PARTNERSHIP AGREEMENT
OF
DDJET Limited LLP
December 15, 2006
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TABLE OF CONTENTS
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ARTICLE I
DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Section
1.1.
Definitions . . . . . . . . . . . . . . . . . . . . . . . . .
1
Section
1.2.
References, Gender, Number. . . . . . . . . . . . . . . . . .
17
ARTICLE II
ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Section
2.1.
Formation . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Section
2.2.
Name; Registered Office; Principal Place of Business. . . . .
17
Section
2.3.
Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Section
2.4.
Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Section
2.5.
Application . . . . . . . . . . . . . . . . . . . . . . . . .
18
Section
2.6.
Insurance or Financial Responsibility . . . . . . . . . . . .
18
ARTICLE III PARTNERSHIP
SHARES; CAPITAL CONTRIBUTIONS; AND
FUNDING MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .
19
Section
3.1.
Partnership Shares. . . . . . . . . . . . . . . . . . . . . .
19
Section
3.2.
Capital Contributions . . . . . . . . . . . . . . . . . . . .
24
Section
3.3.
Capital Contribution Defaults . . . . . . . . . . . . . . . .
25
Section
3.4.
Contribution Loans. . . . . . . . . . . . . . . . . . . . . .
30
Section
3.5.
Optional Initial Funding of Acquisitions. . . . . . . . . . .
31
Section
3.6.
Special Warranties, Assumptions, Indemnities, Limitations and
Disclaimers regarding Contributed Assets. . . . . . . . . . .
32
Section
3.7.
Prior Agreements. . . . . . . . . . . . . . . . . . . . . . .
35
Section
3.8.
True-up of Pre-Formation Costs. . . . . . . . . . . . . . . .
36
ARTICLE IV
PRODUCTION
AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . .
36
Section
4.1.
Partnership Share of Production and Distributions . . . . . .
36
Section
4.2.
Application to Defaults . . . . . . . . . . . . . . . . . . .
38
Section 4.3. Distributions of
Partnership Assets In Kind . . . . . . . . . 38
Section
4.4.
DFW Reversionary Interest . . . . . . . . . . . . . . . . . .
39
ARTICLE V
CAPITAL ACCOUNTS AND TAX MATTERS . . . . . . . . . . . . . . . . .
40
Section
5.1.
Tax Matters Partner . . . . . . . . . . . . . . . . . . . . .
40
Section
5.2.
Income Tax Compliance and Capital Accounts. . . . . . . . . .
41
Section
5.3.
Tax and FMV Capital Account Elections . . . . . . . . . . . .
42
Section
5.4.
FMV Capital Accounts. . . . . . . . . . . . . . . . . . . . .
43
Section
5.5.
Partnership Allocations . . . . . . . . . . . . . . . . . . .
44
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TABLE OF CONTENTS
(continued)
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ARTICLE VI MANAGEMENT
OF THE PARTNERSHIP. . . . . . . . . . . . . . . . . . .
45
Section
6.1.
Partnership Assets. . . . . . . . . . . . . . . . . . . . . .
45
Section
6.2.
Management Committee; General Partner's Duties. . . . . . . .
45
Section
6.3.
Management Committee Representatives and Alternates . . . . .
46
Section
6.4.
Chairman and Deputy Chairman. . . . . . . . . . . . . . . . .
47
Section
6.5.
Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
Section
6.6.
Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
Section
6.7.
Meetings of Management Committee. . . . . . . . . . . . . . .
48
Section
6.8.
Votes Without a Meeting . . . . . . . . . . . . . . . . . . .
49
Section
6.9.
Project Manager, Staff and Officers . . . . . . . . . . . . .
49
Section
6.10.
Programs and Budgets; Acquisitions; Operations. . . . . . . .
51
Section
6.11.
Matters Requiring Unanimous Consent . . . . . . . . . . . . .
53
ARTICLE VII OPERATIONS AND
SERVICES. . . . . . . . . . . . . . . . . . . . . . 54
Section
7.1.
Operating Areas . . . . . . . . . . . . . . . . . . . . . . .
54
Section
7.2.
Duties of General Partner as Operator . . . . . . . . . . . .
54
Section
7.3.
Standard of Responsibility. . . . . . . . . . . . . . . . . .
56
Section
7.4.
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
57
Section
7.5.
Conflicts with Operating Agreement Terms. . . . . . . . . . .
57
Section
7.6.
Service Contracts . . . . . . . . . . . . . . . . . . . . . .
58
Section
7.7.
Maintenance of Private Line Status. . . . . . . . . . . . . .
58
Section
7.8.
Local Government Approvals. . . . . . . . . . . . . . . . . .
58
ARTICLE VIII PARTNERSHIP FUNDS AND
EXPENDITURES . . . . . . . . . . . . . . . . 58
Section
8.1.
Operating Area Expenditures . . . . . . . . . . . . . . . . .
58
Section
8.2.
Bank Accounts; Investment of Funds. . . . . . . . . . . . . .
60
Section
8.3.
Cash Management . . . . . . . . . . . . . . . . . . . . . . .
60
ARTICLE IX BOOKS AND
RECORDS. . . . . . . . . . . . . . . . . . . . . . . . .
61
Section
9.1.
Book and Records. . . . . . . . . . . . . . . . . . . . . . .
61
Section
9.2.
Audits, Adjustments and Inspections . . . . . . . . . . . . .
61
Section
9.3.
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . .
62
Section
9.4.
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
ARTICLE X
COMPETITION; INDEMNIFICATION . . . . . . . . . . . . . . . . . . .
63
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TABLE OF CONTENTS
(continued)
PAGE
Section
10.1.
Other Business of Partners. . . . . . . . . . . . . . . . . .
63
Section
10.2.
Third Party Actions . . . . . . . . . . . . . . . . . . . . .
63
Section
10.3.
Indemnification and Defense Procedures. . . . . . . . . . . .
63
ARTICLE XI AREA OF
INTEREST . . . . . . . . . . . . . . . . . . . . . . . . .
66
ARTICLE XII DISPOSITION OF
PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . 67
Section
12.1.
Restrictions on Transfer. . . . . . . . . . . . . . . . . . .
67
Section
12.2.
Additional and Substituted Partners . . . . . . . . . . . . .
67
Section
12.3.
Partnership Interest Transferred. . . . . . . . . . . . . . .
67
Section
12.4.
Preferential Right to Purchase. . . . . . . . . . . . . . . .
68
ARTICLE XIII WINDING UP AND
LIQUIDATION . . . . . . . . . . . . . . . . . . . . 70
Section
13.1.
Winding Up. . . . . . . . . . . . . . . . . . . . . . . . . .
70
Section
13.2.
Continuation of Partnership; Option Regarding Bankrupt Partner
71
Section
13.3.
Priority of Distribution. . . . . . . . . . . . . . . . . . .
73
Section
13.4.
Liquidation of Partnership Business . . . . . . . . . . . . .
74
Section
13.5.
Certificate of Termination. . . . . . . . . . . . . . . . . .
76
ARTICLE XIV CONFIDENTIALITY.
. . . . . . . . . . . . . . . . . . . . . . . . . 76
Section
14.1.
Confidentiality . . . . . . . . . . . . . . . . . . . . . . .
76
Section
14.2. News
Releases . . . . . . . . . . . . . . . . . . . . . . . .
76
ARTICLE XV
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .
77
Section
15.1.
Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .
77
Section
15.2.
Governing Law . . . . . . . . . . . . . . . . . . . . . . . .
77
Section
15.3.
Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .
77
Section
15.4.
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
Section
15.5.
Successors and Assigns. . . . . . . . . . . . . . . . . . . .
78
Section
15.6.
Headings; Construction. . . . . . . . . . . . . . . . . . . .
78
Section
15.7.
Amendments and Waivers. . . . . . . . . . . . . . . . . . . .
78
Section
15.8.
Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . .
78
Section
15.9.
Agreement for the Partners' Benefit Only. . . . . . . . . . .
78
Section
15.10.
Severability. . . . . . . . . . . . . . . . . . . . . . . . .
79
Section
15.11.
Arbitration . . . . . . . . . . . . . . . . . . . . . . . . .
79
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TABLE OF CONTENTS
(continued)
PAGE
Section
15.12. Remedies
Cumulative . . . . . . . . . . . . . . . . . . . . . 80
Section
15.13. Business
Standards. . . . . . . . . . . . . . . . . . . . . . 80
Section
15.14.
Affiliates of Partners. . . . . . . . . . . . . . . . . . . .
80
Section
15.15.
Determination of FMV. . . . . . . . . . . . . . . . . . . . .
80
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TABLE OF CONTENTS
(continued)
ANNEXES AND EXHIBITS
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ANNEX A
INITIAL CAPITAL CONTRIBUTIONS
EXHIBIT A CONTRACT
AREA
EXHIBIT B INITIAL
LEASES
EXHIBIT C INITIAL
PIPELINE ASSETS
EXHIBIT D INITIAL
BUDGET
EXHIBIT E THE
OPERATING AGREEMENT TERMS
EXHIBIT F HARDING
ENERGY SERVICE CONTRACT
EXHIBIT G CARRIED
ACQUISITION FINANCING CONDITIONS
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PARTNERSHIP AGREEMENT
OF
DDJET Limited LLP
THIS
PARTNERSHIP AGREEMENT OF DDJET Limited LLP, dated as of December
15,
2006, is by and between Metroplex Barnett Shale LLC, a Delaware
limited
liability company, as General Partner ("Metroplex"), Cinco County
Barnett Shale,
LLC, a Texas limited liability company, as a Limited Partner
("Cinco County"),
and Barnett Petrosearch, L.L.C., a Texas limited liability company,
as a Limited
Partner ("Petrosearch").
RECITALS
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WHEREAS, the
Partners desire to form the Partnership (i) to acquire,
explore, develop,
own and operate
Hydrocarbon Interests in portions of Collin,
Dallas, Denton,
Ellis, Hill, Johnson, Navarro and Tarrant Counties, Texas,
covering the areas
expressly identified on Exhibit A attached hereto and made a
part hereof
for all purposes (the "Contract Area") and (ii) to acquire,
construct, own
and operate pipeline assets for the
evacuation of hydrocarbons
produced from
the Hydrocarbon Interests of the Partnership;
WHEREAS, Metroplex,
Cinco County and Petrosearch each own certain
Hydrocarbon Interests
which each wishes to contribute to the
Partnership, and
Metroplex owns
certain pipeline assets which it wishes to contribute to
the
Partnership;
WHEREAS, in
furtherance of the
foregoing, the Partners desire to form the
Partnership as
a limited partnership
and a limited liability partnership under
the Laws of the State
of Texas for the purposes and on the terms and conditions
herein provided;
AGREEMENT
---------
NOW
THEREFORE,
in consideration of the mutual promises made
herein, the
Partners, intending
to be legally bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
-------------
Section 1.1.
Definitions.
The defined terms used in this Agreement
-----------
(including the
recitals) shall, unless the context otherwise requires, have
the
meanings specified
in this Article I, with each such
definition being equally
applicable both
to the singular and the plural forms
of the terms so defined.
"Accounting Procedure"
means the Accounting Procedure attached to and
included in
the Operating Agreement Terms.
"Act" means the Texas Limited Partnership Law, a Part of the Texas
Business
Organization Code,
as amended.
"Additional
Contributions" shall
have the meaning given to such term
in
Section 3.2(c).
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"AFE" means
an authorization for
expenditure setting forth the reasonably
estimated and
itemized costs and expenses of a proposed operation.
"Affiliate" with respect to:
(a)
Cinco County, shall
mean (i) a Person that Controls, is Controlled by,
or is under common Control with Cinco County and (ii) any Cinco
County
Executive Officer;
(b)
Petrosearch,
shall mean (i) a
Person that Controls, is Controlled by,
or is under common Control with
Petrosearch and (ii) any Petrosearch
Executive Officer;
(c)
Metroplex,
shall mean a Person
that Controls, is Controlled by, or is
under common
Control with Metroplex; and
(d)
any other Person,
shall mean a Person that Controls, is Controlled by,
or is under common Control with such other Person.
No Person shall be
deemed an Affiliate of any Partner by reason of the exercise
or existence of rights, interests or remedies under this Agreement.
For purposes
of Section
6.10(b) and Articles
XI and XIV, (i) an "Affiliate" of Cinco County
and any of its successors or assigns hereunder shall also include
(1) any Person
that, directly
or indirectly, owns a 10% or greater equity,
profits, income,
revenue or similar
interest in Cinco County or any of its successors or assigns
hereunder, (2) Harding
Company, a Texas corporation, and (3) Harding Energy and
(ii) an "Affiliate" of Petrosearch and any of its successors or assigns
hereunder shall also include any Person that, directly or
indirectly, owns a 10%
or greater
equity, profits,
income, revenue or similar interest in Petrosearch
or any of its successors or assigns hereunder.
"Agreed Rate"
with respect to any calendar month, means a per annum
interest rate
equal to the lesser of (i) the LIBOR
Rate in effect on the last
day of such calendar month (or the
previous banking day if the last day of the
calendar month
is not a banking day)
plus 6-1/2% or (ii) the maximum amount of
interest allowed
by Law.
"Agreement" means
this Partnership
Agreement of DDJET Limited LLP, as the
same may from time to
time be amended upon the written consent of all Partners.
"Application" shall
have the meaning given such term in Section 2.5.
"Appraiser" means
a nationally recognized independent appraisal firm
recognized as
expert in rendering valuation opinions on the assets or
transactions for
which the appraisal is sought.
"Assumed Environmental
Liabilities"
means all Costs of Compliance and
Environmental
Liabilities, other
than the Retained
Environmental Liabilities.
"Assumed Liabilities"
means (i) all Liabilities which accrue after
the
Effective Date in
connection with the ownership or operation of the Contributed
Assets, including all
obligations of the Contributing Partner or its Affiliates
which arise
or accrue under the Hydrocarbon
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Interests and
all contracts included in the Contributed Assets, (ii) all
Post-Effective Date
Liabilities,
and (iii) all Assumed Environmental
Liabilities. If
a portion of the Contributed Assets reverts back to the
Contributing Partner
or is distributed (or deemed distributed) in kind to
a
Partner pursuant to
the terms of this Agreement, then the "Assumed Liabilities"
with respect to such
reverted or distributed (or deemed distributed) portion of
the Contributed
Assets shall be limited to those Assumed
Liabilities that (a)
accrue after
the Effective Date and before such portion of the
Contributed
Assets reverts or is distributed (or deemed distributed) in kind to
a Partner or
(b) are incurred or
imposed as a result of injury, death or damage to person or
property occurring
after the Effective Date and before such portion of the
Contributed Assets
reverts or is distributed (or deemed distributed) in kind to
a Partner.
"Bankrupt Partner"
shall have the meaning given to such term in
Section
13.2(b).
"Bankruptcy Option
Period" shall have the meaning given to such
term in
Section 13.2(b).
"BIPL Option"
means the
Partnership's contractual option right to acquire
an undivided
interest in the ROW and to build a single natural
gas pipeline
within the
ROW on the terms and
subject to the conditions provided in the BIPL
Option Agreement.
"BIPL Option
Agreement"
means that certain Option Agreement
between the
Partnership and
Metroplex, in the form
attached hereto as Exhibit H, which the
Partnership and
Metroplex agree to execute within 5 Business Days hereof
pursuant to which
Metroplex shall grant to the Partnership the option to elect,
within a period of three (3) years from the date of
this Agreement, to lay a
single natural
gas pipeline within
that portion of the right-of-way associated
with the BIPL Pipeline
that extends from the fence line on the southern side of
the ExxonMobil
Irving Terminal to the point of intersection of the Keller
Pipeline with said
BIPL Pipeline (such portion being referred to as the "ROW");
provided, however,
that (i) the Partnership shall have
such right only to the
extent the
ROW has and includes
validly existing multiple line rights and such
multiple line rights
permit the owner of the ROW to assign to Metroplex (or its
Affiliate or the Partnership), and permit Metroplex (or its
Affiliate) to assign
to the Partnership, an undivided portion of ROW without any further or
additional
compensation or
obligations
to (or consent or approval of) any
landowner or
grantor of all or any part of the ROW and
(ii) the assignment of
such undivided
interest to the Partnership shall not include any interest in
or
right to use any other pipelines, fixtures,
improvements, equipment, personal
property or
other facilities that
are currently located within the ROW or that
the owner of the BIPL Pipeline or its successors or
assigns (other than the
Partnership) may hereafter build, install or otherwise place within
the ROW. The
terms for exercise of this option, the terms
regarding the portion of the ROW
that the Partnership will be permitted to
use, and the rules, restrictions and
responsibilities
regarding multiple
party use of the ROW are set forth in said
Option Agreement.
"BIPL Pipeline"
means EMPCo's Baytown to Irving Pipeline.
"Business Day"
means any day which is not a Saturday, Sunday or
legal
holiday recognized by
the government of the State of Texas or the government of
the United
States of America.
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"Capital Transaction"
means any transaction that results in the
Partnership's receipt
of cash or other consideration other than capital
contributions, including proceeds of sales or exchanges or other
dispositions of
property not
in the ordinary course of business,
condemnations, recoveries of
damage awards,
and insurance proceeds that, in accordance with generally
accepted accounting
principles,
are considered capital in nature.
"Carried Acquisition"
shall have the meaning given to such term in Section
3.5.
"Carried Acquisition
Financing Conditions" shall mean those
covenants of
Cinco County and other
terms and conditions as set forth in Exhibit G which are
applicable to
the financing of
Carried Acquisitions by Metroplex under Section
3.5 and are conditions to the option under Section 3.1(c).
"Carried Acquisition Repayment Amount" shall have the meaning given
to such
term in Section 3.5.
"Certificate" means
the certificate of formation filed pursuant to the Act
by the General Partner with the Secretary of State of the State of
Texas to form
the Partnership
as a limited
partnership, as such certificate of formation may
be amended
from time to time.
"Chairman" shall
have the meaning given to such term in Section 6.4.
"Change of
Control" with respect to a Person, shall mean any direct
or
indirect change
in Control of that Person (whether through merger,
sale of
shares or other equity
interests, or otherwise) through a single transaction or
series of related transactions, from one or more transferors to one or
more
transferees; provided,
however, that (i) a reduction in ownership of the Voting
Stock of a Person from more than fifty percent (50%) of the Voting
Stock of such
Person to fifty percent (50%) of the Voting Stock of such Person
shall not
constitute a Change of
Control of such Person and (ii) an increase in ownership
of the Voting Stock of a Person from
fifty percent (50%) or less of the Voting
Stock of such Person to more than fifty percent (50%)
of the Voting Stock of
such Person shall constitute a Change of Control of such Person.
Notwithstanding
the foregoing,
a change in Control of
the Ultimate Publicly Traded Parent of a
Person shall
not constitute a Change of Control of such Person.
"Cinco County"
shall have the meaning
given to such term in the preamble.
"Cinco County
Executive Officer" means (a) the chairman, vice
chairman,
president, executive
vice president, senior vice president, vice
president,
assistant vice
president, secretary,
assistant secretary, treasurer, assistant
treasurer, principal
executive officer,
principal operating officer, principal
financial officer,
principal accounting officer, principal legal officer,
principal
administrative officer, principal risk control or compliance
officer,
principal regulatory
officer, managing partner, general partner, administrative
partner, managing
director, principal or proprietor of Cinco County or any
Affiliate of
Cinco County, (b) any
Person who routinely performs management or
executive duties or
functions for Cinco County or any Affiliate of Cinco County
that are substantially similar to the organizational roles and
functions of
Persons described in
subpart (a) of this definition, or (c) any Person who is a
spouse, sibling,
offspring or grandchild, or a spouse of any sibling, offspring
or grandchild, of any individual identified in either subpart (a)
or (b) of this
definition.
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"Claim Notice"
shall have the meaning given to such term in Section
10.3(a).
"Code" means
the Internal Revenue Code of 1986, as amended.
"Consequential Loss"
means any Liabilities caused (directly or indirectly)
by any of the following arising out of, relating to, or
connected with this
Agreement, the
operations
carried out under this Agreement, any
Contributed
Asset or any Partnership Asset: (i) reservoir or formation damage; (ii)
inability to produce, use or dispose of Hydrocarbons; (iii) loss or
deferment of
income; (iv) punitive damages; or (v) other indirect or
consequential damages or
losses whether
or not similar to the foregoing.
"Continuing Partner"
shall have the meaning
given to such term in Section
13.2(a).
"Contract Area" shall
have the meaning given to such term in the recitals.
"Contributed Assets"
mean (i) the Initial Leases and (ii) the Initial
Pipeline Assets.
"Contributing Partner"
means a Partner who has contributed (or
caused an
Affiliate of
such Partner to
contribute) or agreed to contribute (or agreed to
cause an Affiliate of such Partner to
contribute) a portion of the Contributed
Assets to the Partnership; provided that
such Partner shall be a "Contributing
Partner" only
with respect to the portion of the
Contributed Assets that such
Partner has
contributed (or caused
an Affiliate of such Partner to contribute)
or agreed to contribute (or agreed to cause an Affiliate of
such Partner to
contribute) to
the Partnership. Contributed Assets that a Partner
causes its
Affiliate to
contribute
to the Partnership shall be deemed to have been
contributed by
such Partner.
"Contribution Loan"
shall have the meaning given to such
term in Section
3.4.
"Control" with
respect to a specified
Person, shall mean the ownership by
any Person or any group of Persons who are Affiliates of each
other, directly or
indirectly, of
more than fifty percent (50%) of the Voting Stock of such
specified Person.
"Controls",
"Controlled
by" and other
derivatives shall be
construed
accordingly.
"Costs of Compliance" means all costs, capital expenditures, fees,
penalties, fines
and expenditures of any kind (i) associated with
attaining
compliance of
the Contributed Assets with any
Environmental Law to the extent
the Contributed Assets were not in compliance with any such
Environmental Law as
of the Effective Date and/or (ii) required to obtain, amend or renew any
Environmental Permit
which is necessary for the Partnership to
own, conduct,
operate or
use the Contributed Assets as of the Effective Date.
"Credit Balance Date"
shall have the meaning given to such term in Section
3.1(c)(4).
"Debit Balance
Date" shall have the
meaning given to such term in Section
3.1(c)(4).
"Default Rate"
with respect to any calendar month, means a per annum
interest rate
equal to the lesser of (i) the LIBOR
Rate in effect on the last
day of such calendar month (or the
previous banking day if the last day of the
calendar month
is not a banking day) plus 15% or (ii) the
maximum amount of
interest allowed
by Law.
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<PAGE>
"Delivery Point" means the point of interconnection between any
Partnership
Pipeline and the
facilities of third party pipeline transporters into which the
Partnership's natural gas (or products derived from processing the
Partnership's
Hydrocarbons) are
delivered.
"Deputy Chairman" shall have the meaning given to such term in
Section 6.4.
"DFW
Pipeline" means Metroplex's currently existing and idle DFW 8"
pipeline extending from the Dallas-Fort Worth Airport to the
northern fence line
of the ExxonMobil Irving Terminal (together with all directly
related equipment,
fixtures, facilities,
rights-of-way,
leases, easements,
servitudes, licenses,
permits, privileges, prescriptive rights, rights of ingress and
egress and other
rights, titles
and interests used for the construction, laying,
operation,
replacement and maintenance of said pipeline) as more fully
described in Exhibit
C, subject
to the DFW Reversionary Interest.
"DFW
Reversionary
Date" shall have the meaning given to such term in
Section 4.4(b).
"DFW
Reversionary Interest" means the vested right and option of
Metroplex,
exercisable by
Metroplex in
accordance with Section 4.4, to acquire all right,
title and interest in and to the DFW Pipeline if within three (3) years
following the date of
this Agreement a written plan for use of the DFW Pipeline
has not been approved by a written agreement signed by a Majority
in Interest of
the Partners which written agreement expressly stipulates that such
written plan
for use satisfies this requirement.
"E&P Agreement"
means that certain Lease Acquisition and Exploration
Agreement -
Dallas, Denton, Ellis,
Johnson, and Tarrant Counties, Texas, dated
June 29, 2005, as amended by that certain Purchase and Sale
Agreement and
Amendment of
Lease Acquisition and Exploration Agreement - Dallas, Denton,
Ellis, Johnson,
and Tarrant Counties, Texas, dated June 12, 2006.
"Effective Date"
means the date the Certificate is first
properly filed
with the Secretary of State of the State of Texas as required by the
Act.
Notwithstanding the
foregoing,
the "Effective Date" when used herein with
respect to
any rights, interests and assets hereafter acquired by the
Partnership under the BIPL Option Agreement in connection with the
Partnership's
exercise and closing
of the BIPL Option shall be the date of the closing of the
BIPL Option.
"Election Period"
shall have the meaning given to such term in
Section
10.3(a).
"Emergencies" shall have the meaning given to such term in Section
6.10(c).
"EMPCo" means
ExxonMobil
Pipeline Company.
"Environmental Law"
means any federal, state or local statute, law,
regulation, ordinance,
rule, order or decree relating to (i) the control of any
potential pollutant
or protection of the environment,
including air, water or
land, (ii)
the generation, handling, treatment, storage, disposal or
transportation of
waste materials, or (iii) the regulation of or
exposure to
hazardous, toxic
or other substances alleged to be harmful.
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<PAGE>
"Environmental
Liabilities" means
any and all Liabilities (including
Remedial Work)
incurred or imposed (a) pursuant to any order, notice,
injunction, judgment
or similar ruling arising out of or in connection with any
Environmental Law
or (b) pursuant to any claim by a
Governmental Authority or
other Person
for personal injury, death, property damage, damage to
natural
resources or
Remedial Work to the
extent arising out of a Release or migration
of Hazardous
Substances.
"Environmental Loss"
means any loss, damage, cost, expense or
liability
(other than
Consequential
Loss) caused by a discharge of Hydrocarbons,
pollutants or other
contaminants into or onto any medium (such as land, surface
water, ground
water and/or air)
arising out of, relating to, or connected with
this Agreement or the operations carried out under this Agreement,
including any
of the following: (i)
injury or damage to, or destruction of, natural resources
or real or personal property; (ii) cost of pollution control, cleanup
and
removal; (iii)
cost of restoration of natural resources; and (iv) fines,
penalties or
other assessments.
"Final Option Payout"
shall have the meaning given to such term in Section
3.1(c)(4).
"First Option Payout"
shall have the meaning given to such term in Section
3.1(c)(4).
"FMV" means
fair market value of a
Partnership Share, the DFW Pipeline, a
Partnership Asset,
or another asset or property, as the context
requires, as
determined by
agreement of the Partners or by an Appraiser, except as
otherwise
provided in
this Agreement. In determining the fair market value of a
Partnership Share,
an Appraiser shall take into consideration, among
other
relevant matters,
the following factors or attributes:
controlling interests,
minority interests,
illiquidity, and
adjustments for abnormal or non-recurring
amounts or
activities. Provisions
for determining FMV are included in Sections
3.3(c), 4.4,
5.4(b), 5.5(a)(1), 13.2(a), 13.2(b), 13.3(f) and 15.15.
"Forfeited Interests"
shall have the meaning given to such term in Section
3.3(c).
"General Partner"
means Metroplex.
"Governmental
Authority" means
any federal, state or local government,
governmental
department,
commission, board,
bureau, agency, regulatory
authority,
instrumentality, or
judicial or administrative body having
jurisdiction over
the Partnership, the Partnership Assets or the matter or
matters in
question.
"Harding Energy"
means Harding Energy Partners, LLC, a Texas limited
liability company.
"Harding Key
Personnel"
means R. W. Harding.
"Hazardous Substances"
means (i) any
chemicals, materials, substances, or
items in any form, whether solid, liquid, gaseous, semisolid, or
any combination
thereof, whether
waste materials, raw
materials, chemicals, finished products,
by-products, or
any other materials or articles, which
are listed, defined or
otherwise designated
as hazardous, toxic or
dangerous under Environmental Law,
including asbestos,
urea formaldehyde foam insulation, and lead-containing
paints or coatings, (ii) any petroleum, petroleum derivatives, petroleum
products or
by-products
-7-
<PAGE>
of petroleum refining,
and (iii) any other chemical, substance or waste that is
regulated by
Environmental Law, including any hazardous waste, as defined by
42
U.S.C. Sec.6903(5),
any hazardous substance as defined by 42 U.S.C.
Sec.9601(14), and
any pollutant or contaminant as defined by 42 U.S.C.
Sec.9601(33).
"Hydrocarbon Interest"
means any right, title
or interest in, to or under
any oil, gas and/or Hydrocarbon lease, leasehold interest, mineral
fee interest,
royalty interest,
overriding royalty
interest, production payment, net profits
interest and
any other right, title
or interest evidencing or creating a right
or interest
in, or any right to produce or receive
the proceeds of production
of, any Hydrocarbons in place and located in the Contract Area, and
any economic
or contractual
rights, options or interests in and to any of the
foregoing,
including interests
therein pursuant to any participation, joint venture,
farm-in, farm-out,
option, operating or other agreement and all rights and
interests attributable
or allocable thereto by virtue of any pooling,
unitization,
communitization,
processing, production
sharing or similar
agreement, order
or declaration.
"Hydrocarbons" means (a) crude oil, natural gas and other liquid or
gaseous
hydrocarbons and
(b) all minerals and substances produced
with or extracted,
separated, processed
or produced from crude oil, natural gas or other liquid or
gaseous
hydrocarbons.
"IDC" shall
have the meaning given to such term in Section
5.3(a)(1).
"Improvements" shall
mean any Pipeline Interest that is incorporated in or
in any manner becomes
a part of the Initial Pipeline Assets after the Effective
Date.
"Indemnified Claim"
shall have the meaning given to such
term in Section
10.3(a).
"Indemnified Employee" shall have the meaning given to such term in
Section
15.9.
"Indemnified Person"
shall have the meaning
given to such term in Section
10.3(a).
"Indemnified
Personnel" means, with
respect to any Partner, such Partner,
any successor
or permitted assign of such Partner, any Affiliate of such
Partner, and
each of their respective directors, officers, employees,
representatives and
agents.
"Indemnifying Person"
shall have the meaning given to such term in Section
10.3(a).
"Indemnitees" shall
have the meaning given to such term in Section 7.3(c).
"Initial Budget"
shall have the meaning given to such term in Section
3.2(b).
"Initial Commitment"
shall have the meaning
given to such term in Section
3.2(b).
"Initial Leases"
means the Hydrocarbon Interests
described in Exhibit B,
together with
(i) any other Hydrocarbon Interests and
(ii) any wells, tanks,
flow lines,
equipment, fixtures,
facilities, surface use agreements, rights of
way, road easements, pipeline easements, pipeline use, handling and
transportation
agreements, seismic
data, seismic permits, seismic options,
geological data
and information, drilling rig contracts and options and
all
other agreements,
in each case under (i)
or (ii), acquired by Harding Company,
Cinco County
or Exxon Mobil
-8-
<PAGE>
Corporation pursuant
to the E&P Agreement or by, through or under Harding
Company, Cinco County
or Exxon Mobil Corporation pursuant to the E&P Agreement.
"Initial Pipeline
Assets" means (i) the DFW Pipeline
(subject to the DFW
Reversionary Interest), (ii) the Keller Pipeline, (iii) the BIPL
Option (subject
to the terms and conditions of the BIPL
Option Agreement), and (iv) subject to
the Partnership's
timely exercise and
closing of the BIPL Option in accordance
with the terms of the BIPL Option Agreement, all
rights, interests and assets
hereafter acquired
by the Partnership under the BIPL Option Agreement in
connection with
the Partnership's exercise and closing of the BIPL Option.
"Keller Pipeline"
means Metroplex's currently existing 8" pipeline
extending from
Mobil Pipe Line Company's Keller Station to the
point within
Mobil Pipe Line
Company's Corsicana Station where said pipeline connects to the
8" pigging
station (together with all directly related equipment,
fixtures,
facilities,
rights-of-way, leases,
easements,
servitudes, licenses,
permits,
privileges,
prescriptive rights, rights of ingress and egress and other
rights,
titles and
interests used for the
construction, laying, operation, replacement
and maintenance
of said pipeline) as more fully described in Exhibit C.
"Law" means
any statute, law,
ordinance, regulation, rule, ruling, order,
writ, injunction,
decree or other official act of or by any Governmental
Authority applicable to the Partnership, the Partnership Assets or
the matter or
matters in
question, whether now in effect or hereafter
existing from time to
time.
"Liabilities" means
claims, suits, actions, proceedings, hearings,
investigations,
charges, complaints,
liabilities,
damages, fines,
penalties,
judgments, prejudgment
and post-judgment interest,
assessments, liens, costs,
expenses (including,
without limitation, reasonable attorneys' fees and
expenses) and
losses.
"LIBOR Rate" means,
for the day in question or the previous banking day if
the day in question is not a banking day, the rate per annum
(rounded upward, if
not an integral multiple of 1/100 of 1%,
to the nearest 1/100 of 1% per annum)
appearing on
Bloomberg screen "BBAM 1" (or any successor page)
as the London
interbank offered
rate for one (1) month deposits in U.S. Dollars at
approximately 11:00
a.m. (London time) of such day.
"Limited Partners"
means Cinco County and Petrosearch,
together with any
Person who
is hereafter admitted to the Partnership as an additional or
substituted limited partner pursuant to and in accordance with the
terms of this
Agreement and
excluding any Person who hereafter withdraws
from or otherwise
ceases to be a limited partner of the
Partnership in accordance with the terms
of this Agreement, in each case from and after the time of such
admission,
withdrawal or
other action or event.
"Liquidator" shall
have the meaning given to such term in
Section 13.4.
"Major Operations"
means any operation or
project reasonably estimated to
require an
expenditure
by the Partnership in excess of $7,500,000.
"Majority in
Interest" means, with respect to the Partners (or the
Partnership Shares),
such of the Partners as shall own (or such of the
Partnership Shares
as shall constitute), at the
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<PAGE>
time of determination, Partnership Shares aggregating not
less than fifty-one
percent (51%)
of all Partnership Shares owned by Partners (excluding any
Partnership Shares
held by assignees who have not been admitted to the
Partnership as
additional
or substitute Partners). The term "Majority in
Interest" when
used herein with respect to a class not
including all Partners
(such as the Partner(s) who are participating or consenting parties
with respect
to a Non-Consent Operation), means such of the Partners within
such class as
shall own, at the time of determination, Partnership Shares
aggregating not less
than fifty-one percent (51%) of all Partnership Shares owned by
Partners in such
class.
"Management Accounts"
shall have the meaning given to such term in Section
8.2.
"Management Committee" shall have the meaning given to such term in
Section
6.2.
"Metroplex" shall
have the meaning given to such term in the
preamble.
"Net
Capital Proceeds" means the proceeds received by the
Partnership in
connection with
a Capital Transaction after the
payment of costs and expenses
incurred by
the Partnership in connection with such Capital Transaction,
including brokers'
commissions,
other closing costs, and the cost of any
alteration,
improvement,
restoration, or
repair of any Partnership property
necessitated by
or incurred in connection with such Capital Transaction.
"Non-Bankrupt Partner" shall have the meaning given to such term in
Section
13.2(b).
"Non-Consent Area" means any portion of the Hydrocarbon Interests
which are
owned as Partnership Assets from time to time as to which a Non-Consent
Operation is
conducted or occurs or
any subdivided portion of such Hydrocarbon
Interests as
to which the Partners voluntarily elect to
revise or specially
allocate their
Partnership
Shares as may be permitted hereunder. By way
of
example, if
the Partners' Partnership Shares with respect to
any Hydrocarbon
Interests are revised or adjusted pursuant to Section 3.1(b) with
respect to any
part of the Hydrocarbon Interests as a
result of a Non-Consent Operation, such
part of the Hydrocarbon Interests shall be considered a
separate Non-Consent
Area.
"Non-Consent
Operation" means
any drilling, completion, recompletion,
deepening,
sidetracking,
reworking or
other operation with
respect to an oil
and/or gas well or a
proposed oil and/or gas well under the Operating Agreement
Terms, the
costs of which are chargeable or allocable
to the account of less
than all of the
Partners as a result of an election by a Partner to participate
or not to participate
in such operation. As used in this Agreement, Non-Consent
Operation shall
not include an operation, activity or action in which the
Partnership does
not participate.
"Offered Interest"
shall have the meaning given to such term in
Section
12.4(a).
"Offerees" shall have the meaning given to such term in
Section 12.4(a).
"Offeror" shall
have the meaning given to such term in Section 12.4.
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<PAGE>
"Operating Agreement Terms" means the terms and conditions
contained in the
form of Operating Agreement attached hereto as
Exhibit E, including the terms
and provisions
of any Exhibit thereto (including the
Accounting Procedure and
the Gas Balancing Agreement).
"Operating Area" means any of the following, considered separately
from the
others together with the Hydrocarbon Interests or Pipeline
Interests assigned or
attributable thereto:
(a) the Contract Area less and except any
Non-Consent
Area(s), or
(b) any Non-Consent Area(s)
"Operator" means, with
respect to any Operating Area, the General Partner,
but only to the extent
that the General Partner is acting in the capacity of an
operator of
Partnership
Assets assigned to the
Operating Area, and not in its
general capacity
as a Partner of the Partnership.
"Option Cap
Amount" shall have the meaning given to
such term in Section
3.1(c)(1).
"Option Payout
Account Balance" shall
have the meaning given to such term
in Section
3.1(c)(4).
"Option Payout Account" shall have the meaning given to such term in
Section 3.1(c)(3).
"Option Period"
shall have the meaning given to such term in Section
6.10(b).
"Option Production
Share" shall have the meaning given to such term
in
Section 3.1(c)(2).
"Option Recovery
Period" shall have the meaning given to such term in
Section 3.1(c)(4).
"Option Well"
shall have the meaning given to such term in Section
3.1(c)(1).
"Partner" means
Metroplex,
Cinco County or Petrosearch, and any Person
subsequently admitted to the Partnership as an additional or
substituted partner
upon the unanimous written consent of the then existing Partners.
"Partnership" means
the Texas limited liability limited partnership formed
by this Agreement and
pursuant to the Certificate, as said partnership may from
time to time be constituted.
"Partnership
Pipelines" means the Initial Pipeline Assets and all Pipeline
Interests acquired
or constructed by the Partnership for the gathering,
evacuation or transportation of the Hydrocarbons produced from the
Partnership's
Hydrocarbon Interests
(or the products processed therefrom), including
such
additional Pipeline
Interests that the Partnership may acquire and construct in
connection with
the Partnership's subsequent exercise of the BIPL Option
pursuant to
the BIPL Option Agreement.
"Partnership Assets"
means any Hydrocarbon Interests or Partnership
Pipelines, or
any part thereof or interest therein, or any other
property,
asset, right
or interest, now or hereafter owned, held or acquired by the
Partnership, whether
by contribution, purchase or
otherwise, on behalf of the
Partnership.
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<PAGE>
"Partnership Share"
means the interest of a Partner in the
equity of the
Partnership, stated
as a fraction or a percentage and, for all Partners,
aggregating 100%. The
initial Partnership Share of each Partner is set forth in
Section 3.1(a) and is subject to adjustment or revision pursuant to
Article III.
"Permitted Encumbrances" means (a) as to the Initial Leases, the
overriding
royalty interests,
burdens and other encumbrances expressly
provided for and
permitted by
the terms of the
E&P Agreement and (b) as to the Initial Pipeline
Assets, all
agreements,
instruments, documents, liens, encumbrances, and other
matters which are
validly existing and affect the Initial Pipeline Assets as of
the date of acquisition thereof by the
Partnership, excluding, in the case of
the Initial
Pipeline Assets, (i) any rental, royalty, overriding
royalty or
similar payment
in favor of Metroplex or its Affiliates,
without limiting or
affecting the
Partnership's
obligation
to pay or reimburse Metroplex or
its
Affiliates for
the Partnership's share of third party
obligations relating to
the shared
ROW, (ii) any liens, security interests, pledges, collateral
assignments and other encumbrances securing the payment of borrowed
money or any
guarantee of the payment of borrowed money, and (iii) any pipeline
use, handling
and transportation
agreements,
easements,
rights-of-way, servitudes, permits,
licenses, surface
leases and other rights in favor of Metroplex or its
Affiliates with
respect to the Initial Pipeline Assets to the extent such
matters would
reasonably be expected
to interfere in any material respect with
the Partnership's
use or operation of the Initial Pipeline
Assets; provided,
however, all
easements,
rights-of-way,
servitudes, permits, licenses, surface
leases and
other rights in favor
of Metroplex or its Affiliates under the BIPL
Option Agreement and/or the easement sharing, joint use and
occupancy agreements
with respect
to the ROW as
contemplated by the BIPL Option Agreement shall all
be deemed to be Permitted Encumbrances. This Agreement and all rights,
interests, liens,
security interests, encumbrances and agreements created,
granted or
contemplated
by this Agreement shall be Permitted
Encumbrances.
"Person" means
any Governmental Authority or any individual, firm,
partnership, corporation, limited liability company, association,
joint venture,
trust, unincorporated
organization
or other entity or organization.
"Petrosearch" shall
have the meaning given to such term in
the preamble.
"Petrosearch Executive
Officer" means (a) the chairman, vice chairman,
president, executive
vice president, senior vice president, vice
president,
assistant vice
president, secretary,
assistant secretary, treasurer, assistant
treasurer, principal
executive officer,
principal operating officer, principal
financial officer,
principal accounting officer, principal legal officer,
principal
administrative officer, principal risk control or compliance
officer,
principal regulatory
officer, managing partner, general partner, administrative
partner, managing
director, principal or proprietor of Petrosearch or any
Affiliate of
Petrosearch,
(b) any Person who
routinely performs management or
executive duties
or functions for Petrosearch or any
Affiliate of Petrosearch
that are substantially similar to the organizational roles and
functions of
Persons described in
subpart (a) of this definition, or (c) any Person who is a
spouse, sibling,
offspring or grandchild, or a spouse of any sibling, offspring
or grandchild, of any individual identified in either subpart (a)
or (b) of this
definition.
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<PAGE>
"Pipeline Interest"
means any pipeline or pipeline assets now or hereafter
owned or held as Partnership Assets and used for purposes of gathering,
evacuation or
transportation
of Hydrocarbons produced from the Hydrocarbon
Interests owned
or held by the Partnership or any lands
pooled, unitized or
otherwise combined
with such Hydrocarbon Interests or any part thereof,
including, but
not limited to, the following:
(a)
Any
pipeline systems or facilities for gathering,
evacuation or
transportation of Hydrocarbons, including main lines, lateral
lines, loop lines,
tap lines, sales
lines, residue return lines and other pipelines, together with
all property and
equipment of every kind or character, real, personal or mixed,
incorporated in
or in any manner
constituting or comprising a part of any such
pipeline system
or pipeline facilities;
(b)
All
tracts and parcels of land, including fee lands, rights-of-way,
leases, easements,
servitudes,
licenses, permits, privileges, prescriptive
rights and other rights, titles and interests of every kind,
nature, description
or character,
used for the construction, laying, operation,
replacement and
maintenance of
said pipelines, systems and facilities;
(c)
All
plants, stations, offices, buildings,
structures, facilities,
improvements,
equipment and fixtures of every kind and nature forming a part
of
said pipelines,
systems and facilities, including, but not limited to, (i)
pumping stations
and facilities, (ii) metering and measurement stations
and
facilities, (iv)
regulating stations
and facilities, (v) distribution systems,
(vi) compressors and
compression stations and facilities, (vii) dehydrators and
dehydration plants
and facilities, (viii)
treating plants and facilities, (ix)
computers and
computer facilities, (x) supply systems, (xi) natural
gasoline
extraction and
other processing plants and facilities, (xii) loading and
unloading facilities,
(xiii) absorption towers, (xiv) cycling and recycling
units, (xv)
/power houses, water/sewage facilities, (xvi)
steam heat and hot
water plants,
and (xvii) service systems;
(d)
All
telephone,
telegraph,
fiber optic and other lines, poles,
transmission towers,
equipment,
appliances
and systems used for purposes of
telecommunication or
electronic data transmission in connection with or forming
any part of said pipelines, systems and facilities;
(e)
All
franchises,
privileges, licenses, permits, leases and consents
covering operations
for the construction,
laying, maintenance and operation of
said pipelines,
systems and facilities in, or over and under, lands,
roads,
highways, railroads,
rivers, bridges, levies, culverts, public grounds or
structures or
elsewhere;
and
(f)
All
judgments,
awards of damages, settlements and other
compensation made
resulting from
condemnation proceedings or the taking of the
properties, rights
and privileges in any manner constituting or
comprising a
part of any such pipeline system or pipeline facilities or
any appurtenance
thereto under
the power of
condemnation or eminent domain or under any similar
power or right
(including any award from any Governmental Authority at any
time
after the allowance of the claim therefor, the ascertainment of the
amount
thereof and
the issuance of the warrant for the payment thereof),
whether
permanent or
temporary or for any damage (whether caused by such
taking or
otherwise) to
said properties, rights, interests and privileges or any
part
thereof, or to any
rights appurtenant any of the foregoing, including severance
and consequential
damages and any awards for change of grade of streets.
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<PAGE>
"Post-Effective Date
Liabilities" means Liabilities incurred or imposed as
a result of injury, death or damage to person
or property occurring after the
Effective Date
to the extent arising out of or
attributable to the ownership,
operation, care,
custody, control, construction, maintenance, occupancy,
condition or
use of the Contributed Assets (regardless of whether any
such
condition existed
prior to the Effective Date or resulted
from any action or
inaction prior
to the Effective Date), it being
agreed that such injuries and
damages which
are of a continuous or ongoing nature and extend over the
Effective Date
shall be apportioned
between Pre-Effective Date Liabilities and
Post-Effective Date
Liabilities on the
basis of the respective portions of the
injury or damage suffered before or after the Effective Date, with
Post-Effective Date
Liabilities
including only that portion of the injury
or
damage suffered after the Effective Date; provided, however, that
Post-Effective
Date Liabilities
shall not include any Environmental
Liabilities or Costs of
Compliance.
"Pre-Effective Date Liabilities" means Liabilities incurred or
imposed as a
result of injury, death or damage to person or property
occurring before the
Effective Date
to the extent arising out of or
attributable to the ownership,
operation, care,
custody, control, construction, maintenance, occupancy,
condition or
use of the Contributed
Assets, it being agreed that such injuries
and damages
which are of a continuous or ongoing nature and
extend over the
Effective Date
shall be apportioned
between Pre-Effective Date Liabilities and
Post-Effective Date
Liabilities on the
basis of the respective portions of the
injury or damage suffered before or after the Effective Date, with
Pre-Effective
Date Liabilities
including only that portion of the injury or
damage suffered
before the
Effective Date; provided, however, that Pre-Effective Date
Liabilities shall
not include any Environmental Liabilities or Costs of
Compliance.
"Prior Covenants and
Warranties" shall have the meaning given to such term
in Section
3.6(a).
"Production Shares"
shall have the meaning given to such
term in Section
4.1(a).
"Program and
Budget" shall have the
meaning given to such term in Section
6.10(a)(1).
"Project Manager" shall have
the meaning given to such term in Section 6.9.
"Qualified Well"
shall have the meaning given to such term in Section
3.1(c)(1).
"Release" shall have the meaning set forth in Environmental Laws,
including
without limitation
the Comprehensive
Environmental Response, Compensation, and
Liability Act,
as amended, at 42 U.S.C. Sec.
9601(22) and any analogous state
Laws, but also shall include any threatened
Release and the spilling, leaking,
pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the
environment, as
well as the migration or movement of Hazardous Substances.
"Remaining Partners"
shall have the meaning
given to such term in Section
13.2(a).
"Remedial Work"
means action of any kind to address a Release or the
presence of
Hazardous Substances
at, on, in, upon, over, across, under, within
or migrating
from the real property included in the Contributed Assets,
including all
investigative,
site monitoring, restoration, abatement,
detoxification,
containment, handling,
treatment,
removal, storage,
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<PAGE>
decontamination,
clean-up, transport,
disposal or other ameliorative work,
corrective action or
response action required by (a) any Environmental Law, (b)
any order or request of any federal, state or local
agency, or (c) any final
judgment, consent
decree, settlement or compromise with respect to any
Environmental Law.
"Retained
Environmental
Liabilities"
means:
(a)
Environmental
Liabilities (including
response costs imposed under
the Comprehensive
Environmental
Response, Compensation and Liability Act,
as
amended, 42
U.S.C. Sec.Sec. 9601
et seq., or its state or local counterpart or
any other similar Environmental Law) to the extent resulting or
arising from, or
attributable to, (i)
an off-site abandonment or storage of Hazardous Substances
or a Release from an off-site abandonment or
storage facility, in either case
occurring prior
to the Effective Date in connection with the ownership,
operation or
use of the Contributed Assets, or (ii)
the treatment, storage or
disposal of
Hazardous Substances generated in connection with the
ownership,
operation or use of
the Contributed Assets that are sent for treatment, storage
or disposal
at an off-site facility prior to the Effective Date;
(b)
Environmental
Liabilities resulting
or arising from, or
attributable to, any
bodily injury or death occurring before the Effective Date
to the extent resulting or arising from, or attributable to,
exposure to or
contamination by
Hazardous Substances
arising from the ownership, operation or
use of the Contributed Assets prior to the
Effective Date; provided, however,
that such injuries and damages which are of
a continuous or ongoing nature and
extend over
the Effective Date shall be apportioned between Assumed
Environmental Liabilities and Retained Environmental Liabilities on
the basis of
the respective
portions of the injury or damage suffered
before or after the
Effective Date,
with Retained Environmental Liabilities including only
that
portion of
the injury or damage suffered before the Effective Date; and
(c)
any
monetary fine or penalty for violations of
Environmental Laws
to the extent resulting or arising from, or attributable to,
the ownership,
operation or use of
the Contributed Assets prior to the Effective Date, but not
including any monetary
fine or penalty from violations of Environmental Laws to
the extent
resulting or arising from, or attributable to, the
continuation,
expansion, change
or aggravation after the Effective Date of any
condition,
operating practice,
course of conduct, activity or circumstance
that existed
before the
Effective Date.
"ROW" shall
have the meaning given
to such term in the definition of BIPL
Option Agreement.
The
terms "sale," "sell" and derivatives of such terms, when
used with
respect to
a Partnership Share or any part
thereof or interest therein, shall
mean any sale or other transfer for value
of all or any portion of an interest
in a Partnership Share. Any transaction resulting
in a Change of Control with
respect to
a Partner shall be
deemed to constitute the sale by such Partner of
its Partnership
Share.
"Senior Supervisory
Personnel"
means, with respect to
a Partner, (i) the
Project Manager,
(ii) any manager who directly reports
to the Project Manager
that is responsible for exploration, appraisal, development or production
operations, (iii)
any individual who functions for such
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<PAGE>
Partner or
one of its Affiliates at a senior
management or supervisory level
equivalent to or
superior to the Project Manager or direct report positions and
is responsible for exploration, appraisal, development or
production operations,
or (iv) any officer or director of such Partner or one of its
Affiliates.
"Service Contract"
means a contract for services entered into by the
Partnership with
a Partner or an
Affiliate of a Partner to provide services to
the Partnership.
"Service Contractor"
means the contractor providing services under a
Service Contract.
"Staff" shall
have the meaning given to such term in Section 6.9.
"Tax" or "Taxes" shall mean any and all
federal, state, local and foreign
taxes, assessments
and other governmental charges, duties, impositions and
liabilities, including
taxes based upon or
measured by gross receipts, income,
profits, sales,
use and occupation, and value added, ad valorem,
transfer,
franchise,
withholding, payroll,
recapture,
employment,
excise and
property
taxes or other tax of any kind whatsoever.
"Tax
Return" shall mean any
return, declaration, report, claim for refund,
or information return
or statement relating to Taxes, including any schedule or
attachment thereto,
and including any amendment thereof.
"Term" shall mean that
period of time commencing on the Effective Date and
continuing until the
earlier of (i) the expiration of all Hydrocarbon Interests
held by the Partnership, (ii) the sale or other disposition of all or
substantially all
of the Partnership Assets, or (iii) the election of all
Partners to
terminate the Partnership.
"TGPL" means
the Texas General Partnership Law, a Part of the Texas
Business Organization
Code, as amended.
"TMP" shall
have the meaning given to such term in Section 5.1(a).
"Transfer Notice"
shall have the meaning given to such term in
Section
12.4.
"Treasury Regulations"
means the income tax regulations, including
temporary regulations,
promulgated under the
Code, as those regulations may be
amended from
time to time. Any reference herein to a
specific section of the
Treasury Regulations
shall include any
corresponding provisions of succeeding,
similar, substitute,
temporary or final Treasury Regulations.
The
"Ultimate Publicly
Traded Parent," if any, with respect to a specified
Person shall
be the Person that (a) is a publicly traded company and
(b)
Controls such
specified Person; provided, however, that no
Person shall be an
Ultimate Publicly
Traded Parent if it is
Controlled by any Person or any group
of Persons
who are Affiliates of each other. As used in this
definition, a
"publicly traded
company" means a public company whose shares of stock or other
equity interests
are regularly traded
on the New York Stock Exchange, American
Stock Exchange,
NASDAQ, London Stock Exchange, NASD
Over-The-Counter Bulletin
Board or other similar public stock exchange or
public over the counter stock
exchange.
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<PAGE>
"Voting Stock"
shall mean capital stock issued by a corporation, the
limited liability
company interests of a limited liability company or the
equivalent interests
in any other Person,
the holders of which are ordinarily,
in the absence of
contingencies, entitled to vote for the election of directors
(or persons performing
similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency.
"Working Capital Loan" shall have the meaning given to such term in
Section
8.3.
"Working Capital
Requirements" shall have the meaning given to such term in
Section 8.3.
Other capitalized
terms defined elsewhere in this Agreement shall have the
meanings so
given them.
Section 1.2.
References, Gender, Number. All references in this
Agreement
--------------------------
to an "Article," "Section," or
"subsection" shall be to an Article, Section or
subsection of this Agreement, unless the context requires
otherwise. Unless
the
context otherwise
requires, the words
"this Agreement," "hereof," "hereunder,"
"herein," "hereby," or
words of similar import shall refer to this Agreement as
a whole and not to a particular Article,
Section, subsection, clause or other
subdivision hereof.
Whenever the context
requires, the words used herein shall
include the
masculine,
feminine and neuter gender, and the singular
and the
plural. When
used herein, the words "including" or "include" or
derivatives
thereof shall
mean including or include without limitation.
ARTICLE II
ORGANIZATION
------------
Section 2.1.
Formation.
The Partners do hereby form a limited
liability
---------
limited partnership
under and pursuant to the provisions of the Act and
the
TGPL, with
such formation being effective upon the
first proper filing of the
Certificate by
the General Partner
with the Secretary of State of the State of
Texas. The
rights and liabilities of the Partners
shall be as provided in the
Act and the TGPL except as herein otherwise expressly provided.
Metroplex shall
be the general partner of the Partnership and Cinco County and
Petrosearch shall
be limited
partners in the Partnership.
Section 2.2.
Name; Registered Office; Principal Place of Business.
----------------------------------------------------------
(a)
Partnership Name.
The name of the Partnership shall be "DDJET
-----------------
Limited LLP".
(b)
Registered Office; Principal Place of Business. The address of the
----------------------------------------------
Partnership's
registered office
shall be 222 Benmar,
Houston, Texas 77060, or
such other
place as the General Partner shall
determine, and the name of the
Partnership's
registered agent for
service of process on the Partnership shall
be the General
Partner. The
Partnership's principal place of business shall be
at 222 Benmar, Houston, Texas 77060, or such other place or places as
the
General Partner shall determine. The Partnership may have such
other offices as
the General
Partner shall designate from time to time.
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<PAGE>
Section 2.3. Purposes. The purpose and business of the Partnership
is to do
--------
any of the following within or relating to the Contract Area: (i)
acquire
Hydrocarbon Interests
by purchase, lease,
farm-in, exchange or any other means
or methods, (ii) acquire, construct and install pipelines and
pipeline assets to
gather, evacuate
and transport Hydrocarbons produced from the Hydrocarbon
Interests held
by the Partnership or any lands pooled,
unitized or otherwise
combined with
the Hydrocarbon Interests held by the Partnership or any
part
thereof, (iii)
own, explore, develop, produce, improve, operate, maintain,
manage, repair,
rebuild, alter, replace and otherwise use, deal with and
administer any
properties
or assets acquired by the Partnership
pursuant to
clauses (i)
and/or (ii) above, including, without
limitation, the producing,
storing, processing,
transporting, marketing, trading or otherwise dealing with
or handling
of any Hydrocarbons,
(iv) sell, lease, sublease, assign, mortgage,
pledge, hypothecate,
encumber, pool,
unitize, combine, abandon or transfer any
properties or
assets of the
Partnership or any interest therein, (v) generally
engage in the Hydrocarbon exploration,
development, production, gathering and
evacuation business
with respect to the properties or assets
acquired by the
Partnership pursuant
to clauses (i) and/or
(ii) above, (vi) accomplish, pursue
or engage in any of the activities described in this Section alone
or with other
Persons pursuant to or by means of any contract or any corporation,
partnership,
joint venture,
trust, unincorporated organization or other entity or
organization, (vii)
any and all activities permitted under the
Act, provided
that the undertaking of such other permitted activities has been
approved by the
unanimous vote
of the Partners; and (viii) engage in any and all
activities
related or
incident to any of the foregoing activities,
including, without
limitation, the
acquisition, lease or
license of properties and assets related
or incident
to such activities.
Section 2.4. Term. The Partnership shall commence on the Effective
Date and
----
shall continue in full force and effect until expiration of the
Term, unless the
winding up
of the business of the Partnership is
required at an earlier date
pursuant to
Article XIII.
Section 2.5.
Application.
As permitted by
Section 153.351 of the Act and
-----------
Section 152.805 of the TGPL, the General Partner shall execute and
file with the
Secretary of
State of the State of
Texas in accordance with Section 152.802 of
the TGPL an application (the "Application") to register
the Partnership as a
limited liability
partnership, and the General Partner shall file such renewals
of the Application as required by the TGPL to maintain the Partnership's
registration as
a limited liability partnership. The Application, and any
renewals of the Application, shall contain such information
required by the TGPL
and such other information as the General Partner may deem
appropriate. The
Partnership may
not conduct business until the Application has
been properly
filed with
the Secretary of State of the State of Texas.
Section 2.6.
Insurance or Financial Responsibility. In order for the
----------------------------------------
Partnership to
maintain its qualification as a limited
liability partnership
under the TGPL, the
Partnership shall at all times comply with the insurance or
financial
responsibility
requirements of
Section 152.804 of the
TGPL and all
other requirements
provided in the TGPL to maintain such qualification.
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<PAGE>
ARTICLE III
PARTNERSHIP SHARES;
-------------------
CAPITAL CONTRIBUTIONS; AND FUNDING MATTERS
------------------------------------------
Section 3.1.
Partnership
Shares.
-------------------
(a)
Standard Partnership Shares. Subject to adjustments, revisions
and
---------------------------
special allocations
pursuant to other provisions hereof, the Partnership Shares
of the Partners in the Partnership are as follows:
Metroplex
80%
Cinco County
14.45545%
Petrosearch
5.54455%
(b)
Special Partnership
Shares. If a Partner elects to cause the
----------------------------
Partnership to conduct or participate in a Non-Consent Operation
(or a Partner's
election to
be a non-participating
or non-consenting party causes an operation
to be a Non-Consent
Operation) with respect to an Non-Consent Area as permitted
under the Operating
Agreement Terms and Section 6.10(c), the Partnership Shares
of the Partners shall be adjusted and
revised with respect to such Non-Consent
Operation and
the Non-Consent Area
to which such Non-Consent Operation relates
as follows:
(1)
Each Partner
shall have a Partnership Share (which may
be
reduced to
zero) with respect to such Non-Consent
Operation (and such related
Non-Consent Area),
and with respect to each item of costs, expenses,
liabilities, claims,
damages, Hydrocarbon production, revenues and economic
interests attributable
to such Non-Consent Operation and Non-Consent Area
(including the costs,
expenses, liabilities, claims and damages attributable or
relating to
the gathering, evacuation, transportation, storage,
processing,
treating, compressing,
dehydrating,
handling and other dealing with the
Hydrocarbon production
(and the products therefrom) attributable to such
Non-Consent Operation
or Non-Consent Area),
that is equal to the percentage of
such item which such Partner would be obligated to bear or be entitled
to
receive or
be allocated pursuant to the
Operating Agreement Terms if (i) each
Partner, without
regard to the Partnership, was a party to a
joint operating
agreement the
terms of which were substantially identical to the
Operating
Agreement Terms,
(ii) each Partner's Partnership Share,
without regard to the
Partnership, was
treated for all purposes as an undivided
interest in oil and
gas rights
in such Non-Consent Area, (iii)
General Partner (without regard to
the Partnership)
was the Operator of
such Non-Consent Area, (iv) prior to such
Partner's election
or agreement regarding such Non-Consent Operation, each
Partner, without regard to the Partnership, held and owned a
percentage interest
in such Non-Consent Area equal to its
Partnership Share, and (v) each Partner,
without regard
to the Partnership,
made separate elections under the Operating
Agreement Terms
with respect to its percentage interest in such
Non-Consent
Area. If the Partners make separate elections regarding
the reinstatement of
their interests
regarding a Non-Consent Operation pursuant to the
Operating
Agreement Terms,
such separate
elections shall be reflected in the adjustments
to their respective Partnership Shares pursuant to this Section 3.1(b).
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<PAGE>
(2)
The Partnership
shall maintain separate books, financial
records and
accounts for each Non-Consent Operation and for
each Non-Consent
Area to which such Non-Consent Operation relates. At such time, if ever, as all
Partners' percentage
interests (as provided in clause (1) above) under the
Operating Agreement
Terms with respect to such Non-Consent Operation are
reinstated or
revert to their original percentage interests prior to such
Non-Consent Operation
(taking into account any subsequent voluntary assignments
or transfers which may
be permitted hereunder), the Partnership shall no longer
maintain separate
books, financial records and accounts with respect
to such
Non-Consent
Operation.
(3)
The foregoing
adjustments
and revisions to the Partners'
Partnership Shares
with respect to a
Non-Consent Operation and the Non-Consent
Area to which such
Non-Consent Operation relates shall not affect the Partners'
Partnership Shares
with respect to other
Partnership Assets, any voting rights
hereunder with respect
to other Partnership Assets, or the Initial Commitments.
(c)
Optional Partnership
Share.
----------------------------
(1)
At the option of Cinco County, exercised on a well
by well
basis, Metroplex
shall be obligated,
subject to the Option Cap Amount, to bear
and pay, as a capital contribution of Metroplex to the Partnership,
fifty
percent (50%) of all
drilling, completion and equipping costs (and plugging and
abandonment costs if a
dry hole) that Cinco County would otherwise be obligated
to bear and pay, as a capital contribution of Cinco County to the
Partnership on
account of Cinco
County's 14.45545% standard Partnership Share, with respect to
any one or more Qualified Wells in which both Metroplex and Cinco
County
participate pursuant to Section 8.1. "Qualified Well" means any of the
first 35
oil and/or
gas wells in which the Partnership participates
that are spudded
after the Effective Date. Metroplex shall not be obligated
to bear more than
50% of Cinco County's 14.45545% standard
Partnership Share of such well costs
notwithstanding that Cinco County's Partnership Share with respect
to a well may
increase if
such well is a Non-Consent Operation or that
Cinco County may be
obligated to
pay more than 14.45545% of any costs as a result of another
Partner's default.
Cinco County must make a separate
election with respect to
each Qualified
Well as to which it wishes to exercise
this option by written
notice delivered to
Metroplex prior to the date on which such Qualified Well is
spudded. To
be effective, the notice of Cinco County exercising
this option
must identify
the Qualified Well and
state that Cinco County is exercising its
option under
this Section 3.1(c) with respect to such Qualified
Well. Once
made, an election is irrevocable without the consent of Metroplex. Each
Qualified Well
as to which Cinco County timely exercises its option
in the
manner required
under this Section 3.1(c) shall be referred
to as an "Option
Well". If Cinco County fails to exercise its
option under this Section 3.1(c)
with respect
to any Qualified Well
by written notice delivered to Metroplex as
required above
prior to the spudding
of such Qualified Well, Cinco County will
be deemed to have elected not to exercise its option with respect
to such
Qualified Well
and such Qualified Well shall not be an Option Well.
Notwithstanding
anything to
the contrary in this
Section 3.1(c), Cinco County
shall not be allowed to exercise its option
with respect to any Qualified Well
pursuant to
this Section 3.1(c) at any time in which (i)
Cinco County or any
Affiliate of
Cinco County is in
breach or default of any duty or obligation to
the Partnership,
Metroplex or any
Affiliate of Metroplex under this Agreement,
any Service Contract, or otherwise, or (ii) Cinco County fails to
satisfy any of
the Carried
Acquisition
Financing Conditions. When the aggregate amount of
drilling,
completion
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<PAGE>
and equipping costs
(and plugging and abandonment costs if a dry hole) incurred
by Metroplex
with respect to 50% of Cinco County's 14.45545% standard
Partnership Share
in the Option Wells
has reached $10,000,000 (the "Option Cap
Amount"), Metroplex will not be obligated to bear and pay any
further costs with
respect to
50% of Cinco County's 14.45545% standard
Partnership Share in the
Option Wells,
and all further costs with respect to
the Option Wells shall be
borne by Cinco County. Cinco County's option under this
Section 3.1(c) shall
cease when
the Option Cap Amount is reached with
respect to the Option Wells.
(2)
If Cinco County timely exercises its option pursuant to
Section 3.1(c)(1)
with respect to an Option Well, (i) until the Option
Cap
Amount is reached with respect to the Option Wells, Metroplex shall
be obligated
to bear and pay, as an increase to
Metroplex's Partnership Share, 7.227725% of
the Partnership's
share of all drilling, completion and
equipping costs (and
plugging and
abandonment costs if a
dry hole) with respect to such Option Well
that Cinco County would otherwise be obligated to bear and pay on
account of 50%
of Cinco County's
14.45545% standard Partnership Share, (ii) during each Option
Recovery Period,
Metroplex shall be entitled to receive, as an increase to
Metroplex's
Partnership Share
and Production Share, 5.0594075% of the
Partnership's share
(i.e., 35% of Cinco County's 14.45545% standard Partnership
Share and Production Share) of all Hydrocarbon production and
products with
respect to
all Partnership wells (the "Option Production Share")
that Cinco
County would
otherwise be entitled to receive, and (iii) during each
Option
Recovery Period, Metroplex shall be obligated to bear and pay, as
an increase to
Metroplex's
Partnership Share,
the Partnership's share of all severance,
production and
other similar taxes, royalties,
overriding royalties and other
burdens on
the Option Production Share which are
debited to the Option Payout
Account pursuant
to Section 3.1(c)(3).
Immediately upon Cinco
County's timely
exercise of
its option pursuant to
Section 3.1(c)(1) with respect to an Option
Well and during the applicable periods provided in
this Section 3.1(c)(2) and
Section 3.1(c)(3),
Metroplex's
Partnership
Share and Production Share with
respect to
all Partnership wells shall be
increased to the extent provided in
this Section 3.1(c)(2) and Cinco County's Partnership Share and
Production Share
with respect
to all Partnership wells shall be reduced by such increase
in
Metroplex's
Partnership Share
and Production Share with respect to all
Partnership wells.
Metroplex's
Partnership
Share, however, shall not be
increased under
this Section 3.1(c) with respect to any
costs with respect to
the Partnership
wells or the Hydrocarbon production and
products with respect
thereto, other than
those costs with respect to the Option Wells and the Option
Production Share
specifically
provided in clauses (i) and (iii) of the
first
sentence of
this Section 3.1(c)(2). Cinco County's Partnership Share
shall
remain the
same with respect to,
and Cinco County shall remain responsible for
its Partnership Share
of, all other costs with respect to each Partnership well
and the Hydrocarbon
production and products with respect thereto, including (x)
all costs of operation, maintenance, reworking, recompletion, re-drilling,
re-equipping,
deepening, plugging
back, plugging and abandonment (except
dry
hole costs
for an Option Well), treating, processing, gathering and
transportation,
including with respect
to the Option Production Share, and (y)
after the Option Cap Amount is reached with respect to
the Option Wells, all
drilling, completion
and equipping costs (and plugging and abandonment costs if
a dry hole) with
respect to the Option Wells. Notwithstanding anything in
this
Agreement to
the contrary,
Metroplex's rights and interests under this Section
3.1(c) with
respect to Cinco County's Partnership
Share and Production Share,
including the
increases in Metroplex's Partnership Share
and Production Share
provided for in this
Section 3.1(c)(2), shall have priority and preference over
all other claims,
liens, security interests, rights, interests and encumbrances
-21-
<PAGE>
whatsoever in,
to or against Cinco County or Cinco
County's Partnership Share
and Production
Share, whether
provided for or arising under or outside of this
Agreement, at
Law or otherwise or arising or created
prior to any election by
Cinco County
under this Section 3.1(c).
(3)
Metroplex shall
maintain a single payout account ("Option
Payout Account"). The
Option Payout Account shall be established as of the date
on which the first costs were incurred with respect
to the first Option Well
(even though
such costs may have been incurred prior
to the time Cinco County
makes an election under this Section 3.1(c)). At the end of each calendar
month
after establishment of
the Option Payout Account and until Final Option Payout,
the Option
Payout Account shall be debited and credited as
provided in this
Section 3.1(c)(3).
At the end of each
calendar month during an Option Recovery
Period, the
Option Payout Account shall be credited with all sales
proceeds
received during
such month by Metroplex with respect to
the Option Production
Share, calculated
at the point the Option Production Share is
delivered to
Metroplex pursuant
to Section 4.1, or the market value
thereof if such Option
Production Share
is not sold by Metroplex.
At the end of each
calendar month
until Final
Option Payout, the
Option Payout Account shall be debited with the
following:
(i)
7.227725% of
the Partnership's share of all drilling,
completion and
equipping costs (and plugging and abandonment costs if
a dry hole) with respect to any Option Well incurred during
such
calendar month;
provided that the aggregate amount of costs
debited
with respect to the Option Wells pursuant to this clause (i) shall
not
exceed the
Option Cap Amount, and
(ii)
an amount calculated like interest, compounded
quarterly, at the
Agreed Rate on the Option Payout Account Balance as
of the end of each calendar month.
At the end of each calendar month during
an Option Recovery Period, the Option
Payout Account
shall be debited with the following:
(A)
the severance, production and other similar taxes
(other than income, franchise and similar taxes) payable on the
Option
Production Share
produced during such calendar month,
(B)
the lessors'
royalties on the Option Production Share
produced during
such calendar month, and
(C)
any overriding
royalties,
net profits
interests,
production payments
and like burdens on the Option
Production Share
produced during
such calendar month which burden or encumber the
Partnership's interest
in such production.
An amount equal to the excess of the aggregate amount of
the credits to the
Option Payout
Account over the aggregate amount of the
debits charged against
the Option
Payout Account as of the First Option Payout and
as of any Credit
Balance Date
shall be paid by
Metroplex to Cinco County, and the Option Payout
Account shall be debited with the amount paid by Metroplex to Cinco
County so as
to bring the balance in the Option Payout Account to zero as of the
First Option
Payout or such Credit Balance Date, as the case may be. The portion of
the
Option Production
Share received and
sold by Metroplex which gives rise to the
amount paid
by
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<PAGE>
Metroplex to Cinco
County pursuant to the preceding sentence shall be deemed to
have been distributed by the Partnership to Cinco County as Cinco
County's
Production Share
and sold by Metroplex on behalf of Cinco County.
(4)
The following
additional
defined terms are used in this
Section 3.1(c):
(i)
"First Option Payout"
means the first point in time when
there is a credit balance in the Option Payout Account at the end
of a
calendar month
(after all debits and credits with respect to
such
calendar month
have been debited or credited to the Option
Payout
Account).
(ii)
Following the First
Option Payout, any point in time at
the end of a calendar month (after all debits and credits with
respect
to such calendar month have been debited or credited to
the Option
Payout Account) when the aggregate amount of the credits to the
Option
Payout Account ceases to be equal to or in excess of (and becomes
less
than) the aggregate amount of the debits charged
against the Option
Payout Account shall
be referred to herein as a "Debit Balance Date."
(iii) Conversely,
following the First Option Payout, any
point in time at the end of a calendar month (after
all debits and
credits with
respect to such calendar month have been debited or
credited to
the Option Payout Account) when the
aggregate amount of
the credits
to the Option Payout
Account ceases to be less than (and
becomes equal
to or in excess of)
the aggregate amount of the debits
charged against the
Option Payout Account shall be referred to herein
as a "Credit Balance Date."
(iv)
"Option Recovery
Period" means any of the following
respective periods:
(a) the period from the establishment of the
Option Payout Account to and including the First Option Payout and
(b)
each period
from and including the first day of a calendar month
following a
Debit Balance Date to and including the next Credit
Balance Date.
(v)
"Final Option
Payout" means the First Option Payout
or
the first Credit Balance Date, as the case may be, occurring after
all
Qualified Wells
have been spudded and all drilling,
completion and
equipping costs
(and plugging and abandonment costs if a dry
hole)
with respect
to such Qualified Wells have been incurred by the
Partnership and
the applicable shares
of all such costs with respect
to such Qualified Wells which are Option Wells have
been debited to
the Option
Payout Account in accordance with Section 3.1(c)(3).
(vi)
"Option Payout
Account Balance" means, as of a
particular date,
the aggregate amount of the debits
charged against
the Option Payout Account as of such date less the aggregate amount
of
the credits
to the Option Payout Account as of such date, in
accordance with Section 3.1(c). For purposes of Section
3.1(c)(3)(ii),
the Option Payout Account Balance will be deemed to be zero at the
end
of a calendar month if, prior the calculation under Section
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<PAGE>
3.1(c)(3)(ii) for
such month, the
aggregate amount of credits to the
Option Payout
Account as of the end of such month exceeds the
aggregate amount
of debits charged
against the Option Payout Account
as of the end of such month.
Section 3.2.
Capital Contributions.
----------------------
(a)
Initial Capital.
Effective as of the
Effective Date, each Partner
----------------
hereby contributes
as its initial capital contribution
the property described
next to such Partner's name on Annex A, which also sets forth as of the
Effective Date
the FMV of each such contributed property
as agreed to by the
Partners. Within
ninety (90) days following the Effective Date,
each Partner
will execute and
deliver (or cause one or more of its Affiliates to execute and
deliver) to the Partnership such assignments, deeds and other
conveyances as are
reasonably necessary to transfer legal or record title to the
Partnership in the
aforesaid property
that such Partner has contributed to the Partnership;
provided, however,
that such requirement to transfer legal
or record title to
the Partnership
and such transfer
documents shall not vary or change the terms
and provisions
of this Agreement or the Partners' and the Partnership's
respective obligations
under this Agreement, including the terms and provisions
of Section
3.6. All rights, interests and assets hereafter acquired by
the
Partnership under the BIPL Option Agreement in connection with the
Partnership's
exercise and closing of the BIPL Option shall be deemed to have
been contributed
to the Partnership by Metroplex upon the
Partnership's exercise and closing of
the BIPL Option. The exercise or non-exercise by the
Partnership of the BIPL
Option will
not cause or result in
any adjustment of the Partnership Shares of
the Partners.
Similarly,
the deemed reversion
to the Partners and acquisition
by Metroplex of the
DFW Pipeline pursuant to the DFW Reversionary Interest will
not cause or result in any adjustment of the Partnership Shares of
the Partners.
(b)
Initial Commitments.
Each Partner agrees to make additional
cash
--------------------
capital contributions
to the Partnership which in the aggregate equal its
Partnership Share
of $566,900,000 (its "Initial Commitment").
The Partners'
Initial Commitments
shall be due and payable pro rata in the ratio
of their
Partnership Shares and
are contemplated to become due and payable in accordance
with the plan, budget and schedule set
forth in Exhibit D hereto (the "Initial
Budget"). The
Initial Budget is an estimate of the
expected costs required to
operate the
Partnership
from the Effective Date until the end of
2008. The
Partners recognize
that it is not
possible to predict the exact nature, timing
and amounts
of the required costs set forth in
the Initial Budget.
Thus, the
exact nature,
timing and amounts of such costs (and the
timing and amounts of
the Initial
Commitments necessary to fund such costs) will be determined by
the
Management Committee;
provided, however, the Management Committee shall be
obligated to abide by any milestones or conditions specifically set
forth in the
Initial Budget
that are required to be met before certain expenditures
are
required to be made.
At least thirty (30) days prior to the date of anticipated
expenditure of
any cost projected in the Initial Budget, the Management
Committee shall
give each Partner notice of the exact amount
required to be
contributed by it as
part of its Initial Commitment. Each Partner's payment of
such portion
of its Initial Commitment shall be due and payable to the
Partnership on the fifth (5th) day preceding the date of
anticipated expenditure
of such cost; provided that, if the Management Committee elects not
to make such
expenditure or
such expenditure is postponed for more than ninety
(90) days,
each Partner's
payment of such portion of its Initial Commitment shall
be
refunded (without
interest thereon), but each Partner shall remain obligated to
contribute the
balance and any refunded portion of its Initial
Commitment.
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<PAGE>
(c)
Additional Capital
Contributions.
In addition to the Initial
----------------------------------
Commitment and
any mandatory additional capital contributions
required to be
made pursuant
to this Agreement, each Partner shall be obligated to make
additional capital
contributions to the Partnership as may from time to time be
necessary to
meet its obligations in Article III and Article VIII (its
"Additional
Contributions").
(d)
Non-Consent Operations
Capital Contributions.
If a Partner elects
---------------------------------------------
to cause the Partnership to conduct or
participate in a Non-Consent Operation
(or a Partner's election to be a non-participating or
non-consenting party
causes an operation to be a Non-Consent Operation) with respect to
a Non-Consent
Area as permitted
under the Operating Agreement Terms and Section 6.10(c), each
Partner who
elects to cause the Partnership to
conduct or participate in such
Non-Consent Operation
agrees to make additional cash capital
contributions to
the Partnership
of its Partnership Share of all
costs, expenses, liabilities,
claims and damages which the Partnership or any Partner becomes
obligated to pay
as a result of such Non-Consent Operation. Any such additional capital
contributions which
are to be paid to the Partnership pursuant to the foregoing
shall be due and payable by such Partner
(i) within 10 days after such Partner
receives notice
from the General Partner of the amount of
additional capital
contributions which
are required with
respect to such Non-Consent Operation or
(ii) two (2) Business Days prior to such later date on which such
Partner (as if
such Partner were directly participating in such Non-Consent
Operation as to its
Partnership Share) would be obligated under the Operating Agreement
Terms to pay
the amounts
with respect to such Non-Consent
Operation which give rise to the
need for such additional capital contributions.
(e)
Payment. To
the extent not paid to the Partnership under the
-------
Operating Agreement
Terms, all capital contributions following the initial
capital contributions
(including
the Initial Commitments and the Additional
Contributions) shall be paid by wire transfer of the capital
contribution amount
in immediately
available funds to the bank account from time to time
designated
by the General Partner for the deposit of Partnership
capital contributions.
Section 3.3.
Capital Contribution Defaults. All capital contributions
-------------------------------
which are not paid when due shall bear interest from the date due
at the Default
Rate until
paid. In the event that a Partner defaults in its
obligations
hereunder to
make or pay contributions to
Partnership capital or any interest
accruing thereon,
the Management Committee (excluding the
representative and
alternate of
such defaulting Partner) may enforce such obligations in
such
manner as may be
permitted by Law and may exercise on behalf of the Partnership
all rights
and remedies with respect to such obligations and
all collateral
securing the
same as may be provided by Law or under the terms of this
Agreement. All
reasonable
costs and expenses, including attorneys'
fees and
expenses, incurred
by the Partnership or such committee in enforcing such
obligations, realizing
on any security
therefor or otherwise exercising any of
the Partnership's
rights or remedies
with respect thereto shall be included in
such obligations and paid by such defaulting Partner. In addition to and not in
lieu of any other
rights and remedies, each Partner hereby grants the following
rights and
remedies:
(a)
Lien
and Security Interest. Each Partner hereby grants the
-----------------------------
Partnership a
lien and security interest in such Partner's interest in
the
Partnership from time
to time existing and in and to all assets attributable to
and proceeds
of and from such
interest (including its Production Share and all
other Partnership
distributions)
to secure the payment
by such Partner of its
obligations
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<PAGE>
hereunder to
make capital contributions to the Partnership, to pay
interest
accruing thereon
and to pay collection
costs and expenses provided for herein,
all in accordance with and subject to the provisions of the Texas
Uniform
Commercial Code and other Laws; and the Partnership shall be
entitled to all the
rights and remedies of a lien holder and secured party in the event
of a default
by a debtor under the provisions of such Laws,
including (but not limited to)
the right and power to offer for sale and to
sell the Partnership interest of
such Partner
as may be provided in such Laws. The Management Committee
(excluding the
representative
and alternate of such defaulting Partner) is
hereby authorized
to take all actions which such committee, in its sole
discretion, deems necessary or expedient to enforce the
Partnership's rights and
remedies as
a lien holder and secured party
under such Laws.
Notwithstanding
any foreclosure,
such Partner whose interest is foreclosed upon
shall remain
liable for
any deficiency on such foreclosure. At any time and from time to
time, upon
the written request of the Partnership
or any Partner, any Partner
will promptly
and duly execute and deliver such further instruments and
documents and
take such further action as the Partnership or the
applicable
Partner may
reasonably
request for the
purpose of obtaining or preserving the
full benefits
of the liens and
security interests granted under this Agreement
(including Sections
3.3, 3.4 and 3.5) and of the rights and powers
herein
granted, including the
filing of any financing or continuation statements under
the Uniform
Commercial
Code in effect in any
jurisdiction with respect to the
liens and security interests created hereby. Each Partner hereby authorizes
the
Partnership, any
other Partner or either of their respective counsel or
representative, at any
time and from time to time, to file financing statements
and amendments
to financing
statements that describe the collateral covered by
such financing
statements
in such jurisdictions as the Partnership
or other
Partner may reasonably deem necessary or desirable in order to
perfect the liens
and security interests granted under this Agreement (including
Sections 3.3, 3.4
and 3.5). Each Partner hereby further authorizes the
Partnership, any other
Partner or either of their respective counsel or representative, at
any time and
from time to time, to file continuation
statements with respect to previously
filed financing
statements.
A photographic or other reproduction of this
Agreement, including
Exhibits A, B, C and E (but not any other annexes
or
exhibits hereto), will
be sufficient as a financing statement for filing in any
jurisdiction.
(b)
Partnership
Distributions and Payments. Subject to the priorities
---------------------------------------
set forth in Section
4.2, if a Partner defaults in its obligations hereunder to
make or pay contributions to Partnership capital or any interest accruing
thereon when
due hereunder, then
until such capital contribution, all interest
accruing thereon
and all collection costs and expenses provided herein
with
respect thereto
shall be paid in full:
(1)
at the option of the Management Committee (excluding the
representative and
alternate of such defaulting Partner), (i)
all or any part
the defaulting
Partner's distributed share of Hydrocarbon production and
products may
be sold, on behalf of
such defaulting Partner, by the Partnership
(or by the non-defaulting Partner(s) who make a Contribution Loan to such
defaulting Partner
pursuant to Section 3.4) and for such purpose the defaulting
Partner grants an
irrevocable power of attorney coupled with an interest to the
Partnership and
such non-defaulting
Partner(s), or (ii) all or any part of the
share of Hydrocarbon production and products to which
such defaulting Partner
would otherwise
be entitled may be retained by the Partnership,
(2)
(i) all proceeds of the sales of the defaulting
Partner's
distributed share of
Hydrocarbon production and products (net of all reasonable
expenses of
such sales), (ii) all
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<PAGE>
proceeds of
the sales of the share of Hydrocarbon production and
products
retained by
the Partnership pursuant to clause (1)(ii) above (net of all
reasonable expenses
of such sales), and (iii) all other distributions or
payments which
would otherwise be made or paid by the Partnership to
such
defaulting Partner
shall be applied to such unpaid capital contribution,
interest and
collection
costs and expenses in such order and
priority as the
Management Committee
(excluding
the representative and alternate of such
defaulting Partner)
may elect, subject to the priorities
set forth in Section
4.2, and
(3)
the balance
thereof shall be applied or distributed in
accordance with
the other provisions of this Agreement, subject to the
priorities set
forth in Section 4.2.
(c)
Expulsion. If
a Partner defaults in the timely
payment of all or
---------
any part of its Initial Commitment or any mandatory additional capital
contributions it is required to make hereunder (including any
additional capital
contribution required
to be made by Cinco County in connection with any Carried
Acquisition under
Section 3.5) when due and such default continues for a period
of sixty (60) days
after the Management Committee (excluding the representative
and alternate
of such defaulting Partner) has given such defaulting
Partner
written notice
stating that such Partner has defaulted in
paying its Initial
Commitment and/or
any mandatory additional capital
contribution and that such
Partner is
subject to being
expelled from the Partnership if such Partner does
not immediately
pay its Initial Commitment and/or such mandatory
additional
capital contribution,
then the Management Committee (excluding the
representative and alternate of such defaulting Partner) may elect
to expel such
defaulting Partner from the Partnership at any time after the
expiration of said
60-day period and
prior to the time such defaulting Partner cures such default.
In the event the Management Committee (as so constituted)
elects to expel a
Partner from
the Partnership as permitted by the preceding sentence, then
effective as
of such election and
without any further action being required of
the Management Committee, such Partner shall automatically cease to
be a Partner
in the Partnership and shall permanently and irrevocably
forfeit its entire
Partnership Share
and all of its right, title and interest in and to the
Partnership and
all Partnership Assets to the remaining Partners
("Forfeited
Interests"). The
remaining Partners shall receive and own
Forfeited Interests
in the ratio of their respective Partnership
Shares; provided that, if one or
more Partners
elect to make
Contribution Loans in connection with such default
as permitted
in Section 3.4 and one
or more Partners do not elect to make such
Contribution Loans,
such Forfeited Interests shall be received and owned by the
Partner or Partners
making such Contribution Loans in the ratio that such loans
are made by such Partner(s). Upon the effective transfer of such
Forfeited
Interests to the
non-defaulting Partners in accordance with the foregoing, such
Contribution Loans
shall be deemed fully discharged and
satisfied, except for
purposes of
Section 3.3(c)(4). Without limiting the foregoing, each
Partner
hereby grants
the Management Committee (as so constituted) an
irrevocable,
special power
of attorney, coupled with an interest, which
shall survive the
dissolution, bankruptcy or legal disability of such Partner, to
take all actions
necessary on its
behalf, if any, to evidence the expulsion of such Partner from
the Partnership
and to transfer or
otherwise deal with its Forfeited Interests
as provided in this Section should such Partner thus become a
defaulting Partner
and be expelled from the Partnership, including, without limitation, the
execution, delivery
and filing of such certificates, affidavits and other
instruments or
documents as the Management Committee (as so
constituted) may
deem necessary
or desirable to evidence that such Partner has
ceased to be a
Partner of
the Partnership. If a defaulting Partner is expelled from the
Partnership and
its Forfeited Interests forfeited pursuant to
the foregoing,
such Partner
shall be released from its
-27-
<PAGE>
obligation to
pay any portion of its Initial Commitment and any
mandatory
additional capital
contribution,
together with any
interest accruing thereon,
which has not theretofore been paid to the Partnership, but shall not be
released from
any of its obligations set forth in this Section 3.3 or
any
reasonable costs and
expenses, including attorneys' fees and expenses, incurred
by the Partnership, the General Partner or the Management Committee (as
so
constituted) in
exercising
or enforcing any
rights and remedies in connection
with such default. Notwithstanding the expulsion of a defaulting Partner
pursuant to
this Section and the forfeiture by such
defaulting Partner of its
Forfeited Interests,
such defaulting Partner (i) shall have, and shall continue
to be liable to the Partnership and the other
Partners for, all obligations,
liabilities, costs, expenses, losses and damages provided in
Sections 3.3(c)(1),
3.3(c)(2) and
3.3(c)(3) and (ii) shall have the rights under Section
3.3(c)(4).
(1)
All
additional
or increased costs or
expenses and all actual
losses or damages,
excluding any damages for lost profits, incurred or suffered
by the Partnership or any Partner as a result of such Partner's
default in
paying all or any portion of its Initial Commitment or Additional
Contributions;
provided, however,
that following the
forfeiture by such defaulting Partner of
its Forfeited
Interests,
such defaulting Partner shall no longer have any
liability to
pay any portion of its Initial Commitment or Additional
Contributions on
which it defaulted.
(2)
If within two (2) years after the effective date of the
expulsion of such
Partner from the Partnership on account of non-payment of all
or part of its Initial Commitment or any
Additional Contributions, such former
Partner or
any Affiliate of such former Partner (or any
partnership, joint
venture, association
or other investment
group in which such former Partner or
such Affiliate
is a member) directly or indirectly acquires
any Hydrocarbon
Interest or any
Pipeline Interest in all or any part of the Contract Area, such
Hydrocarbon Interest
or Pipeline Interest shall be deemed a Partnership
opportunity and shall
be offered to the Partnership by notice in writing within
30 days after such acquisition, for an amount
equal to the actual acquisition
cost therefor
to such former Partner or its
Affiliate. The
Partnership shall
have thirty
(30) days after receipt of such notice in which to accept
such
offer. If such offer
is accepted such Hydrocarbon Interest or Pipeline Interest
shall be promptly conveyed to the Partnership free and clear of all
liens,
encumbrances,
royalties and
burdens created by, through or under such
former
Partner or
any of its Affiliates (other than those existing prior to
such
acquisition or
created in favor of non-Affiliates of such
former Partner as a
condition to
such acquisition) and the Partnership shall pay the
acquisition
cost therefor.
The notice of such acquisition shall include all relevant
information regarding
such investment (other than proprietary geophysical,
geological,
engineering, financial and other data of such former Partner or
its
Affiliates which
was not generated at
Partnership expense), but shall include,
without limitation,
(i) an itemized
breakdown of the acquisition cost thereof,
(ii) copies
of all agreements, leases, deeds, conveyances, rights-of-way,
easements,
assignments,
judgments, decrees,
or other instruments
evidencing,
creating, transferring
or assigning the Hydrocarbon Interest or Pipeline
Interest, and
(iii) copies of all agreements and obligations which
must be
assumed or
performed in
connection with acquiring said Hydrocarbon Interest or
Pipeline Interest.
(3)
Upon its expulsion from the Partnership,
such former Partner
shall immediately deliver to the Partnership all information and
data (including
all copies thereof in whatsoever form or medium) generated or
reproduced by such
former Partner or any of its Affiliates in connection with such
former Partner's
investment in
the Partnership or its activities
-28-
<PAGE>
on behalf of or as a Partner of the Partnership, other than
proprietary
geophysical,
geological,
engineering and other
data of such former Partner or
its Affiliates
which was not generated at Partnership expense.
During the
period commencing
with the effective
date of such Partner's expulsion from the
Partnership and
extending for a period of three (3) years thereafter,
such
former Partner
and its Affiliates
shall keep all information and data referred
to in this Section 3.3(c)(3) strictly
confidential and shall not in any manner
use, broker,
trade on, profit by, disclose or disseminate any of such
information or
data; provided that, these restrictions shall not apply to
information and data which (i) has entered into the public domain
without breach
of the provisions of this Section 3.3(c)(3), (ii)
was received by such former
Partner or
any of its Affiliates
from a third party not under an obligation of
confidentiality to
the Partnership or any other Partner with respect
thereto
prior to the time such former Partner or its
Affiliate received, generated or
reproduced such
information
or data in the manner referred to above in
this
Section 3.3(c)(3), or
(iii) is required to be disclosed by any Law or the rules
and regulations
of any governmental
agency or any stock exchange applicable to
such former
Partner or such Affiliate; provided that,
such former Partner and
its Affiliates shall use their best efforts to give the Partnership
at least ten
(10) days prior notice of any disclosure
under this clause (iii). Such former
Partner and
each Affiliate of such former Partner shall take all
reasonable
steps to require its
employees and consultants to be bound by the provisions of
this Section
3.3(c)(3) in the same manner as it is bound hereunder.
(4)
A defaulting
Partner who forfeits its Partnership Share
pursuant to
this Section 3.3(c), shall be entitled
to be paid by the Partners
who receive such forfeited Partnership Share, in the ratio in which
they receive
such forfeited Partnership Share, a cash amount equal to the
positive number, if
any, obtained
by subtracting the
amount determined under Section 3.3(c)(4)(ii)
below from
the amount determined under Section 3.3(c)(4)(i) below. If a
negative number
is obtained by
subtracting the amount determined under Section
3.3(c)(4)(ii) below from the amount determined under Section
3.3(c)(4)(i) below,
then no payment will be due under this Section 3.3(c)(4).
(i)
An amount equal to the FMV of the forfeited
Partnership
Share as of the effective date of the expulsion of the
defaulting
Partner less (x) the amount of all capital contributions on which
such
defaulting Partner
has defaulted, together with interest accruing
thereon (including, without duplication, the principal and interest
on
all Contribution
Loans made on account of any default by such
defaulting Partner),
reduced by any payments actually made by
such
defaulting Partner on such capital contributions or Contribution
Loans
and any amounts applied to the payment thereof pursuant to
Section
4.2, (y) the amount of all costs incurred
by the Partnership and the
other Partners
in determining the amount payable to the
defaulting
Partner under
this Section
3.3(c)(4), including reasonable appraisal
fees and attorneys' fees, and (z) at the option of any remaining
Partner who
receives such forfeited Partnership Share, any of the
amounts for
which such defaulting Partner remains liable to the
Partnership or
the remaining Partners following its
expulsion under
this Section
3.3(c).
(ii)
An amount equal to 30% of the amount determined
under
Section 3.3(c)(4)(i)
above.
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<PAGE>
The FMV of the forfeited Partnership Share as of the effective date of
the
expulsion of
the defaulting Partner shall be determined by the unanimous
agreement of the
defaulting Partner and the remaining Partners who receive such
forfeited Partnership
Share or by an Appraiser selected by a
Majority-in-Interest
of the remaining Partners who receive such forfeited
Partnership Share (or pursuant to the procedure provided in Section
15.15 if the
unanimous agreement of the defaulting Partner and such remaining
Partners is not
obtained or
a Majority-in-Interest of such remaining Partners are unable
to
agree upon
an Appraiser).
The amount, if any, to
which the defaulting Partner
is entitled pursuant
to this Section 3.3(c)(4) shall be severally (not jointly)
due and payable to the
defaulting Partner by the remaining Partners who receive
such forfeited
Partnership
Share, in the ratio they receive such
forfeited
Partnership Share,
within fifteen (15) days after the amount to which the
defaulting Partner
is entitled pursuant to this Section
3.3(c)(4) has been so
agreed or determined. If an amount is paid to the
defaulting Partner pursuant
to this Section 3.3(c)(4) and any amounts are actually deducted
pursuant to
Section
3.3(c)(4)(i)(z) in
connection
with determining such
amount, then the
defaulting Partner shall be released from liability for all amounts
which are so
deducted pursuant
to Section 3.3(c)(4)(i)(z).
(d)
Additional Remedies
Pursuant to the Operating Agreement Terms. In
--------------------------------------------------------------
addition to
the remedies available hereunder, the Partnership and the
non-defaulting
Partners shall
also have all other lien rights and security
interests on, and any other remedies with respect to, any
defaulting Partner and
its Partnership
Share with respect to
any Operating Area which the Partnership
or the non-defaulting Partners would have under the Operating
Agreement Terms if
(i) each Partner, without regard to the Partnership, was a party to
a joint
operating agreement
the terms of which were substantially identical to
the
Operating Agreement Terms, (ii) each Partner's Partnership Share
with respect to
any Operating
Area, without regard to the Partnership, was treated for
all
purposes as
an undivided interest
in oil and gas rights in the Operating Area,
and (iii) the General Partner (without regard to the Partnership) was the
Operator of
the Operating Area.
Section 3.4.
Contribution Loans.
If any Partner
defaults in making all or
------------------
any portion of its capital contributions required by Section 3.2,
the Management
Committee (excluding the representative and alternate of the
defaulting Partner)
may require each
non-defaulting Partner to make a loan ("Contribution Loan") to
the Partnership
or such defaulting Partner in an amount equal to such
non-defaulting
Partner's
proportionate share
of such unpaid capital
contribution. A
non-defaulting
Partner's
proportionate share shall be (i) the
ratio of its Partnership Share to the
Partnership Shares of all non-defaulting
Partners or (ii) if
such default is with respect to a specific Non-Consent Area
in which the Partnership Shares are not in the
standard ratios provided under
Section 3.1(a) as a result of a Non-Consent Operation or otherwise,
the ratio of
its Partnership
Share with respect to
such Non-Consent Area to the Partnership
Shares of all non-defaulting Partners with respect to such
Non-Consent Area.
If
any non-defaulting Partner with a Partnership Share with respect to
the specific
Non-Consent Area to
which such capital contribution default relates defaults in
its obligation to make such Contribution Loan, the other
non-defaulting Partners
with Partnership Shares with respect to such Non-Consent Area shall
be obligated
to make Contribution Loans to cover such default in the ratio of their
Partnership Shares
with respect to such Non-Consent Area. If all Partners with
Partnership Shares
with respect to such Non-Consent Area default in their
obligation to make
such Contribution Loans, the Management Committee (excluding
the representatives
and alternates of the defaulting Partners) may require each
non-defaulting Partner
(whether or not it has a Partnership Share in
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such Non-Consent
Area) to make a Contribution Loan in an
amount equal to its
proportionate share
(determined under
clause (i) above) of such defaulted upon
Contribution Loans.
The Contribution Loans shall bear
interest at the Default
Rate. Subject to the
priorities set forth in Section 4.2, each Partner making a
Contribution Loan
shall have and is hereby granted,
proportionately with each
other Partner
making a Contribution Loan, the same rights, remedies and
collateral with
respect to the Contribution Loan as are granted to the
Partnership under
Section 3.3 with respect to the defaulted-upon capital
contribution giving
rise to such
Contribution Loan, including (i) the right to
sell its proportionate share of the defaulting Partner's
distributed share of
Hydrocarbon production and products on behalf of the defaulting
Partner and (ii)
the right to repayment out of a proportionate share of (1) the net sales
proceeds of
the defaulting Partner's distributed share of all
production and
products, after
deducting all reasonable expenses of such sales,
(2) the net
sales proceeds
of the defaulting
Partner's share of Hydrocarbon production and
products that are retained by the Partnership pursuant to Section
3.3(b)(1)(ii),
after deducting
all reasonable expenses of such sales, and (3) all other
distributions or
payments which would otherwise be made or paid to such
defaulting Partner
under this Agreement or by the Partnership.
Section 3.5.
Optional Initial Funding of Acquisitions.
Upon the written
-----------------------------------------
request of Cinco
County, Metroplex shall make on behalf of Cinco County, and as
a loan to Cinco County, all additional capital contributions that the
Partnership Agreement
requires Cinco County to make to the Partnership for
acquisition costs
relating to the
acquisition of Hydrocarbon Interests located
within the Contract
Area (each such acquisition being referred to as a "Carried
Acquisition") during
the time period between the date on which Metroplex
receives such written request and the expiration of the second
(2nd) year of the
Term; provided,
however, that Metroplex shall not be required to make any
additional capital
contribution
on Cinco County's behalf with respect
to any
Carried Acquisition
at any time in which (a) Cinco County
or any Affiliate of
Cinco County
is in breach or default of any duty or obligation to the
Partnership, Metroplex
or any Affiliate of
Metroplex under this Agreement, any
Service Contract, or
otherwise, or (b) Cinco County fails to satisfy any of the
Carried Acquisition Financing Conditions. In respect of each additional
capital
contribution so
made by Metroplex on Cinco County's behalf
with respect to a
Carried Acquisition of a Hydrocarbon Interest, Cinco County shall
be required to
reimburse and
pay Metroplex an
amount equal to the amount so paid by Metroplex
(together with
any interest, costs
and expenses which may become payable after
default by
Cinco County under this Section 3.5, the "Carried Acquisition
Repayment Amount")
prior to the earlier of (i) two hundred
seventy (270) days
after the date Metroplex made such additional capital contribution
in respect of
a Carried Acquisition of a Hydrocarbon
Interest, (ii) within five (5) Business
Days of the date Cinco County receives
written notice from the General Partner
providing that
the first well on such
Hydrocarbon Interest (or any land pooled
or unitized
therewith) has spud,
or (iii) the date on which Cinco County fails
to satisfy
any of the Carried Acquisition Financing
Conditions (the "Carried
Acquisition Expiration Date" ). If Cinco County fails to pay any
portion of the
Carried Acquisition
Repayment Amount when due, (x) the unpaid portion
of the
Carried Acquisition
Repayment Amount shall bear interest from
the date due at
the Default Rate until paid, (y) Cinco County shall pay all
reasonable costs and
expenses, including
attorneys'
fees and expenses, incurred by Metroplex in
enforcing payment
by Cinco County of the Carried
Acquisition Repayment Amount
and such accrued interest, realizing on any security therefor and
otherwise
exercising any
of Metroplex's rights
or remedies with respect thereto, and (z)
all such interest, costs and expenses shall
be included in Carried Acquisition
Repayment Amount
and paid by
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Cinco County.
Subject to the priorities set forth in Section 4.2, if
Cinco
County fails to pay
Metroplex any Carried Acquisition Repayment Amount when due
hereunder, then
until all Carried
Acquisition Repayment Amounts have been paid
in full by Cinco County:
(1)
at the option of Metroplex, (i) all or any part of Cinco
County's distributed
share of Hydrocarbon
production and products may be sold,
on behalf of Cinco County, by Metroplex and for such purpose Cinco
County grants
an irrevocable power
of attorney coupled with an interest to Metroplex, or (ii)
all or any part of the share of Hydrocarbon
production and products to which
Cinco County
would otherwise be entitled may be distributed to Metroplex,
(2)
(i) all proceeds of the sales of Cinco County's
distributed
share of Hydrocarbon
production and products (net of all reasonable expenses of
such sales),
(ii) all proceeds of the sales of the share of Hydrocarbon
production and
products distributed to Metroplex pursuant to clause
(1)(ii)
above (net
of all reasonable expenses of such sales), and (iii) all
other
distributions or
payments which would otherwise be made or paid by the
Partnership to
Cinco County shall be applied to Cinco
County's obligations to
reimburse and pay
Metroplex for the Carried Acquisition Repayment Amounts under
this Section
in such order and priority as Metroplex may elect, and
(3)
the balance
thereof shall be applied or distributed in
accordance with
the other provisions of this Agreement, subject to the
priorities set
forth in Section 4.2.
In addition
to all other remedies available to
Metroplex, Cinco County hereby
grants Metroplex a lien and security interest in its interest in
the Partnership
and in and to all
assets attributable to and proceeds of and from such interest
(including its
Production
Share and all other Partnership
distributions) to
secure the payment by
Cinco County of the Carried Acquisition Repayment Amount,
all in accordance with and subject to the provisions of the Texas
Uniform
Commercial Code
and other Laws; and Metroplex and the Partnership
shall be
entitled to
all the rights and remedies of a lien
holder and secured party in
the event of a default
by a debtor under the provisions of such Laws, including
(but not limited to) the right and power to offer for sale and to
sell the
Partnership interest
of Cinco County as may be provided in such Laws.
Section 3.6. Special
Warranties, Assumptions, Indemnities, Limitations and
-------------------------------------------------------------
Disclaimers regarding
Contributed
Assets.
-------------------------------------------
(a)
Special Warranty
of Title. Each Contributing Partner, in
respect
---------------------------
to the portion of the Contributed Assets that such
Contributing Partner has
contributed (or
caused to be contributed by an Affiliate
of such Contributing
Partner) or
agreed to contribute (or agreed to cause to
be contributed by an
Affiliate of
such Contributing
Partner) to the Partnership pursuant to Section
3.2(a), (i) does
hereby bind itself, its successors and assigns, to WARRANT and
FOREVER DEFEND all and
singular such portion of the Contributed Assets unto the
Partnership, its
successors
and assigns, against every person whomsoever
lawfully claiming
or to claim the same or any part
thereof or any interest or
encumbrance therein
by, through or under such Contributing Partner or its
Affiliates, but not
otherwise; subject, however, to the Permitted Encumbrances,
and (ii) does hereby
represent and warrant to the Partnership that such portion
of the Contributed Assets is not subject to any sales, assignments,
gas contract
dedications, calls
on production, liens, security interests or
encumbrances
created by,
through or under such
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<PAGE>
Contributing Partner
or its Affiliates,
except for the Permitted Encumbrances.
To the extent transferable and without any
direct or indirect liability to or
obligation of
such Contributing Partner or any of its Affiliates, each
Contributing Partner
hereby transfers and conveys unto the
Partnership all of
its rights
under and by virtue of all covenants and warranties,
express or
implied, pertaining
to the portion of the Contributed Assets that such
Contributing Partner
has contributed or agreed to contribute (or caused or
agreed to cause to be contributed) to the Partnership pursuant to
Section 3.2(a)
that have heretofore been made by any of such Contributing Partner's
predecessors in
title (other than any Affiliate of such
Contributing Partner)
(collectively, the "Prior Covenants and Warranties"). Subject to the foregoing,
each Contributing
Partner's contribution of a portion of the Contributed Assets
to the Partnership is made with full substitution and subrogation of the
Partnership in,
to, under and by virtue of the Prior
Covenants and Warranties
and with full subrogation (to the extent
transferable) to any rights accruing
under the statutes of limitations, prescription and
repose und
