SPECIFIC
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL
TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED
MATERIAL
HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION,
AND THE REDACTED TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE
WITH TWO ASTERISKS (**).
This
FIRST AMENDMENT of COOPERATIVE AGREEMENT (this
“Amendment”) is executed to be effective as of
October 21, 2005 between RESOLUTE ANETH, LLC
(“Resolute”), a Delaware limited liability company, and
NAVAJO NATION OIL AND GAS COMPANY, INC. (“NNOG”), a
Federal corporation. Resolute and NNOG are sometimes referred to
herein individually as a “Party” or together as the
“Parties.”
1.01
Resolute Natural Resources Company (“RNRC”), an
affiliate of Resolute, and NNOG entered into that certain
Cooperative Agreement dated effective October 22, 2004 (as
amended hereby, the “Agreement”). RNRC has assigned all
of its rights and obligations under the Agreement to Resolute. The
Agreement provides for certain cooperative arrangements between
NNOG and Resolute concerning oil and gas ownership and operations
of jointly held assets in the Greater Aneth Field in southeast
Utah.
1.02
This Amendment is entered into in order to (i) state the
agreement of the Parties with respect to the potential joint
acquisition of assets in the Greater Aneth Field and Cortez,
Colorado, currently held by ExxonMobil and its affiliates
(“Exxon”) and described in a Purchase and Sale
Agreement (the “PSA”) between Exxon and XTO Energy,
Inc. (“XTO”) dated effective January 1, 2005 (the
“Exxon Assets”), (ii) to amend and supplement the
Agreement to apply to the Exxon Assets and grant certain options to
NNOG in regard to such assets and (iii) to amend the Agreement
in certain other respects. Except as amended hereby, the Agreement
remains effective in accordance with its terms.
1.03
Capitalized terms used herein that are defined in the Agreement are
used as so defined. For convenience of reference, the Articles and
Sections of this Amendment are organized to a certain extent to be
parallel to the Articles and Sections of the Agreement. No
significance shall be given to such arrangement and the provisions
hereof amend and supplement the Agreement only as expressly stated
herein.
1.04
The parties intend to acquire the Exxon Assets as successors or
designated assignees of the assets pursuant to the exercise by the
Navajo Nation of its preferential purchase right set forth in 18
N.N.C. § 605 (the “PPR”) or pursuant to a purchase
and sale agreement with Exxon. It is recognized that the PPR right
of the Navajo Nation does not apply to all such assets, but it is
expected that the assets would be acquired in their entirety.
Reference herein to the Exxon Assets means such of the Exxon Assets
that are acquired by the Navajo Nation or either of the Parties
whether through exercise of the PPR or otherwise. Any agreement
between Exxon and the Parties or the Navajo Nation and the Parties
for the acquisition of the assets by the Parties is referred to as
the “Acquisition Agreement.”
1.05
Resolute (or one or more of its subsidiaries or affiliates) will
acquire 75% and NNOG will acquire 25% of the Exxon Assets. Resolute
and NNOG’s interests in the Exxon Assets shall be several,
not joint. Each Party shall use its best efforts to acquire the
financial assets necessary to acquire its share of such assets at
the purchase price provided for in the PSA.
1.06
The Parties acknowledge that the PSA appears on its face to be a
valid and existing contract between Exxon and XTO. Neither Party
shall take any action to cause or encourage either party to the PSA
to breach its obligations thereunder.
ARTICLE
II.
PAYMENTS AND OBLIGATIONS
IN CONNECTION WITH THE ACQUISITION
2.01
Prior to or contemporaneous with the closing of the Acquisition
Agreement, Resolute will pay $(**) to NNOG in consideration for
NNOG’s services in connection with the acquisition of the
Exxon Assets. If the value of the Exxon Assets is reduced or
diminished on account of title failures, exercises of preferential
purchase rights, exclusions, casualty losses or similar changes,
the $(**) payment will be reduced in proportion to the reduction in
value of the Exxon Assets. If for any reason (i) the closing
of the Acquisition Agreement does not occur, or is determined to be
void, rescinded or otherwise not effective, (ii) the
assignments of the Exxon Assets to Resolute and NNOG do not receive
the required Navajo Nation approvals or the Navajo Nation denies
such approvals or exercises its right of first refusal, or
(iii) at any time NNOG or the Navajo Nation disclaims the
effectiveness of the Agreement including, without limitation, the
waivers and consents in Article X, NNOG shall refund such
amount immediately to Resolute.
2.02
At closing of the Acquisition Agreement, Resolute will pay 75% and
NNOG will pay 25% of the adjusted purchase price for the Exxon
Assets as determined under the Acquisition Agreement. The
obligations and liabilities of the parties under the Acquisition
Agreement shall be apportioned severally 75% to Resolute and 25% to
NNOG.
2.03
NNOG agrees to use its best good faith efforts to obtain the
support of the Navajo Nation for the closing of the Acquisition
Agreement, as well as support for the implementation of the terms
and provisions of this Amendment. In particular, without
limitation, NNOG will work with the Navajo Nation to obtain an
expedited approval of the assignment of interests from Exxon or the
Navajo Nation to Resolute, or its designated subsidiary or
affiliate, and NNOG.
ARTICLE
III.
NNOG OPTIONS
3.01
NNOG will have options with respect to the Exxon Assets with terms
and conditions identical to the terms and conditions stated in
Agreement Article III except that (i) the references to
the “Aneth Assets” shall mean the Exxon Assets,
(ii) the reference to the CVX Agreement shall mean the
Acquisition Agreement, (iii) the reference to the unit
operating agreement in Section 3.02(ii) shall mean the McElmo
and Ratherford Unit Operating Agreements, as applicable,
(iv) the reference to the $(**) shall mean the payment of such
amount under this Amendment.
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3.02
The NNOG options with respect to the Exxon Assets shall be
independent of the NNOG options with respect to the Aneth Assets.
Payout with respect to the Exxon Assets shall be determined
independently of Payout with respect to the Aneth
Assets.
(a)
In the event that Resolute makes a partial sale or other conveyance
of interest in the Aneth Assets or the Exxon Assets to a party
other than an affiliate of Resolute, such that a Sale as defined in
Section 4.01 of the Agreement (as revised by Section 4.02
of this Amendment) has not occurred, then NNOG shall have the
option of considering as “revenue from production” for
purposes of the occurrence of Payout with respect to the Aneth
Assets or Exxon Assets, as applicable, (i) the net proceeds
(after all costs of the transaction) from Resolute’s sale or
other conveyance of interests in the relevant assets (in which case
NNOG’s options shall terminate as to the assets so sold or
conveyed), or (ii) the continuing revenue from production of the
assets so sold or otherwise conveyed, (in which case NNOG’s
option shall continue to burden the assets sold, revenue from
production of such assets shall mean the revenue received by the
purchaser or transferee, and the purchaser or transferee must agree
in writing to comply with the provisions of Articles III and IV of
the Agreement and supply the information required for the
determination of Payout). If Resolute intends to undertake a
transaction that would give rise to the foregoing option of NNOG,
Resolute shall give NNOG a minimum of 30 days advance notice
of such transaction and NNOG shall have 30 days from receipt
of such notice within which to elect its option by giving written
notice to Resolute of such election. If NNOG fails to make an
election within such time period, then the option set forth in
3.03(a)(i) shall apply. A partial sale shall not include any
transaction which is a bona fide financing transaction, including
but not limited to transactions involving a conveyance that is
limited to a volume of production, an amount of revenue received,
net profits or period of time or similar type of limitation (and
the receipt of revenue from such transaction shall not be deemed to
be revenue for purposes of Payout until the underlying production
is produced and delivered into sales, and the price for such
production shall be the consideration received in the financing for
such production).
(b)
In the case of a partial sale covered by 3.03(a) above, if the sale
involves an interest that would leave Resolute with less that the
total interest necessary to honor the NNOG options, the NNOG
options shall burden any interest conveyed to the extent necessary
to insure that NNOG’s options are not diminished. Resolute
shall give NNOG 30 days advance notice and either demonstrate
that Resolute will continue a sufficient interest to fully honor
the NNOG options, or provide a written agreement from the
transferee of the partial interest acknowledging that such
transferred interest is burdened by the NNOG options and agreeing
to fully comply with the terms of Articles III and IV hereof in the
event of the exercise of the options.
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ARTICLE
IV.
TERMINATION UPON SALE, FIRST OPTION ACCELERATION,
AND FIRST RIGHT OF NEGOTIATION
4.01
The provisions of Agreement Article IV shall apply
independently to the NNOG options with respect to the Exxon Assets,
with references to the “Aneth Assets” meaning the Exxon
Assets.
4.02
The following language shall replace in its entirety the second
sentence of Agreement Section 4.01:
(a)
The occurrence of a Sale, as defined below, shall be determined
independently with respect to the Aneth Assets and the Exxon Assets
and the provisions of this Section 4.01 shall be so
interpreted. A “Sale” for the purposes of this
Agreement is defined to include a sale other than to the
party’s affiliates of all or substantially all of a
Party’s Aneth Assets or Exxon Assets, as applicable, or the
production or revenue from production from such assets, or a change
of control, direct or indirect, of the Resolute entity holding the
assets in question (the “Pertinent Entity”).
(b)
Subject to the exceptions stated below, a change of control with
respect to the Pertinent Entity shall be deemed to occur as a
result of any transaction or series of transactions whereby
Resolute and its affiliates no longer own or control, directly or
indirectly, at least 50% of the voting control of the Pertinent
Entity (“Voting Control”). Notwithstanding the
foregoing, no change of control shall occur solely on account of
any transaction (which includes a series of transactions) where the
following circumstances exist:
(i)
Immediately following such a transaction a majority of the members
of the senior management of Resolute, as constituted on the date of
this Amendment (which for clarity is Nick Sutton, Jim Piccone, Ted
Gazulis, Dale Cantwell, Janet Pasque, Jim Kincaid, Rick Betz, Steve
Malkewicz and Bret Siepman), but as such group of members may be
amended with the approval of NNOG, continue to have and to exercise
actual field operational control over the pertinent assets and have
no obligation to resign; and
(ii)
NNOG shall have been given at least 30 days’ notice of
the contemplated transaction and all of its materials terms; and
either:
(iii)
the Board of Managers of Resolute Holdings, LLC as constituted
immediately prior to such transaction (which includes a series of
transactions) shall constitute at least a majority of the board of
managers or directors of the acquiring entity or entities that have
Voting Control immediately after the transaction occurs; and such
members of the Board of Managers of Resolute
4
Holdings,
LLC who so serve on the board of managers or directors of the
acquiring entity or entities have no obligation to resign, abstain
or to exercise their authority in favor of any other person or
entity; or
(iv)
the transaction (which includes a series of transactions) involves
a sale or other offering or exchange of securities carrying Voting
Co
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