EXHIBIT (II) FORM OF DRILLING AND OPERATING AGREEMENT FOR ATLAS RESOURCES PUBLIC #17-2007(A) L.P. [ATLAS RESOURCES PUBLIC #17-2008(B) L.P.] [ATLAS RESOURCES PUBLIC #17-2008(C) L.P.] DATED NOVEMBER 5, 2007
EXHIBIT
10.1
EXHIBIT
(II)
FORM
OF
FOR
ATLAS
RESOURCES PUBLIC #17-2007(A) L.P.
[ATLAS
RESOURCES PUBLIC #17-2008(B) L.P.]
[ATLAS
RESOURCES PUBLIC #17-2008(C) L.P.]
DATED
NOVEMBER 5, 2007
INDEX
Section
|
Page
|
||
1.
|
Assignment
of Well Locations; Representations and Indemnification Associated
with the
Assignment of the Lease; Designation of Additional Well Locations;
Outside
Activities Are Not Restricted
|
1
|
|
2.
|
Drilling
of Xxxxx; Timing; Depth; Interest of Developer; Right to Substitute
Well
Locations
|
3
|
|
3.
|
Operator
- Responsibilities in General; Covenants; Term
|
4
|
|
4.
|
Operator’s
Charges for Drilling and Completing Xxxxx; Payment; Completion
Determination; Dry Hole Determination; Excess Funds and Cost Overruns
–
Intangible Drilling Costs; Excess Funds and Cost Overruns – Tangible
Costs
|
6
|
|
5.
|
Title
Examination of Well Locations; Developer’s Acceptance and Liability;
Additional Well Locations
|
10
|
|
6.
|
Operations
Subsequent to Completion of the Xxxxx; Fee Adjustments; Extraordinary
Costs; Pipelines; Price Determinations; Plugging and
Abandonment
|
11
|
|
7.
|
Billing
and Payment Procedure with Respect to Operation of Xxxxx; Disbursements;
Separate Account for Sale Proceeds; Records and Reports; Additional
Information
|
13
|
|
8.
|
Operator’s
Lien; Right to Collect From Oil or Gas Purchaser
|
15
|
|
9.
|
Successors
and Assigns; Transfers; Appointment of Agent
|
16
|
|
10.
|
Operator’s
Insurance; Subcontractors’ Insurance; Operator’s Liability
|
17
|
|
11.
|
Internal
Revenue Code Election; Relationship of Parties; Right to Take Production
in Kind
|
18
|
|
12.
|
Effect
of Force Majeure; Definition of Force Majeure; Limitation
|
19
|
|
13.
|
Term
|
20
|
|
14.
|
Governing
Law; Invalidity
|
20
|
|
15.
|
Integration;
Written Amendment
|
20
|
|
16.
|
Waiver
of Default or Breach
|
21
|
|
17.
|
Notices
|
21
|
|
18.
|
Interpretation
|
21
|
|
19.
|
Counterparts
|
21
|
|
Signature
Page
|
22
|
||
Exhibit
A
|
Description
of Leases and Initial Well Locations
|
||
Exhibits
A-l through A-7
|
Maps
of Initial Well Locations
|
||
Exhibit
B
|
Form
of Assignment
|
||
Exhibit
C
|
Form
of Addendum
|
THIS
AGREEMENT made this 5th day of November 2007, by and between ATLAS RESOURCES,
LLC, a Pennsylvania limited liability company (hereinafter referred to as
“Atlas” or “Operator”),
and
ATLAS
RESOURCES PUBLIC #17-2007(A) L.P. [Atlas Resources Public #17-2008(B) L.P.]
[Atlas Resources Public #17-2008(C) L.P.], a Delaware limited partnership,
(hereinafter referred to as the “Developer”).
WITNESSETH
THAT:
WHEREAS,
the Operator, by virtue of the Oil and Gas Leases (the “Leases”) described on
Exhibit A attached to and made a part of this Agreement, has certain rights
to
develop the seven (7) initial well locations (the “Initial Well Locations”)
identified on the maps attached to and made a part of this Agreement as Exhibits
A-l through A-7;
WHEREAS,
the Developer, subject to the terms and conditions of this Agreement, desires
to
acquire certain of the Operator’s rights to develop the Initial Well Locations
and to provide for the development on the terms and conditions set forth in
this
Agreement of additional well locations (“Additional Well Locations”) that the
parties may from time to time designate; and
WHEREAS,
the Operator is in the oil and gas exploration and development business, and
the
Developer desires that Operator, as its independent contractor, perform certain
services in connection with its efforts to develop the aforesaid Initial and
Additional Well Locations (collectively the “Well Locations”) and to operate the
xxxxx completed on the Well Locations, on the terms and conditions set forth
in
this Agreement;
NOW
THEREFORE, in consideration of the mutual covenants herein contained and subject
to the terms and conditions hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1.
|
Assignment
of Well Locations; Representations and Indemnification Associated
with the
Assignment of the Lease; Designation of Additional Well Locations;
Outside
Activities Are Not
Restricted.
|
(a)
|
Assignment
of Well Locations.
The Operator shall execute an assignment of an undivided percentage
of
Working Interest in the Well Location acreage for each well to the
Developer as shown on Exhibit A attached hereto, which assignment
shall be
limited to a depth from the surface to the deepest depth penetrated
at the
cessation of drilling operations.
|
The
assignment shall be substantially in the form of Exhibit B attached to and
made
a part of this Agreement. The amount of acreage included in each Initial Well
Location and the configuration of the Initial Well Location are indicated on
the
maps attached to this Agreement as Exhibits A-l through A-7. The amount of
acreage included in each Additional Well Location and the configuration of
the
Additional Well Location shall be indicated on the maps to be attached as
exhibits to the applicable addendum to this Agreement as provided in sub-section
(c) below.
1
(b)
|
Representations
and Indemnification Associated with the Assignment of the
Lease.
The Operator represents and warrants to the Developer
that:
|
(i)
|
the
Operator is the lawful owner of the Lease and rights and interest
under
the Lease and of the personal property on the Lease or used in connection
with the Lease;
|
(ii)
|
the
Operator has good right and authority to sell and convey the rights,
interest, and property;
|
(iii)
|
the
rights, interest, and property are free and clear from all liens
and
encumbrances; and
|
(iv)
|
all
rentals and royalties due and payable under the Lease have been duly
paid.
|
These
representations and warranties shall also be included in each recorded
assignment of the acreage included in each Initial Well Location and Additional
Well Location designated pursuant to sub-section (c) below, substantially in
the
form of Exhibit B attached to and made a part of this Agreement.
The
Operator agrees to indemnify, protect and hold the Developer and its successors
and assigns harmless from and against all costs (including but not limited
to
reasonable attorneys’ fees), liabilities, claims, penalties, losses, suits,
actions, causes of action, judgments or decrees resulting from the breach of
any
of the above representations and warranties. It is understood and agreed that,
except as specifically set forth above, the Operator makes no warranty or
representation, express or implied, as to its title or the title of the lessors
in and to the lands or oil and gas interests covered by said
Leases.
(c)
|
Designation
of Additional Well Locations.
If
the parties hereto desire to designate Additional Well Locations
to be
developed in accordance with the terms and conditions of this Agreement,
then the parties shall execute an addendum substantially in the form
of
Exhibit C attached to and made a part of this Agreement
specifying:
|
(i)
|
the
undivided percentage of Working Interest and the Oil and Gas Leases
to be
included as Leases under this
Agreement;
|
(ii)
|
the
amount and configuration of acreage included in each Additional Well
Location on maps attached as exhibits to the addendum;
and
|
(iii)
|
their
agreement that the Additional Well Locations shall be developed in
accordance with the terms and conditions of this
Agreement.
|
(d)
|
Outside
Activities Are Not Restricted.
It
is understood and agreed that the assignment of rights under the
Leases
and the oil and gas development activities contemplated by this Agreement
relate only to the Initial Well Locations and the Additional Well
Locations. Nothing contained in this Agreement shall be interpreted
to
restrict in any manner the right of each of the parties to conduct
without
the participation of the other party any additional activities relating
to
exploration, development, drilling, production, or delivery of oil
and gas
on lands adjacent to or in the immediate vicinity of the Well Locations
or
elsewhere.
|
2
2.
|
Drilling
of Xxxxx; Timing; Depth; Interest of Developer; Right to Substitute
Well
Locations.
|
(a)
|
Drilling
of Xxxxx.
Operator, as Developer’s independent contractor, agrees to drill, complete
(or plug) and operate seven (7) oil and gas xxxxx on the seven (7)
Initial
Well Locations in accordance with the terms and conditions of this
Agreement. Developer, as a minimum commitment, agrees to participate
in
and pay the Operator’s charges for drilling and completing (or plugging)
the xxxxx and any extra costs pursuant to Section 4 in proportion
to the
share of the Working Interest owned by the Developer in the xxxxx
with
respect to all initial xxxxx. It is understood and agreed that, subject
to
sub-section (e) below, Developer does not reserve the right to decline
participation in the drilling of any of the initial xxxxx to be drilled
under this Agreement.
|
(b)
|
Timing.
Operator shall begin drilling the first well within thirty (30) days
after
the date of this Agreement, and shall begin drilling each of the
other
initial xxxxx for which payment is made pursuant to Section 4(b)
before
the close of the 90th
day after the close of the calendar year in which this Agreement
is
entered into by Operator and the Developer. Subject to the foregoing
time
limits, Operator shall determine the timing of and the order of drilling
the Initial Well Locations.
|
(c)
|
Depth.
All of the xxxxx to be drilled under this Agreement shall be:
|
(i)
|
drilled
and completed (or plugged) in accordance with the generally accepted
and
customary oil and gas field practices and techniques then prevailing
in
the geographical area of the Well Locations; and
|
(ii)
|
drilled
to a depth sufficient to test thoroughly the objective formation
or the
deepest assigned depth, whichever is
less.
|
(d)
|
Interest
of Developer.
Except as otherwise provided in this Agreement, all costs, expenses,
and
liabilities incurred in connection with the drilling and other operations
and activities contemplated by this Agreement shall be borne and
paid, and
all xxxxx, gathering lines of up to approximately 2,500 feet on each
Well
Location in connection with a natural gas well, equipment, materials,
and
facilities acquired, constructed or installed under this Agreement
shall
be owned, by the Developer in proportion to the share of the Working
Interest owned by the Developer in the xxxxx. Subject to the payment
of
lessor’s royalties and other royalties and overriding royalties, if any,
production of oil and gas from the xxxxx to be drilled under this
Agreement shall be owned by the Developer in proportion to the share
of
the Working Interest owned by the Developer in the
xxxxx.
|
(e)
|
Right
to Substitute Well Locations.
Notwithstanding the provisions of sub-section (a) above, if the Operator
or Developer determines in good faith, with respect to any Well Location,
before operations begin under this Agreement on the Well Location,
that it
would not be in the best interest of the parties to drill a well
on the
Well Location, then the party making the determination shall notify
the
other party of its determination and the basis for its determination
and,
unless otherwise instructed by Developer, the well shall not be drilled.
This determination may be based on:
|
3
(i)
|
the
production or failure of production of any other xxxxx that may have
been
recently drilled in the immediate area of the Well Location;
|
(ii)
|
newly
discovered title defects; or
|
(iii)
|
any
other evidence with respect to the Well Location as may have been
obtained.
|
If
the
well is not drilled, then Operator shall promptly propose a new well location
(including all information for the Well Location as Developer may reasonably
request) to be substituted for the original Well Location. Developer shall
then
have seven (7) business days to either reject or accept the proposed new well
location. If the new well location is rejected, then Operator shall promptly
propose another substitute well location pursuant to the provisions of this
sub-section.
Once
the
Developer accepts a substitute well location or does not reject it within the
seven (7) day period, this Agreement shall terminate as to the original Well
Location and the substitute well location shall become subject to the terms
and
conditions of this Agreement.
3. |
Operator
- Responsibilities in General; Covenants;
Term.
|
(a)
|
Operator
- Responsibilities in General.
Atlas shall be the Operator of the xxxxx and Well Locations subject
to
this Agreement and, as the Developer’s independent contractor, shall, in
addition to its other obligations under this Agreement do the following:
|
(i) |
arrange
for drilling and completing (or plugging) the xxxxx and, if a gas
well,
installing the necessary gas gathering line systems and connection
facilities;
|
(ii) |
make
the technical decisions required in drilling, testing, completing
(or
plugging), and operating the xxxxx;
|
(iii) |
manage
and conduct all field operations in connection with the drilling,
testing,
completing (or plugging), equipping, operating, and producing the
xxxxx;
|
(iv) |
maintain
all xxxxx, equipment, gathering lines if a gas well, and facilities
in
good working order during their useful lives; and
|
(v) |
perform
the necessary administrative and accounting functions.
|
In
performing the work contemplated by this Agreement, Operator is an independent
contractor with authority to control and direct the performance of the details
of the work.
(b)
|
Covenants.
Operator covenants and agrees that under this
Agreement:
|
(i)
|
it
shall perform and carry on (or cause to be performed and carried
on) its
duties and obligations in a good, prudent, diligent, and workmanlike
manner using technically sound, acceptable oil and gas field practices
then prevailing in the geographical area of the Well Locations;
|
4
(ii)
|
all
drilling and other operations conducted by, for and under the control
of
Operator shall conform in all respects to federal, state and local
laws,
statutes, ordinances, regulations, and requirements;
|
(iii)
|
unless
otherwise agreed in writing by the Developer, all work performed
pursuant
to a written estimate shall conform to the technical specifications
set
forth in the written estimate and all equipment and materials installed
or
incorporated in the xxxxx and facilities shall be new or used and
of good
quality;
|
(iv)
|
in
the course of conducting operations, it shall comply with all terms
and
conditions, other than any minimum drilling commitments, of the Leases
(and any related assignments, amendments, subleases, modifications
and
supplements);
|
(v)
|
it
shall keep the Well Locations and all xxxxx, equipment and facilities
located on the Well Locations free and clear of all labor, materials
and
other types of liens or encumbrances arising out of operations;
|
(vi)
|
it
shall file all reports and obtain all permits and bonds required
to be
filed with or obtained from any governmental authority or agency
in
connection with the drilling or other operations and activities;
and
|
(vii)
|
it
will provide competent and experienced personnel to supervise drilling,
completing (or plugging), and operating the xxxxx and use the services
of
competent and experienced service companies to provide any third
party
services necessary or appropriate in order to perform its
duties.
|
(c)
|
Term.
Atlas shall serve as Operator under this Agreement until the earliest
of:
|
(i)
|
the
termination of this Agreement pursuant to Section 13;
|
(ii)
|
the
termination of Atlas as Operator by the Developer at any time in
the
Developer’s discretion, with or without cause on sixty (60) days’ advance
written notice to the Operator; or
|
(iii)
|
the
resignation of Atlas as Operator under this Agreement which may occur
on
ninety (90) days’ written notice to the Developer at any time after five
(5) years from the date of this Agreement, it being expressly understood
and agreed that Atlas shall have no right to resign as Operator before
the
expiration of the five-year period.
|
Any
successor Operator shall be selected by the Developer. Nothing contained in
this
sub-section shall relieve or release Atlas or the Developer from any liability
or obligation under this Agreement that accrued or occurred before Atlas’
removal or resignation as Operator under this Agreement. On any change in
Operator under this provision, the then present Operator shall deliver to the
successor Operator possession of all records, equipment, materials and
appurtenances used or obtained for use in connection with operations under
this
Agreement and owned by the Developer.
5
4.
|
Operator’s
Charges for Drilling and Completing Xxxxx; Payment; Completion
Determination; Dry Hole Determination; Excess Funds and Cost
Overruns-Intangible Drilling Costs; Excess Funds and Cost
Overruns-Tangible Costs.
|
(a)
|
Operator’s
Charges for Drilling and Completing Xxxxx.
Each oil and gas well that is drilled and completed under this Agreement
shall be drilled and completed for
an amount equal to the sum of the following items: (i) the Cost of
permits, supplies, materials, equipment, and all other items used
in the
drilling and completion of a well provided by third-parties, or if
the
foregoing items are provided by Affiliates of the Developer’s Managing
General Partner, then those items shall be charged at competitive
rates;
(ii) fees
for third-party services; (iii) fees for services provided by the
Developer’s Managing General Partner’s Affiliates, which shall be charged
at competitive rates; (iv) an
administration and oversight fee of $15,000 per well, which is $45,000
per
well in the Marcellus Shale primary area in western Pennsylvania,
which
shall be charged to the Developer’s investors as part of each well’s
Intangible Drilling Costs (“IDC's”), as that term is defined below and the
portion of Tangible Costs, as that term is defined below, paid by
the
Developer’s investors;
and (v) a xxxx-up in an amount equal to 15% of the sum of (i), (ii),
(iii)
and (iv), above, for the Developer’s Managing General Partner’s services
as general drilling contractor as Operator under this
Agreement.“Cost”
shall mean the price paid by Operator in an arm’s-length transaction.
Additionally, if
the Developer’s Managing General Partner drills a well for the Developer
that the Managing General Partner determines is not an average well
in the
area because of the well’s depth, complexity associated with either
drilling or completion activity or as otherwise determined by the
Managing
General Partner, the administration and oversight fee for the well
described in §4.02(d)(1)(iv) of the Developer’s Partnership Agreement may
be increased to a competitive rate as determined by the Managing
General
Partner.
|
The
estimated price
for
drilling and completing each of the xxxxx shall be set forth in an Authority
for
Expenditure (“AFE”) that shall be attached to this Agreement as an Exhibit, and
shall cover all ordinary costs which may be incurred in drilling and completing
(or plugging) each well. This includes without limitation, site preparation,
permits and bonds, roadways, surface damages, power at the site, water,
Operator’s compensation as set forth above, rights-of-way, drilling rigs,
equipment and materials, costs of title examinations, logging, cementing,
fracturing, casing, meters (other than utility purchase meters), connection
facilities, salt water collection tanks, separators, siphon string, rabbit,
tubing, an average of 2,500 feet of gathering line per well in connection with
each gas well, and geological, geophysical and engineering services.
(b)
|
Payment.
The Developer shall pay to Operator, in proportion to the share of
the
Working Interest owned by the Developer in the xxxxx, one hundred
percent
(100%) of the estimated IDC's and Tangible Costs, as those terms
are
defined below, for drilling and completing all initial xxxxx on execution
of this Agreement. Notwithstanding the foregoing, Atlas’ payments for its
share of the estimated Tangible Costs, as that term is defined below,
of
drilling and completing all initial xxxxx as the Managing General
Partner
of the Developer shall be paid within five (5) business days of notice
from Operator that the costs have been incurred. The Developer’s payment
shall be nonrefundable in all events in order to enable Operator
to do the
following:
|
(i)
|
commence
site preparation for the initial
xxxxx;
|
6
(ii)
|
obtain
suitable subcontractors for drilling and completing or plugging the
initial xxxxx at currently prevailing prices; and
|
(iii)
|
insure
the availability of equipment and materials.
|
For
purposes of this Agreement, “Intangible Drilling Costs” or “IDC's” shall mean
those expenditures associated with property acquisition and the drilling and
completion of oil and gas xxxxx that under present law are generally accepted
as
fully deductible currently for federal income tax purposes. This includes:
(i)
|
all
expenditures made with respect to any well before the establishment
of
production in commercial quantities for wages, fuel, repairs, hauling,
supplies and other costs and expenses incident to and necessary for
the
drilling of the well and the preparation of the well for the production
of
oil or gas, that are currently deductible pursuant to Section 263(c)
of
the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury
Reg. Section 1.612-4, which are generally termed "intangible drilling
and
development costs";
|
(ii)
|
the
expense of plugging and abandoning any well before a completion attempt;
and
|
(iii)
|
the
costs (other than Tangible Costs and Lease acquisition costs) to
re-enter
and deepen an existing well, complete the well to deeper formations
or
reservoirs, or plug and abandon the well if it is nonproductive from
the
targeted deeper formations or reservoirs.
|
“Tangible
Costs” shall mean those costs associated with property acquisition and the
drilling and completion of oil and gas xxxxx that are generally accepted as
capital expenditures pursuant to the provisions of the Code. This includes:
(i)
|
all
costs of equipment, parts and items of hardware used in drilling
and
completing (or plugging) a well;
|
(ii)
|
the
costs (other than IDC's and Lease acquisition costs) to re-enter
and
deepen an existing well, complete the well to deeper formations or
reservoirs, or plug and abandon the well if it is nonproductive from
the
targeted deeper formations or reservoirs; and
|
(iii)
|
those
items necessary to deliver acceptable oil and gas production to purchasers
to the extent installed downstream
from the wellhead of any well, which are required to be capitalized
under
the Code and its regulations.
|
7
With
respect to each additional well drilled on the Additional Well Locations, if
any, the Developer shall pay to Operator, in proportion to the share of the
Working Interest owned by the Developer in the xxxxx, one hundred percent (100%)
of the estimated IDCs
and
Tangible Costs for drilling and completing the well on execution of the
applicable addendum pursuant to Section l(c) above. Notwithstanding the
foregoing, Atlas’ payments for its share of the estimated Tangible Costs of
drilling and completing all additional xxxxx as the Managing General Partner
of
the Developer shall be paid within five (5) business days of notice from
Operator that the costs have been incurred. The Developer’s payment shall be
nonrefundable in all events in order to enable Operator to do the
following:
(i)
|
commence
site preparation for the additional
xxxxx;
|
(ii)
|
obtain
suitable subcontractors for drilling and completing the additional
xxxxx
at currently prevailing prices; and
|
(iii)
|
insure
the availability of equipment and
materials.
|
Developer
shall pay, in proportion to the share of the Working Interest owned by the
Developer in the xxxxx, any extra costs incurred for each well pursuant to
sub-section (a) above within ten (10) business days of its receipt of Operator’s
statement for the extra costs.
(c)
|
Completion
Determination.
Operator shall determine whether or not to run the production casing
for
an attempted completion or to plug and abandon any well drilled under
this
Agreement. However, a well shall be completed only if Operator has
made a
good faith determination that there is a reasonable possibility of
obtaining commercial quantities of oil and/or
gas.
|
(d)
|
Dry
Hole Determination.
If
Operator determines at any time during the drilling or attempted
completion of any well drilled under this Agreement, in accordance
with
the generally accepted and customary oil and gas field practices
and
techniques then prevailing in the geographic area
of the Well Location that the well should not be completed, then
it shall
promptly and properly plug and abandon the well.
|
(e)
|
Excess
Funds and Cost Overruns-Intangible Drilling Costs.
Any estimated IDCs
(which
are the IDCs
set
forth on the AFE Exhibit) prepaid by Developer with respect to any
well
that exceed Operator’s price specified in sub-section (a) above for the
Intangible Drilling Costs of the well (i.e., the actual IDCs)
shall
be retained by Operator. This excess of estimated IDCs
as reflected on the AFE Exhibit over the actual price of the IDCs
for the
well shall
be applied, in proportion to the share of the Working Interest owned
by
the Developer in the xxxxx, to:
|
(i)
|
the
IDCs
of
an additional well or xxxxx to be drilled on the Additional Well
Locations; or
|
(ii)
|
any
cost overruns owed by the Developer to Operator for IDCs
on
one or more of the other xxxxx on the Well Locations.
|
Conversely,
if Operator’s price specified in sub-section (a) above for the IDCs
of
any
well (i.e., the actual IDCs)
exceeds
the estimated IDCs
(which
are the IDCs
set
forth
on the AFE Exhibit) prepaid by Developer for the well, then:
8
(i)
|
Developer
shall pay the additional price to Operator within ten (10) business
days
after notice from Operator that the additional amount is due and
owing;
or
|
(ii)
|
Developer
and Operator may agree to delete or reduce Developer’s Working Interest in
one or more xxxxx to be drilled under this Agreement that have not
yet
been spudded to provide funds to pay the additional amounts owed
by
Developer to Operator. If doing so results in any excess prepaid
IDCs,
then these funds shall be applied, in proportion to the share of
the
Working Interest owned by the Developer in the xxxxx, to:
|
(a)
|
the
IDCs
of
an additional well or xxxxx to be drilled on the Additional Well
Locations; or
|
(b)
|
any
cost overruns owed by the Developer to Operator for IDCs
of
one or more of the other xxxxx on the Well Locations.
|
The
Exhibits to this Agreement with respect to the affected xxxxx shall be amended
as appropriate.
(f)
|
Excess
Funds and Cost Overruns – Tangible Costs.
Any estimated Tangible Costs (which are the Tangible Costs set forth
on
the AFE Exhibit) prepaid by Developer with respect to any well that
exceed
Operator’s price specified in sub-section (a) above for the Tangible Costs
of the well (i.e., the actual Tangible Costs) shall be retained by
Operator. This excess of Tangible Costs as reflected on the AFE Exhibit
over the actual price of the Tangible Costs for the well shall be
applied,
in proportion to the share of the Working Interest owned by the Developer
in the xxxxx, to:
|
(i)
|
the
Developer’s Participants’ share of the Tangible Costs for an additional
well or xxxxx to be drilled on the Additional Well Locations; or
|
(ii)
|
any
cost overruns owed by the Developer to Operator for the Developer’s
Participants’ share of the Tangible Costs of one or more of the other
xxxxx on the Well Locations.
|
Conversely,
if Operator’s price specified in sub-section (a) above for the Developer’s
Participants’ share of Tangible Costs of any well (i.e., the actual Tangible
Costs) exceeds
the estimated Tangible Costs (which are the Tangible Costs set forth on the
AFE
Exhibit) prepaid by Developer for the Developer’s Participants’ share of the
Tangible Costs for the well, then:
(i)
|
Developer
shall pay the additional price to Operator within ten (10) business
days
after notice from Operator that the additional price is due and owing;
or
|
(ii)
|
Developer
and Operator may agree to delete or reduce Developer’s Working Interest in
one or more xxxxx to be drilled under this Agreement that have not
yet
been spudded to provide funds to pay the additional amounts owed
by
Developer to Operator. If doing so results in any excess prepaid
Tangible
Costs, then these funds shall be applied, in proportion to the share
of
the Working Interest owed by the Developer in the xxxxx, to:
|
9
(a)
|
the
Developer’s Participants’ share of the Tangible Costs of an additional
well or xxxxx to be drilled on the Additional Well Locations; or
|
(b)
|
any
cost overruns owed by the Developer to Operator for the Developer’s
Participants’ share of the Tangible Costs of one or more of the other
xxxxx on the Well Locations.
|
(iii)
|
The
Developer’s Participants’ share of the Tangible Costs of all of the xxxxx
drilled under this Agreement and any additional xxxxx to be drilled
on the
Additional Well Locations under any Addendum to this Agreement shall
be
ten percent (10%) of the total price prepaid by Developer to Operator
pursuant to Section 4(b) of this Agreement or any Addendum hereto.
The
Developer’s Participants’ share of the Tangible Costs of any one well
drilled under this Agreement shall be determined subject to the preceding
sentence, taking into account the Developer’s share of all of the Tangible
Costs of all of the xxxxx to be drilled under this Agreement and
any
Addendum hereto.
|
The
Exhibits to this Agreement with respect to the affected xxxxx shall be amended
as appropriate.
5.
|
Title
Examination of Well Locations, Developer’s Acceptance and Liability;
Additional Well Locations.
|
(a)
|
Title
Examination of Well Locations, Developer’s Acceptance and
Liability.
The Developer acknowledges that Operator has furnished Developer
with the
title opinions identified on Exhibit A, and other documents and
information that Developer or its counsel has requested in order
to
determine the adequacy of the title to the Initial Well Locations
and
leased premises subject to this Agreement. The Developer accepts
the title
to the Initial Well Locations and leased premises and acknowledges
and
agrees that, except for any loss, expense, cost, or liability caused
by
the breach of any of the warranties and representations made by the
Operator in Section l(b), any loss, expense, cost or liability whatsoever
caused by or related to any defect or failure of the title shall
be the
sole responsibility of and shall be borne entirely by the
Developer.
|
(b)
|
Additional
Well Locations.
Before beginning drilling of any well on any Additional Well Location,
Operator shall conduct, or cause to be conducted, a title examination
of
the Additional Well Location, in order to obtain appropriate abstracts,
opinions and certificates and other information necessary to determine
the
adequacy of title to both the applicable Lease and the fee title
of the
lessor to the premises covered by the Lease. The results of the title
examination and such other information as is necessary to determine
the
adequacy of title for drilling purposes shall be submitted to the
Developer for its review and acceptance. No drilling on the Additional
Well Locations shall begin until the title has been accepted in writing
by
the Developer. After any title has been accepted by the Developer,
any
loss, expense, cost, or liability whatsoever, caused by or related
to any
defect or failure of the title shall be the sole responsibility of
and
shall be borne entirely by the Developer, unless such loss, expense,
cost, or liability was caused by the breach of any of the warranties
and
representations made by the
Operator
in
Section l(b).
|
10
6.
|
Operations
Subsequent to Completion of the Xxxxx; Fee Adjustments; Extraordinary
Costs; Pipelines; Price Determinations; Plugging and
Abandonment.
|
(a)
|
Operations
Subsequent to Completion of the Xxxxx.
Beginning with the month in which a well drilled under this Agreement
begins to produce, Operator shall be entitled to an operating fee
of $377
per month for each well being operated under this Agreement, which
operating fee shall be proportionately reduced, on a well-by-well
basis to
the extent the Developer owns less than 100% of the Working Interest
in a
well. This fee shall be in lieu of any direct charges by Operator
for its
services or the provision by Operator of its equipment for normal
superintendence and maintenance of the xxxxx and related pipelines
and
facilities.
|
The
operating fees shall cover all normal, regularly recurring operating expenses
for the production, delivery and sale of natural gas, including without
limitation:
(i)
|
well
tending, routine maintenance and adjustment;
|
(ii)
|
reading
meters, recording production, pumping, maintaining appropriate books
and
records;
|
(iii)
|
preparing
reports to the Developer and government agencies; and
|
(iv)
|
collecting
and disbursing revenues.
|
The
operating fees shall not cover costs and expenses related to the following:
(i)
|
the
production and sale of oil;
|
(ii)
|
the
collection and disposal of salt water or other liquids produced by
the
xxxxx;
|
(iii)
|
the
rebuilding of access roads; and
|
(iv)
|
the
purchase of equipment, materials or third party services;
|
which,
subject to the provisions of sub-section (c) of this Section 6, shall be
invoiced by Operator to the Developer on a monthly basis, and shall be paid
by
the Developer within ten (10) business days after notice from Operator that
the
additional amounts are due and owing in proportion to the share of the Working
Interest owned by the Developer in the xxxxx.
Any
well
that is temporarily abandoned or shut-in continuously for an entire calendar
month shall not be considered a producing well for purposes of determining
the
number of xxxxx in the month subject to the operating fee.
11
(b)
|
Fee
Adjustments.
The monthly operating fee set forth in sub-section (a) above may
be
adjusted by Operator annually, as of the first day of January (the
“Adjustment Date”) of each year, beginning January 1, 2008 [2009]. This
adjustment, if any, shall not exceed the percentage increase in the
average weekly earnings of “Crude Petroleum, Natural Gas, and Natural Gas
Liquids” workers, as published by the U.S. Department of Labor, Bureau of
Labor Statistics, and shown in Employment and Earnings Publication,
Monthly Establishment Data, Hours and Earning Statistical Table C-2,
Index
Average Weekly Earnings of “Crude Petroleum, Natural Gas, and Natural Gas
Liquids” workers, SIC Code #131-2, or any successor index thereto, since
January l, 2006 [2007], in the case of the first adjustment, and
since the
previous Adjustment Date, in the case of each subsequent adjustment.
|
In
addition, the monthly operating fee set forth in sub-section (a) above for
any
given well or xxxxx being operated under this Agreement may be increased beyond
the annual adjustment described in the prior paragraph without advance notice
to
the Developer, from time-to-time to the competitive rate in the area where
the
well(s) are situated, as determined by the Operator in its sole
discretion.
(c)
|
Extraordinary
Costs.
Without the prior written consent of the Developer, pursuant to a
written
estimate submitted by Operator, Operator shall not undertake any
single
project or incur any extraordinary cost with respect to any well
being
produced under this Agreement that is reasonably estimated to result
in an
expenditure of more than $5,000, unless the project or extraordinary
cost
is necessary for the following:
|
(i)
|
to
safeguard persons or property; or
|
(ii)
|
to
protect the well or related facilities in the event of a sudden emergency.
|
In
no
event, however, shall the Developer be required to pay for any project or
extraordinary cost arising from the negligence or misconduct of Operator, its
agents, servants, employees, subcontractors, licensees, or invitees.
All
extraordinary costs incurred and the cost of projects undertaken under this
section with respect to a well being produced under this Agreement shall be
billed to the Developer at the invoice cost of third-party services performed
or
materials purchased together with a reasonable charge by Operator for any
services performed directly by it, in proportion to the share of the Working
Interest owned by the Developer in the xxxxx. Operator shall have the right
to
require the Developer to pay in advance all or a portion of the estimated costs
of a project undertaken under this section, before undertaking the project,
in
proportion to the share of the Working Interest owned by the Developer in the
well or xxxxx.
(d)
|
Pipelines.
Developer shall have no interest in the pipeline gathering system,
which
gathering system shall remain the sole property of Operator or its
Affiliates and shall be maintained at their sole cost and
expense.
|
12
(e)
|
Price
Determinations.
Notwithstanding anything in this Agreement to the contrary, the Developer
shall pay all costs in proportion to the share of the Working Interest
owned by the Developer in the xxxxx with respect to obtaining price
determinations under and otherwise complying with the Natural Gas
Policy
Act of 1978 and the implementing state regulations. This responsibility
shall include, without limitation, preparing, filing, and executing
all
applications, affidavits, interim collection notices, reports and
other
documents necessary or appropriate to obtain price certification,
to
effect sales of natural gas, or otherwise to comply with the Act
and the
implementing state regulations.
|
Operator
agrees to furnish the information and render the assistance as the
Developer may reasonably request in order to comply with the Act
and the
implementing state regulations without charge for services performed
by
its employees.
|
(f)
|
Plugging
and Abandonment.
The Developer shall have the right to direct Operator to plug and
abandon
any well that has been completed under this Agreement as a producer.
In
addition, Operator shall not plug and abandon any well that has been
drilled and completed as a producer under this Agreement before obtaining
the written consent of the Developer. However, if the Operator determines
that any well drilled and completed under this Agreement as a producer
shall be plugged and abandoned in accordance with the generally accepted
and customary oil and gas field practices and techniques then prevailing
in the geographic area of the well location, and makes a written
request
to the Developer for authority to plug and abandon the well and the
Developer fails to respond in writing to the request within forty-five
(45) days following the date of the request, then the Developer shall
be
deemed to have consented to the plugging and abandonment of the well.
|
All
costs
and expenses related to plugging and abandoning xxxxx that have been drilled
and
completed under this Agreement as producing xxxxx shall be borne and paid by
the
Developer in proportion to the share of the Working Interest owned by the
Developer in the xxxxx. Also, at any time after one (1) year from the date
each
well drilled and completed under this Agreement is placed into production,
Operator shall have the right to deduct each month from the proceeds of the
sale
of the production from the well up to $200, in proportion to the share of the
Working Interest owned by the Developer in the well, for the purpose of
establishing a fund to cover the Operator’s estimate of the Developer’s share of
the costs of eventually plugging and abandoning the well. All of these funds
shall be deposited by Operator in a separate interest bearing escrow account
for
the account of the Developer, and the total amount so retained and deposited
shall not exceed Operator’s reasonable estimate of Developer’s share of the
costs of eventually plugging and abandoning the well.
7.
|
Billing
and Payment Procedure with Respect to Operation of Xxxxx; Disbursements;
Separate Account for Sale Proceeds; Records and Reports; Additional
Information.
|
(a)
|
Billing
and Payment Procedure with Respect to Operation of
Xxxxx.
Operator shall promptly and timely pay and discharge on behalf of
the
Developer, in proportion to the share of the Working Interest owned
by the
Developer in the xxxxx, the following:
|
13
(i)
|
all
expenses and liabilities payable and incurred by reason of its operation
of the xxxxx in accordance with this Agreement , such as severance
taxes,
royalties, overriding royalties, operating fees, and pipeline gathering
charges; and
|
(ii)
|
any
third-party invoices received by Operator with respect to the Developer’s
share of the costs and expenses incurred in connection with the operation
of the xxxxx.
|
Operator,
however, shall not be required to pay and discharge any of the above costs
and
expenses that are being contested in good faith by Operator.
Operator
shall:
(i)
|
deduct
the foregoing costs and expenses from the Developer’s share of the
proceeds of the oil and/or gas sold from the xxxxx; and
|
(ii)
|
keep
an accurate record of the Developer’s account, showing expenses incurred
and charges and credits made and received with respect to each well.
|
If
the
Developer’s share of the proceeds of the oil and/or gas sold from the xxxxx is
insufficient to pay the costs and expenses, then Operator shall promptly and
timely pay and discharge the costs and expenses described above, in proportion
to the share of the Working
Interest owned by the Developer in the xxxxx, and prepare and submit an invoice
to the Developer each month for those costs and expenses. The invoice shall
be
accompanied by the form of statement specified in sub-section (b) below, and
shall
be
paid by the Developer within ten (10) business days of its receipt.
(b)
|
Disbursements.
Operator shall disburse to the Developer, on a monthly basis, the
Developer’s share of the proceeds received from the sale of oil and/or gas
sold from the xxxxx operated under this Agreement,
less:
|
(i)
|
the
amounts charged to the Developer under sub-section (a); and
|
(ii)
|
the
amount, if any, withheld by Operator for future plugging costs pursuant
to
sub-section (f) of Section 6.
|
Each
disbursement made and/or invoice submitted to the Developer pursuant to
sub-section (a) above shall be accompanied by a statement from the Operator
itemizing with respect to each well:
(i)
|
the
total production of oil and/or gas since the date of the last disbursement
or invoice billing period, as the case may be, and the Developer’s share
of the production;
|
(ii)
|
the
total proceeds received from any sale of the production, and the
Developer’s share of the proceeds;
|
(iii)
|
the
costs and expenses deducted from the proceeds and/or being billed
to the
Developer pursuant to sub-section (a) above;
|
14
(iv)
|
the
amount withheld for future plugging costs; and
|
(v)
|
any
other information as Developer may reasonably request, including
without
limitation copies of all third-party invoices listed on the statement
for
the period.
|
(c)
|
Separate
Account for Sale Proceeds. Operator
agrees to deposit all proceeds from the sale of oil and/or gas sold
from
the xxxxx operated under this Agreement in a separate checking account
maintained by Operator. This account shall be used solely for the
purpose
of collecting and disbursing funds constituting proceeds from the
sale of
production under this Agreement.
|
(d)
|
Records
and Reports.
In
addition to the statements required under sub-section (b) above,
Operator,
within seventy-five (75) days after the completion of each well drilled,
shall furnish the Developer with a detailed statement itemizing with
respect to the well the total costs and charges under Section 4(a)
and the
Developer’s share of the costs and charges, and any other information as
is necessary to enable the
Developer:
|
(i)
|
to
allocate any extra costs incurred with respect to the well between
Tangible Costs and Intangible Drilling Costs; and
|
(ii)
|
to
determine the amount of the investment tax credit or marginal well
production tax credit, if
applicable.
|
(e)
|
Additional
Information. Operator
shall promptly furnish the Developer with any additional information
as it
may reasonably request, including without limitation geological,
technical, and financial information, in the form as may reasonably
be
requested, pertaining to any phase of the operations and activities
governed by this Agreement. The Developer and its authorized employees,
agents and consultants, including independent accountants shall,
at
Developer’s sole cost and expense:
|
(i)
|
on
at least ten (10) days’ written notice to Operator have access during
normal business hours to all of Operator’s records pertaining to
operations under this Agreement, including without limitation, the
right
to audit the books of account of Operator relating to all receipts,
costs,
charges, expenses and disbursements and information regarding the
separate
account required under sub-section (c); and
|
(ii)
|
have
access, at its sole risk, to any xxxxx drilled by Operator under
this
Agreement at all times to inspect and observe any machinery, equipment
and
operations.
|
8. Operator’s
Lien; Right to Collect From Oil or Gas Purchaser.
(a)
|
Operator’s
Lien. To
secure the payment of all sums due from Developer to Operator under
this
Agreement, the Developer grants Operator a first and preferred lien
on and
security interest in the following:
|
(i)
|
the
Developer’s interest in the Leases covered by this Agreement;
|
(ii)
|
the
Developer’s interest in oil and gas produced under this Agreement and its
share of the proceeds from the sale of the oil and gas; and
|
15
(iii)
|
the
Developer’s interest in materials and equipment under this
Agreement.
|
(b)
|
Right
to Collect From Oil or Gas Purchaser. If
the Developer fails to timely pay any amount owing under this Agreement
by
it to the Operator, then Operator, without prejudice to other existing
remedies, may collect and retain from any purchaser or purchasers
of oil
or gas the Developer’s share of the proceeds from the sale of the oil and
gas until the amount owed by the Developer, plus twelve percent (12%)
interest on a per annum basis, and any additional costs (including
without
limitation actual attorneys’ fees and costs) resulting from the
delinquency, has been paid. Each purchaser of oil or gas shall be
entitled
to rely on Operator’s written statement concerning the amount of any
default.
|
9. Successors
and Assigns; Transfers; Appointment of Agent.
(a)
|
Successors
and Assigns.
This Agreement shall be binding on and inure to the benefit of the
undersigned parties and their respective successors and permitted
assigns.
However, without the prior written consent of the Developer, the
Operator
may not assign, transfer, pledge, mortgage, hypothecate, sell or
otherwise
dispose of any of its interest in this Agreement, or any of its rights
or
obligations under this Agreement. Notwithstanding, this consent shall
not
be required in connection with:
|
(i)
|
the
assignment of work to be performed for Operator to subcontractors,
it
being understood and agreed, however, that any assignment to Operator’s
subcontractors shall not in any manner relieve or release Operator
from
any of its obligations and responsibilities under this Agreement;
|
(ii)
|
any
lien, assignment, security interest, pledge or mortgage arising under
Operator’s present or future financing arrangements; or
|
(iii)
|
the
liquidation, merger, consolidation, or other corporate reorganization
or
sale of substantially all of the assets of
Operator.
|
Further,
in order to maintain uniformity of ownership in the xxxxx, production,
equipment, and leasehold interests covered by this Agreement, and
notwithstanding any other provision of this Agreement to the contrary, the
Developer shall not, without the prior written consent of Operator, sell,
assign, transfer, encumber, mortgage or otherwise dispose of any of its interest
in the xxxxx, production, equipment or leasehold interests covered by this
Agreement unless the disposition encompasses either:
(i)
|
the
entire interest of the Developer in all xxxxx, production, equipment
and
leasehold interests subject to this Agreement; or
|
(ii)
|
an
equal undivided interest in all such xxxxx, production, equipment,
and
leasehold interests.
|
(b)
|
Transfers.
Subject to the provisions of sub-section (a) above, any sale, encumbrance,
transfer or other disposition made by the Developer of its interests
in
the xxxxx, production, equipment, and/or leasehold interests covered
by
this Agreement shall be made:
|
16
(i)
|
expressly
subject to this Agreement;
|
(ii)
|
without
prejudice to the rights of the Operator; and
|
(iii)
|
in
accordance with and subject to the provisions of the Leases covering
the
Well Locations.
|
(c)
|
Appointment
of Agent. If
at any time the interest of the Developer is divided among or owned
by
co-owners, Operator may, in its discretion, require the co-owners
to
appoint a single trustee or agent with full authority to do the
following:
|
(i)
|
receive
notices, reports and distributions of the proceeds from production;
|
(ii)
|
approve
expenditures;
|
(iii)
|
receive
xxxxxxxx for and approve and pay all costs, expenses and liabilities
incurred under this Agreement;
|
(iv)
|
exercise
any rights granted to the co-owners under this Agreement;
|
(v)
|
grant
any approvals or authorizations required or contemplated by this
Agreement;
|
(vi)
|
sign,
execute, certify, acknowledge, file and/or record any agreements,
contracts, instruments, reports, or documents whatsoever in connection
with this Agreement or the activities contemplated by this Agreement;
and
|
(vii)
|
deal
generally with, and with power to bind, the co-owners with respect
to all
activities and operations contemplated by this
Agreement.
|
However,
all the co-owners shall continue to have the right to enter into and execute
all
contracts or agreements for their respective shares of the oil and gas produced
from the xxxxx drilled under this Agreement in accordance with sub-section
(c)
of Section 11.
10. Operator’s
Insurance; Subcontractors’ Insurance; Operator’s
Liability.
(a)
|
Operator’s
Insurance.
Operator shall obtain and maintain at its own expense so long as
it is
Operator under this Agreement all required Workmen’s Compensation
Insurance and comprehensive general public liability insurance in
amounts
and coverage not less than $1,000,000 per person per occurrence for
personal injury or death and $1,000,000 for property damage per
occurrence, which shall include coverage for blow-outs, and total
liability coverage of not less than $10,000,000.
|
Subject
to the above limits, the Operator’s general public liability insurance shall be
in all respects comparable to that generally maintained in the industry with
respect to services of the type to be rendered and activities of the type to
be
conducted under this Agreement. Operator’s general public liability insurance
shall, if permitted by Operator’s insurance carrier:
17
(i)
|
name
the Developer as an additional insured party; and
|
(ii)
|
provide
that at least thirty (30) days’ prior notice of cancellation and any other
adverse material change in the policy shall be given to the
Developer.
|
However,
the Developer shall reimburse Operator for the additional cost, if any, of
including it as an additional insured party under the Operator’s insurance.
Current
copies of all policies or certificates of the Operator’s insurance coverage
shall be delivered to the Developer on request. It is understood and agreed
that
Operator’s insurance coverage may not adequately protect the interests of the
Developer and that the Developer shall carry at its expense the excess or
additional general public liability, property damage, and other insurance,
if
any, as the Developer deems appropriate.
(b)
|
Subcontractors’
Insurance.
Operator shall require all of its subcontractors to carry all required
Workmen’s Compensation Insurance and to maintain such other insurance, if
any, as Operator in its discretion may
require.
|
(c)
|
Operator’s
Liability.
Operator’s liability to the Developer as Operator under this Agreement
shall be limited to, and Operator shall indemnify the Developer and
hold
it harmless from, claims, penalties, liabilities, obligations, charges,
losses, costs, damages, or expenses (including but not limited to
reasonable attorneys’ fees) as provided in Section 4.05 of the Developer’s
Partnership Agreement.
|
11. Internal
Revenue Code Election; Relationship of Parties; Right to Take Production in
Kind.
(a)
|
Internal
Revenue Code Election.
With respect to this Agreement, each of the parties elects under
Section
761(a) of the Internal Revenue Code of 1986, as amended, to be excluded
from the provisions of Subchapter K of Chapter 1 of Subtitle A of
the
Internal Revenue Code of 1986, as amended. If the income tax laws
of the
state or states in which the property covered by this Agreement is
located
contain, or may subsequently contain, a similar election, each of
the
parties agrees that the election shall be exercised.
|
Beginning
with the first taxable year of operations under this Agreement, each party
agrees that the deemed election provided by Section 1.761-2(b)(2)(ii) of the
Regulations under the Internal Revenue Code of 1986, as amended, will apply;
and
no party will file an application under Section 1.761-2 (b)(3)(i) of the
Regulations to revoke the election. Each party agrees to execute the documents
and make the filings with the appropriate governmental authorities as may be
necessary to effect the election.
(b)
|
Relationship
of Parties.
It
is not the intention of the parties to create, nor shall this Agreement
be
construed as creating, a mining or other partnership or association
or to
render the parties liable as partners or joint venturers for any
purpose.
Operator shall be deemed to be an independent contractor and shall
perform
its obligations as set forth in this
Agreement.
|
(c)
|
Right
to Take Production in Kind.
Subject to the provisions of Section 8 above, the Developer shall
have the
exclusive right to sell or dispose of its proportionate share of
all oil
and gas produced from the xxxxx to be drilled under this Agreement,
exclusive of production:
|
18
(i)
|
that
may be used in development and producing operations;
|
(ii)
|
unavoidably
lost; and
|
(iii)
|
used
to fulfill any free gas obligations under the terms of the applicable
Lease or Leases.
|
Operator
shall not have any right to sell or otherwise dispose of the oil and gas. The
Developer shall have the exclusive right to execute all contracts relating
to
the sale or disposition of its proportionate share of the production from the
xxxxx drilled under this Agreement.
Developer
shall have no interest in any gas supply agreements of Operator, except the
right to receive Developer’s share of the proceeds received from the sale of any
gas or oil from xxxxx developed under this Agreement. The Developer agrees
to
designate Operator or Operator’s designated bank agent as the Developer’s
collection agent in any contracts. On request, Operator shall assist Developer
in arranging the sale or disposition of Developer’s oil and gas under this
Agreement and shall promptly provide the Developer with all relevant information
that comes to Operator’s attention regarding opportunities for selling
production.
If
Developer fails to take in kind or separately dispose of its proportionate
share
of the oil and gas produced under this Agreement, then Operator shall have
the
right, subject to the revocation at will by the Developer, but not the
obligation, to purchase the oil and gas or sell it to others at any time and
from time to time, for the account of the Developer at the best price obtainable
in the area for the production. Notwithstanding, Operator shall have no
liability to Developer should Operator fail to market the production.
Any
such
purchase or sale by Operator shall be subject always to the right of the
Developer to exercise at any time its right to take in-kind, or separately
dispose of, its share of oil and gas not previously delivered to a purchaser.
Any purchase or sale by Operator of the Developer’s share of oil and gas under
this Agreement shall be only for reasonable periods of time as are consistent
with the minimum needs of the oil and gas industry under the particular
circumstances, but in no event for a period in excess of one (1)
year.
12. Effect
of Force Majeure; Definition of Force Majeure; Limitation.
(a)
|
Effect
of Force Majeure. If
Operator is rendered unable, wholly or in part, by force majeure
(as
defined below) to carry out any of its obligations
under this Agreement, including
but not limited to beginning the drilling of one or more xxxxx by
the
applicable times set forth in Section 2(b), or any Addendum to this
Agreement, the obligations of the Operator, so far as it is affected
by
the force majeure, shall be suspended during but no longer than,
the
continuance of the force majeure. The
Operator shall give to the Developer prompt written notice of the
force
majeure with
reasonably full particulars concerning it. Operator shall use all
reasonable diligence to remove the force majeure as quickly as possible
to
the extent the same is within its reasonable
control.
|
19
(b)
|
Definition
of Force Majeure. The
term “force majeure” shall mean an act of God, strike, lockout, or other
industrial disturbance, act of the public enemy, war, terrorist acts,
blockade, public riot, lightning, fire, storm, flood, explosion,
governmental restraint, unavailability of drilling rigs, equipment
or
materials, plant shut-downs, curtailments by oil and gas purchasers
and
any other causes whether of the kind specifically enumerated above
or
otherwise, which directly preclude Operator’s performance under this
Agreement and is not reasonably within the control of the Operator
including, but not limited to, the inability of Operator to begin
the
drilling of the xxxxx subject to this Agreement by the applicable
times
set forth in Section 2(b) or in any Addendum to this Agreement due
to
decisions of third-party operators to delay drilling the xxxxx, poor
weather conditions, inability to obtain drilling permits, access
right to
the drilling site or title
problems.
|
(c)
|
Limitation.
The
requirement that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts, or
other
labor difficulty affecting the Operator contrary to its wishes. The
method
of handling these difficulties shall be entirely within the discretion
of
the Operator.
|
13. Term.
This
Agreement shall become effective when executed by Operator and the Developer.
Except as provided in sub-section (c) of Section 3, this Agreement shall
continue and remain in full force and effect for the productive lives of each
xxxxx being operated under this Agreement.
14. Governing
Law; Invalidity.
(a)
|
Governing
Law. This
Agreement shall be governed by, construed and interpreted in accordance
with the laws of the Commonwealth of Pennsylvania, excluding its
conflict
of law provisions.
|
(b)
|
Invalidity.
The
invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions of this Agreement,
and
this Agreement shall be construed in all respects as if the invalid
or
unenforceable provision were
omitted.
|
15. Integration;
Written Amendment.
(a)
|
Integration.
This
Agreement, including the Exhibits to this Agreement, constitutes
and
represents the entire understanding and agreement of the parties
with
respect to the subject matter of this Agreement and supersedes all
prior
negotiations, understandings, agreements, and representations relating
to
the subject matter of this Agreement.
|
(b)
|
Written
Amendment. No
change, waiver, modification, or amendment of this Agreement shall
be
binding or of any
effect unless in writing duly
signed by the party against which the change, waiver, modification,
or
amendment is sought to be enforced.
|
20
16. Waiver
of Default or Breach.
No
waiver
by any party to any default of or breach by any other party under this Agreement
shall operate as a waiver of any future default or breach, whether of like
or
different character or nature.
17. Notices.
Unless
otherwise provided in this Agreement, all notices, statements, requests, or
demands that are required or contemplated by this Agreement shall be in writing
and shall be hand-delivered or sent by registered or certified mail, postage
prepaid, to the following addresses until a party’s address is changed by
certified or registered letter so addressed to the other party:
(i)
|
If
to the Operator, to:
|
Atlas
Resources, LLC
Westpointe
Corporate Center One
0000
Xxxxxxxxxx Xxxxxxx Xxxx, 0xx Xxxxx
Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
Attention:
President
(ii)
|
If
to Developer, to:
|
Atlas
Resources Public #17-2007(A) L.P.
[Atlas
Resources Public #17-2008(B) L.P.]
[Atlas
Resources Public #17-2008(C) L.P.]
c/o
Atlas
Resources, LLC
Westpointe
Corporate Center One
0000
Xxxxxxxxxx Xxxxxxx Xxxx, 0xx Xxxxx
Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
Notices
that are served by registered or certified mail on the parties in the manner
provided above shall be deemed sufficiently served or given for all purposes
under this Agreement at the time the notice is hand-delivered or mailed in
any
post office or branch post office regularly maintained by the United States
Postal Service or any successor. All payments shall be hand-delivered or sent
by
United States mail, postage prepaid to the addresses set forth above until
a
party’s address is changed by certified or registered letter so addressed to the
other party.
18. Interpretation.
The
titles of the Sections in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of any of the terms
and provisions of this Agreement. As used in this Agreement, the plural shall
include the singular and the singular shall include the plural whenever
appropriate.
19. Counterparts.
The
parties may execute this Agreement in any number of separate counterparts,
each
of which, when executed and delivered by the parties, shall have the force
and
effect of an original; but all counterparts of this Agreement shall be deemed
to
constitute one and the same instrument.
21
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
ATLAS
RESOURCES, LLC
|
|
By:
|
/s/ Xxxxx X. Xxxxxxx |
Xxxxx
X. Xxxxxxx, Executive Vice President
|
|
ATLAS
RESOURCES PUBLIC #17-2007(A) L.P.
|
|
[ATLAS
RESOURCES PUBLIC #17-2008(B) L.P.]
|
|
[ATLAS
RESOURCES PUBLIC #17-2008(C) L.P.]
|
|
By
its Managing General Partner:
|
|
ATLAS
RESOURCES, LLC
|
|
By:
|
/s/ Xxxxx X. Xxxxxxx |
Xxxxx
X. Xxxxxxx, Executive Vice
President
|
22
DRILLING
AND OPERATING AGREEMENT DATED NOVEMBER 5, 0000
|
|||
XXXXX
XXXXXXX PUBLIC #17-2007(A) L.P.
|
|||
WELL
|
|||
XXXXXXXX
23
|
|||
XXXXXX
#11
|
|||
PINOWAR
#4
|
|||
XXXXXX
#3
|
|||
CC-2189A
|
|||
PUST
#1
|
|||
CC-2193
|
Exhibit
A
DESCRIPTION
OF LEASES AND INITIAL WELL LOCATIONS
[To
be
completed as information becomes available]
1. WELL
LOCATION
(a)
|
Oil
and Gas Lease from ______________________________________ dated
_____________________ and recorded in Deed Book Volume __________,
Page
__________ in the Recorder’s Office of County, ____________, covering
approximately _________ acres in ____________________________ Township,
___________________ County,
__________________________.
|
(b)
|
The
portion of the leasehold estate constituting the
____________________________________________ No. __________ Well
Location
is described on the map attached hereto as Exhibit
A-l.
|
(c)
|
Title
Opinion of _________________________________,
____________________________________,
________________________________________,
________________________________________, dated ___________________,
200___.
|
(d)
|
The
Developer’s interest in the leasehold estate constituting this Well
Location is an undivided %
Working Interest to those oil and gas rights from the surface to
the
deepest depth penetrated at the cessation of drilling activities
(which is
___________ feet), subject to the landowner’s royalty interest and
overriding royalty interests.
|
Exhibit
A
Well
Name, Twp.
County,
State
ASSIGNMENT
OF OIL AND GAS LEASE
STATE
OF _______________________________
COUNTY
OF _____________________________
KNOW
ALL MEN BY THESE PRESENTS:
THAT
the
undersigned
_______________________________________________________________________________________
(hereinafter
called “Assignor”), for and in consideration of One Dollar and other valuable
consideration ($1.00 ovc), the receipt whereof is hereby acknowledged, does
hereby sell, assign, transfer and set over
unto ______________________________________ __________________ (hereinafter
called “Assignee”), an undivided _____________________________ in, and to, the
oil and gas lease described as follows:
together
with the rights incident thereto and the personal property thereto, appurtenant
thereto, or used, or obtained, in connection therewith.
And
for
the same consideration, the assignor covenants with the said assignee and his
or
its heirs, successors, or assigns that assignor is the lawful owner of said
lease and rights and interest thereunder and of the personal property thereon
or
used in connection therewith; that the undersigned has good right and authority
to sell and convey the same; and that said rights, interest and property are
free and clear from all liens and encumbrances, and that all rentals and
royalties due and payable thereunder have been duly paid.
In
Witness Whereof, the undersigned owner ______ and assignor ______ ha___ signed
and sealed this instrument the ______ day of _______________,
200___.
Signed
and acknowledged in the presence of
|
||
Exhibit
B
(Page
1)
ACKNOWLEDGMENT
BY INDIVIDUAL
STATE
OF
_______________________________
BEFORE
ME, a Notary Public, in and for said
COUNTY
OF
_____________________________
County
and State, on this day personally appeared
who
acknowledged
to me that ____ he ____ did sign the foregoing instrument and that the same
is
_____________ free act and deed.
In
testimony whereof, I have hereunto set my hand and official seal, at
_____________________________, this ______ day of _______________, A.D.,
200___.
Notary
Public
|
CORPORATION
ACKNOWLEDGMENT
STATE
OF
_______________________________
BEFORE
ME, a Notary Public, in and for said
COUNTY
OF _____________________________
County
and State, on this day personally appeared ___
known to
me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged that the same was the act of the said
______________________________________________, a corporation, and that he
executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein
stated.
In
testimony whereof, I have hereunto set my hand and official seal, at
_____________________________, this ______ day of _______________, A.D.,
200___.
Notary
Public
|
This
instrument was prepared by:
Atlas
Resources, LLC
Westpointe
Corporate Center One
1500
Xxxxxxxxxx Xxxxxxx Xxxx, 0xx Xxxxx
Xxxx
Xxxxxxxx, XX 00000
Exhibit
B
(Page
2)
ADDENDUM
NO. __________
DATED
___________________ , 200___
THIS
ADDENDUM NO. __________ made and entered into this ______ day of
________________, 200___, by and between ATLAS RESOURCES, LLC, a Pennsylvania
limited liability company (hereinafter referred to as “Operator”),
and
ATLAS
RESOURCES PUBLIC #17-2007(A) L.P. [ATLAS RESOURCES PUBLIC #17-2008(B) L.P.]
[ATLAS RESOURCES PUBLIC #17-2008(C) L.P.], a Delaware limited partnership,
(hereinafter referred to as the Developer).
WITNESSETH
THAT:
WHEREAS,
Operator and the Developer have entered into a Drilling and Operating Agreement
dated ___________________, 200___, (the “Agreement”), which relates to the
drilling and operating of ________________ (______)xxxxx on the ________________
(______) Initial Well Locations identified on the maps attached as Exhibits
A-l
through A-______ to the Agreement, and provides for the development on the
terms
and conditions set forth in the Agreement of Additional Well Locations as the
parties may from time to time designate; and
WHEREAS,
pursuant to Section l(c) of the Agreement, Operator and Developer presently
desire to designate ________________ Additional Well Locations described below
to be developed in accordance with the terms and conditions of the
Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants contained in this Addendum
and intending to be legally bound, the parties agree as follows:
1. Pursuant
to Section l(c) of the Agreement, the Developer hereby authorizes Operator
to
drill, complete (or plug) and operate, on the terms and conditions set forth
in
the Agreement and this Addendum No.__________, ________________ additional
xxxxx
on the ________________ Additional Well Locations described on Exhibit A to
this
Addendum and on the maps attached to this Addendum as Exhibits A-______ through
A-______.
2. Operator,
as Developer’s independent contractor, agrees to drill, complete (or plug) and
operate the additional xxxxx on the Additional Well Locations in accordance
with
the terms and conditions of the Agreement and further agrees to begin drilling
the first additional well within thirty (30) days after the date of this
Addendum and to begin drilling all of the additional xxxxx before the close
of
the 90th
day
after the close of the calendar year in which the Agreement was entered into
by
Operator and the Developer, or, if this Addendum is dated after that 90 day
period, to begin drilling the first additional well within thirty (30) days
after the date of this Addendum and to drill and complete (or plug) all of
the
remaining additional xxxxx by the end of the calendar year in which this
Addendum is dated.
3. Developer
acknowledges that:
(a) |
Operator
has furnished Developer with the title opinions identified on Exhibit
A to
this Addendum; and
|
(b) |
such
other documents and information which Developer or its counsel has
requested in order to determine the adequacy of the title to the
above
Additional Well Locations.
|
Exhibit
B
(Page
1)
The
Developer accepts the title to the Additional Well Locations and leased premises
in accordance with the provisions of Section 5 of the Agreement.
4. The
drilling and operation of the additional xxxxx on the Additional Well Locations
shall be in accordance with and subject to the terms and conditions set forth
in
the Agreement as supplemented by this Addendum No. __________ and except as
previously supplemented, all terms and conditions of the Agreement shall remain
in full force and effect as originally written.
5.
This
Addendum No. __________ shall be legally binding on, and shall inure to
the
benefit of, the parties and their respective successors and permitted
assigns.
WITNESS
the due execution of this Addendum on the day and year first above
written.
ATLAS
RESOURCES, LLC
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx | |
Xxxxx
X. Xxxxxxx, Executive Vice President
|
||
ATLAS
RESOURCES PUBLIC #17-2007(A) L.P.
|
||
[ATLAS
RESOURCES PUBLIC #17-2008(B) L.P.]
|
||
[ATLAS
RESOURCES PUBLIC #17-2008(C) L.P.]
|
||
By
its Managing General Partner:
|
||
ATLAS
RESOURCES, LLC
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx | |
Exhibit
B
(Page
2)