SUPPLEMENT TO EXPLORATION AGREEMENT
This Supplement to Exploration Agreement is made and entered into
effective March 11, 2002, by and between Fortune Natural Resources Corporation
("Fortune"), PrimeEnergy Management Corporation ("Prime"), Channel Exploration,
LLC ("Channel"), Cymraec Exploration, Inc. ("Cymraec"), Lonesome Dove Petroleum,
Inc. ("Lonesome Dove"), Braveheart Holdings, LLC ("Braveheart"), Southwestern
Eagle, LLC ("Southwestern"), and Blue Ridge Energy, Inc. ("BRE"). Lonesome Dove,
Braveheart, Southwestern, Cymraec and BRE are sometimes hereinafter referred to
collectively as the "Seismic Partners", or individually as a "Seismic Partner".
Fortune, Prime, Channel, Cymraec and each of the Seismic Partners are sometimes
hereinafter referred to collectively as the "Parties" or, individually, as a
"Party."
WHEREAS, the Parties are parties to the Exploration Agreement dated as of
February 1, 2002, and capitalized terms used but not defined herein shall have
the same meaning as in said Exploration Agreement; and
WHEREAS, since the Exploration Agreement was executed, Lonesome Dove and
Cymraec have transferred to BRE a total of 35% of the Seismic Participation
Percentages of the Seismic Partners, so that the Seismic Participation
Percentages are now as follows: Lonesome Dove - 30%, Southwestern - 20%,
Braveheart - 15%, Cymraec - 0%; and BRE - 35%; and
WHEREAS, the Seismic Partners desire to have Fortune and Prime agree with
respect to the interpretation of the Exploration Agreement concerning dry hole
funds delivered to them as Operator pursuant to Prospect Proposal Elections made
by the Seismic Partners, and with respect to the handling of Seismic Partners'
funds advanced to the Operator, all as more particularly provided in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, and of the
mutual and dependent covenants set forth in the Exploration Agreement and
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties agree as follows:
1. Limitation on "Reasonable Time." Fortune and Prime agree that the
definition of the term "Reasonable Time" shall not authorize the Operator to
hold the Seismic Partners' shares of the dry hole costs for a proposed well
longer than the time allowed by the provisions of Article VI.B.1 or VI.B.2 of
the applicable Operating Agreement, prior to the commencement of the operation
in question, i.e., ninety (90) days from the end of the election period, plus an
additional thirty (30) days in certain circumstances as set out therein, or such
shorter periods of time as therein provided when a drilling rig is on location.
If the proposed operation is not commenced within such applicable time period,
such dry hole costs shall be returned to the appropriate Seismic Partners until
again requested by Operator, which shall not be more than thirty (30) days prior
to the date the operator intends (at that time) to commence such operation.
2. Segregation of Seismic Partners' payments. Fortune and Prime each
agree, with respect to funds it receives from the Seismic Partners for their
respective shares of the AFE Pre-Completion Costs or other advances of costs
attributable to drilling or completion, to segregate and not to commingle such
funds with its own and to maintain such funds (until they are expended in
accordance with the Exploration Agreement or applicable Operating Agreement) in
a specially designated account or accounts with designation that reasonably
identifies such account as containing only the funds of parties other than
Fortune or Prime. It is agreed and understood among the parties that neither
this provision nor the preceding provision dealing with the refund of dry hole
costs shall apply to any reimbursement for expenses incurred, including Prospect
Costs, or for payment of fees incurred in accordance with the applicable
Operating Agreement or Exploration Agreement.
3. Optional Continuation of Exploration Agreement. If Fortune and/or Prime
so recommend to the Seismic Partners, and if a majority in interest of the
membership interests in Channel as of March 1, 2006 agree to do so in writing
not later than March 15, 2006, the Exploration Agreement shall be continued in
effect until March 31, 2007. Each March of each following year through March
2010, if the Exploration Agreement is then in effect, the Exploration Agreement
shall be continued for an additional year, upon such recommendations and votes
in like manner.
4. Consent to Assign. Each Party consents to the assignments from Cymraec
and Lonesome Dove to BRE referred to above. BRE hereby (i) ratifies the
Exploration Agreement in its entirety,(ii) agrees to be bound thereby and to
perform its proportionate share of the obligations and understandings provided
in the Exploration Agreement for the performance by the Seismic Partners, (iii)
makes the representations and warranties set forth in Section 8.2 of the
Exploration Agreement to all other Partners, and (iv) agrees to indemnify,
defend and hold harmless Fortune and Prime with respect to the matters provided
in Section 3.13 of the Exploration Agreement.
IN WITNESS WHEREOF, this Agreement is executed by the Parties effective as
of the date first above written.
FORTUNE NATURAL RESOURCES
CORPORATION
By: /s/ Xxx Xxxxx
------------------------------
Name: Xxx Xxxxx
Title: President and COO
PRIMEENERGY MANAGEMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
CHANNEL EXPLORATION, LLC
By: /s/ R. Xxxxxxx Xxxxxx
------------------------------
Name: R. Xxxxxxx Xxxxxx
Title: Manager
CYMRAEC EXPLORATION, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
LONESOME DOVE PETROLEUM, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxx x. Xxxxxxxxx
Title: President
SOUTHWESTERN EAGLE, LLC
By: /s/ Xxx X. Xxxxxxxx
------------------------------
Name: Xxx X. Xxxxxxxx
Title:
BRAVEHEART HOLDINGS, LLC
By: /s/ Xxxxx Xxxxx
------------------------------
Name: Xxxxx Xxxxx
Title: Managing Partner
BLUE RIDGE ENERGY, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------------
Name: Xxxxxx X. Xxxx
Title: Chairman
