Exhibit 10.6
FIRST AMENDMENT TO
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PARTICIPATION AGREEMENTS
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This First Amendment to Participation Agreements is dated this 31st day
of October, 2005, by and between the parties listed below.
Whereas Kerogen Resources, Inc. has entered into three separate
Participation Agreements described as follows:
1) Participation Agreement dated September 20th , 2005, by and between Kerogen
Resources Inc., with an address at Ashford Crossing II, 0000 Xxxxx Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (hereafter, "Kerogen") and Calibre
Energy, Inc. (hereinafter "Calibre"), 0000 X Xxxxxx XX, Xxxxxxxxxx, XX 00000;
2) Participation Agreement dated October 19th, 2005 by and between Kerogen and
Triangle Petroleum USA, Inc. (hereafter "Triangle"), Xxxxx 0000, 000 0xx Xxxxxx
XX, Xxxxxxx, XX X0X0X0
3) Participation Agreement dated October 14th, 2005 by and between Kerogen and
Xxxx-Xxxxxx Partners I, LP (hereinafter "W-C"), 0000 Xxxx Xxxxx Xxxxxxx, Xxxxx
000 Xxxxx, Xxxxx 00000
Whereas each of the three Participation Agreements provided for the
development of Prospects in the Southern Fort Worth Basin ("SFWB") being more
specifically described as including all of the lands in the following counties
in Texas; Johnson, Summerville, Bosque, Hill and Hood, ("Contract Area"). But
specifically excluding lands included under that certain Participating
Agreements with Xxxxxxxxx Petroleum Inc. dated October 12th, 2005, ("Xxxxxxxxx
Participation Agreements") which govern certain lands and operations located
within the SFWB, such lands and the operations described therein, including
lands and operations that may be covered by the AMI provisions of the Xxxxxxxxx
Participation Agreement, are specifically excluded from the terms and conditions
of each of the three Participation Agreements described above. For purposes of
identifying excluded lands and operations, the Xxxxxxxxx Participation
Agreements are incorporated herein by reference.
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Whereas each of the Participation Agreements enumerated above generally
provide for the following terms as between each Participant and Kerogen, the
Parties hereto ("Parties") in accordance such Participation Agreements now
desire and do bind themselves to each other as to the terms and provisions set
forth herein. In the event of conflict between the Participation Agreements
enumerated above and the terms and provisions specifically addressed herein the
terms and provisions hereof will prevail.
Now therefore, for and in consideration of the promises previously
exchanged in the Participation Agreements and in consideration of the mutual
agreements and promises stated herein, the parties hereto do agree as follows:
I.
Elections by the Parties
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All Prospects generated, identified or acquired by the Parties
respectively, in the SFWB, during the Term of this Agreement, shall be offered
to the other Parties. For the purposes of this Agreement the terms "Prospect"
and "Prospect Area" shall consist of the individual governmental pro-ration area
for the relevant potential shale well proposed under this Agreement along with
all acreage that is directly adjacent to such pro-ration area unless a different
area is mutually agreed to by the Participating Parties (defined below) within
five (5) days after the relevant Prospect Meeting (defined below).. The Parties
receiving the offer will have the opportunity to participate in the offered
Prospect(s) for the following portion of the interest available to the offering
Party:
Kerogen 10%
Calibre 30%*
Triangle 30%*
W-C 30%*
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*Subject to carried interest to Kerogen, which interest is specifically
described in each Participation Agreement enumerated above, which
carried interest is not in anyway amended or impacted by this First
Amendment to Participation Agreements.
Calibre and Triangle are the "Other Participants" to which reference is
made in the Participation Agreement dated October 14, 2005, and the
Participation Agreements above described are the "separate agreements" to which
reference is made in Section 3.01 of such Participation Agreement.
It is recognized that the Parties may be involved in the acquisition of
producing properties within the SFWB and that the evaluation of and acquisition
of producing properties is outside the scope or purpose of this Agreement. By
executing this Agreement, each Party individually acknowledges and waives any
claim to any property, acreage or subsurface rights that, at the time the other
Party makes an offer to a third party to purchase, are part of or directly
related to the proration unit or allocated acreage of a well that is producing,
or capable of producing hydrocarbons, or has logged behind pipe pay (a
"Producing Property").
Once a Prospect is generated by a Party ("Presenting Party"), the
Prospect (with studies and all other relevant subsurface and commercial data)
will be presented in writing to the other Parties, and within thirty (30) days
there from the Parties will convene a meeting to discuss the Prospect, including
all relevant technical, operational and commercial information and a budget for
the prospect ("Prospect Meeting"). All material presented by the Presenting
Party at the Prospect Meeting will be considered "Intellectual Property". It is
also anticipated that during the Term of this Agreement each Party may identify
Prospects being developed and/or marketed by third parties. If one of the
Parties evaluates any of these Prospects, it may call a Prospect Meeting (Note:
if the opportunity is time sensitive to the degree that it may not be available
later, the Presenting Party may request a Prospect Meeting to occur within 48
hours of the time it calls the Prospect Meeting) to present the relevant
Prospect to the other Party. Within fifteen (15) days from the Prospect Meeting,
the non-Presenting Party must elect in writing to participate in the Prospect on
the terms contained in this Agreement, or forfeit all rights to such Prospect to
the presenting Party. All Parties that participate in an individual Prospect
shall be deemed a "Participating Party" for that Prospect. Failure to respond in
writing within the time provided above shall be deemed an election not to
participate in the relevant Prospect. At the Prospect Meeting, the Parties xxxx
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disclose any third party requirements that would prevent W-C from being Operator
of the Prospect ("Prospect Operator"), such as a third party already serving as
Operator under an existing operating agreement in the area covered by the
Prospect and if the Participating Parties in the relevant Prospect cannot obtain
the agreement of such third party operator to allow W-C to serve as Prospect
Operator, the Participating Parties shall designate such third party as Prospect
Operator. Additionally, in the event W-C does not have a rig available to drill
a particular well within a time frame necessary to maintain a material lease
within the relevant Prospect Area or within a reasonable time frame as a part of
the drilling program of W-C, if one of the other Participants has a specific rig
available within such time frame, upon such other Participant's request, the
other Participating Parties in the relevant Prospect shall designate such other
Participant as operator of the well for drilling and completion purposes and
after completion or plugging and abandonment of the well, the Participating
Parties will designate W-C as Prospect Operator for the purposes of production
and for any other operations on the relevant Prospect Area. Except as provided
in the previous two sentences, W-C may elect to serve as Operator. All
interpretive materials created by a Party and presented at the Prospect Meeting
("Intellectual Property"), shall remain the sole property of the presenting
Party until the Initial Test Well has been drilled and evaluated in the relevant
Prospect. Thereafter the non-presenting Parties will have earned a non exclusive
license in the Intellectual Property for each Prospect in which it participates.
Each Party shall treat all Intellectual Property provided to it by the other
Parties as confidential. The parties will execute a binding confidentiality
agreement at the Prospect Meeting. Should a Party elect not to participate in
any Prospect presented by the other Party, it agrees to keep all information
provided at the Prospect Meeting confidential and further agrees not to acquire
any leases or rights to property within the Prospect Area that is mutually
designated by the Parties for the Prospect for two years from the date of the
Prospect Meeting. Should the non-presenting Party or any affiliate acquire such
interests, it agrees to assign such interests to the Presenting Party, upon
written request, at no cost.
Prior to the termination of this Agreement on October 31, 2007, each
Party will provide to the other Parties a Prospect Meeting and the opportunity
to elect to become a Participating Party concerning any portion of the Contract
Area in which the Presenting Party has obtained an oil and/or gas interest
during the term of this Agreement.
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II.
Leasing / Acquisition Program
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Once a Prospect is generated, approved and accepted by the Parties, the
Prospect Area shall be deemed an Area of Mutual Interest (AMI) for a period of
two years from the date of relevant Prospect meeting, for the acquisition of oil
and gas leases. Any Party acquiring an interest within the AMI during the term
of this Agreement will offer the other Parties the other Party's percentage
interest and if that Party accepts by agreeing to pay its percentage interest of
actual costs then the ownership of any leases or properties acquired by any
Party within the Contract Area as set forth above:
Thereafter, the Parties through the "Prospect Operator" shall initiate
a leasing program to lease (or farm-in) any remaining necessary acreage within
the Prospect Area. The Parties anticipate that during the term of this
Agreement, Prospects shall be developed that will result in an effort to lease
between 25,000 and 45,000 acres in the area of each Prospect, on a Prospect by
Prospect basis (or such additional acreage as may be reasonable). In the event a
Prospect is to be acquired by an acquisition of leasehold from a third party or
earned under a farmout or participation arrangement, then the acquiring Party or
Prospect Operator, as appropriate, will take such actions as are necessary to
effect such transaction, subject to the provisions of Paragraph V of this
Amendment. The Prospect Operator or acquiring Party will take title in its name,
to either the leases or contractual rights as is necessary to implement the plan
set forth in the Prospect Meeting. All non-acquiring Parties shall receive
recordable assignments of their interest in a Prospect upon payment of their
proportionate share of the lease acquisition costs. In the event the entire
interest cannot be placed the Prospect will be treated as not accepted and the
Parties will not pursue it.
The Party acquiring leasehold or conducting operations may provide the
other Parties with a cash call along with a detailed statement itemizing
estimated costs and expenses to be incurred during the next succeeding calendar
month. The Party receiving the cash call agrees to pay such cash call invoice
within 30 days of receipt. In the event the Party receiving the cash call fails
to pay all undisputed portions of the cash call as provided hereunder, the Party
making the cash call may tender a default notice in writing; if within ten days
of receipt of said default notice the payment is not received for all undisputed
amounts and a written explanation of the reasons for any disputed amounts, the
Party making the cash call may elect to hold the Party receiving the cash call
in a non-consent status as provided for under the Operating Agreement,
concerning the undisputed portions of the cash call and the disputed portions if
no written explanation concerning the disputed portions was provided by the
Party receiving the cash call, or may deem that such default is an election to
reject the Prospect, if drilling has not yet commenced thereon. The Party
receiving the cash call will have rights to audit all invoices and cash calls
pursuant to the Operating Agreement, should it dispute any such items.
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Each Party will be responsible for overseeing and directing the leasing
or acquisition program until the Prospect meeting, concerning Prospects on which
it is the Presenting Party. The non-Presenting Parties will be consulted on both
the budget and terms being accepted for the leases and contracts being secured
in the relevant Prospect Area. Should any Party want to acquire a lease, the
terms of which another party does not want to accept, it shall have the right to
do so. If such lease is acquired for those terms, then that lease shall be
excluded from the relevant Prospect Area. The non-Presenting Party will have
full rights to access the lease and title data within any Prospect to assure
itself that title and environmental conditions of the properties being acquired
are acceptable to it. Each Party hereby waives any claims of action it may have
against the other Party concerning duties and obligations hereunder, unless a
Party is grossly negligent or performs acts of willful misconduct. Any
assignment(s) delivered pursuant to the terms of this Agreement will be without
warranty of title except by through and under the assigning Party.
III.
Operations
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Once a Prospect is accepted, those parties that have elected to
participate in such Prospect will enter into an Operating Agreement the form of
which is attached hereto as Exhibit "A," covering such Prospect. The Prospect
Area and Operator will be defined in the Prospect Meeting and the Prospect Area
shall be the same as the Prospect Area defined above. All operations shall be
conducted under the terms and provisions of Exhibit "A". Each Prospect Area
shall have a separate Operating Agreement signed by the Parties. In lieu of
non-consent penalties for drill xxxxx in the operating agreement, should a Party
not timely elect to participate in a subsequent well, it shall be deemed to have
relinquished its interest in the well and all leasehold acreage not allocated to
the governmental proration area for the initial well or other subsequent xxxxx
in which the party has previously participated.
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IV.
Term
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This Agreement shall continue for a Term expiring October 31, 2007,
except as provided otherwise above in Article II. Concerning the AMI. The term
of the Operating Agreement(s) referenced in P. 6.02 shall be as set forth in
each Operating Agreement.
V.
Relationship of Parties
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No relationship of partnership or principal and agent shall exist or
arise among the parties hereto because of the execution of this agreement or the
joint acquisition by them of properties and interests pursuant to this
agreement. No party hereto shall have any right, power or authority to contract
on behalf of any other party hereto or to commit any party hereto to any
obligation, liability or undertaking, except to the extent the party to be
obligated has expressly consented thereto (i) at a Prospect Meeting, or (ii) by
instrument in writing.
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VI.
Limitation of Assignment
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Without the prior written consent of the other Party, the rights and
privileges of this Agreement, or any Prospect, or rights to any Prospect Area
generated pursuant to the terms hereof, may not be shown or sold by any Party.
Such consent may not be unreasonably withheld, but may be withheld if the Party
from whom consent is requested has a reasonable basis to question the financial
capability of the proposed assignee. This Limitation of Assignment provision
will terminate upon the completion of operations in the first well drilled on
each Prospect Area as to that Prospect Area. Any Assignment of any interest
acquired pursuant to the terms of this Participation Agreement will be made
specifically subject to the terms and provisions of this Agreement and the
Participation Agreement from which the Party acquired its interest.
VII.
Entire Agreement and Amendments
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This Agreement and the Participation Agreements referred to on the
first page of this Agreement, constitute the entire understanding between the
parties with respect to the subject matter hereof, and supersede all other
agreements written or oral between the parties with respect to such subject
matter (except for the Xxxxxxxxx Participation Agreements described above). This
Agreement may not be changed, modified or amended except by a written agreement
between the Parties, which specifies that it amends this Agreement. This
Agreement shall govern in the event of conflict between this Agreement and the
Participation Agreements.
VIII
Arbitration
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Any disputes arising out of or related to this Agreement must be
arbitrated in accordance with the rules for commercial arbitration disputes for
the American Arbitration Association for binding arbitration and such
arbitration shall be conducted in Houston, Texas.
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IX.
Notice
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All notices authorized or required to be given pursuant to this
Agreement shall be in writing and may be delivered by hand, mailed by first
class airmail, sent by telecommunication, or overnight delivery to the address
set forth in this Agreement.
The notice shall be deemed to have been given and received:
a. if delivered, on the day on which it was delivered,
excluding Saturdays, Sundays and statutory holidays; or
b. if mailed, on the days received, or
c. if sent by telecommunication, on the first business day
following the day it was dispatched.
A Party may change its address for the receipt of notices at any time
by giving written notice thereof to the other Party. With regard to any notice
that W-C is required to give the other Parties under this Agreement, or
responses from the other Parties to W-C, Kerogen shall act as the representative
of Triangle and Calibre.
X.
Counterpart Execution
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This Agreement may be executed in multiple counterparts. It shall not
be binding on any party unless and until a counterpart is signed by all parties
and each party has been delivered a counterpart executed by all other parties.
XXXX-XXXXXX PARTNERS I, LTD.
By: WCFM Partners I, Ltd., as General Partner
By: Xxxx-Xxxxxx Investments, Ltd., as General Partner
/s/ Xxx Xxxxxx
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BY: Xxx Xxxxxx
Vice President of Land
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KEROGEN RESOURCES, Inc.
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
President
Triangle Petroleum, USA
By /s/ Xxx Xxxxxxx
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Xxxxxx Xxxxxxx
President
Calibre Energy, Inc.
By /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxxx
Xx. Vice President
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