EXHIBIT 10.1
LEASE ACQUISITION AND DEVELOPMENT AGREEMENT BETWEEN DOLPHIN ENERGY
CORPORATION (BUYER/OPERATOR) AND APOLLO ENERGY LLC AND ATEC ENERGY
VENTURES, LLC (SELLER/NON-OPERATOR) DATED FEBRUARY 22, 2005
LEASE ACQUISITION AND DEVELOPMENT AGREEMENT
Between
Dolphin Energy Corporation
(Buyer/Operator)
and
Apollo Energy LLC and ATEC Energy Ventures, LLC
(Seller/Non-Operator)
February 22, 2005
Table of Contents
PAGE
1. Definitions..............................................................2
1.1 Definitions.....................................................2
2. Consideration............................................................6
2.1 Escrow..........................................................6
2.2 First Closing and Payment.......................................6
2.3 Second Closing and Payment......................................6
2.4 Third Closing and Payment.......................................6
2.5 Purchase and Sale of Pending Leases.............................7
2.6 Top Leases......................................................8
2.7 Assignment......................................................8
2.8 Closing Conditions..............................................8
3. Reservations By Seller...................................................8
3.1 Reserved Production Payment.....................................8
3.2 Reserved ORRI...................................................9
3.3 Backin WI.......................................................9
4. Review of Records and Title.............................................10
4.1 Review of Records..............................................10
4.2 Title Defects..................................................10
4.3 Additional Acreage.............................................10
5. Buyer's Covenants.......................................................11
5.1 Drilling Commitment............................................11
5.2 Substitute Well................................................11
5.3 ▇▇▇▇▇▇ Agreement...............................................11
6. Area of Mutual Interest.................................................11
7. Operations..............................................................12
8. Confidentiality; Access to Information..................................12
8.1 Confidentiality................................................12
8.2 Access to Information..........................................13
9. Acceptance of Surface Conditions........................................13
10. Miscellaneous...........................................................13
10.1 Term...........................................................13
10.2 Force Majeure..................................................14
10.3 Relationship of the Parties....................................14
10.4 Audit Rights...................................................15
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10.5 Like-Kind Exchange.............................................15
10.6 Delay Rentals and Shut-in/Minimum Royalty Payments.............16
10.7 Press Releases.................................................16
10.8 Construction of Agreement......................................16
10.9 Assignability..................................................16
10.10 Successors and Assigns.........................................17
10.11 Counterparts...................................................17
10.12 Words and Gender...............................................17
10.13 Partial Invalidity.............................................17
10.14 Incorporation by Reference.....................................17
10.15 Notices........................................................17
10.16 Governing Law..................................................18
10.17 Entire Agreement...............................................18
10.18 Disclaimers and Release........................................18
10.19 Representations................................................19
10.20 No Third Party Beneficiaries...................................20
10.21 No Recording...................................................20
10.22 Necessary Documents............................................20
EXHIBITS
A Lease Schedule -- Existing Initial Leases
B Lease Schedule -- Biscuit Ranch
C Lease Schedule -- Miscellaneous Tracts
D Lease Schedule -- Pending Leases
E Form of Assignment of Oil and Gas Leases
F Form of Operating Agreement
G Area of Mutual Interest
H Form of Oil and Gas Lease
I Form of Escrow Agreement
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LEASE ACQUISITION AND DEVELOPMENT AGREEMENT
THIS LEASE ACQUISITION AND DEVELOPMENT AGREEMENT ("Agreement"), is
entered into this 22nd day of February, 2005 (the "Effective Date"), by and
between Dolphin Energy Corporation, a Nevada corporation, with an office at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as
"Buyer"), ATEC Energy Ventures, LLC, a Texas limited liability company ("ATEC"),
whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Apollo Energy, LLC, a
Colorado limited liability company ("Apollo"), whose address is ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the "Apollo Nominees," as defined
below. ATEC, Apollo and the Apollo Nominees may be collectively referred to as
"Seller," or the "Selling Parties," and Buyer and Seller may be collectively
referred to as the "Parties" and each Buyer and Seller may be referred to
individually as a "Party."
RECITALS
WHEREAS, Seller owns or will own certain oil and gas leases covering
approximately 4,000 Net Mineral Acres in lands located in Garfield County,
Colorado, as more particularly described on Exhibits A, B, C and D, to be
attached hereto (the "Initial Leases and the "Pending Leases");
WHEREAS, Apollo holds record title for and on behalf of ATEC and the
Apollo Nominees pursuant to certain agreements among and between the Selling
Parties;
WHEREAS, the Apollo Nominees have designated Apollo to act for them and
on their behalf in connection with the negotiation and execution of this
Agreement;
WHEREAS, Seller seeks an operating company to conduct exploration and
development activities, including, without limitation, the drilling of
exploration ▇▇▇▇▇ and development ▇▇▇▇▇ on lands covered by the Initial Leases,
the Pending Leases, and other Leases acquired or to be acquired by Seller, and
Buyer desires to acquire a 50% undivided interest in the 4,000 Net Mineral Acres
comprising the Initial Leases and the Pending Leases and to conduct such
exploration and development activities in accordance with the terms and
provisions of this Agreement;
WHEREAS, Buyer is an operating company that has the necessary financial
capabilities, personnel with the appropriate professional and technical
expertise and the appropriate equipment and infrastructure to conduct the
exploration and development activities contemplated by this Agreement;
WHEREAS, Buyer has conducted or will conduct an independent
investigation of the Leases and desires to acquire the Initial Leases and to
conduct such exploration and development activities in accordance with the terms
and provisions of this Agreement; and
WHEREAS, to accomplish the foregoing, the Parties wish to enter into
this Agreement.
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NOW, THEREFORE, based on the above and in consideration of the
covenants and agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
1. DEFINITIONS
1.1 DEFINITIONS. For purposes of this Agreement, capitalized terms shall
have the meanings set forth herein.
"ACQUIRED INTERESTS" is defined in Article 6.
"ACQUISITION COSTS" means invoice amounts actually incurred and paid by
Buyer to Seller or to a Non-affiliated Person to acquire a Lease, farmout,
assignment or other interest in Hydrocarbons or Production Assets, including
without limitation, lease per acre bonus (including bonuses paid pursuant to
compulsory pooling orders), paid up delay rentals, and amounts paid to Seller or
to a Non-affiliated Person for mineral take-offs, but excluding Seller's
Overhead Expense and broker fees and expenses.
"AFFILIATE" means any Person that (a) a Party either owns or otherwise
directly or indirectly controls, (b) owns or otherwise directly or indirectly
controls a Party, (c) is under common ownership or control with a Party by
another Person. "Ownership" means at least fifty percent (50%), (or such lesser
percentage which results in actual de facto control), of the voting securities
or of profits, whichever is applicable. "Control" means the ability to control
the management or actions of the Person in question, by whatever means.
"AMI" OR "AREA OF MUTUAL INTEREST" means all lands within the
geographical area outlined on Exhibit G.
"APOLLO NOMINEES" means the following individuals and entities: ▇▇▇
▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇▇▇▇; Eatex; ▇▇▇▇ ▇▇▇▇▇▇▇; Huckelberry; WYOTEX Oil Company;
JLW Investments.
"BACKIN WI" is defined in Section 3.3.
"▇▇▇▇▇▇" means the third party which enters into the ▇▇▇▇▇▇ Agreement.
"▇▇▇▇▇▇ AGREEMENT" means that certain Lease Acquisition and Development
Agreement to be entered into between Seller and ▇▇▇▇▇▇ under which ▇▇▇▇▇▇ will
acquire either a 25% or a 50% undivided interest in the Initial Leases and the
Pending Leases.
"CLOSING" means the First Closing, the Second Closing, the Third
Closing, the closing under Section 2.5(b), and/or any other payment by Buyer in
exchange for an Assignment of an interest in Net Mineral Acres in the Leases.
"DEFENSIBLE TITLE" means record title to the Leases that: (i) entitles
Seller, and after the Closing Buyer, to receive and retain proceeds from the
sale of Hydrocarbons, without suspension, reduction (except pursuant to the
terms of this Agreement) or termination, not
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less than the net revenue interest(s) specified for each of the Leases on
Exhibits A through D (subject to proportionate reduction, however, in the event
of pooling, unitization or communitization) through plugging, abandonment and
salvage of all ▇▇▇▇▇ now or hereafter located on the each of the Leases; (ii)
obligates Seller, and after Closing Buyer, to bear the costs and expenses
attributable to the drilling, maintenance, repair, and operation of all ▇▇▇▇▇
now or hereafter located on each of the Leases, through plugging, abandonment
and salvage of any of such ▇▇▇▇▇ (subject to proportionate reduction, however,
in the event of pooling, unitization or communitization), in an amount not
greater than the working interest(s) specified for each of the Leases on
Exhibits A through D; (iii) for transfers of federal Leases, is approved by the
Bureau of Land Management, and (iv) is free and clear of all, liens,
encumbrances or other title defects that would have a material and adverse
affect on Buyer's ownership of the Leases, or that are created by through or
under Seller (except for the Reserved Production Payment or the Reserved ORRI
and the Backin WI). For the purposes of this definition, "material and adverse"
means with respect to the WI and/or NRI of the Lease, as set forth on Exhibits A
through D that Buyer can show through affirmative written documentation that
Seller does not own such WI and/or NRI.
"ESCROW" means an arrangement and account for deposit of the purchase
price pursuant to the escrow agreement in a form similar to the attached Exhibit
I, to give effect to the applicable provisions of this Agreement, which escrow
agreement shall terminate in any event on or before December 15, 2005.
"EXISTING LEASE BURDENS" means landowner royalties, overriding
royalties, net profits interests, production payments and similar payments out
of production owned by a Non-affiliated Persons and shown of record, in either
the applicable real estate records where the lands are located or in the
applicable federal records, on either the Effective Date or the date on which a
Lease is acquired by Seller from a Non-affiliated Person, whichever is later.
"FIRST CLOSING" means the date on which Seller assigns to Buyer and
receives consideration for a portion of the Leases, as set forth in Section 2.2.
"FORCE MAJEURE" is defined in Section 10.2.
"HYDROCARBONS" means any oil or gas in, under and that may be produced
after the Effective Time from Leases and lands, including without limitation
crude oil, condensate, natural gas liquids and natural gas regardless of source
rock, casinghead gas and coalbed methane.
"INFORMATION" is defined in Section 8.1.
"INITIAL LEASES" means the oil, gas and mineral leases described on
Exhibits A, B and C, together with such additional oil, gas and mineral leases
which the Parties mutually agree to include on Exhibits A, B and C for the
purpose of the First Closing, the Second Closing, and/or any subsequent Closing,
up to 2,000 Net Mineral Acres.
"LEASES" means the Initial Leases, the Pending Leases, and the Acquired
Interests, together with such additional oil, gas and mineral leases acquired by
Seller during the term
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of this Agreement, either by purchase or farmout, and paid for or earned by
Buyer pursuant to this Agreement.
"NET MINERAL ACRES" means the number of acres of a full mineral
interest in a tract of land covered by a Lease on such tract, even though the
said tract contains a greater number of surface acres.
"NON-AFFILIATED PERSON" means a Person who is not an Affiliate.
"OPERATING AGREEMENT" means an AAPL No. 610-1982 Revised Model Form
Joint Operating Agreement in the form attached hereto as Exhibit F.
"OVERHEAD EXPENSE(S)" means costs for routine accounting,
administrative, geological, land, engineering, supervision, travel, and office
services incurred by a Party to furnish either the personnel or facilities
necessary to perform its obligations under this Agreement, provided, however,
excluding direct overhead expense chargeable under the terms of the Operating
Agreement.
"PENDING LEASES" means the oil, gas and mineral leases described on
Exhibit D, together with such additional oil, gas and mineral leases which the
Parties mutually agree to include on Exhibit D for the purpose of the Closing
pursuant to Section 2.5(b), and/or any subsequent Closing, and which shall be
comprised of all Net Mineral Acres other than the 2,000 Net Mineral Acres of
Initial Leases, up to a total of 4,000 Net Mineral Acres.
"PERSON" means any individual, partnership, corporation, limited
liability company, trust, trustee, estate, executor, administrator, guardian, or
other entity.
"PRODUCTION ASSETS" means wellbores, pipelines, gathering systems,
production or processing facilities, surface estate interests, rights-of-way, or
other surface uses, and other production related infrastructure on the Leases.
"PROJECT COSTS" means all costs paid or incurred by Buyer in connection
with or in respect to the acquisition and development of the Leases, excluding
however, any of Buyer's Overhead Expenses. Project Costs shall include, without
limitation, the purchase price for the Properties, payments with respect to
Acquisition Costs as paid by Buyer under Article 2, costs and expenses incurred
for the drilling, reworking, sidetracking, deepening, testing, completing,
re-completing, equipping, plugging back, plugging and abandoning or operating
any ▇▇▇▇▇ on the Leases, liquidated damages under Section 5.1(b), recording of
oil, gas and mineral leases, assignments, and other transfers of interests in
the Leases, abstracts, runsheets, mineral take-offs, title examination, and
obtaining title curative material with respect to the Leases, consideration
paid, costs associated with easements, rights-of-way, construction and
installation of gathering, processing, treating, compression, and transportation
infrastructure on the Leases, payments of royalties, overriding royalties, delay
rentals, minimum rentals, shut-in gas royalty and the proceeds attributable to
the Reserved Production Payment, the Reserved ORRI, costs of purchasing or
shooting seismic on the Leases, costs of gathering, processing, treating,
compression, and transportation of production attributable to Buyer's production
of Hydrocarbons and attributable to the Reserved Production Payment, but
4
paid by Buyer, severance and ad valorem taxes, and all direct charges
attributable to the oversight and administration of all activities conducted on
the Leases that would be chargeable under the terms of the Operating Agreement,
as if it were effective as to the Leases from and after Closing.
"PROJECT PAYOUT" means the first day of the month following the date on
which Project Payout Account has a credit balance.
"PROJECT PAYOUT ACCOUNT" is defined in Section 3.2.
"PROJECT REVENUES" means all proceeds received by Buyer from the sale
of Hydrocarbons attributable to Buyer's ownership in the Leases, proceeds from
the sale of seismic data covering the Leases and any amounts received by Buyer
from third parties as payment for gathering, treating, processing or
transportation of Hydrocarbons in Production Assets constructed by Buyer on the
Leases. In the event of an assignment of Buyer's interest in the Leases, Project
Revenues shall include the items of revenue described in the foregoing sentence
attributable to Buyer and Buyer's assigns interest in the Leases.
"PROPERTIES" means all the Leases, Production Assets, and all other
real and personal property interests within the AMI.
"RESERVED ORRI" is defined in Section 3.2, below.
"RESERVED PRODUCTION PAYMENT" is defined in Section 3.1, below.
"SECOND CLOSING" means the date on which Seller assigns to Buyer and
receives consideration for the Leases described on Exhibit B, as set forth in
Section 2.3.
"THIRD CLOSING" means the date on which Seller assigns to Buyer and
receives consideration for the Leases described on Exhibit C, as set forth in
Section 2.4.
"THIRD PARTY OPERATING AGREEMENT" is defined in Article 7, below.
"TITLE DEFECT" means any lien, encumbrance, encroachment or other
defect in, on or associated with Seller's title to a Lease, excluding Existing
Lease Burdens, that would cause Seller not to have Defensive Title to such
Lease.
"TOP LEASE" means a lease between a third party (as lessor) and Seller
(as lessee), which has not become effective as of the date of the applicable
Closing, as a result of a pre-existing recorded oil and gas lease pertaining to
all or a portion of the same tract of land, and/or the same undivided interest
in land, as the Top Lease, and which is to become effective if and when the
pre-existing lease expires or is terminated.
"▇▇▇▇▇▇▇▇ FORK FORMATION" means that certain formation as identified by
Halliburton Resistivity Log curve in the wellbore of the Encana Oil & Gas (USA)
▇▇▇▇▇ 30-15 (B-31) Well, with a total depth of 8,677 feet, and which is located
in Section ▇▇, ▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇▇▇▇ 92 West, Garfield County, Colorado.
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2. CONSIDERATION
For the consideration set forth below, and subject to Section 2.8,
below, Buyer agrees to purchase from Seller and Seller agrees to sell and assign
to Buyer the Leases, in accordance with the following:
2.1 ESCROW. Within three (3) business days after Board Approval
pursuant to Section 2.8(b), Buyer shall wire transfer Six Million Dollars
($6,000,000) into the Trust Account of ▇▇▇▇▇▇ ▇▇▇▇▇ LLP or other mutually
agreed-upon third party ("Escrow Agent"), and shall cause the Escrow Agent to
provide written confirmation to Seller of such wire transfer. The disbursement
of all funds from said account shall be made in accordance with the terms of
this Agreement, and pursuant to the Escrow Agreement attached hereto as Exhibit
I. Notwithstanding anything in this Agreement pertaining to the dates of Closing
or pertaining to the Leases currently identified on Exhibits A through D, the
intent of the Parties is that Buyer agrees to purchase and Seller agrees to sell
a 50% undivided interest in the first 4,000 Net Mineral Acres owned by Seller
within the AMI, subject to the Parties rights and obligations under Article 4.
2.2 FIRST CLOSING AND PAYMENT. On or before April 8, 2005, and subject
to the terms and conditions set forth herein, Seller agrees to sell and assign a
50% undivided interest in its right, title and interest in the portion of the
Initial Leases described on Exhibit A, using the form of Assignment attached
hereto as Exhibit E. Simultaneously with such assignment, Buyer and Seller shall
instruct the Escrow Agent to pay a total sum to Seller, by wire transfer of
immediately available funds to an account designated by Seller in writing, which
represents Three Thousand Dollars ($3,000.00) per Net Mineral Acre
(proportionately reduced to $1,500 for said 50% undivided interest) times the
total Net Mineral Acres under the Leases described on Exhibit A, or under other
Leases agreed to be assigned at said Closing (the "First Closing"), in which
Seller is able to sell and assign Defensible Title, as determined in accordance
with Article 4, below.
2.3 SECOND CLOSING AND PAYMENT. Between April 9 and April 15, 2005, and
subject to the terms and conditions set forth herein, Seller agrees to sell and
assign a 50% undivided interest in its right, title and interest in the portion
of the Initial Leases described on Exhibit B, using the form of Assignment
attached hereto as Exhibit E. Simultaneously with such assignment, Buyer and
Seller shall instruct the Escrow Agent to pay a total sum to Seller, by wire
transfer of immediately available funds to an account designated by Seller in
writing, which represents Three Thousand Dollars ($3,000.00) per Net Mineral
Acre (proportionately reduced to $1,500 for said 50% undivided interest) times
the total Net Mineral Acres under the Leases described on Exhibit A, or under
other Leases agreed to be assigned at said Closing (the "Second Closing"), in
which Seller is able to sell and assign Defensible Title, as determined in
accordance with Article 4, below.
2.4 THIRD CLOSING AND PAYMENT. On or before ninety (90) days from the
date of this Agreement, and subject to the terms and conditions set forth
herein, Seller agrees to sell and assign a 50% undivided interest in its right,
title and interest in the
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portion of the Initial Leases described on Exhibit C, using the form of
Assignment attached hereto as Exhibit E. Simultaneously with such assignment,
Buyer and Seller shall instruct the Escrow Agent to pay a total sum to Seller,
by wire transfer of immediately available funds to an account designated by
Seller in writing, which represents three Thousand Dollars ($3,000.00) per Net
Mineral Acre (proportionately reduced to $1,500 for said 50% undivided interest)
times the total Net Mineral Acres under the Leases described on Exhibit B or C,
or under other Leases agreed to be assigned at said Closing (the "Third
Closing") in which Seller is able to sell and assign Defensible Title, as
determined in accordance with Article 4, below. Seller represents that it owns,
or will own by the Third Closing described in this Section 2.4, Defensible Title
to 2,000 Net Mineral Acres in the Initial Leases as to all depths included in
the ▇▇▇▇▇▇▇▇ Fork Formation.
2.5 PURCHASE AND SALE OF PENDING LEASES.
(a) Seller is currently engaged in negotiations for oil and gas
leases covering 2,000 Net Mineral Acres (the "Pending Leases") as more
particularly described in Exhibit D, or to be acquired by Seller within
the AMI after the date of this Agreement. Seller shall use its best
efforts to acquire 2,000 Net Mineral Acres within the AMI, above the
2,000 Net Mineral Acres of Initial Leases. Seller agrees that each of
the Pending Leases actually acquired will provide to Buyer, after the
Reserved Production Payment, Defensible Title to not less than a
seventy-eight and 00/100ths percent (78.00%) net revenue in
Hydrocarbons in the Net Mineral Acres covered by the Pending Lease as
to all depths included in the ▇▇▇▇▇▇▇▇ Fork Formation. Unless the
Parties mutually agree otherwise, Buyer shall not be required to
acquire and pay for, or pay interest on the acquisition cost for, any
of the Pending Leases that do not meet the requirements stated above.
(b) On one or more mutually-agreeable dates subsequent to the
Third Closing, and subject to the terms and conditions set forth
herein, Seller agrees to sell and assign a 50% undivided interest in
its right, title and interest in the Pending Leases described on
Exhibit D, or to be acquired by Seller within the AMI after the date of
this Agreement, using the form of Assignment attached hereto as Exhibit
E. Simultaneously with such assignment, Buyer shall pay a total sum to
Seller, by wire transfer of immediately available funds to an account
designated by Seller in writing, which represents Three Thousand
Dollars ($3,000.00) per Net Mineral Acre (proportionately reduced to
$1,500 for said 50% undivided interest) times the total Net Mineral
Acres under the Leases described on Exhibit D, in which Seller is able
to sell and assign Defensible Title, as determined by the Parties in
accordance with Article 4, below. Any and all Leases obtained by Seller
after Seller has sold and assigned a 50% undivided interest in the
first 4,000 Net Mineral Acres to Buyer will be deemed to be an Acquired
Interest under the ▇▇▇▇▇▇ Agreement, and Article 6 of this Agreement,
rather than a Pending Lease subject to this Section 2.5.
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2.6 TOP LEASES. The consideration paid by Buyer for any and all Top
Leases included in the Leases shall be the actual percent of the bonus amount
which Seller paid for such Top Lease. When any Top Lease vests, Seller shall
promptly notify Buyer in writing that the balance of such bonus is due. Within
ten (10) days after Buyer receives such written notice, Buyer shall pay Seller
the full amount of said remaining balance due ($3,000 per Net Mineral Acre,
proportionately reduced). All acquisitions of Top Leases which fall into the
category of Acquired Interests shall be subject to the ▇▇▇▇▇▇ Agreement.
Notwithstanding anything in this Agreement to the contrary, the Parties may
mutually identify specified Top Leases as future Initial Leases and/or future
Pending Leases, which will comprise a portion of the 2,000 Net Mineral Acres in
each such category of Leases if and when such Top Leases vest. In the case of
such mutual identification the Parties shall defer the portion of the Closing
pertaining to such Top Leases until such times as they vest.
2.7 ASSIGNMENT. All Assignments of Initial Leases and Pending Leases
shall be subject to and burdened by: (a) either the Reserved Production Payment
or the Reserved ORRI; and (b) the Backin WI and the undertakings of this
Agreement, with warranty of title by, through, and under Seller, as applicable,
but not otherwise, and in the form attached hereto as Exhibit E.
2.8 CLOSING CONDITIONS. Notwithstanding anything in this Agreement to
the contrary:
(a) Seller shall provide Buyer with Exhibits A through D by 4:00
p.m. (Mountain Standard Time) on February 23, 2005.
(b) If Seller and ▇▇▇▇▇▇ do not enter into the ▇▇▇▇▇▇ Agreement
by 4:00 p.m. (Mountain Standard Time) on February 23, 2005, for any
reason other than Buyer's or Seller's material breach of this
Agreement, all Parties shall have no further rights, and shall be
relieved from all further obligations, under this Agreement, except
Buyer shall promptly return all Information in its possession to
Seller.
(c) This Agreement and all rights and obligations related thereto
are subject to approval by Buyer's Board of Directors. Buyer shall
communicate the Board's action by written notice to Seller no later
than 6:00 p.m. (Mountain Standard Time), on February 24, 2005.
3. RESERVATIONS BY SELLER
3.1 RESERVED PRODUCTION PAYMENT. Seller's assignment of the Initial
Leases and the Pending Leases shall reserve either the Reserved Production
Payment or the Reserved ORRI (but not both), at Seller's election, provided,
however, the Reserved Production Payment will terminate at such time as the
Initial Leases and Pending Leases have produced ninety percent (90%) of the
economically recoverable reserves attributable to the said Leases. The Reserved
Production Payment is payable out of a fraction of total production equal to the
difference between Existing Lease
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Burdens and twenty percent (20%), but never less than 2.0%, proportionately
reduced to the extent that any Initial Lease or Pending Lease covers less than
the entire mineral estate in and to the ▇▇▇▇▇▇▇▇ Fork Formation in the lands
covered thereby or Seller own less than the entire leasehold estate in any
Lease assigned to Buyer. (For example, on a full interest Lease having a
87.5% NRI, Seller's Reserved Production Payment would be 7.5% [(the difference
between 20% and 12.5%) = 7.5%]; on a full interest Lease having a 84.25% NRI,
Seller's Reserved Production Payment would be 4.25% [(the difference between
20% and 15.75%) = 4.25%]). The Reserved Production Payment shall be free of all
post production costs and expenses, and shall be paid to Seller without any
deductions whatsoever, except applicable taxes.
3.2 RESERVED ORRI. Seller's assignment of the Initial Leases and the
Pending Leases shall reserve either the Reserved ORRI or the Reserved Production
Payment (but not both) at Seller's election. The Reserved ORRI shall be equal to
the difference between Existing Lease Burdens and twenty percent (20%), but
never less than 2.0%, proportionately reduced to the extent that any Lease
covers less than the entire mineral estate in and to the ▇▇▇▇▇▇▇▇ Fork Formation
in the lands covered thereby or Seller own less than the entire leasehold estate
in any Lease assigned to Buyer. (For example, on a full interest Lease having a
87.5% NRI, Seller's Retained ORRI would be 7.50% ORRI [(the difference between
20% and 12.5%) = 7.5%]; on a full interest Lease having a 84.25% NRI, Seller's
Retained ORRI would be 4.25% ORRI [(the difference between 20% and 15.75%) =
4.25%]). The Reserved ORRI shall each be free of all post production costs and
expenses, and shall be paid to Seller without any deductions whatsoever, except
applicable taxes.
3.3 BACKIN WI. Effective at Project Payout, Seller shall be vested with
an undivided twelve and one-half percent (12.5%) of Buyer's ownership of all
Leases and Production Assets related to the Leases and constructed or installed
by Buyer up to the time of Project Payout. Thereafter, but not before, Seller's
and Buyer's ownership interest in the Leases and related assets, and operations
related thereto shall be governed by the terms of the Operating Agreement, with
Seller bearing its proportionate share of all costs and burdens on the Leases,
including the Reserved Production Payment and the Reserved ORRI.
(a) In order to determine Project Payout, Buyer shall establish
and maintain a cash basis account (the "Project Payout Account") in
accordance with generally accepted accounting principles. The Project
Payout Account shall be credited monthly with the amount of Project
Revenues received by Buyer and debited monthly with the amount of
Project Costs paid by Buyer. Buyer agrees to provide Seller a Payout
Statement reflecting the status of the Payout Account on a quarterly
basis, together with supporting documentation.
(b) At Project Payout, Buyer agrees to promptly execute,
acknowledge and deliver to Seller a recordable assignment of its Backin
WI in the Leases, the Production Assets and any other property owned by
Buyer within the AMI.
9
4. REVIEW OF RECORDS AND TITLE
4.1 REVIEW OF RECORDS. Buyer acknowledges that Seller has not developed
any of the Leases and that title opinions have not been rendered on the Leases.
Seller shall make the Records available to Buyer for review in Seller's offices
during normal business hours, until each applicable Closing Date. Except for the
representations contained in this Agreement, Seller makes no representation of
any kind as to the Records or any information contained therein. Buyer agrees
that any conclusions drawn from the Records shall be the result of its own
independent review and judgment.
4.2 TITLE DEFECTS
(a) As soon as reasonably practicable after Buyer's review of the
Records, but in no event later than five (5) business days prior to the
Closing Date pertaining separately to each Closing, Buyer shall notify
Seller in writing of any Title Defect(s) affecting the Properties.
Buyer's notice of Title Defect(s) shall include a description of each
Title Defect and the value that Buyer attributes to each said Title
Defect. Upon receipt of Buyer's notice, Seller may elect to attempt to
cure some, all, or none of the Title Defects identified in Buyer's
notice, at Seller's sole cost and expense. Prior to Closing, Buyer and
Seller shall attempt in good faith to agree on a proposed resolution of
any Title Defect(s) which has not been cured at least two business days
prior to the Closing Date.
(b) Unless (i) Buyer agrees to waive the Title Defect or that a
Title Defect is not a Title Defect, or (ii) the Title Defect has been
cured by Seller at Seller's sole cost and expense prior to Closing, the
acreage affected by the Title Defect shall not be assigned at Closing
and Buyer shall not be obligated to pay for such acreage.
(c) Notwithstanding Sections 4.2(a) or (b), above, if Seller
cures any Title Defects and provides Buyer with documentation
reasonably satisfactory to Buyer that such Title Defects have been
cured within ninety (90) days after Closing, Buyer agrees to pay Seller
and Seller agrees to assign the subject Leases within fifteen (15) days
after Seller has provided such documentation. Such payment and
assignment shall take place in accordance with Article 2 and other
applicable provisions of this Agreement. Provided, however, the total
number of Net Mineral Acres categorized as Initial Leases and Pending
Leases shall not increase beyond 4,000, and such post-Closing
assignments shall be consistent with Section 4.3, below.
4.3 ADDITIONAL ACREAGE. If Buyer's title examination shows that Seller
owns more than 2,000 Net Mineral Acres in the Initial Leases, then (a) Buyer
shall pay Seller at Closing and shall receive an assignment for the additional
Net Mineral Acres based upon $3,000.000 per Net Mineral Acre and (b) any
additional Net Mineral Acres shall be deemed a part of the Pending Leases. Net
Mineral Acres in excess of 2,000 acres in the Pending Leases shall be deemed to
be Acquired Interests, subject to the provisions of Article 6.
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5. BUYER'S COVENANTS
5.1 DRILLING COMMITMENT. Buyer agrees to drill the following ▇▇▇▇▇
within the following time frames, subject to Force Majeure, and subject to any
limitations and other terms contained in the Leases.
(a) On or before November 1, 2005, Buyer shall commence drilling
of a well at a location of its choosing on one of the Leases, and drill
the same to a depth sufficient to test the entire ▇▇▇▇▇▇▇▇ Fork
Formation to the top of the ▇▇▇▇▇▇▇ Formation, or a to a depth of
10,000 feet subsurface, whichever is the lesser depth; and
(b) On or before eighteen months from the date of this Agreement,
Buyer shall commence drilling of nine (9) additional ▇▇▇▇▇ at locations
of its choice on the Leases, and drill each of said ▇▇▇▇▇ to a depth
sufficient to test the entire ▇▇▇▇▇▇▇▇ Fork Formation to the top of the
▇▇▇▇▇▇▇ Formation, or a to a depth of 10,000 feet subsurface, whichever
is the lesser depth. If Buyer fails to drill any of the said nine (9)
▇▇▇▇▇ described above, then Buyer shall pay Seller upon their written
demand the sum of $500,000.00 for each well Buyer fails to drill, as
liquidated damages or Buyer shall reassign all of its interests within
the AMI to ATEC/Apollo free and clear of any burdens created by Buyer,
except the drilling and spacing unit and ▇▇▇▇▇ already commenced by
Buyer pursuant to this Agreement as of eighteen months from the date of
this Agreement.
5.2 SUBSTITUTE WELL. If, prior to reaching the specified depth in any
of the ▇▇▇▇▇ described in Section 5.1, above, Buyer encounters formations,
conditions, steep dips, excess lost circulation, or mechanical well bore
problems that would render further drilling operations by a prudent operator
impracticable or which cannot be penetrated by the use of customary drilling
procedures, then Buyer shall have the right to commence drilling of a substitute
well within ninety (90) days from the date the drilling rig for was released on
the well in which such conditions were encountered. The ▇▇▇▇▇ described above
shall be deemed to include a substitute well for determining Buyer's compliance
with its drilling commitments.
5.3 ▇▇▇▇▇▇ AGREEMENT. Notwithstanding anything in this Agreement to the
contrary, the drilling commitment set forth in Section 5.1, above, shall be
several, not joint, and shall be a combined obligation of Buyer and the owner(s)
of the other 50% undivided interest in the Initial Leases and the Pending
Leases, such that Buyer and such owner(s) shall each have an obligation to pay
for 50% of the costs of the ▇▇▇▇▇ (or the liquidated damages for the failure to
drill any such well) pursuant to Section 5.1, and the total combined number of
▇▇▇▇▇ to be drilled under this Agreement and by such owner(s) is ten (not a
total of twenty).
6. AREA OF MUTUAL INTEREST
The Parties hereby establish an Area of Mutual Interest ("AMI"), as
described on Exhibit G, which shall continue in full force and effect for a term
of ten (10) years from the
11
date of this Agreement. During the term of the AMI, Seller shall handle for the
Parties all acquisitions of (i) Leases, farmouts or other interests in
Hydrocarbons, and (ii) Production Assets, within the AMI (collectively "Acquired
Interests"). If either Buyer or Seller is offered or learns of an opportunity to
acquire Leases, farmouts or other interests in Hydrocarbons, or Production
Assets, within the AMI, then it will notify Seller and ▇▇▇▇▇▇ of such
opportunities. Buyer hereby assigns and relinquishes to Seller and to ▇▇▇▇▇▇ all
right, title, and interest in any and all Acquired Interests, which shall be
subject solely to the terms of the ▇▇▇▇▇▇ Agreement.
7. OPERATIONS
As Operator, Buyer shall conduct all operations under the terms of the
Operating Agreement, which each of the Parties agrees to execute contemporaneous
with the First Closing. If there is any conflict between this Agreement and the
Operating Agreement, then this Agreement shall control to the extent of the
conflict. Effective at Project Payout, Seller's interest shall be subject to the
terms of the Operating Agreement, even if Seller shall fail or refuse to execute
a counterpart of the Operating Agreement. If Leases are subject to existing
operating agreements or unit operating agreements, or may require a different
operating agreement because of the existence of third party owners (in each case
a "Third Party Operating Agreement"), then the Parties shall attempt to conform
such Third Party Operating Agreement to the Operating Agreement to the greatest
extent possible, and the rights among the Parties shall be governed by such
Third Party Operating Agreement only with respect to the Leases covered thereby
and then only to the extent it is in conflict with or inconsistent with the
Operating Agreement. Seller shall provide to Buyer, and shall cause its
Affiliates and subsidiaries to provide to Buyer, any and all rights-of-way and
surface uses on and across the surface of lands owned by Seller, shareholders of
Seller, and Affiliates of Seller within and in the vicinity of the Leases for
the purpose of conducting operations on or related to the production of oil and
gas from the Leases, whether such operations take place within or outside the
AMI. Buyer, or the Parties jointly under the Operating Agreement (whichever is
applicable), shall be responsible for any and all damages caused to the lands
affected by such rights-of-way and surface uses. Buyer shall pay Seller (and
such shareholders and Affiliates) industry rates (per acre and per rod,
whichever is applicable) for such rights-of-way and surface uses, which are
comparable to rates paid by third parties for similar uses in the vicinity of
the Leases in Garfield County, Colorado.
8. CONFIDENTIALITY; ACCESS TO INFORMATION
8.1 CONFIDENTIALITY. All geological, geophysical, engineering, and
information obtained or developed by the Parties, either jointly or individually
(collectively, "Information") will be kept confidential by the Parties and will
not, without the prior written consent of the other Parties, be disclosed by a
Party or its representatives, in whole or in part, and will not be used by the
Parties or their representatives, directly or indirectly, for any purpose other
than in connection with carrying out the purposes of this Agreement. The Parties
agree that any Party may show such geological, geophysical and engineering
Information to any third party with whom that Party is conducting bona fide
negotiations for a sale, farmout or other
12
development proposal of lands, provided such disclosures shall be limited to the
Information relative only to the lands under negotiation and provided further
that such third party has first agreed in writing to be bound by the
confidentiality provisions of this Agreement. Confidential Information does not
include information that is or becomes generally available to the public, other
than as a result of a disclosure by a Party or their representative, or that is
or becomes known or available to a Party on a non-confidential basis and not in
contravention of this Agreement. The obligation to maintain Information as
confidential will continue for three (3) years after the expiration or
termination of this Agreement.
8.2 ACCESS TO INFORMATION. Subject to the Operating Agreement, each
Party shall have full and free access at all reasonable times to all operations
on the Leases. Upon thirty (30) days written notice, each Party shall have the
right to inspect and copy Buyer's books and records during normal business
hours, and shall have a proportional ownership interest in all Information
acquired or developed under this Agreement. Upon request, Buyer shall furnish
ATEC and Apollo one legible copy of any and all well or lease data as generated,
which shall include but not necessarily be limited to the following: meter and
chart reports, production purchaser statements, run tickets and monthly gauge
reports, application for permit to drill, survey plats, drilling reports,
completion reports, test reports, well logs, plugging and abandoning reports,
and drilling and division order title opinions. Buyer further agrees to furnish
ATEC and Apollo a complete data set on all linear seismic and 3-D seismic as
well as any other available data, geological, geophysical, engineering, and
title information obtained or developed by Buyer during the term of this
Agreement. Seller's access rights shall not be exercised in a manner interfering
with Buyer's operations. Buyer shall not be obligated to furnish any geologic or
geophysical data of an interpretive nature to Seller unless the cost of
preparation of such interpretive data was charged to the joint account.
9. ACCEPTANCE OF SURFACE CONDITIONS
Upon each Closing, Buyer accepts the surface and environmental
conditions of the Leases "AS IS, WHERE IS." The Parties acknowledge that Seller
will provide Buyer reasonable access to the Leases for a surface and
environmental condition inspection prior to Closing. Further, Buyer acknowledges
that Seller has made no representations concerning the environmental quality or
condition of the Lands or Leases. Buyer agrees that it shall acquire the such
interests on an "AS IS, WHERE IS" basis and Seller hereby disclaims all
representations and warranties, express, implied or statutory, concerning (a)
the environmental quality and condition of the Lands, (b) the existence of and
discharge of hazardous substances or other pollutants upon or from such lands
which has caused or may cause environmental degradation; and (c) the status of
compliance of such lands with federal, state and local laws and/or regulations
pertaining to health, safety or environmental protection.
10. MISCELLANEOUS
10.1 TERM. This Agreement shall be effective when executed, and if
Closing occurs, shall continue in effect until the termination of the AMI or
Project Payout,
13
whichever occurs last, unless the context of a particular provision indicates by
its context that it should survive such termination. The termination of this
Agreement shall not relieve any Party of any expense, liability or other
obligation, or any remedy therefor, which has accrued or attached prior to the
date of such termination.
10.2 FORCE MAJEURE. If, as a result of Force Majeure (as hereinafter
defined) any Party is rendered unable, wholly or in part, to carry out its
obligations under this Agreement, other than the obligation to pay money, the
obligations of the Party giving such notice, so far as and to the extent that
the obligations are affected by such Force Majeure, shall be suspended during
the continuance of any inability so caused. The Party claiming Force Majeure
shall notify the other Parties of the Force Majeure as soon as reasonably
possible after the occurrence of the facts relied on and shall keep all Parties
informed of all significant developments. Such notice shall give reasonably full
particulars of the Force Majeure, and also estimate the period of time that the
Party will probably require to remedy the Force Majeure. The affected Party
shall use all reasonable diligence to remove or overcome the Force Majeure as
quickly as possible, but shall not be obligated to settle any labor dispute
except on terms acceptable to it and all such disputes shall be handled within
the sole discretion of the affected Party. As used herein, the term "Force
Majeure" shall mean any acts of God, strikes, lockouts, acts of the public
enemy, wars, sabotage, blockages, insurrections, riots, terrorism, epidemics,
landslides, lightning, earthquakes, fires, storms, hurricanes, floods, washouts,
arrests and restraints of rulers and people, civil disturbances, explosions,
breakage or accident to machinery or lines of pipe, or the necessity to make
repairs, tests or alterations to machinery or lines of pipe, line freeze-ups,
the binding order of any court or governmental authority which has been resisted
in good faith by all reasonable legal means, lack of governmental permit, lack
of rig availability on economic terms reasonably acceptable to Buyer, or any
other cause whether of the kind herein enumerated, or otherwise, and whether
caused or occasioned by or happening on the account of the act or omission of
one of the Parties hereto, or some person or concern not a Party hereto, which
cause is not within the control of the Party claiming suspension and which, by
the exercise of due diligence, such Party is unable to foresee or prevent and,
in either case, overcome; provided, however, any change in the economic
condition of a Party, any general change in economic conditions affecting the
industry as a whole or any change in commodity prices shall not constitute an
event of Force Majeure.
10.3 RELATIONSHIP OF THE PARTIES. Notwithstanding anything contained
herein to the contrary, Buyer and Seller shall be liable for only each such
Parties' proportionate share of the cost, expenses, liabilities and obligations
arising under this Agreement, and no Party shall be liable, secondarily, or
jointly or otherwise for any other Parties' share of any such cost, expenses,
liabilities and obligations. It is not the purpose or intention of this
Agreement to create, and this Agreement shall not be construed as creating, a
joint venture, mining partnership or relationship whereby any Party shall be
liable for the acts, either of omission or commission, of any other Party
hereto.
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10.4 AUDIT RIGHTS. The Selling Parties and Buyer shall each have the
right to audit the books and records of the other with respect to all matters
related to this Agreement at the times and in the manner as provided in the
▇▇▇▇▇ - 1984 - Onshore Accounting Procedure, Joint Operations, attached to the
Operating Agreement, except to the extent otherwise provided in this Section.
Buyer and Seller will each permit representatives designated by the other,
including independent accountants, agents, attorneys, and designated employees,
to visit and (i) inspect and to review their respective books and records
pertaining to the Leases (ii) to make copies and photocopies from such records
and to write-down and record such information as such representatives may
request, (iii) to have access to their respective accountants and their working
papers (subject to such independent accountants' policies respecting the
availability to working papers), and (iv) to reasonably investigate and verify
the accuracy of information furnished to the other Party hereunder or in
connection herewith, all at the expense of the Party conducting the audit
provided, however, that the reasonable cost of any good faith investigation
which Seller or Buyer conducts under this Section 10.4 shall be borne by the
other Party if such investigation reveals audit exceptions in excess of
twenty-five thousand dollars ($25,000.00).
10.5 LIKE-KIND EXCHANGE
(a) Buyer agrees to cooperate with Seller so that Seller's
transfer of the Initial Leases, and/or other Leases, to Buyer shall, at
Seller's election, be accomplished in a manner enabling the transfer to
qualify as part of a like-kind exchange of property by Seller within
the meaning of Section 1031 of the Code, which cooperation shall
include, without limitation, taking such actions as Seller reasonably
request in order to transfer the Initial Leases and receive all or a
portion of the purchase price and other payments in a manner which
enables such transfer to qualify as part of a like-kind exchange of
property within the meaning of Section 1031 of the Code.
(b) Without limiting the generality of Section 10.5(a) above, and
notwithstanding any provision in this Agreement to the contrary, Seller
may, at any time before delivery of the Initial Leases to Buyer, assign
Seller rights (but not its obligations) under this Agreement in whole
or in part to a qualified trust, a qualified escrow account or a
qualified intermediary as such terms are defined in Treas. Reg. Section
1.1031(k)-1(g) (3) & (4), respectively, for the purpose of effectuating
a deferred like-kind exchange of property within the meaning of Section
1031 of the Code and the regulations thereunder. In the event of such
assignment, Seller agrees to defend, indemnify and hold harmless the
Buyer from and against any and all costs and liabilities arising out of
or resulting from such a deferred exchange.
(c) Buyer acknowledges that Seller may direct certain portions of
the purchase price, and any other payments for the assignment of a
Lease from Seller to Buyer to be made to a Qualified Intermediary, as
directed in writing by Apollo for and on behalf of the Apollo Nominees.
15
10.6 DELAY RENTALS AND SHUT-IN/MINIMUM ROYALTY PAYMENTS. For a period
of one year after the First Closing, on Buyer's behalf, Seller shall make every
reasonable effort to make all delay rental and shut-in/minimum royalty payments
which become due and payable after the date of this Agreement and are required
to continue in force any of the Leases, and to advise Buyer in writing of all
drilling commitments under all leases, regardless of whether such drilling
commitments accrue within or after such one-year period. Seller shall provide a
monthly accounting to Buyer during said one-year period regarding all such
payments made and to be made during such period.
10.7 PRESS RELEASES. Seller and Buyer shall consult each other with
respect to any press release or public announcement concerning this Agreement
and the transaction contemplated hereby, and, except as required by, or pursuant
to applicable law, or the applicable rules and regulations of any governmental
body or stock exchange, neither Party shall issue any press release or public
announcement without the prior written consent of the other Party.
10.8 CONSTRUCTION OF AGREEMENT. In construing this Agreement, the
following rules shall apply:
(a) CAPTIONS. No consideration shall be given to the captions,
which are inserted only for convenience in locating provisions of this
Agreement and not as an aid in its construction.
(b) CONTROL OF DRAFTING. No consideration shall be given to the
fact or presumption that one Party has had a greater or lesser hand in
drafting this Agreement than any other Party.
(c) DEFINED TERMS. A defined term has its defined meaning
everywhere in this Agreement, regardless of whether the term appears
before or after the place in this Agreement where the term is defined.
(d) CONSTRUCTION. All documents that are collateral to and
supportive of this Agreement are supplemental to the terms and
conditions of this Agreement and the terms and conditions of this
Agreement shall control in the event of any conflict or question that
might arise between such document, including the exhibits attached,
that is collateral to or supportive of this Agreement and this
Agreement itself.
10.9 ASSIGNABILITY. This Agreement is personal in nature and may not be
assigned by Buyer without the prior written consent of Apollo and ATEC, which
consent shall not be unreasonably withheld. Provided, however, Buyer shall have
the right, before or after Closing, to agree to assign a one and two-tenths
percent (1.2%) overriding royalty interest to one or more third parties to be
effective as of the Effective Date. Seller may freely assign its interest in the
Leases and in this Agreement. Any assignment of this Agreement, or any interest
in the Leases shall be made specifically subject to the terms and conditions of
this Agreement and any assignee shall agree in writing to be bound by the terms
of this Agreement.
16
10.10 SUCCESSORS AND ASSIGNS. This Agreement, and all the rights,
titles, interests, requirements, covenants, obligations, terms and conditions
set forth herein, shall be binding upon, and inure to the benefit of, the
Parties hereto and their respective partners, parties of interests,
beneficiaries, heirs, representatives, trustees, and permitted successors and
assigns.
10.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, no one of which need be executed by all the Parties hereto. Each
Party hereby authorizes the removal of the signature pages and reassembly of the
same into a single document composed of one copy of the substantive portion of
the Agreement attached to the multiple, separately executed pages of the
signatures. A copy by reproduction showing signatures, including any copies
reproduced electronically by facsimile, telecopy or otherwise, will be deemed to
be as valid as an executed copy or original. Following each execution and
delivery by counterparts, the Parties shall thereafter execute and deliver "hard
copies" of the Agreement and related documents as well, but the failure or
refusal to execute and deliver such "hard copies" shall not invalidate the
Agreement.
10.12 WORDS AND GENDER. Words of any gender used in this Agreement or
any of the documents collateral to it will be held and construed to include any
other gender, and the words in the singular number will be held to include the
plural and vice versa unless the context clearly requires otherwise.
10.13 PARTIAL INVALIDITY. The invalidity or unenforceability of any
particular provision of this Agreement or any of the documents collateral to it
will not affect the other provisions hereof or thereof, and the Agreement and
any of the documents collateral to it will be construed in all respects as if
such invalid or unenforceable provisions were omitted.
10.14 INCORPORATION BY REFERENCE. Any and all exhibits or documents or
their record referred to or described herein or attached hereto are incorporated
herein by reference for all purposes as though same were set forth herein
verbatim.
10.15 NOTICES. Except as otherwise provided above, all notices required
under this Agreement will be given in writing and delivered in person, by United
States certified mail return receipt requested, courier service, facsimile,
telecopy or e-mail addressed to each of the Parties at the addresses listed
below:
Dolphin Energy Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
17
Apollo Energy, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
Telecopy: 303.830.2818
ATEC Energy Ventures, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
Telecopy: 713.782.6738
Any notice delivered in person, by courier service, facsimile or telecopy shall
be deemed given when received by the Party to whom it is addressed. Apollo
agrees to act for and on behalf of the Apollo Nominees for the purposes of
giving and receiving notices. Each Party has the right to change its address by
giving written notice thereof to the other Parties.
10.16 GOVERNING LAW. The laws of the State of Colorado shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Parties, without regard to the
principles of conflicts of laws, including, but not limited to, matters of
performance, non-performance, breach, remedies, and procedures. The laws of the
State of Colorado shall govern the validity, construction and interpretation of
any conveyances executed pursuant to this Agreement. Forum and venue shall be
exclusively in state or federal court in Denver, Colorado.
10.17 ENTIRE AGREEMENT. The Parties agree and understand that this
Agreement and all of its exhibits constitute their entire agreement among the
Parties respecting the subject matter of the transactions contemplated hereby
and that there are no other agreements among them other than the terms and
conditions contained herein.
10.18 DISCLAIMERS AND RELEASE.
(a) DATA AND INFORMATION. Seller makes no warranty or
representation, express, implied or statutory, as to the accuracy or
completeness of any data, information or materials heretofore or
hereafter furnished to Buyer in connection with the interests that may
be acquired by Buyer in the Leases or interest within the AMI, or as to
quality or quantity of Hydrocarbon reserves attributable to the Leases
or the ability of the Leases to produce Hydrocarbons. Any and all such
data, information and other materials furnished by Seller is provided
to Buyer as a convenience and any reliance on or use of the same shall
be at Buyer' sole risk. Buyer further acknowledges that it has had the
opportunity to review Seller' files relating to the Leases.
18
(b) PROJECT. Buyer is experienced and knowledgeable in the oil
and gas business and is aware of its risks. In entering into this
Agreement, Buyer acknowledges and affirms that it has relied and will
rely solely on the terms of this Agreement and upon its independent
analysis, evaluation and investigation of, and judgment with respect
to, the business, economic, legal, tax or other consequences of the
this Agreement, including its own estimate and appraisal of the extent
and value of the petroleum, natural gas and other reserves of the
Leases, and future operation, maintenance and development costs
associated with the Leases and the legal risks of owning and operating
an interest in the Leases. Buyer owns and operates other oil and gas
properties similar in nature and kind to the Leases and is aware of the
geologic factors and risks associated with operating oil and gas ▇▇▇▇▇,
and risks associated with the development and operation of oil and gas
interests.
10.19 REPRESENTATIONS. The Parties each represent each to the other
that:
(a) They each have the authority to enter into this Agreement in
the name, title and capacity herein stated with full and lawful
authority on behalf of their respective principals, including a current
authorization by their respective boards of directors or managers
approving the execution and delivery of this Agreement, and including
the Apollo Nominees' written authorization granting Apollo all
necessary authority to act on their behalf;
(b) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the
compliance with the terms hereof, will result in any default under any
agreement or instrument to which a Party is a party, or violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to a Party;
(c) This Agreement constitutes (and the assignments to be
delivered herein, when executed and delivered, constitute) the legal,
valid and binding obligation of the Party, enforceable in accordance
with its terms, except as limited by bankruptcy or other laws
applicable generally to creditor's rights and as limited by general
equitable principles;
(d) It has not incurred any obligation or liability, contingent
or otherwise for broker's or finder's fees with respect to the
transactions provided for in this Agreement;
(e) They each have, or will have when necessary, as applicable,
the authority and the ownership rights and interests to carry out the
undertakings of this Agreement with respect to the Leases or Production
Assets; and
(f) The Leases include all fee mineral interest owned by Seller
as of the date of this Agreement and will include fee mineral interests
acquired by Seller after the date of this Agreement, all of which shall
be leased to Buyer under the terms of the oil and gas lease attached
hereto as Exhibit H for a term
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of four (4) years and reserving not more than a 20% royalty (that is,
for an 80% net revenue interest). Buyer shall pay to Seller a bonus
of $3,000 per Net Mineral Acre.
10.20 NO THIRD PARTY BENEFICIARIES. This Agreement is intended to
benefit only the Parties hereto and their respective successors and assigns,
including the Dolphin Shareholders.
10.21 NO RECORDING. Except for any assignments of the Leases or other
interests in the AMI, the Parties agree not to record all or any portion of this
Agreement in any county or other public records
10.22 NECESSARY DOCUMENTS. The Parties further agree to prepare,
execute and deliver all such other documents that may be reasonably necessary to
fully effectuate all the terms and conditions herein required.
EXECUTED by each Party on the date of its acknowledgment shown below,
to be effective as of the date first written above.
DOLPHIN ENERGY CORPORATION APOLLO ENERGY, LLC, for itself
and for the Apollo Nominees
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
----------------------------------- ---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, President
ATEC ENERGY VENTURES, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO
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