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EXHIBIT 10.24
GEOPHYSICAL EXPLORATION AGREEMENT
XXXXXXXX PROJECT
XXXXXXXX AND WILBARGER COUNTIES, TEXAS
XXXXXXX COUNTY, OKLAHOMA
This Geophysical Exploration Agreement (this "Agreement"), dated as of
the 15th day of March, 1993, is by and among GENERAL ATLANTIC RESOURCES, INC.
("GARI"), XXXXXXX OIL COMPANY ("Xxxxxxx"), RUJA MUTA CORPORATION ("RMC"),
XXXXXX-XXXXXX INTERESTS, LTD. ("Xxxxxx-Xxxxxx"), JHJ EXPLORATION, LTD. ("JHJ"),
CHEYENNE PETROLEUM COMPANY ("Cheyenne"), ANTRIM RESOURCES, INC. ("Antrim") and
XXXXXXX OIL & GAS, L.P. ("Xxxxxxx") (GARI, Maynard, RMC, Xxxxxx-Xxxxxx, JHJ,
Cheyenne, Antrim and Xxxxxxx are sometimes referred to herein individually as a
"Party" and collectively as "Parties");
WHEREAS, GARI, Maynard, RMC, Xxxxxx-Xxxxxx, JHJ, Cheyenne, Antrim and
Xxxxxxx identified an area (the "Program Area") in Xxxxxxxx and Wilbarger
Counties, Texas and Xxxxxxx County, Oklahoma, identified on the map attached
hereto as Exhibit A, which GARI, Maynard, RMC, Xxxxxx-Xxxxxx, Xxxxxxxx, Antrim
and Xxxxxxx believe to be prospective for oil and gas production; and
WHEREAS, GARI, Maynard, RMC, Xxxxxx-Xxxxxx, JHJ, Cheyenne, Antrim and
Xxxxxxx reached an agreement with respect to the evaluation by them of the
Program Area; and
WHEREAS, the Parties have obtained certain option agreements (the
"Existing Options") to acquire oil and gas leases, oil and gas leases (the
"Existing Leases") and other agreements to obtain oil and gas leases (the
"Existing Farm-Ins") covering portions of the Program Area (the Existing
Options, Existing Leases and Existing Farm-Ins being described on Exhibit B
hereto), and the Parties anticipate that additional options (such options and
the Existing Options being herein referred to as "Options") to acquire oil and
gas leases, oil and gas leases (such leases and the Existing Leases being
herein referred to as "Leases"), and other agreements to obtain oil and gas
leases (such agreements and the Existing Farm-Ins being referred to herein as
"Farm-Ins") may be obtained in the future covering portions of the Program
Area; and
WHEREAS, GARI, Maynard, RMC, Xxxxxx-Xxxxxx, JHJ, Cheyenne, Antrim and
Xxxxxxx also reached an agreement with respect to certain matters concerning
the ownership of Options, Leases and Farm-Ins, and the future exploration,
development and operation of the Program Area;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I.
EVALUATION PROGRAM
Section 1.1. Relationship of Parties. The liabilities of the Parties
hereunder shall be several, not joint or collective. It is not the intention
of the Parties to create, nor shall this Agreement be deemed as creating, a
mining or other partnership or association or to render the Parties liable as
partners. However, for tax purposes only, concurrent with their execution of
this Agreement, the Parties agree to enter into that certain Tax Partnership
Agreement attached hereto as Exhibit D. In the event that, with respect to any
Subsequent Geophysical Programs or drilling operations conducted hereunder, the
Parties Ownership Interests in such Geophysical Programs or the Options, Leases
and Farm-Ins is not consistent with the Parties Ownership Interests in other
operations conducted hereunder, at the Tax Matters Partner's (as designated in
Exhibit D) request, the Parties agree to execute a separate Tax Partnership
Agreement in the form attached hereto as Exhibit D (with revisions as necessary
to reflect the correct Ownership Interests and percentage responsibility for
payment of the Parties) for all operations involving different break downs of
Ownership Interest.
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Section 1.2. Geophysical Programs.
(a) Original Geophysical Programs. The Parties hereto agree that
three-dimensional geophysical programs (hereinafter referred to as "Geophysical
Programs") will be conducted to cover all of the lands outlined and cross-
hashed on Exhibit C attached hereto (hereinafter referred to as the "Original
Geophysical Programs"); provided, however, that Xxxxxxx shall have the right to
remove from the Original Geophysical Programs (i) any part of the acreage over
which the Parties are unable to obtain seismic permits upon reasonable terms
and conditions and (ii) any part of the acreage which, because of its terrain,
location or other factors, would make it unreasonable, in Brigham's reasonable
opinion, to include such acreage within the Original Geophysical Programs.
Xxxxxxx will determine the scope, design and timing of each of the Original
Geophysical Programs.
(b) Subsequent Geophysical Programs. In addition to the Original
Geophysical Programs, at any time during the term of this Agreement, any Party
hereto shall have the right to propose (such Party being sometimes referred to
herein as the "Proposing Party") that additional Geophysical Programs (herein
referred to as the "Subsequent Geophysical Programs") be conducted to cover any
part of the Program Area which has not been included within a prior Geophysical
Program. Each such proposal for a Subsequent Geophysical Program shall be in
writing and shall (i) outline the land position existing in the area to be
covered by the proposed Subsequent Geophysical Program, (ii) provide an
estimate of the costs for the proposed Subsequent Geophysical Program, and
(iii) provide an estimate of the time frame for conducting the proposed
Subsequent Geophysical Program. The non-proposing Parties shall notify the
Proposing Party in writing within thirty (30) days of their receipt of such
proposal for a Subsequent Geophysical Program as to whether such Parties shall
participate in, or not participate in, the proposed Subsequent Geophysical
Program. If a Party is electing not to participate in the Subsequent
Geophysical Program, in addition to notifying the Proposing Party of such
election as aforesaid, within the same thirty (30) day time frame such Party
shall also notify all of the other Parties hereto of its election not to
participate in the Subsequent Geophysical Program.
(c) Participation in Subsequent Geophysical Programs. In the event
that all of the Parties hereto elect to participate in a proposed Subsequent
Geophysical Program, the Parties interests in such Subsequent Geophysical
Program shall be in accordance with their Ownership Interests set forth in
Section 1.3 below. In the event that any Party elects not to participate in a
Subsequent Geophysical Program, the Parties electing to participate in the
Subsequent Geophysical Program shall have the right to elect to acquire all or
part of the non-participating Party's Ownership Interest provided that such
election is made within fifteen (15) days of its receipt of the non-
participating Party's election not to participate. If more than one of the
participating Parties desires to acquire part of the non-participating Party's
Ownership Interest in the Subsequent Geophysical Program, each of the
participating Parties shall have the right to acquire a proportionate share (in
the proportion that such Party's Ownership Interest bears to the total of all
of the Ownership Interests of all of the participating Parties that desire to
acquire such non-participating Party's Ownership Interest) of such non-
participating Party's Ownership Interest in the Subsequent Geophysical Program.
If between all of the participating Parties, all of the non-participating
Party's interest is acquired by such participating Parties, each of the
participating Parties shall reimburse the non-participating Party for such
participating Party's share (being in the proportion that the share of the non-
participating Party's Ownership Interest acquired by such Party bears to the
entire original Ownership Interest of the non-participating Party) of all
Option, Lease and Farm-In costs incurred by the non-participating Party with
respect to Options, Leases and Farm-Ins located within the Subsequent
Geophysical Program and such acquiring Parties shall be responsible for all
future costs incurred under this Agreement and related to the share of the non-
participating Party's Ownership Interest acquired by such Party. If within
such fifteen (15) day period the participating Parties have not elected to
acquire all of the non-participating Party's Ownership Interest, all of such
non-participating Party's Ownership Interest shall remain in the non-
participating Party and the non-participating Party shall have thirty (30) days
from the expiration of such fifteen (15) day period in which to contract for
the sale of its Ownership Interest in such Subsequent Geophysical Program to a
third party (such assignment to be made in accordance with terms of Section 5.1
below and is to be subject to all of the terms and conditions of this
Agreement). Before the non-participating Party may disclose the outline of the
Subsequent Geophysical Program and its terms and conditions to a third party,
such non-participating Party
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must have the third party execute a confidentiality agreement in the form
attached hereto as Exhibit H naming all of the Parties hereto as "Offeror" in
such confidentiality agreement. In the event that the non-participating Party
does not contract for the sale of its Ownership Interest in the Subsequent
Geophysical Program to a third party within such thirty (30) day period as
aforesaid, then the non-participating Party shall forfeit all of its right,
title and interest in and to all existing and future Options, Leases and Farm-
Ins located within the acreage covered by the Subsequent Geophysical Program,
together with all of its right, title and interest in and to any and all
Program Data resulting from such Subsequent Geophysical Program, to the Parties
electing to participate in such Subsequent Geophysical Program and such
participating Parties shall not be required to reimburse the non-participating
Party for any costs incurred by the non-participating Party in such Subsequent
Geophysical Program or any costs incurred by the non-participating Party in
acquiring any interest in the Options, Leases or Farm-Ins located within the
acreage covered by the Subsequent Geophysical Program. In the event of such a
forfeiture by the non-participating Party, the Parties participating in the
Subsequent Geophysical Program shall have the right to acquire a proportionate
share (in the proportion that such Party's Ownership Interest bears to the
total of all of the Ownership Interests held by all of the Parties
participating in the Subsequent Geophysical Program) of the non-participating
Party's Ownership Interest in all of the Program Data, and all existing and
future Options, Leases and Farm-Ins forfeited by the non-participating Party.
In the event that any participating Party does not elect to acquire its
proportionate share of a non-participating Party's Ownership Interest, the
Proposing Party shall have the option to either acquire such unaccounted for
share of the non-participating Party's Ownership Interest or withdraw the
proposal for the Subsequent Geophysical Program. In the event a non-
participating Party's interest is not fully subscribed to by the participating
Parties and/or the Proposing Party, and the proposed Subsequent Geophysical
Program is withdrawn as aforesaid, then the non-participating Party's interest
shall not be forfeited. The participating Parties or third party acquiring a
share of a non-participating Party's Ownership Interest shall pay all costs
that are attributable to their acquired share of the non-participating Party's
Ownership Interest acquired by such Party or third party, including without
limitation, the non-participating Party's share of the seismic costs associated
with the Subsequent Geophysical Program as set forth in Section 1.5. In the
event that a Subsequent Geophysical Program is proposed and is not subsequently
withdrawn, each Party that has elected not to participate in the Subsequent
Geophysical Program shall not compete with any of the Parties participating in
the Subsequent Geophysical Program by owning or acquiring any leasehold,
mineral or royalty interest within the acreage covered by the Subsequent
Geophysical Program, either directly or indirectly, through any agents,
nominees, or representatives, for a period of five (5) years from the date
hereof.
(d) Parties to Conduct the Geophysical Programs. With respect to
each of the Original Geophysical Programs and each of the Subsequent
Geophysical Programs in which Xxxxxxx participates, Xxxxxxx shall conduct
and/or supervise third parties in conducting such Geophysical Programs,
including permitting, acquisition of the data, processing of the data and
interpretation of the data. If Xxxxxxx is not participating in a Subsequent
Geophysical Program, the Parties participating in such Subsequent Geophysical
Program shall reach a mutual agreement as to who shall conduct and/or supervise
third parties in conducting such Subsequent Geophysical Program, including
permitting, acquisition of the data, processing of the data and interpretation
of the data.
(e) Duties With Respect to the Conduct of a Geophysical Program. The
Party responsible for conducting a Geophysical Program, as provided in Section
1.3 (d), shall conduct all such operations as a reasonable prudent operator, in
a good and workmanlike manner, with due diligence and dispatch, in accordance
with good industry practice, and in compliance with applicable law and
regulation, but in no event shall such Party have any liability whatsoever to
the other Parties hereto for losses sustained or liabilities incurred, except
as may result from gross negligence or willful misconduct. All seismic
acquisition and/or processing agreements related to each of the Subsequent
Geophysical Programs shall be awarded on a competitive bid basis to qualified
third-party contractors that have been previously approved and accepted by the
Parties.
(f) Third Party Liability. Any third party damage claim or suit
arising from any operations conducted hereunder and all costs and expenses of
handling, settling, or otherwise discharging such claim or suit shall be at the
joint expense of the Parties participating in the
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operation giving rise to the claim, each Party's responsibility being in the
proportion that their Ownership Interest (as defined below in Section 1.3)
bears to the total of the Ownership Interests of all of the Parties
participating in the operation. In the event any such claim or suit is made
against any Party hereto, such Party shall immediately notify all other
Parties, and the claim or suit shall be jointly handled by all of the Parties
hereto participating in the operation giving rise to the claim or suit.
Section 1.3. Ownership of Data. Subject to the forfeiture provisions
contained in Sections 1.2 and 1.7, the data resulting from the Geophysical
Programs ("Program Data") shall be owned jointly by the Parties in the
following percentages (the percentages indicated below being hereinafter
referred to as the Parties' "Ownership Interests"):
Party Percentage
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Brigham 21.875%
JHJ 2.344%
Xxxxxx-Xxxxxx .781%
GARI 25.000%
Antrim 10.000%
Xxxxxxx 25.000%
Cheyenne 10.000%
RMC 5.000%.
Section 1.4. Right to Program Data and Interpretations.
(a) Provided such Party has paid its proportionate share (as set
forth in Section 1.5 below) of the costs of a Geophysical Program and subject
to any restrictions that may be contained in applicable license agreements,
upon request, each Party shall receive copies of the Program Data and other
supporting data related to such Geophysical Program, including all tapes,
interpretations and reproducibles; provided, however, that no restrictions may
be placed on the seismic data resulting from a Geophysical Program without the
prior written consent of the Parties. In addition, provided that such Party
has paid its proportionate share of the costs of a Geophysical Program, the
Party responsible for conducting the Geophysical Program in accordance with
Section 1.2 (d) above shall provide the Parties that have participated in the
Geophysical Program the following interpretational maps on the acreage covered
by the Geophysical Program:
(i) time and depth maps on the following geological horizons or
another geological horizon in the vicinity of such horizon
Palo Xxxxx
Xxxxxxx
Meramec;
(ii) isochron maps covering the intervals between the following
geological horizons or other geological horizons in the vicinity
of such horizons
Xxxxxxx to Meramec;
(iii) any other interpretational maps that Xxxxxxx and any other Party
reasonably believes may materially aid them in their evaluation
of the acreage covered by the Geophysical Program.
(b) Each Party which has participated in a Geophysical Program and
paid its proportionate share of the costs of a Geophysical Program will also
have all rights to use the Program Data and interpretations related to such
Geophysical Program in connection with exploration and development of the
Program Area. No Party shall have the right to trade or exchange the Program
Data related to a Geophysical Program within five years from the date of
completion of the Geophysical Program without the prior written consent of all
of the other Parties. No Party shall have the right to sell the Program Data
related to a Geophysical Program
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within twenty-four months from the date of completion of the Geophysical
Program without the prior written consent of the other Parties. Any proceeds
resulting from a sale of the Program Data that occurs within five years of the
date of this Agreement shall be divided among the Parties in accordance with
their percentage ownership of the Program Data. Anything to the contrary
contained herein notwithstanding, if the Geophysical Program is a Subsequent
Geophysical Program in which such Party has not participated, such Party shall
own no interest in the Program Data resulting from such Subsequent Geophysical
Program and such Party shall not have the right to receive or review the
resulting Program Data.
(c) No Party shall disclose the Program Data or any interpretational
maps to any third party within twenty-four months of the completion of a
Geophysical Program without written consent from the other Parties hereto,
except that each Party may disclose the Program Data and interpretational maps
to (i) parties in connection with bona fide negotiations with such parties
interested in entering into farm-out or farm-in agreements with the disclosing
Party covering all or parts of the Program Area, or (ii) parties interested in
entering into agreements to purchase an interest or otherwise participate in
the exploration and/or development of all or parts of the Program Area with the
disclosing Party; provided, however, that all third parties to which the
Program Data and/or interpretations are to be disclosed prior to the expiration
of such twenty-four month period must execute a confidentiality agreement in
the form attached hereto as Exhibit H (naming all of the Parties hereto as
"Offeror" in such confidentiality agreement) prior to their review of the
Program Data.
(d) If a Party is aware that any other Party hereto has not paid for
its proportionate part of the costs of a Geophysical Program in accordance with
the terms of Section 1.5 below, such Party shall not intentionally disclose the
Program Data or interpretations related to such Geophysical Program to the non-
paying Party without the consent of all of the other Parties hereto.
Section 1.5. Responsibility for Geophysical Program Costs.
(a) Each of the Parties shall pay their share, in accordance with the
percentages listed in the table below, of all costs and liabilities associated
with the conduct of each of the Original Geophysical Programs, including all
costs heretofore and hereafter billed by third parties to Xxxxxxx in connection
with the conduct of a Geophysical Program as provided herein, and including,
without limitation, the costs associated with three dimensional ("3-D") seismic
acquisition, seismic permitting and damages, processing, interpretation (if
Xxxxxxx interprets the Program Data, such costs shall include all costs
associated with interpreting the data on Brigham's work station and include a
charge of $40.00 for each half hour, or fraction thereof, for work station use
and $35.00 for each scaled plot generated on Brigham's plotter), reproduction
and any other costs associated with the Geophysical Programs (such costs being
sometimes hereinafter collectively referred to as "Geophysical Program Costs").
Party Percentage
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Brigham 0.000%
JHJ 0.000%
Xxxxxx-Xxxxxx 0.000%
GARI 33.334%
Antrim 13.333%
Xxxxxxx 33.333%
Cheyenne 13.333%
RMC 6.667%.
(b) In addition, in the event that a Party has elected to participate
in any Subsequent Geophysical Program pursuant to the terms of Section 1.2 (b)
and (c) above, such Party agrees to be responsible for the percentage share
indicated above in Section 1.5 (a) of the Geophysical Program Costs for (i) any
Subsequent Geophysical Program commenced on or before the earlier to occur of
June 15, 1994 or the date that casing point is reached in the tenth well
drilled by the Parties within the AMI (the earlier to occur of such dates is
hereinafter referred to as the "Cut-Off Date"), and (ii) the portion of any
Subsequent Geophysical Program commenced after the Cut-Off Date that crosses
any Option, Lease or Farm-In (together with a 1/4 mile tail around such Option,
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Lease or Farm-In acreage) that was acquired by any Party hereto prior to the
Cut-Off Date. For purposes of this Section 1.5, a Subsequent Geophysical
Program shall be deemed to have commenced when a seismic contractor physically
enters onto any part of the area to be covered by the Geophysical Program with
vibroseis trucks for the purpose of acquiring seismic data.
(c) The Parties shall be responsible for the Geophysical Program
Costs applicable to any part of the Subsequent Geophysical Programs in which
they participate and which are not described in Section 1.5 (b) above, in
proportion to their Ownership Interest.
(d) Anything to the contrary contained in Section 1.5 (b) above
notwithstanding, once the Geophysical Program Costs incurred for all of the
Subsequent Geophysical Programs and the costs incurred in acquiring and
maintaining Options, Leases and Farm-Ins located within the acreage covered by
the Subsequent Geophysical Programs equals or exceeds six hundred thirty-three
thousand forty dollars ($633,040.00), the Parties shall be responsible for all
Subsequent Geophysical Program Costs incurred after such six hundred and
thirty-three thousand forty dollar ($633,040.00) amount has been exceeded in
proportion to their Ownership Interest in the applicable Subsequent Geophysical
Program rather than the percentages set forth in Section 1.5 (a) above. In no
event shall the Parties be required to pay in accordance with the percentages
indicated in Section 1.5 (a) for any Subsequent Geophysical Program Costs
incurred after such six hundred and thirty-three thousand forty dollar
($633,040.00) amount has been exceeded, but rather, the Parties' responsibility
for such Subsequent Geophysical Program Costs shall be in accordance with the
Parties' Ownership Interests.
(e) Anything to the contrary contained in Section 1.5 (b) and (c)
above notwithstanding, once the total of (i) the Geophysical Program Costs
incurred for all of the Geophysical Programs (both Original Geophysical
Programs and Subsequent Geophysical Programs), (ii) the costs incurred in
acquiring and maintaining Options, Leases and Farm-Ins located within the AMI,
and (iii) the costs incurred by the Parties in drilling the first ten xxxxx
located within the AMI to casing point, equals or exceeds eight million seven
hundred eighty-nine thousand sixty-six dollars ($8,789,066.00), the Parties
shall be responsible for all Geophysical Program Costs incurred after such
eight million seven hundred eighty-nine thousand sixty-six dollar
($8,789,066.00) amount has been exceeded in proportion to their Ownership
Interest in the Geophysical Program rather than the percentages set forth in
Section 1.5 (a) above. In no event shall the Parties be required to pay in
accordance with the percentages indicated in Section 1.5 (a) for any
Geophysical Program Costs incurred after such eight million seven hundred
eighty-nine thousand sixty-six dollar ($8,789,066.00) amount has been exceeded,
but rather, the Parties' responsibility for such Geophysical Program Costs
shall be in accordance with the Parties' Ownership Interests.
(f) In the event that in accordance with the terms of Section 1.2 (b)
and (c) above, a Party has elected not to participate in a Subsequent
Geophysical Program, then each of the Parties acquiring such Party's interest
in accordance with the terms of Section 1.2 (b) and (c) above shall be
responsible (in the proportions provided in Section 1.2 (b) and (c) above) for
such non-participating Party's share of the Geophysical Program Costs as
provided in this Section 1.5.
Section 1.6. Payment of Geophysical Program Costs.
(a) Original Geophysical Program Costs. As of the date of the
execution of this Agreement, the total of the Geophysical Program Costs for all
of the Original Geophysical Programs is estimated to be two million four
hundred seventy six thousand twenty six dollars ($2,476,026.00). However, this
estimate is not in any way a limit on any Party's responsibility for the
payment of the actual Geophysical Program Costs for the Original Geophysical
Programs. Concurrent with such Party's execution of this Agreement, GARI,
Maynard, Ruja Muta and Cheyenne shall each reimburse Xxxxxxx for their
proportionate share of the Geophysical Program Costs that have either been
incurred as of the date of execution or that are due and payable as of the date
of execution. All Geophysical Program Costs incurred subsequent to the
Parties' execution of this Agreement shall be billed out to the Parties as such
costs are incurred and each Party shall remit payment of all invoiced amounts
within twenty (20) days of their receipt of such an invoice. Xxxxxxx shall not
be obligated to deliver any information relative to Program Data to any Party
that has failed to make payment when due until such time as such costs owed by
such non-paying Party have been paid.
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(b) Subsequent Geophysical Programs. All Geophysical Program Costs
incurred with respect to a Subsequent Geophysical Program shall be billed out
to the Parties participating in the Subsequent Geophysical Program as such
costs are incurred and each Party shall remit payment of all invoiced amounts
within twenty (20) days of their receipt of such an invoice. The Party
responsible for conducting the Geophysical Program (as provided in Section 1.2
(d)) shall not be obligated to deliver any information relative to Program Data
related to such Subsequent Geophysical Program to any Party that has failed to
make payment when due until such time as such costs owed by such non-paying
Party have been paid.
Section 1.7. Failure to Pay Geophysical Program Costs. In the event
that any Party fails to pay any part of its proportionate share of invoiced
Geophysical Program Costs within twenty (20) days of their receipt of the
applicable invoice, any other Party hereto may give such Party written notice
of such default by certified mail return receipt requested. In the event that
such non-paying Party does not cure the default within thirty (30) days of its
receipt of such notice, and to the extent that the deficiency is not subject to
a valid dispute, in addition to all other remedies that may be available to the
paying Parties at law or in equity, such non-paying Party shall automatically
forfeit all of its present and future right, title and interest in and to the
Program Area and AMI and all present and future property rights of every kind
owned by such Party within the Program Area and AMI. In the event of such a
forfeiture, the Parties participating in the Geophysical Program shall have the
right to acquire a proportionate share (being in the proportion that such
Party's Ownership Interest, as defined in Section 1.3 above, bears to the total
of all of the Ownership Interests held by all of the Parties participating in
the Geophysical Program) of the forfeiting Party's Ownership Interest in all of
the Program Data, and all existing and future Options, Leases, Farm-Ins and all
other present and future rights owned by the forfeiting Party in the Program
Area and AMI. The non-paying Party shall execute all conveyance instruments
necessary to effectuate such forfeiture. In the event that any Party does not
elect to acquire its proportionate share of a non-paying Party's Ownership
Interest within ten (10) days of the date of such forfeiture, the Party that is
responsible for conducting the Geophysical Program (as provided in Section
1.2(d) above) in which the non-paid Geophysical Program Costs were incurred
shall receive the unaccounted for share of the non-paying Party's Ownership
Interest. The Parties receiving the non-paying Party's interests shall pay
their proportionate share of the costs attributable to the non-paying Party's
interest acquired by such Parties within ten (10) days of such forfeiture. In
the event of such a failure to make payment and forfeiture of right, title and
interest, for a period of five (5) years from the date hereof, such forfeiting
Party shall not compete with any of the other Parties hereto within the AMI by
owning or acquiring any leasehold, mineral or royalty interest within the AMI,
either directly or indirectly, through any agents, nominees, or
representatives.
Section 1.8. Disclaimer of Warranties as to Program Data and
Interpretations. The Parties understand that with respect to the Original
Geophysical Programs and each Subsequent Geophysical Program in which Xxxxxxx
participates, Xxxxxxx will use all reasonable efforts to obtain high quality
Program Data and to provide good quality interpretation of such Program Data;
however, Xxxxxxx MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND AS TO THE
PROGRAM DATA OR INTERPRETATIONS, INCLUDING WITHOUT LIMITATION, THEIR FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR ACCURACY, AND XXXXXXX HEREBY
DISCLAIMS ANY AND ALL SUCH REPRESENTATIONS OR WARRANTIES, and any use of the
Program Data or interpretations by the Parties, or any action taken by the
Parties shall be based solely on their own judgment, and neither Xxxxxxx nor
its successors or assigns, shall be liable or responsible to the other Parties
for any loss, cost, damages, or expense whatsoever, including incidental or
consequential damages, incurred or sustained as a result of the use of or
reliance upon the Program Data or interpretations.
ARTICLE II.
AREA OF MUTUAL INTEREST
Section 2.1. Establishing an Area of Mutual Interest. The Parties
hereto have agreed to establish an Area of Mutual Interest ("AMI") which shall
encompass all of the land located in
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the Program Area. The AMI shall remain in force for a period of five (5) years
from the date of this Agreement, unless sooner terminated by mutual agreement
of the Parties.
Section 2.2. Payment for Options, Farm-Ins and Leases.
(a) All costs incurred in acquiring and maintaining Existing Leases,
Existing Farm-Ins and Existing Options that have been incurred prior to the
Cut-Off Date (as defined in Section 1.5 (b) above) will be paid for by the
Parties in accordance with the percentages set forth below:
Party Percentage
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Brigham 0.000%
JHJ 0.000%
Xxxxxx-Xxxxxx 0.000%
GARI 33.334%
Antrim 13.333%
Xxxxxxx 33.333%
Cheyenne 13.333%
RMC 6.667%.
(b) Subject to the notification and response procedures contained in
Sections 2.4, 2.5 and 2.6 below, all costs incurred prior to the Cut-Off Date
in acquiring and maintaining any other Leases, Options and Farm-Ins covering
acreage located within the AMI, shall also be paid for by the Parties in
accordance with the percentages set forth above in Section 2.2 (a). In
addition, subject to the notification and response procedures contained in
Section 2.6 below, all costs incurred in acquiring any Leases acquired by any
of the Parties at any time during the term of this Agreement through the
exercise of an Option that was acquired by any Party on or before the Cut-Off
Date shall be paid for by the Parties in accordance with the percentages
indicated in the table set forth in Section 2.2 (a) above. Anything to the
contrary contained in this Section 2.2 (b) notwithstanding, in the event that
the Parties are required to obtain an extension of any Option or Farm-in as the
result of a delay that is caused solely by Xxxxxxx, regardless of the date of
the acquisition of such extension, the Parties shall each be responsible for
the costs of such extension in proportion to their Ownership Interest.
(c) Subject to the notification and response procedures contained in
Sections 2.4, 2.5 and 2.6 below, all costs incurred after the Cut-Off Date in
acquiring and maintaining Leases (except as provided in Section 2.2 (b)),
Options and Farm-Ins shall be paid for by the Parties in proportion to their
Ownership Interest.
(d) Anything to the contrary contained in this Section 2.2
notwithstanding, once the Geophysical Program Costs incurred for all of the
Subsequent Geophysical Programs and the costs incurred in acquiring Options,
Leases and Farm-Ins located within the acreage covered by the Subsequent
Geophysical Programs equals or exceeds six hundred thirty-three thousand forty
dollars ($633,040.00), the Parties shall be responsible for all costs incurred
in acquiring and maintaining Leases, Options and Farm-Ins that are located
within the acreage that is covered by the Subsequent Geophysical Programs after
such six hundred and thirty-three thousand forty dollars ($633,040.00) amount
has been exceeded in proportion to their Ownership Interest rather than the
percentages set froth in the table contained in Section 2.2 (a) above. In no
event shall the Parties be required to pay in accordance with the percentages
indicated in Section 2.2 (a) for any costs incurred in acquiring and
maintaining Leases, Options and Farm-Ins located within the acreage that is
covered by the Subsequent Geophysical Programs after such six hundred and
thirty-three thousand forty dollar ($633,040.00) amount has been exceeded, but
rather, the Parties' responsibility for such costs shall be in accordance with
the Parties' Ownership Interests.
(e) Anything to the contrary contained in Section 1.5 (b) and (c)
above notwithstanding, once the total of (i) the Geophysical Program Costs
incurred for all of the Geophysical Programs (both Original Geophysical
Programs and Subsequent Geophysical Programs), (ii) the costs incurred in
acquiring and maintaining Options, Leases and Farm-Ins located within the AMI,
and (iii) the costs incurred by the Parties in drilling the first ten xxxxx
located within the AMI to casing point, equals or exceeds eight million seven
hundred eighty-nine thousand sixty-six dollars ($8,789,066.00), the Parties
shall be responsible for all costs incurred in acquiring and maintaining
Leases, Options and Farm-Ins that are located within the AMI after such eight
million seven hundred eighty-nine thousand sixty-six dollar ($8,789,066.00)
amount has been exceeded in proportion to their Ownership Interest rather than
the percentages set forth
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in Section 2.2 (a) above. In no event shall the Parties be required to pay in
accordance with the percentages indicated in Section 2.2 (a) for any costs
incurred in acquiring and maintaining Leases, Options and Farm-Ins after such
eight million seven hundred eighty-nine thousand sixty-six dollar
($8,789,066.00) amount has been exceeded, but rather, the Parties'
responsibility for such costs shall be in accordance with the Parties'
Ownership Interests.
(f) Concurrent with their execution of this Agreement, Cheyenne,
GARI, Xxxxxx, Xxxxxxx and RMC each agree to reimburse Xxxxxxx for their
proportionate share of all costs incurred prior to the execution of this
Agreement by Xxxxxxx in acquiring and maintaining the Existing Leases, Existing
Farm-ins and Existing Options. All other costs incurred in acquiring and
maintaining Leases, Options and Farm-ins shall be paid by the Parties within
thirty (30) days of their receipt of an invoice reflecting the amount due.
Section 2.3. Ownership of Options, Farm-Ins and Leases. All Existing
Leases, Existing Options and Existing Farm-Ins shall be owned by the Parties in
accordance with their undivided Ownership Interests (as defined in Section 1.3
above). Subject to the notification and response procedures contained in
Sections 2.4, 2.5 and 2.6 below, all other Leases, Options and Farm-Ins
acquired by the Parties within the AMI during the term of this Agreement shall
also be owned by the Parties in accordance with their undivided Ownership
Interests. However, unless a Party requests prior record assignment of its
interest in the Leases, Options or Farm-Ins, record title to all Leases,
Options and Farm-ins shall remain in the Party originally acquiring same until
such time as the acreage covered by such Existing Options, Existing Leases,
Leases and Options have been included within a designated Prospect Area as
provided in Section 3.5 below.
Section 2.4. Notification and Response Procedures. Should any Party
own on the date hereof, acquire or propose to acquire at any time after the
date hereof but prior to the date such AMI terminates hereunder, (a) an oil,
gas and/or mineral lease, an interest in an oil, gas and/or mineral lease or
other interests in oil, gas and/or other minerals covering lands any part of
which are located within the AMI or (b) an Option or a Farm-In covering lands
any part of which are located within the AMI (the properties, interests and
rights described in clauses (a) and (b), insofar and only insofar as they cover
lands within the AMI (as it then exists) being herein called "Acquired
Interests" with the Existing Leases, Existing Options and Existing Farm-Ins
being excluded from the definition of Acquired Interests) such Party (the
"Acquiring Party") shall notify the other Parties, in writing with supporting
documentation, of such acquisition or proposed acquisition, the consideration
paid or to be paid for the Acquired Interest, any other obligations (including,
without limitation, drilling obligations) undertaken or to be undertaken as a
part of such acquisition or proposed acquisition and any other terms of such
acquisition. Each non-acquiring Party shall, within thirty (30) days after
receipt of such a notice from the Acquiring Party with respect to such an
acquisition or proposed acquisition, notify the Acquiring Party, in writing,
whether it wishes to participate in such acquisition; provided that failure to
respond within the time and in the manner set forth above shall be deemed to be
an election to not participate in such acquisition.
Section 2.5. Effect of a Party's Election Not to Participate. Should
all of the Parties elect to participate in an acquisition or proposed
acquisition of an Acquired Interest, upon payment of its share of the
acquisition costs (or to the extent not yet due, agree to pay when due) each
participating Party shall own its Ownership Interest (being the percentage
specified for such Party in the table set forth in Section 1.3 above) in the
Acquired Interest. However, unless a Party requests prior record assignment of
its interest in the Acquired Interest, record title to the Acquired Interest
shall remain in the Acquiring Party until such time as the acreage covered by
such Acquired Interest has been included within a designated Prospect Area as
provided in Section 3.5 below. If any Party elects not to participate in such
acquisition, the Parties participating in the Acquired Interest shall have the
right to acquire a proportionate share (being in the proportion that such
Party's Ownership Interest, as defined in Section 1.3 above, bears to the total
of all of the Ownership Interests held by all of the Parties participating in
the Acquired Interest) of the non-participating Party's Ownership Interest in
the Acquired Interest. The participating Parties shall pay their proportionate
share (in the proportion that the amount of the non-participating Party's
Ownership Interest that they acquired bears to the original total amount of the
non-participating Party's Ownership Interest) of the costs attributable to the
non-paying Party's Ownership Interest in the Acquired Interest which was
acquired by such Parties. In the event that any Party does not elect to
acquire its proportionate share of a non-participating Party's Ownership
Interest in an Acquired Interest, the Acquiring Party shall receive the
unaccounted for share of such non-
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participating Party's Ownership Interest in the Acquired Interest; provided,
however, that in the event that the Acquired Interest has only been proposed
for acquisition by the Acquiring Party and has not yet been acquired by the
Acquiring Party and there is an unaccounted for share of the Acquired Interest
as aforesaid, the Acquiring Party shall have the option not to acquire the
Acquired Interest.
Section 2.6. Exercise of Options. Should any Party propose to exercise
an Option with respect to some or all of the lands covered thereby, such Party
shall notify the other Parties owning an interest in such Option in the same
manner as provided for in Section 2.4 above with respect to acquisitions of
Acquired Interests, and each Party owning an interest in the Option shall elect
to participate or to not participate in the exercise of such Option in the same
manner as provided in Section 2.4 with respect to elections to participate or
to not participate in the acquisition of Acquired Interests. The effect of a
Party's election to participate in such an exercise of an Option, and the
payment of costs and the ownership of interests in the Leases acquired pursuant
to such exercise, shall be handled in the same manner as provided in Sections
2.4 and 2.5 with respect to elections to participate or not participate in
acquisitions of Acquired Interests and the party proposing the exercise of the
Option shall be deemed to be the "Acquiring Party" under those Sections. If
any Party does not wish to participate in the exercise of any Option when the
time to exercise arrives, then said non-participating Party shall not have any
interest in the leasehold appurtenant to such Option but will still be subject
to this Agreement in all other respects. The participating Parties shall have
the right to acquire a proportionate share of the non-participating Parties'
Ownership Interest as provided in Section 2.5. Notwithstanding the foregoing,
should there be a disagreement between the Parties owning an interest in the
Option as to whether the exercise of the Option should be delayed or as to
whether the Parties should obtain an extension of the term of the Option, a
majority vote (being 51% of the Ownership Interest in the applicable Option) of
the Parties owning an interest in the Option shall determine what action is to
be taken with respect to the Option.
ARTICLE III.
PROSPECT DESIGNATION AND PARTICIPATION
Section 3.1. Prospect Designation. Upon completion of the initial
interpretation of the data resulting from each Geophysical Program, the Parties
participating in the Geophysical Program will meet to delineate prospects
(hereinafter individually referred to as "Prospect Area") for exploration and
development within that part of the Program Area covered by such Geophysical
Program. The participating Parties shall attempt to agree on 1) the number of
Prospect Areas within the area covered by the Geophysical Program, 2) the
acreage to be included in each Prospect Area, and 3) for each Prospect Area,
the Parties participating in such Prospect Area and their respective
participation percentages (which shall, if all Parties participate, be in
accordance with the Parties' Ownership Interests set forth in the table
contained in Section 1.3 above, unless all Parties agree otherwise). As to all
Prospect Areas proposed and agreed upon by all of the Parties in the initial
meeting, such Prospect Areas shall be deemed to be designated and the Parties
shall document their agreement in writing in the form attached hereto as
Exhibit E. Any Prospect Area proposed at the initial meeting which is not
agreed to by the Parties may be re-submitted by any Party utilizing the
procedures contained in Section 3.2 below.
Section 3.2. Proposals by Parties for Prospect Areas. After the
meeting described in Section 3.1 above, any Party which has participated in the
Geophysical Program may propose that a portion of the Program Area be
designated as a Prospect Area by giving written notice to the other Parties,
which notice shall describe the acreage which such Party would include in the
Prospect Area. The acreage proposed to be included in a Prospect Area shall
not include any acreage previously included in a Prospect Area.
Section 3.3. Response to a Prospect Area Proposal. Each Party
desiring to participate in a Prospect Area proposed by another Party under
Section 3.2 (such Party proposing the Prospect Area being referred to herein as
the "Proposing Party"), shall notify the Proposing Party, in writing, within 30
days after its receipt of such proposal, or sooner, if an existing option or
lease is expiring, of its election to participate in the proposed Prospect Area
and stating whether or not such Party agrees with the acreage being proposed
for inclusion in the Prospect Area by the Proposing Party; an election to
participate in a Prospect Area which contains no statement as
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to whether the Party agrees with the acreage proposed for inclusion in the
Prospect Area shall be deemed agreement to the acreage proposed for inclusion
in the Prospect Area. A Party who disagrees with the acreage proposed to be
included in the Prospect Area shall give notice of such disagreement to the
Proposing Party within the time and in the manner provided above for elections
to participate. A Party failing to respond, within the time and in the manner
provided above, to a proposal for a Prospect Area, or a Party responding and
electing to not participate in a Prospect Area but making no statement as to
whether it agrees with the acreage proposed to be included in the Prospect
Area, will be deemed to have elected not to participate in the Prospect Area
and to have agreed to the acreage proposed to be included in the Prospect Area.
If no Party disagrees with the acreage proposed to be included in the proposed
Prospect Area, such Prospect Area shall be deemed to be designated and the
Parties that have elected to participate therein shall have the right to
explore and/or develop such Prospect Area to the exclusion of the Parties that
have elected (or have been deemed to have elected) not to participate in the
Prospect Area. If no other Parties elect to participate with the Proposing
Party in a designated Prospect Area the Proposing Party shall have the right to
develop the Prospect Area for its own account in accordance with the terms of
Section 3.6 hereof.
Section 3.4. Determining Prospect Area Disagreements. If, with respect
to a Prospect Area proposed under Section 3.2, there is disagreement concerning
the lands to be included in the Prospect Area, the Parties shall, for a period
of ten (10) days after the expiration of the response period described in
Section 3.3 above, attempt to agree upon the lands to be included in the
Prospect Area and, failing to reach such agreement within such time, the
Prospect Area shall be deemed to be designated and the lands included in the
Prospect Area shall consist of the Governmental Quarter Section on which the
initial well is proposed to be located and the East Half of the Governmental
Quarter Section adjoining such Quarter Section on the West, the West Half of
the Governmental Quarter Section adjoining such Quarter Section on the East,
the North Half of the Quarter Section adjoining such Quarter Section on the
South and the South Half of the Quarter Section adjoining such Quarter Section
on the North. In the event that the acreage located in the area of the
proposed Prospect Area is not divided into Governmental Quarter Sections, to
the extent practicable, the Prospect Area shall consist of a 320 acre tract in
the form of a square with the proposed location for the initial well being
located in the center of the tract. In the event of such a Prospect Area
disagreement, once the acreage to be included within the Prospect Area has been
resolved and the Prospect Area has been designated in accordance with this
Section 3.4, the Proposing Party must give all of the Parties notice of the
acreage included within the Prospect Area and each of the Parties shall notify
the Proposing Party, in writing, within fifteen (15) days after its receipt of
such notice, or sooner, if an existing option or lease is expiring, of its
election to participate in the Prospect Areas.
Section 3.5. Participation of the Parties. With respect to each
Prospect Area proposed under Section 3.1 or 3.2, the participation of the
Parties therein shall be (unless all Parties agree otherwise) determined in
accordance with the terms set forth in Article II above, provided that if fewer
than all Parties participate in any Prospect Area, the participation of each of
the Parties participating therein shall be in the percentage ownership interest
in which such Parties agree to participate. If fewer than all of the Parties
elect to participate and if the participating Parties are unable to agree upon
the percentages in which they will participate (each Party electing to
participate will be deemed to have agreed to participate with the percentage
Ownership Interest set forth for such Party in the table contained in Section
1.3 above, but each Party will have no obligation to participate for a larger
interest) within 30 days after the date of such Prospect Area proposal, the
proposal for such Prospect Area will be deemed withdrawn. Once a Prospect Area
has been designated and the Options covering acreage located within such
Prospect Area have been exercised, title to the Leases and Farm-ins located
within the Prospect Area shall be assigned (without warranty of title except as
provided in Section 3.8 below) to the Parties participating therein in
accordance with their participation percentages, insofar as such Leases and
Farm-ins cover acreage located within the Prospect Area. Notwithstanding the
above, in the event that a Party has elected not to participate in an Acquired
Interest that is included within a Prospect Area, such Party shall not be
entitled to receive an assignment in or otherwise participate in such Acquired
Interest even though it is included within the Prospect Area in which such
Party has elected to participate.
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Section 3.6. Relinquishment of Interests by Non-Participating Parties.
If a Party agrees or elects (or is deemed to have elected) not to participate
in a particular Prospect Area, then such Party shall relinquish all interest,
other than rights to Program Data, in such Prospect Area (including, without
limitation, rights under Options, Leases, Farm-Ins, Minerals or Royalties
insofar as they cover the Prospect Area) to the Parties electing to participate
in such designated Prospect Area in accordance with their participation in such
non-participating Party's interest as determined in accordance with the
provisions of Section 3.5 above; provided, however, that this provision shall
not be construed so as to require an assignment of a Party's interest in any
xxxxx or units that were producing or capable of producing before such Prospect
Area was designated.
Section 3.7. Xxxxxxx Override. All Leases, Options and Farm-ins
covering interests located within the Program Area shall be burdened with an
overriding royalty in all oil, gas and other minerals produced, saved and
marketed pursuant to such Leases, Options and Farm-ins, in favor of Xxxxxxx
(hereinafter referred to as the "Xxxxxxx Override"), in an amount equal to the
lesser of: (i) two percent (2% of 8/8ths); or (ii) the positive difference, if
any, between 22% and all existing royalty and overriding royalty burdens. It
being understood that the Xxxxxxx Override is not to reduce the net revenue
interest in an Option, Lease or Farm-in below 78%. In addition, the Xxxxxxx
Override shall be proportionately reduced in the event that the Lease, Option
or Farm-in does not cover 100% of the leasehold working interest in the acreage
that is included in the Lease, Option or Farm-in. In addition, the amount of
the Xxxxxxx Override shall also be reduced in the proportion that the Party's
interest in the Option, Lease or Farm-In bears to the entire interest in the
Option, Lease or Farm-In. The Xxxxxxx Override shall be conveyed by the
Parties to Xxxxxxx utilizing the form attached hereto as Exhibit G, promptly
following their receipt of an interest in a Lease (regardless of whether such
interest in the Lease is obtained as the result of an assignment from a Party
hereto, through the exercise of an Option, an assignment under the terms of a
Farm-In, or otherwise).
Section 3.8. Lease Burdens. No Party hereto shall burden or encumber
any other Party's interest in an Acquired Interest, Lease, Option or Farm-In
with any overriding royalty, production payment, or other burden except as
provided in Section 3.7 above, without the consent of the other Parties;
provided, however, that in its efforts to obtain an Acquired Interest, a Party
hereto may grant or otherwise burden an Acquired Interest with a royalty,
overriding royalty, production payment or other burden in favor of a third
party owning such Acquired Interest (farmor, mineral owner, assignor, lessee or
lessor) in such Party's reasonable efforts to obtain the Acquired Interest. If
any Party hereto burdens or encumbers its Ownership Interest in any Option,
Lease, Farm-In, Program Data with any overriding royalty, production payment,
or other burden (hereinafter referred to as "Subsequently Created Burdens")
except as provided in this Section 3.8 or Section 3.7 above, and such Party is
required under the terms of this Agreement to assign or relinquish to any other
Party or Parties, all or a portion of its Ownership Interest and/or the
production attributable thereto, said other Party or Parties shall receive such
assignment and/or production free and clear of such Subsequently Created
Burdens and such Party shall indemnify and hold harmless the Party or Parties
entitled to the assignment or forfeiture from any and all claims and demands
for payment asserted by owners of such Subsequently Created Burdens.
ARTICLE IV.
DRILLING OPERATIONS
Section 4.1. Drilling Operations. A Party's election to participate in
a Prospect Area in accordance with the terms of Article III above does not
constitute a commitment to participate in the drilling of a well within the
Prospect Area; however, as provided in the form Operating Agreement attached
hereto as Exhibit F, in the event that a Party does not participate in the
first well proposed and drilled within the Prospect Area, such Party must
relinquish all of its interest in the applicable Prospect Area. Except as
provided herein to the contrary, or as otherwise provided in any Farm-in or
Option agreement to the contrary, all drilling, completing, workover and other
well and production operations on each Prospect Area shall be governed by the
terms of a separate Operating Agreement for each such Prospect Area in the form
attached hereto as Exhibit F (with appropriate insertions and exhibits
reflecting the agreements hereunder on Prospect Area, participation percentages
and initial well). In the event that there are any irreconcilable
inconsistencies or ambiguities between the terms of this Agreement and the
terms of the Operating Agreement, the terms and conditions contained in this
Agreement shall control.
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Section 4.2. Responsibility for Drilling Costs. Anything to the
contrary contained in the applicable Operating Agreement notwithstanding, with
respect to each of GARI, Xxxxxxx, Xxxxxxxx, Antrim or RMC (each of GARI,
Xxxxxxx, Xxxxxxxx, Antrim and RMC being sometimes referred to herein
individually as a "Promoted Party"), each Promoted Party shall, with respect to
the first ten (10) xxxxx drilled within the AMI in which it participates, pay
for the costs of drilling each of such Promoted Party's first ten (10) xxxxx to
casing point on a third for a quarter basis. As such, each of the Promoted
Parties shall be responsible for and pay the percentage indicated in the table
below for each such Promoted Party of all of the costs incurred in drilling the
first ten (10) xxxxx within the AMI to casing point in which such Promoted
Party participates.
Party Percentage of Cost
----- ------------------
GARI 33.334%
Antrim 13.333%
Xxxxxxx 33.333%
Cheyenne 13.333%
RMC 6.667%.
In the event that any of the Promoted Parties elect not to participate in any
well drilled within the AMI, the Promoted Parties that do not participate in
the drilling of such well shall not receive credit for the drilling of such
well toward their obligation to pay for the cost of drilling such Party's first
ten (10) xxxxx to casing point on a third for a quarter basis. In addition, in
the event that the Parties' interests in any of the first ten (10) xxxxx is
proportionately reduced by outside participation, then the Promoted Parties
that participate in such well shall be obligated to pay for Brigham's, JHJ's
and Xxxxxx-Xxxxxx'x unfulfilled carried costs on subsequent xxxxx. For
example, should one of the first ten (10) xxxxx be drilled within the AMI on
acreage that is subject to a farm-in agreement in which the Parties hereto only
hold a 50% working interest, and of the Promoted Parties only GARI and Xxxxxxx
participate in the drilling of such well, then such well shall only count as
one half (1/2) of a well toward GARI's and Xxxxxxx'x obligation to pay for
drilling costs to casing point on a third for a quarter basis for the first ten
(10) xxxxx such Parties participate in. Subject to the terms of the Operating
Agreement, the Parties shall pay for all other drilling costs, completion and
workover costs in proportion to their working interest in each well.
Section 4.3. Operator. It is agreed and understood that, except as may
be provided in any Farm-in or Option agreement to the contrary, Xxxxxxx shall
be designated as operator in the Operating Agreement executed for each well in
which Xxxxxxx participates drilled by the Parties within the AMI until such
time as Xxxxxxx is operating twenty (20) producing xxxxx. Once the Parties
have drilled twenty (20) producing xxxxx within the AMI that are operated by
Xxxxxxx, except as may be provided in any Farm-in or Option agreement to the
contrary, GARI shall have the option to be designated as operator with respect
to the next twenty (20) producing xxxxx that are drilled by the Parties within
the AMI in which GARI participates. Thereafter, except as may be provided in
any Farm-in, Lease or Option agreement to the contrary, Xxxxxxx and GARI shall
each have the option to be designated as operator after the drilling of the
twentieth producing well within the AMI by the Parties since that Party was
last designated as operator. In the event that Xxxxxxx and GARI do not
participate in the drilling of a well which occurs when such Party has the
right to be designated as operator, except as may be provided in any Farm-in,
Lease or Option agreement to the contrary, the Parties holding a majority
working interest in the Prospect Area or well shall designate the operator.
The operator shall consult with all of the other Parties participating in the
well as to all drilling and completion operations.
Section 4.4. AMI for Prospect Area. Commencing with the establishment
of a Prospect Area, such Prospect Area shall from that time forward no longer
be subject to the AMI provided for in Article II above and shall thereafter be
considered covered instead by a new Prospect Area AMI. The new Prospect Area
AMI (i) is binding on all Parties (whether or not they participated, or had
rights to participate, in such Prospect Area), (ii) consists of such Prospect
Area, (iii) lasts until the later to occur of five years from the date hereof
or the date the Operating Agreement for such Prospect Area terminates, and (iv)
is governed by the same terms set forth in Sections 2.2, 2.3, 2.4, 2.5 and 2.6,
with the participation percentages of the Parties being in accordance with
their Ownership Interest in the Leases, Options and Farm-Ins located within the
Prospect Area. Any portion of the Program Area not designated as a Prospect
Area shall continue to be subject to the AMI provided for in Article II.
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Section 4.5. Limitation on Concurrent Well Proposals. The Parties
agree that during the first two years of the term of this Agreement no more
than three active well proposals shall be in existence at any one time within
the AMI, without the agreement of all Parties; except to the extent that such
operations are necessary to acquire, maintain or hold Lease or Farm-In acreage
located within the AMI.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Assignments. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
their respective assigns of rights hereunder. Any Party hereto may assign all
or any part of its interest under the terms of this Agreement provided that
such assignment expressly provides that the assigned interest is subject to the
terms and provisions of this Agreement. Unless (and then only to the extent
that) this Agreement is itself assigned at the same time, the benefits of this
Agreement shall not run with an assignment of a Party's interests in the
Options, Leases or Farm-Ins, or any other rights in lands within the Program
Area, but the assigned interest shall be subject to the terms of this
Agreement. In the event that a Party is assigning only part of its interest in
this Agreement and/or the Options, Leases or Farm-Ins and such assignment is
limited in geographical area such that the assignee is not receiving an
interest in the entire AMI, such assignment shall provide that the assignee is
not entitled to receive or review any of the Program Data or interpretations
covering any acreage other than the acreage in which the interest is being
assigned without the prior written consent of all of the Parties hereto. In
addition, in the event the assignment is limited in geographical area as
aforesaid, the assignment must contain an agreement that the assignee shall not
compete with the Parties hereto within a one (1) mile radius of the perimeter
of the acreage covered by the interest assigned to such third party, by owning
or acquiring any leasehold, mineral or royalty interest within such area,
either directly or indirectly, through any agents, nominees, or
representatives, during the term of the AMI hereunder.
Section 5.2. Audit. Upon request and advance notice, the Party
responsible for conducting the Geophysical Program will make available , at a
reasonable time and place, access to the books and records reasonably related
to such Geophysical Program in which such requesting Party is a participant
together with any and all records related to the Options, Leases and Farm-Ins
located within the area covered by the applicable Geophysical Program.
Section 5.3. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing, and unless otherwise
specifically provided, shall be delivered personally, or by mail, telecopier or
delivery service, to the addresses set forth opposite the signatures of the
Parties below, and shall be considered delivered upon the date of receipt.
Each Party may specify its proper address or any other post office address
within the continental limits of the United States by giving notice to other
Parties, in the manner provided in this section, at least ten (10) days prior
to the effective date of such change of address.
Section 5.4. Governing Law. This Agreement and all matters pertaining
thereto, including, but not limited to, matters of performance, non-
performance, breach, remedies, procedures, rights, duties, and interpretations
or construction, shall be governed by the laws of the State of Texas. The
Parties agree that the venue for any disputes or claims arising hereunder or in
any way related hereto shall be in Dallas County, Texas.
Section 5.5. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be binding upon the signing Party or Parties
thereto as fully as if all Parties had executed one instrument, and all of such
counterparts shall constitute one and the same instrument.
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IN WITNESS WHEREOF this Agreement is executed by the Parties on the
dates set forth opposite their respective signatures below.
Address: XXXXXXX OIL & GAS, L.P.,
0000 Xxxxxx Xxxx, Xxxxx 0000 by Xxxxxxx Exploration Company,
Xxxxxx, Xxxxx 00000 its Managing General Partner
(000) 000-0000
Fax: (000) 000-0000
Dated: By:
-------------------- ------------------------------------
Xxxx X. Xxxxxxx, Vice President
Address: XXXXXXX OIL COMPANY
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
(000) 000-0000
Fax: (000) 000-0000 By:
------------------------------------
Dated: Xxxxx X. Xxxxx, President
--------------------
Address: JHJ EXPLORATION, LTD.
000 Xxxx Xxxxxx By:AVJ Exploration Corporation,
Xxxxxx, Xxxxx 00000 General Partner
(000) 000-0000
Fax: (000) 000-0000
Dated: By:
-------------------- ------------------------------------
X.X. Xxxxx, Xx., Chairman
Address: XXXXXX-XXXXXX INTERESTS, LTD.
000 Xxxx Xxxxxx Xx:Xxxxxx-Xxxxxx Interests, Inc.
Xxxxxx, Xxxxx 00000 General Partner
(000) 000-0000
Fax: (000) 000-0000
Dated: By:
-------------------- ------------------------------------
Xxxxxxx X. Xxxxxx, Xx., President
Address: CHEYENNE PETROLEUM COMPANY
0000 X.X. 00xx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
(000) 000-0000
Fax: (000) 000-0000
Dated: By:
-------------------- ------------------------------------
Xxxxxxx X. Xxxxx, Vice President of
Land
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Address: RUJA MUTA CORPORATION
0000 Xxxxxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
(000) 000-0000
Fax: (000) 000-0000
Dated: By:
-------------------- ------------------------------------
Xxxx X. Xxxxxxxx, Xx., President
Address: GENERAL ATLANTIC RESOURCES, INC.
410 Building
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000
Fax: (000) 000-0000
Dated: By:
-------------------- ------------------------------------
Xxx X. Xxxxxxxx, Vice President of
Land
Address: ANTRIM RESOURCES, INC.
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000
Fax (000) 000-0000
Dated: By:
-------------------- ------------------------------------
Xxxx Xxxxxxxx, President
Geophysical Exploration Agreement
Xxxxxxxx Project
16
