Common use of Phase III Clause in Contracts

Phase III. If GEM elects to participate in Phase III, it shall pay to Ohio Cumberland, within ten (10) days of receipt by Ohio Cumberland of GEM’s written election to participate, the sum of Five Hundred Thousand And No/100 Dollars ($500,000.00) as the third and final payment of the initial prospect costs (“Third Prospect Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Ohio Cumberland. Subject to Section 9.16, GEM’s failure to pay timely shall cause this Agreement to terminate and become null and void as between the Parties. (a) Notwithstanding the operator replacement provisions in the Cumberland Prospect Operating Agreement, GEM shall have the option at any time, after GEM makes the Third Prospect Payment and after consultation with Ohio Cumberland, to become the contract operator or to appoint a designee as contract operator. For the purposes of this Agreement the term “Contract Operator” shall mean GEM, if it elects to become the contract operator or its designee contract operator and shall not be interchanged with the term “operator” as hereinafter defined. If GEM elects to become the Contract Operator, then Ohio Cumberland and the Operator shall be obligated to take all reasonably necessary actions to make GEM or a designee the contract operator for the Cumberland Prospect Area for the purposes of this Agreement; such contract operating agreement shall be consistent with industry standards, have a term of one year (and may be renewable, unless terminated earlier by Ohio Cumberland pursuant to Section 3.4(c) hereinbelow), provide that all Overhead charges under the Cumberland Prospect Operating Agreement shall be paid to the Contract Operator, but shall provide for distribution of production revenues by the Contract Operator only if the first purchaser of production who is not a Party, refuses to distribute directly to the Parties. If GEM elects to become the Contract Operator or elects a designee to be the Contract Operator, neither GEM nor its designee shall in any manner change or modify the scheduling or implementation of the Phase II Report or change or modify any AFE previously submitted to GEM pursuant to the terms of this Agreement. (b) Within ninety (90) days of Ohio Cumberland’s receipt of the Third Prospect Payment, the Operator shall commence operations for Phase III, in accordance with the Phase II Report. The Phase III operations will begin the development drilling of the Cumberland Prospect Area. Phase III will end at the point in time when GEM has met the Carried Interest Amount as defined in Section 3.5 below. (c) In addition to the payment of the Third Prospect Payment, GEM shall pay all of the costs for all operations to be conducted in Phase III until GEM has paid the Carried Interest Amount. Subject to the provisions of Section 3.7, GEM shall pay 100% of the actual costs incurred for Phase III until GEM has paid the Carried Interest Amount. Within ten (10) days after Ohio Cumberland’s receipt of the Third Prospect Payment, the Operator shall submit to GEM an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the first calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall contemporaneously deliver a fully executed AFE. Thereafter the Operator shall submit to GEM at least thirty (30) days prior to the next calendar quarter an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the next calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall deliver an executed AFE with its payment. The Operator shall continue to submit AFE’s on a quarterly basis until such time as the Carried Interest Amount has been reached. Once the Carried Interest Amount is met, then Phase III shall end. Subject to Section 9.16 of this Agreement, failure by GEM to timely pay the full amount of each AFE submitted by the Operator for the Phase III costs shall cause the Agreement to terminate and become null and void as between the Parties. GEM shall only be entitled to an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well.

Phase III. If GEM elects to participate in Phase III, it shall pay to Ohio CumberlandIndiana ▇▇▇▇▇, within ten (10) days of receipt by Ohio Cumberland Indiana ▇▇▇▇▇ of GEM’s written election to participate, the sum of Five Hundred Thousand And No/100 Dollars ($500,000.00) as the third and final payment of the initial prospect costs (“Third Prospect Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Ohio CumberlandIndiana ▇▇▇▇▇. Subject to Section 9.16, GEM’s failure to pay timely shall cause this Agreement to terminate and become null and void as between the Parties. (a) Notwithstanding the operator replacement provisions in the Cumberland ▇▇▇▇▇ Prospect Operating Agreement, GEM shall have the option at any time, after GEM makes the Third Prospect Payment and after consultation with Ohio CumberlandIndiana ▇▇▇▇▇, to become the contract operator or to appoint a designee as contract operator. For the purposes of this Agreement the term “Contract Operator” shall mean GEM, if it elects to become the contract operator or its designee contract operator and shall not be interchanged with the term “operatorOperator” as hereinafter defined. If GEM elects to become the Contract Operator, then Ohio Cumberland Indiana ▇▇▇▇▇ and the Operator shall be obligated to take all reasonably necessary actions to make GEM or a designee the contract operator for the Cumberland ▇▇▇▇▇ Prospect Area for the purposes of this Agreement; such contract operating agreement shall be consistent with industry standards, have a term of one year (and may be renewable, unless terminated earlier by Ohio Cumberland Indiana ▇▇▇▇▇ pursuant to Section 3.4(c) hereinbelow), provide that all Overhead charges under the Cumberland ▇▇▇▇▇ Prospect Operating Agreement shall be paid to the Contract Operator, but shall provide for distribution of production revenues by the Contract Operator only if the first purchaser of production who is not a Party, refuses to distribute directly to the Parties. If GEM elects to become the Contract Operator or elects a designee to be the Contract Operator, neither GEM nor its designee shall in any manner change or modify the scheduling or implementation of the Phase II Report or change or modify any AFE previously submitted to GEM pursuant to the terms of this Agreement. (b) Within ninety (90) days of Ohio Cumberland’s Indiana ▇▇▇▇▇’▇ receipt of the Third Prospect Payment, the Operator shall commence operations for Phase III, in accordance with the Phase II Report. The Phase III operations will begin the development drilling of the Cumberland ▇▇▇▇▇ Prospect Area. Phase III will end at the point in time when GEM has met the Carried Interest Amount as defined in Section 3.5 below. (c) In addition to the payment of the Third Prospect Payment, GEM shall pay all of the costs for all operations to be conducted in Phase III until GEM has paid the Carried Interest Amount. Subject to the provisions of Section 3.7, GEM shall pay 100% of the actual costs incurred for Phase III until GEM has paid the Carried Interest Amount. Within ten (10) days after Ohio Cumberland’s Indiana ▇▇▇▇▇’▇ receipt of the Third Prospect Payment, the Operator shall submit to GEM an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the first calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall contemporaneously deliver a fully executed AFE. Thereafter the Operator shall submit to GEM at least thirty (30) days prior to the next calendar quarter an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the next calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall deliver an executed AFE with its payment. The Operator shall continue to submit AFE’s on a quarterly basis until such time as the Carried Interest Amount has been reached. Once the Carried Interest Amount is met, then Phase III shall end. Subject to Section 9.16 of this Agreement, failure by GEM to timely pay the full amount of each AFE submitted by the Operator for the Phase III costs shall cause the Agreement to terminate and become null and void as between the Parties. GEM shall only be entitled to an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well.

Phase III. If GEM elects to participate in Phase III, it shall pay to Ohio CumberlandTriangle, within ten (10) days of receipt by Ohio Cumberland Triangle of GEM’s written election to participate, the sum of Five Two Hundred Thousand And No/100 Dollars ($500,000.00200,000.00) as the third and final payment of the initial prospect Lease costs (“Third Prospect Lease Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Ohio CumberlandTriangle. Subject to Section 9.16, GEM’s failure to pay timely shall cause this Agreement to terminate and become null and void as between the Parties. (a) Notwithstanding the operator replacement provisions in the Cumberland Triangle Prospect Operating Agreement, GEM shall have the option at any time, after GEM makes the Third Prospect Lease Payment and after consultation with Ohio CumberlandTriangle, to become the contract operator or to appoint a designee as contract operator. For the purposes of this Agreement the term “Contract Operator” shall mean GEM, if it elects to become the contract operator or its designee contract operator and shall not be interchanged with the term “operatorOperator” as hereinafter defined. If GEM elects to become the Contract Operator, then Ohio Cumberland Triangle and the Operator shall be obligated to take all reasonably necessary actions to make GEM or a designee the contract operator for the Cumberland Triangle Prospect Area for the purposes of this Agreement; such contract operating agreement shall be consistent with industry standards, have a term of one year (and may be renewable, unless terminated earlier by Ohio Cumberland Triangle pursuant to Section 3.4(c) hereinbelow), provide that all Overhead charges under the Cumberland Triangle Prospect Operating Agreement shall be paid to the Contract Operator, but shall provide for distribution of production revenues by the Contract Operator only if the first purchaser of production who is not a Party, refuses to distribute directly to the Parties. If GEM elects to become the Contract Operator or elects a designee to be the Contract Operator, neither GEM nor its designee shall in any manner change or modify the scheduling or implementation of the Phase II Report or change or modify any AFE previously submitted to GEM pursuant to the terms of this Agreement. (b) Within ninety (90) days of Ohio CumberlandTriangle’s receipt of the Third Prospect Lease Payment, the Operator shall commence operations for Phase III, in accordance with the Phase II Report. The Phase III operations will begin the development drilling of the Cumberland Triangle Prospect Area. Phase III will end at the point in time when GEM has met the Carried Interest Amount as defined in Section 3.5 below. (c) In addition to the payment of the Third Prospect Lease Payment, GEM shall pay all of the costs for all operations to be conducted in Phase III until GEM has paid the Carried Interest Amount. Subject to the provisions of Section 3.7, GEM shall pay 100% of the actual costs incurred for Phase III until GEM has paid the Carried Interest Amount. Within ten (10) days after Ohio CumberlandTriangle’s receipt of the Third Prospect Lease Payment, the Operator shall submit to GEM an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the first calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall contemporaneously deliver a fully executed AFE. Thereafter the Operator shall submit to GEM at least thirty (30) days prior to the next calendar quarter an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the next calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall deliver an executed AFE with its payment. The Operator shall continue to submit AFE’s on a quarterly basis until such time as the Carried Interest Amount has been reached. Once the Carried Interest Amount is met, then Phase III shall end. Subject to Section 9.16 of this Agreement, failure by GEM to timely pay the full amount of each AFE submitted by the Operator for the Phase III costs shall cause the Agreement to terminate and become null and void as between the Parties. GEM shall only be entitled to an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well.