SECOND AMENDED AND RESTATED PROGRAM AGREEMENT
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This Second Amended and Restated Program Agreement ("Second Amendment") is
entered into as of August 29, 2006 ("Effective Date") between ▇▇▇▇▇▇▇ COMPANY
("▇▇▇▇▇▇▇") and PETROSEARCH ENERGY CORPORATION ("Petrosearch").
DEFINITIONS:
The following definitions shall apply to the capitalized terms in this
Second Amendment. If not otherwise defined herein, capitalized terms herein
shall have the same meaning as used in the E & P Agreement and the Restated
Program Agreement (defined below).
"E & P Agreement" shall mean Lease Acquisition and Exploration Agreement for
Dallas, Denton, Ellis, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Counties, Texas dated June 29, 2005
between Exxon Mobil Corporation ("ExxonMobil") and ▇▇▇▇▇▇▇.
"Eagle" shall mean Eagle Oil & Gas Co. "ExxonMobil" shall mean Exxon Mobil
Corporation.
"ExxonMobil/▇▇▇▇▇▇▇ Agreements" shall mean the E & P Agreement and the MOU
Agreement.
"Heads of Agreement" shall mean the document of that title among ExxonMobil,
▇▇▇▇▇▇▇, Petrosearch, Eagle and PSG dated as of May 9, 2006, as amended and
extended.
"June 8 Purchase Agreement" shall mean the Purchase and Sale Agreement and
Amendment of Lease Acquisition and Exploration Agreement - Dallas, Denton,
Ellis, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Counties, Texas, dated June 8, 2006, between
ExxonMobil and ▇▇▇▇▇▇▇ and acknowledged by Eagle and PSG.
"MOU Agreement" shall mean Memorandum of Understanding Regarding Gas Evacuation
from ExxonMobil and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Shale E & P Venture dated June 29, 2005,
between ▇▇▇▇▇▇▇ and ExxonMobil.
"Operating Agreement" shall mean the A.A.P.L. Model Form Operating Agreement
attached to the E & P Agreement as Exhibit "C".
"PSG" shall mean PS Gas Partners, LLC, in its individual capacity and as general
partner of Gas Partners, LP.
"Restated Program Agreement" shall mean the First Amended and Restated Program
Agreement dated effective February 6, 2006 between ▇▇▇▇▇▇▇ and Petrosearch.
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TERMS OF SECOND AMENDMENT:
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
▇▇▇▇▇▇▇ and Petrosearch agree as follows:
1. RESTATED PROGRAM AGREEMENT RATIFIED/DEFINED TERMS INCORPORATED.
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Except as modified by this Second Amendment, the Restated Program Agreement is
hereby ratified by ▇▇▇▇▇▇▇ and Petrosearch.
2. STIPULATION AS TO PROJECT COSTS DUE/STIPULATION AS TO PETROSEARCH'S
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WORKING INTEREST IN PROJECT LEASES. ▇▇▇▇▇▇▇ and Petrosearch stipulate and agree
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that simultaneously with the payment by Petrosearch of the agreed sums described
in this paragraph 2, ▇▇▇▇▇▇▇ shall deliver to Petrosearch a recordable
assignment, subject to applicable royalty and overriding royalty burdens
described in the Restated Program Agreement and subject to the Operating
Agreement, an undivided 14% working interest in those project Leases which
▇▇▇▇▇▇▇ has acquired for the project as of June 30, 2006 and for which
Petrosearch has paid (by virtue of its $2,800,000 payment at execution of the
Restated Program Agreement) and has agreed to pay (as set forth in paragraphs
2(b) and 2(c) hereinbelow) its proportionate share of project costs, including
but not limited to, lease acquisition and bonus costs, exploration, Technical
and Administrative Costs (as defined in paragraph 3), and related operational
costs. Petrosearch's cost bearing interest in all future project costs,
including but not limited to, lease acquisition and bonus costs, exploration,
Technical and Administrative Costs, and related operational costs, after payment
of the sums described in this paragraph 2, shall remain fixed at a 14% working
interest such that Petrosearch has the right to elect to not participate in
future project lease acquisitions (and not acquire an interest as a result of
such election) and/or become a Non-Consenting Party under the Operating
Agreement as to future operations. However, in the event Petrosearch elects to
acquire its 14% working interest share in future project Leases by paying its
share of leasehold acquisition and bonus costs and Technical and Administration
Costs and/or elects to be a Consenting Party under the terms of the Operating
Agreement as to future exploration and development operations and does not
timely pay its 14% working interest share of such costs in accordance with the
Program Agreement or Operating Agreement, whichever is applicable, then its 14%
working interest share in the particular well to which Petrosearch has consented
but failed to timely pay costs shall be forfeited to ▇▇▇▇▇▇▇, together with the
proration unit associated with the forfeited well, and such forfeited interest
shall not be subject to any claim by Petrosearch as to its tagalong right. There
shall be no distinction between before Payout and after Payout in Petrosearch's
revenue sharing and cost bearing interests in the project and such revenue
sharing and cost bearing interests will both be fixed at a 14%, working interest
without any accelerated recoupment of expenditures. ▇▇▇▇▇▇▇ and Petrosearch
stipulate and agree to the following payment terms with respect to accrued
exploration costs, other operational costs, and lease bonus payment obligations
through June 30, 2006:
(a) The $2,800,000 sum paid by Petrosearch at the time of execution of
the Restated Program Agreement is hereby deemed to satisfy all of Petrosearch's
cost payment
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obligations under the Restated Program Agreement and the Operating Agreement up
to May 1, 2006.
(b) With regard to the accrued exploration costs, other operational
costs, and lease acquisition obligations for the months of May and June, 2006,
and subject to the simultaneous delivery by ▇▇▇▇▇▇▇ of a recordable assignment
conveying to Petrosearch a 14% working interest in those Leases referenced in
Paragraph 2 above, Petrosearch shall pay to ▇▇▇▇▇▇▇ $875,605 of such costs, in
current funds, on or before October 15, 2006. In the event that the integrated
venture document contemplated by the Heads of Agreement is executed by the
parties to the document prior to October 15, 2006, then Petrosearch shall be
obligated to pay the $875,605 sum at the time of execution of the integrated
venture document. The assignment of Leases referenced in this paragraph 2(b)
shall include the Leases obtained by ▇▇▇▇▇▇▇ through June 30, 2006, except those
Leases specifically covered and included within the lease bonus costs payment of
$1,635,725 described in paragraph 2(c) below. The Leases covered by and included
within the $1,635,725 payment described in paragraph 2(c) below shall not be
assigned by ▇▇▇▇▇▇▇ to Petrosearch until Petrosearch pays that specific sum.
(c) With regard to the accrued lease bonus costs for the months of May
and June 2006, and likewise subject to the simultaneous delivery by ▇▇▇▇▇▇▇ of a
recordable assignment conveying to Petrosearch its 14% working interest in those
Leases referenced in Paragraph 2 above other than those Leases covered by the
assignment of leases delivered at the payment of the $875,605 sum, Petrosearch
shall pay $1,635,725 in lease bonus costs ON THE EARLIER OF: (i) the spudding
date of the first well on the acreage to which the lease bonus applies if said
well spuds after October 15, 2006; (ii) October 15, 2006, if said well spuds
before October 15, 2006; or (iii) 9 months after the lease bonus was paid by
ExxonMobil, in accordance with the payment terms set forth in the June 8
Purchase Agreement.
(d) In the event Petrosearch fails to timely make the payments required
under paragraphs 2(b) and/or 2(c) above, other than as excused by ▇▇▇▇▇▇▇'▇
failure or refusal to simultaneously deliver a recordable assignment to
Petrosearch of a 14% working interest in the Leases, Petrosearch shall be in
default under the provisions of Paragraph 1 of the Restated Program Agreement
and agrees that the remedy for such default shall be a dilution of its interest
as described in paragraph 1 of the Restated Program Agreement. Dilution shall
not be an available remedy other than with regard to the unexcused non-payment
of the sums in paragraphs 2(b) and/or 2(c) above.
Notwithstanding the payment by Petrosearch of the $875,605 and $1,635,725
sums described above, Petrosearch reserves its audit rights set forth in the
Operating Agreement. Should the ▇▇▇▇▇▇▇ calculations of these sums later be
determined, to both party's reasonable satisfaction, to be in error, ▇▇▇▇▇▇▇ and
Petrosearch shall promptly reconcile and settle the difference. In the event
that the parties are unable to mutually agree that an error in computation
exists despite their good faith efforts, then either party shall have the right
to utilize the remedies set forth in the Operating Agreement and/or to demand
arbitration to resolve their differences regarding the audit.
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3. STIPULATION REGARDING TECHNICAL AND ADMINISTRATIVE COSTS. ▇▇▇▇▇▇▇
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and Petrosearch agree that the Technical and Administrative Costs shall be
billed and paid monthly as a cost to the parties rather than assigned to an AFE
under the provisions of the Operating Agreement, For purposes of this paragraph
3, the Technical and Administrative Costs shall mean those costs defined as
Technical and Administrative Costs in the E&P Agreement and, if consummated,
also in the proposed Drillwell Services Agreement for the integrated venture
which is expected to be entered into by ▇▇▇▇▇▇▇, Petrosearch, ExxonMobil and
others. Petrosearch shall pay these costs at all times during their
participation in this Agreement.
4. PROPOSED AGREEMENT WITH EXXONMOBIL CREATING INTEGRATED VENTURE.
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▇▇▇▇▇▇▇ and Petrosearch agree that ▇▇▇▇▇▇▇ shall not oppose Petrosearch's
request to ExxonMobil that it contract with ExxonMobil directly and separately
as to the integrated venture entity contemplated by the Heads of Agreement,
rather than becoming a participant in the integrated venture as a partner,
member or shareholder of a ▇▇▇▇▇▇▇ created or controlled entity, so long as all
obligations of Petrosearch to ▇▇▇▇▇▇▇ described in paragraphs 2(b) and 2(c)
above have been satisfied or are simultaneously satisfied at the time of
execution of the integrated venture document. Petrosearch acknowledges that such
integrated venture will own record title to and operate all assets, and it is
contemplated that Petrosearch's 14% working interest will be contributed to the
integrated venture and proportionately adjusted on a ratio of 14% to 50.5%.
▇▇▇▇▇▇▇ and Petrosearch further agree that the agreements made in this Second
Amendment shall be binding upon them and their successors and assigns whether or
not a definitive agreement is reached with ExxonMobil as to an integrated
venture. ▇▇▇▇▇▇▇ and Petrosearch each acknowledge that only gas produced by the
integrated venture shall be entitled to be evacuated by the integrated venture's
pipeline. The agreements made in this Second Amendment are not subject to
contingencies.
5. MUTUAL RELEASE/DISMISSAL OF ARBITRATION. Other than the obligations
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of the parties under the Restated Program Agreement, as amended by this Second
Amendment, ▇▇▇▇▇▇▇ and Petrosearch each hereby release acquit and forever
discharge one another, ExxonMobil, and each party's and ExxonMobil's respective
officers, managers, members, agents, servants, employees, partners, directors,
shareholders, attorneys, trustees, representatives, affiliates, parents,
subsidiaries, successors and assigns, and all persons, natural or juridical, in
privity with such parties, from any and all claims and causes of action raised
or which could have been raised whether legal or equitable, statutory,
contractual, or otherwise, contingent or absolute, matured or unmatured, direct
or indirect, which relate to the Restated Program Agreement prior to the
Effective Date above (save and except Petrosearch's audit rights as set forth in
paragraph 2 above), including without limitation, those claims asserted by the
parties relating to ExxonMobil's preferential right to purchase, ExxonMobil's
right to consent, Petrosearch's claim to tagalong rights or favored nations
rights in connection with the June 8, 2006 sale of interests by ▇▇▇▇▇▇▇ to
ExxonMobil, the sale of interests to PSG and/or Eagle, the billing disputes and
allegations of default, and the claims of ▇▇▇▇▇▇▇ that the interests of
Petrosearch have been frozen as of that date. Petrosearch agrees to cause the
pending Arbitration proceedings before the American Arbitration Association to
be promptly dismissed at the time of the execution of this Second Amendment and
▇▇▇▇▇▇▇ will promptly dismiss its counterclaim.
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6. TIME IS OF ESSENCE/ATTORNEYS FEES. Time is of the essence with
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respect to this Second Amendment. In the event that either party seeks
enforcement of this Agreement by arbitration proceedings, the prevailing party
in such proceeding shall be entitled to recover from the other party all
expenses attributable to such proceeding, including interest, court costs and
attorneys fees.
7. BINDING ARBITRATION. ANY CONTROVERSY OR CLAIM ARISING OUT OF OR
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RELATING TO THIS SECOND AMENDMENT, OR THE CONSTRUCTION, INTERPRETATION, VALIDITY
OR ALLEGED BREACH THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN
DALLAS, TEXAS IN ACCORDANCE WITH THE ARBITRATION PROVISIONS OF THE RESTATED
PROGRAM AGREEMENT.
8. INCORPORATION OF OTHER PROVISIONS FROM RESTATED PROGRAM AGREEMENT.
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The provisions of the Restated Program Agreement, except as amended hereby, are
incorporated herein by reference as if copied in full.
9. COUNTERPARTS/FACSIMILE SIGNATURES. This Second Amendment may be
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executed in counterpart originals, each of which shall be treated as a fully
executed original hereof when all parties hereto have executed such a
counterpart. A facsimile signature shall be treated as an original signature
unless an original signature is required by law.
EXECUTED as of the Effective Date set forth above.
PETROSEARCH ENERGY CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Operating Officer
▇▇▇▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
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