to timely elect shall be deemed an
election not to participate.
7.6 Within ten (10) days of the election of Horizon to participate in the
Second Program, the parties shall enter into a JOA on AAPL Form 610, which,
among other things, shall provide for electing joint loss of title,
insurance provisions meeting industry standard, 1984 XXXXX Accounting
Procedure with drilling and producing rates competitive with those charged
in the area, a gas balancing agreement with volumetric 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. Horizon shall have the right to review and audit
all of Dolphin's accounting records in accordance with the XXXXX Accounting
Procedure attached as Exhibit C to the JOA
VIII
SECOND PROGRAM
8.1 In the event that both parties agree to participate in the Second Program,
the parties shall consult with each other as to location and timing of the
drilling of Xxxxx, but in the absence of agreement, the decision shall be
made in accordance with the JOA. Within ten (10) days of notification that
Dolphin intends to drill a particular Well, Horizon shall cause the Trustee
to notify Dolphin that Horizon has available in immediately payable funds
the sum of One Hundred and Seventy-One Thousand Dollars ($171,000), subject
to the Well Location Fee limitations set forth in Section 8.4 below and
that Horizon will remain current on all xxxxxxxx from Dolphin. Drilling of
the Xxxxx shall be performed at such locations, at such times, and under
such conditions as Dolphin shall in its sole judgement deem advisable.
8.2 Except to the extent otherwise provided herein, all operations on a Well
shall be conducted under the terms of the applicable JOA, including
Subsequent Operations, and the cost, risk and expense of all Subsequent
Operations with respect to which both parties elect to participate shall be
paid by both Dolphin and Horizon under any election to participate in the
Second Program, except that Horizon alone will bear the costs associated
with the Carried Interest.
8.3 With respect to each Well or Subsequent Operation thereon which Horizon
drills hereunder, either as a producer or as a dry hole, Dolphin will
assign and convey to Horizon sixty - seven and one-half percent (67.5%) of
its Working Interest in 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 operations to all depths covered by the Subject
Leases. Such assignment and conveyance shall be on such form acceptable to
counsel for Horizon, and shall be subject to Dolphin's reservation of the
Carried Interest, royalties, overriding royalties and other burdens in
effect and of record as of the date Dolphin designates the Available
Acreage for the Second Program as provided in Article VII above. The
Carried Interest shall be subject to Proportionate Reduction. Accordingly,
although Horizon's
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Working Interest in the drill site spacing unit for any Well will be
sixty-seven and one-half percent (67.5%) of Dolphin's Working Interest for
such drill site spacing unit, Horizon will bear ninety percent (90%) of the
costs attributable to the combined Working Interests of Horizon and Dolphin
in such drill site spacing unit and Well until the Carried Interest is
extinguished. The parties specifically agree that the Net Revenue Interest
to be delivered to Horizon will not be less than Seventy-Five Percent
(75%), subject to Proportionate Reduction.
8.4 Dolphin and Horizon may drill more than one Well to different coal seams on
the same eighty (80) acre drill site spacing unit as permitted by the
applicable well spacing regulations. Subject to Proportionate Reduction,
Horizon shall pay Dolphin a Well Location Fee of ($20,000) for each Well,
including any recompletion or other Subsequent Operations, provided that
the total Well Location Fees paid with respect to any particular eighty
(80) acre drill site spacing unit may not exceed ($40,000). Dolphin shall
be solely liable for payment of any finder's fee or well location fees
payable to Contract Operator and/or other service providers.
8.5 Except as to any Working Interest in which Horizon elected to participate
and which may be subsequently purchased by Dolphin, Horizon shall be liable
and responsible to Dolphin as operator to the extent of its Working
Interest for the entire cost of drilling, testing and completion operations
on Xxxxx, as well as for Subsequent Operations and operating expenses
(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.
8.6 All geologic, engineering, land and other data pertaining to the Second
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 Subsequent
Operations.
IX
NOTICES
All notifications to be delivered hereunder shall be made as follows:
Horizon Gas, Inc.
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention : Xxxx Xxxxxxxx
Phone : 000-000-0000
Fax : 000-000-0000
Dolphin Energy Corporation
0000 00XX Xxxxxx, Xxxxx 000
Xxxxxx, Xx 00000
Attention: Xxxxx Xxxxx
Phone: 000-000-0000
Fax:000-000-0000
X
CONFIDENTIALITY
10.1 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:
8
(1) to an Affiliate, provided such Affiliate maintains
confidentiality as provided in this Article X;
(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:
10.2 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 judgment, 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.
10.3 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.
10.4 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.
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XI
TERM AND TERMINATION
11.1 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 hereunder.
11.2 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; or
(3) 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), or (3), 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.
11.3 The obligations of Dolphin and Horizon which by their nature extend past
the Term hereof shall survive the termination of this Agreement for a
period of one (1) year after the Termination Date.
XII
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 them. Notwithstanding 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 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 l, Subtitle "A", of the
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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.
XIII
GENERAL PROVISIONS
13.1 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.
13.2 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.
13.3 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.
13.4 This Agreement represents the entire agreement of the Parties with
respect to the subject matter hereof, all previous agreements and
communications, having been merged and integrated into the terms hereof.
13.5 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.
13.6 The captions and headings 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.
13.7 In connection with this Agreement and the transactions contemplated by
it, each party will execute and deliver 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.
13.8 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.
13.9 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.
13.10 Neither party may assign all or any part of its rights 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, ASSIGN
ALL OF ITS RIGHTS
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AND OBLIGATIONS UNDER THE DRILLING PROGRAM OR THE SECOND PROGRAM TO AN
AFFILIATE WITHOUT OBTAINING ANY CONSENT FROM THE OTHER PARTY.
13.11 In the event of any conflict or ambiguity in any of the terms or
conditions of the Subject Leases, the Lease Agreement or 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, including any
Exhibits thereto, the following order of precedence shall apply: (i) the
Subject Leases; (ii) this Agreement; (iii) the Exhibits to this Agreement;
(iv) the JOA; and (v) 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: November 2, 2004 Dolphin Energy Corporation
-----------------------
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx
Chief Operating Officer
Date: November 2, 2004 Horizon Gas, Inc.
------------------------
By: /s/ Xxxx H.E. Trabandt
------------------------------------
Xxxx H.E. Xxxxxxxx
President
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State of Colorado
-----------------------
County of Denver
-----------------------
The foregoing instrument was acknowledged before this 2nd day of
November 2004, by Xxxxx X. Xxxxx as COO of Dolphin Energy Corporation.
/s/ H. Xxxxxx Xxxxx
----------------------------------
Notary Public
My Commission Expires: 12/19/2007
-------------------
State of Colorado
-------------------------
County of Denver
-------------------------
The foregoing instrument was acknowledged before this 2nd day of
November 2004, by Xxxx Xxxxxxxx as President of Horizon Gas, Inc.
/s/ H. Xxxxxx Xxxxx
----------------------------------
Notary Public
My Commission Expires: 12/19/2007
-------------------
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