EXIBIT 99
JOINT DEVELOPMENT AGREEMENT
(Buffalo Creek Prospect - Dundy County, Nebraska)
by and among
▇▇▇▇▇▇▇ PRODUCTION CORPORATION,
KODIAK PETROLEUM, INC.
and
SYNERGY RESOURCES CORPORATION
dated effective August 1, 2014
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JOINT DEVELOPMENT AGREEMENT
(Buffalo Creek Prospect - Dundy County, Nebraska)
This JOINT DEVELOPMENT AGREEMENT (the "Agreement") is dated effective as
of the 1st day of August, 2014, (the "Effective Date"), by and among ▇▇▇▇▇▇▇
PRODUCTION CORPORATION, a Colorado corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("JPC"), KODIAK PETROLEUM, INC., a Colorado
corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Kodiak") and SYNERGY RESOURCES CORPORATION, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("Synergy"). JPC, Kodiak and Synergy are sometimes referred to hereinafter
individually as a "Party" or collectively as the "Parties".
In consideration of the mutual covenants and agreements contained herein,
the benefits to be derived by each Party hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
JPC, Kodiak and Synergy represent, warrant and agree as follows.
I. DEFINITIONS
When referred to in this Agreement, and unless otherwise specified:
A. The term "Acquisition Costs" means 100% of the cost incurred by a Party
to acquire an Oil and Gas Interest in the Contract Area, and shall include any
direct payment for the Oil and Gas Interest (e.g. bonus payments or other cash
consideration) and a reasonable charge for the costs and expenses incurred by
the Acquiring Party to employee the field landmen, lease brokers, attorneys and
other consultants needed to identify the ownership of the Oil and Gas Interest,
negotiate the acquisition of the Oil and Gas Interest, and cure the Oil and Gas
Interest (if any).
B. The term "Commence" or "Commencement" of a Test Well, as described
hereinafter, means spudding the Test Well with a rig capable of reaching the
intended total depth.
C. The term "Contract Area" means the following described lands in Dundy
County, Nebraska, as shown on the Plat attached hereto as Exhibit B:
▇▇▇, ▇▇▇▇, ▇▇▇ P.M.
Sections 1 - 18: All
T3N, R41W, 6th P.M.
Sections 19 - 36: All
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D. The term "Drilling and Completion" or "Drill and Complete" means the
following:
(1) pre-drilling activities related to the drilling of a Test Well (as
defined below) such as surveying, construction of the drillsite and
roads, the installation of tanks, pits, disposal facilities and other
equipment necessary to drill the Test Well, and obtaining all
necessary permits and title work, spacing and pooling orders and
agreements, (including the employment of attorneys, landmen and other
consultants to the extent directly associated with any of the
foregoing); and
(2) the moving on and "rigging up" of a drilling rig capable of drilling
to the proposed depth of the Test Well, the commencement of drilling
operations for the Test Well, the completion of the bore hole for
testing purposes, and the testing of all potentially productive
geologic formations in the wellbore; and
(3) if the Test Well is Drilled and Immediately Abandoned ("D&A") as a dry
hole: the plugging and abandonment of the Test Well and all costs to
reclaim the drillsite; or
(4) if the Test Well is to be completed as a producer of oil or liquid
hydrocarbons: taking all steps, and installing all other equipment in
and on the Test Well and the Spacing Unit for the Test Well, necessary
to complete the well "through the tanks" and allow the well to produce
commercial quantities of marketable oil and liquid hydrocarbons, and
to be able to temporarily store said production at the wellsite; or
(5) if the Test Well is completed as a producer of gas and related
substances: taking all steps, and installing all equipment in and on
the Test Well and the Spacing Unit for the Test Well, necessary to
complete the well and allow the well to produce commercial quantities
of gas and related substances, including the installation of surface
equipment such as dehydrators, separators, lac units and
heater/treaters located on the wellsite.
The term "Drilling and Completion" or "Drill and Complete" shall not
include:
(6) the acquisition, maintenance or extension of the Pre-Owned Leases or
Jointly Owned Interests (as defined below); and
(7) operations necessary to maintain a Test Well after it is completed,
tested, and equipped "through the tanks" as a well capable of
production in paying quantities, such as a re-work or re-completion
operation, or (ii) the construction and installation of gathering
systems and pipelines required to collect and transport gas produced
by each well, and transmission and/or processing facilities located
off of the wellsite.
E. The term "Costs of Drilling and Completion" or the term "Cost to Drill
and Complete" shall mean 100% of the cumulative cost of the Drilling and
Completion of a Test Well.
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F. Intentionally deleted.
G. The term "Jointly Owned Interest" means any Oil and Gas Interest located
in the Contract Area, whether a portion of a Pre-Owned Lease, as defined below,
or an Acquired Interest (as defined in Section IV.C., below) in which Synergy
and JPC each own one-half of the interest.
H. The term "Oil and Gas Interest" means any oil and gas lease, fee mineral
interests, or any other interest in oil, gas and related hydrocarbons acquired
by either Party to this Agreement in the Contract Area during the terms of this
Agreement.
I. The term "Pre-Owned Leases" means the oil and gas leases that were
acquired by Synergy within the Contract Area on or before May 9, 2014, which are
more particularly described on Exhibit A to this Agreement.
J. The term "Spacing UnitK. " for purposes of this Agreement shall be
defined as the "160-acre" quarter Section in which the Test Well is located.
K. The term "Test Well" means any one of the ten (10) Test ▇▇▇▇▇ that JPC
and Kodiak have the right, but not the obligation, to Drill and Complete, down
to a depth sufficient to test the Lansing-Kansas City formation in the Contract
Area, pursuant to the terms of this Agreement.
II. TERM OF AGREEMENT and JPC's OPTION TO DRILL TEST ▇▇▇▇▇
A. Initial Term of this Agreement. The "Initial Term" of this Agreement
shall be the one (1) year period following the Effective Date of this Agreement.
B. JPC's Option to Drill Test ▇▇▇▇▇. JPC shall have the option, but not the
obligation, to Drill and Complete a maximum of ten (10) Test ▇▇▇▇▇ during the
term of this Agreement. The maximum term of this Agreement is five (5) years
from the Effective Date of this Agreement.
C. Test Well Requirements. Any Test Well proposed by JPC must be located on
the Contract Lands. Otherwise, the location of each Test Well will be determined
at the sole discretion of JPC. Each Test Well must be drilled by JPC or Kodiak,
as Operator, pursuant to the terms of the A.A.P.L. 610-1989 Model Form Operating
Agreement (attached hereto as Exhibit C and incorporated by reference herein),
and in accordance with standards of an experienced and prudent oil and gas
operator.
D. Spacing Unit Requirement. Unless otherwise agreed to by the Parties, the
Spacing Unit for each Test Well must include Pre-Owned Leases which contributes
a majority of the total working interest in the Spacing Unit for the Test Well.
E. Extension of the Initial Term. In the event JPC or Kodiak Drills and
Completes a minimum of two (2) Test ▇▇▇▇▇ within the Initial Term, the term of
this Agreement shall be extended for an additional one (1) year period, and will
likewise be extended for additional successive one-year periods, up to a maximum
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of four additional successive one-year periods, until JPC or Kodiak has Drilled
and Completed ten (10) Test ▇▇▇▇▇, but only on the condition that JPC or Kodiak
Drills and Completes a minimum of two (2) Test ▇▇▇▇▇ in each one year extension
of the Initial Term, subject to Synergy having the sole and absolute discretion
to waive this condition as set forth in Section II.F. directly below.
F. Termination of this Agreement. Notwithstanding the foregoing, this
Agreement shall terminate upon the earliest occurrence of one of the following
events:
(1) at the end of the Initial Term, in Synergy's sole and absolute
discretion, if JPC or Kodiak fails to Drill and Complete Two (2) Test
Well in the Contract Area during the Initial Term;
(2) at the end of any extended one year term of this Agreement, in
Synergy's sole and absolute discretion, if JPC or Kodiak fails to
Drill and Complete two (2) Test Well in the Contract Area within said
extended one-year term;
(3) upon the date of completion "through the tanks" of the tenth Test
Well; or
(4) five (5) years from the Effective Date of this Agreement.
G. Interest to be Earned by JPC in each Test Well. If JPC elects to Drill
and Complete a Test Well, Synergy shall be obligated to participate in the Test
Well on the following terms:
(1) JPC shall pay 5/8ths of the Cost of Drilling and Completing the Test
Well that is attributable to the combined working interest owned by
Synergy and JPC in those portions of the Pre-Owned Leases and Jointly
Owned Interests that are located within the Spacing Unit for the Test
Well, to earn (i) one-half of the combined working interest of Synergy
and JPC in the wellbore of the Test Well and in the oil and/or gas
production attributable to said wellbore interest; (ii) one-half of
the combined interest of Synergy and JPC in that portion of the
Pre-Owned Leases located in the Spacing Unit; and (iii) 5% of
Synergy's original interest in those portions of the Pre-Owned Leases
that are located outside of any Spacing Unit for a Test Well, as
further described in Section III.B below.
(2) Synergy shall pay 3/8ths of the Costs of Drilling and Completing the
Test Well that is attributable to the combined working interest owned
by Synergy and JPC in those portions of the Pre-Owned Leases and
Jointly Owned Interests that are located within the Spacing Unit for
the Test Well, to own one-half of the combined working interest of
Synergy and JPC in the wellbore of the Test Well along with the oil
and gas production attributable to said interest. Synergy shall retain
the equivalent of one-half of the combined interest of Synergy and JPC
in the Pre-Owned Leases located in the Spacing Unit for the Test Well,
and will also retain that portion of its original working interest in
any of the Pre-Owned Leases not located in a Spacing Unit for a Test
Well that has not been earned by JPC pursuant to the provisions of
Section III.B.
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III. ACREAGE TO BE EARNED BY JPC AFTER
DRILLING AND COMPLETING EACH TEST WELL
A. Working Interest Earned by JPC in Pre-Owned Leases Located in Spacing
Unit. Upon the Drilling and Completion of any Test Well pursuant to the terms of
this Agreement, JPC shall earn one-half of the combined interest of Synergy and
JPC in the working interest and associated net revenue interest in that portion
of any Pre-Owned Lease located within the Spacing Unit for the Test Well.
Synergy shall deliver an assignment of the working and net revenue interest
earned by JPC hereunder in the applicable portions of the Pre-Owned Leases,
without warranty of title other than by and through Synergy, but subject to the
ORI reservation described in Section III.D. below, within thirty (30) business
days of the completion of the Test Well "through the tanks".
B. Additional Interests Earned by JPC in Pre-Owned Leases. Upon the
Drilling and Completion of any Test Well pursuant to this Agreement, JPC shall
have earned one-half (1/2) of one-tenth (1/10th) of Synergy's original working
interest and associated net revenue interest in those portions of the Pre-Owned
Leases described on Exhibit A that are not located in a Spacing Unit for a Test
Well. Synergy shall be obligated to deliver an assignment to JPC of a 5%
interest in the applicable portions of the Pre-Owned Leases, without warranty of
title other than by and through Synergy, but subject to the ORI reservation
described in Section III.D. below, within thirty (30) business days of the
completion of the Test Well "through the tanks".
C. Limitation on the Interest to be Earned Under Agreement. Notwithstanding
any provision in this Agreement to the contrary, JPC shall never earn, and shall
never be entitled to assignment of: (i) more than one-half of Synergy's original
working interest in any Pre-Owned Lease, or (ii) any portion of Synergy's
one-half share in any Jointly Owned Interest.
D. Reservation of Overriding Royalty Interest in Pre-Owned Leases. Any
assignment from Synergy to JPC of an interest in a Pre-Owned Lease shall be
subject to a reservation by Synergy of an overriding royalty interest in said
lease equal to the difference between existing LOR and ORI burdens on the
Pre-Owned Lease and 16.0%, proportionately reduced to reflect the working
interest in the Pre-Owned Lease that is assigned from Synergy to JPC.
E. Illustration of Earning by JPC. The following examples, based on the
fact situation presented below, are provided to clarify the interest that JPC
will earn in the Pre-Owned Leases as a result of drilling seven of ten Test
▇▇▇▇▇ pursuant to the terms of this Agreement:
Facts
1. JPC will Drill and Complete a total of ten (10) Test ▇▇▇▇▇.
2. Synergy's original interest in the Pre-Owned Leases cover 8,086 gross
acres and 8,011 Net Mineral Acres.
3. The Spacing Unit for each Test Well consists of a quarter section
wholly within the Contract Area covering 160 acres.
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4. Each Spacing Unit consists of Pre-Owned Leases covering 100% all of
the mineral rights in the Spacing Unit, i.e., 160 gross and net acres
of Pre-Owned Leases.
(A) When JPC Drills and Completes the first Test Well, JPC shall earn:
(1) One-Half of the combined 100% interest of Synergy (100%) and JPC
(0%) in the 160 Net Mineral Acres in those portions of the
Pre-Owned Leases located in the Spacing Unit for the first Test
Well (i.e. a 50% working interest, or 80 Net Mineral Acres);
(2) Five Percent (5%) (i.e., 1/2 x 1/10th) of Synergy's 7851 Net
Mineral Acres (8011 - 160 = 7851) of Pre-Owned Leases remaining
after excluding that portion of the Pre-Owned Leases located in
the Spacing Unit for the first Test Well (i.e. 392 Net Mineral
Acres);
(3) All of the interest earned by JPC will be assigned to JPC subject
to the ORI reserved by Synergy in Section III.D. above.
(B) When JPC Drills and Completes the second Test Well, JPC shall earn an
additional:
(1) One-Half of the combined 100% interest of Synergy (95%) and JPC
(5%) in the 160 Net Mineral Acres covered by the portion of the
Pre-Owned Leases located in the Spacing Unit for the second Test
Well. Since JPC already owns 8 Net Mineral Acres in the Pre-Owned
Leases covering the Spacing Unit (i.e., 1/2 x 1/10th of the 160
Net Mineral Acres originally owned by Synergy) Synergy will only
be obligated to assign JPC an additional 72 Net Mineral Acres, or
a 45% working interest, in the Spacing Unit in order to give
Synergy and JPC an equal interest the Spacing Unit (i.e. a 50%
working interest, or 80 Net Mineral Acres);
(2) Five Percent (5%) (i.e. 1/2 x 1/10th) of Synergy's 7691 Net
Mineral Acres (7851 - 160 = 7691) of Pre-Owned Leases remaining
after excluding the Pre-Owned Leases located in the Spacing Unit
for the first and second Test Well, less the 8 Net Mineral Acres
JPC already owned in the Spacing Unit for the second Test Well
(i.e. 376 Net Mineral Acres);
(3) All of the interest assigned to JPC in the second Test Well will
be subject to the ORI reserved by Synergy in Section III.D.
above.
(C) When JPC Drills and Completes the third Test Well, JPC shall earn an
additional:
(1) One-half of the combined interest of Synergy (90%) and JPC (10%)
in the 160 Net Mineral Acres covered by the portion of the
Pre-Owned Leases located in the Spacing Unit for the third Test
Well. Since JPC already owns 16 Net Mineral Acres in the
Pre-Owned Leases covering the third Spacing Unit (i.e., 1/2 of
2/10ths of the 160 Net Mineral Acres that Synergy originally
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owned in the third Spacing Unit) Synergy will only be obligated
to assign an additional 64 Net Mineral Acres, or a 40% working
interest, in the Spacing Unit to JPC in order to give Synergy and
JPC an equal interest the Spacing Unit (i.e. a 50% working
interest, or 80 Net Mineral Acres);
(2) Five Percent (5%) (i.e. 1/2 x 1/10th) of Synergy's 7531 Net
Mineral Acres (7691 - 160 = 7531) of Pre-Owned Leases remaining
after excluding the Pre-Owned Leases located in the Spacing Unit
for the first, second and third Test ▇▇▇▇▇, less the 16 Net
Mineral Acres JPC already owned in the Spacing Unit for the third
Test Well (i.e. 360 Net Mineral Acres);
(3) All of the interest assigned to JPC in the third Test Well will
be subject to the ORI reserved by Synergy in Section III.D.
above.
(D) After JPC Drills and Completes the three Test ▇▇▇▇▇, JPC shall have
earned the following cumulative interest in the Pre-Owned Leases.
(1) One-Half of Synergy's original 480 Net Mineral Acres in those
portions of the Pre-Owned Leases located in the three Spacing
Units for the first three Test ▇▇▇▇▇ (i.e. 240 Net Mineral
Acres);
(2) 15% (i.e., 1/2 x 1/10th x 3 Test ▇▇▇▇▇) of Synergy's 7531 Net
Mineral Acres (8011 - 480 = 7531) of Pre-Owned Leases remaining
after excluding the 480 Net Mineral Acres of Pre-Owned Leases
located in the Spacing Units for the three Test ▇▇▇▇▇ (i.e. 1129
Net Mineral Acres);
(3) All of the cumulative interest earned by JPC, as described above,
will bear the ORI reserved by Synergy in Section III.D above.
(E) After JPC Drills and Completes a total of seven (7) Test ▇▇▇▇▇, JPC
shall have earned a cumulative:
(1) One-Half of Synergy's original Net Mineral Acres in the portions
of the Pre-Owned Leases covering the seven Spacing Units for the
seven Test Well (i.e., 560 Net Mineral Acres);
(2) 35% (i.e., 1/2 x 1/10th x 7 Test ▇▇▇▇▇) of Synergy's 6891 Net
Mineral Acres (8011 - 1120 = 6891) of the Pre-Owned Leases
remaining after excluding the 1120 Net Mineral Acres of Pre-Owned
Leases located in the seven Spacing Units for the seven Test
▇▇▇▇▇ (i.e. 2412 Net Mineral Acres);
(3) All interest earned by JPC, as described above, will be subject
to the ORI reserved by Synergy in Section III.D above.
(F) After JPC Drills and Completes a total of ten (10) Test ▇▇▇▇▇, JPC
shall have earned a cumulative:
(1) One-Half of Synergy's original Net Mineral Acres in the portions
of the Pre-Owned Leases covering the ten Spacing Units for the
ten Test ▇▇▇▇▇ (i.e., 800 Net Mineral Acres);
(2) 50% (i.e., 1/2 x 1/10th x 10 Test ▇▇▇▇▇) of Synergy's 6411 Net
Mineral Acres (8011 - 1600 = 6411) of the Pre-Owned Leases
remaining after excluding the 1600 Net Mineral Acres of Pre-Owned
Leases located in the ten Spacing Units for the ten Test ▇▇▇▇▇
(i.e. 3205 Net Mineral Acres);
(3) All interest earned by JPC, as described above, will be subject
to the ORI reserved by Synergy in Section III.D above.
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IV. AREA OF MUTUAL INTEREST
A. Area of Mutual Interest. The execution of this Agreement will cause the
establishment of an Area of Mutual Interest ("AMI"), comprised of the Contract
Area as shown on the Plat attached hereto as Exhibit B, which shall remain
binding on the Parties during the term of this Agreement but no longer than (5)
years from the Effective Date of this Agreement.
B. Intentionally deleted.
C. The Rights of the Parties to Leases Acquired in the AMI. If, during the
term of the AMI, any Party acquires an Oil and Gas Interest within the AMI
(hereinafter referred to as an "Acquired Interest"), whether by leasing,
farm-in, purchase from a third party lessee or otherwise, the Party that
acquires the Acquired Interest (the "Acquiring Party") shall deliver written
notice of the acquisition to the other Party (the "Non-Acquiring Party"), by
certified mail, within fifteen (15) days of the date of the acquisition (the
"Notice"). The Notice must include a copy of the instrument creating the
Acquired Interest (e.g. an oil and gas lease or mineral deed), any title
documents defining the title and quantity of the Acquired Interest (e.g.
ownership reports and run sheets), and documentation of the Acquisition Cost, as
defined above, of the Acquired Interest. The Non-Acquiring Party shall have
fifteen (15) days from receipt of the Notice in which to provided notice to the
Acquiring Party, in writing, delivered by certified mail, of its decision
whether or not to acquire one-half of the Acquired Interest. If the
Non-Acquiring Party elects to acquire one-half of the Acquired Interest, the
Non-Acquiring Party shall tender to the Acquiring Party, within thirty (30) days
of its election, one-half of the Acquisition Costs of the Acquired Interest, and
the Acquiring Party shall, within thirty (30) days of receipt of the
Non-Acquiring Party's share of the Acquisition Costs, deliver an assignment of
one-half of the Acquired Interest to the Non-Acquiring Party, without
reservation. Failure of the Non-Acquiring Party to respond to the Notice within
fifteen (15) days, or to deliver its share of the Acquisition Costs to the
Acquiring Party within the following (30) days, shall be deemed a waiver and
release, by the Non-Acquiring Party, of any present or future right to a share
of the Acquired Interest. Any Acquired Interest in which the Non-Acquiring Party
elects to participate for a one-half share shall be referred to hereinafter as a
"Jointly Owned Interest".
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V. OTHER OPERATIONS IN THE CONTRACT AREA
A. Generally. All operations conducted by the Parties in the Contract Area
shall be conducted by Kodiak, as Operator, in accordance with the terms of the
A.A.P.L. Form 610-1989 MODEL FORM OPERATING AGREEMENT (hereinafter referred to
as the "JOA") that is attached as Exhibit C to this Agreement. The "Preferential
Right to Purchase" provision described in Article VIII.F of the JOA shall be
deleted. The provisions in the JOA regarding the maintenance of the uniform
interest of the Parties to the JOA shall be amended to permit the ownership and
assignments of different working interest in different lands within the Contract
Area as provided for in this Agreement. However, if the working interest of
Synergy and JPC in the wellbore of a Test Well is different from the working
interest of the same Parties in the Spacing Unit for the same Test Well, then
notwithstanding anything in this Agreement or in the JOA to the contrary, the
cost of operating and maintaining the wellbore of said Test Well, or the cost of
subsequent operations to deepen, plug back or recomplete the well bore of said
Test Well, and the ownership of the production from the wellbore of said Test
Well, will be apportioned among the Parties in the same proportion as their
respective ownership of the wellbore of said Test Well.
B. Cash Calls. Kodiak shall have the right, with regard to any Test Well,
to obtain from Synergy an advance of Synergy's share of the estimated cost of
the Test Well, but only in accordance with the terms and provisions of Article
VII.C of the JOA attached as Exhibit C to this Agreement. However,
notwithstanding the provisions of Article VII.C of the JOA, Kodiak shall be
obligated to refund to Synergy, immediately, the full amount of any the advance
if the subject Test Well is not commenced within 30 days, and any amount of the
advance that is in excess of Synergy's share of the actual cost of the Test
Well.
▇. ▇▇▇ Coverage if No Test Well is Drilled and Completed. If JPC fails to
drill any Test Well in the Contract Area within the initial one-year term of
this Agreement, the JOA shall remain in full force and effect as to any Jointly
Owned Interests acquired by the Parties prior to termination of this Agreement,
but shall not apply to, and JPC and Kodiak shall release any claim to, the
Pre-Owned Leases.
D. Conflict Between Joint Development Agreement and JOAE. . In the event of
a conflict between the terms and conditions of the JOA and this Agreement, the
terms and conditions of this Joint Development Agreement shall control.
E. Synergy's Unrestricted Right to Access, Records and Reports.
Notwithstanding anything in the JOA to the contrary, and even if Synergy has
elected not to participate in any operation proposed by any party under the JOA,
Synergy shall nevertheless be entitled to access to the Contract Area and to the
records of operations as described and provided for in Article V.D.5 of the JOA,
and shall further be entitled to the reports, test results and notices regarding
progress of operations as described and provided for in Articles V.D.5 and V.D.7
of the JOA.
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VI. REPRESENTATIONS OF JPC AND KODIAK
A. Existence. JPC and Kodiak (referred to hereinafter as "JPC") are duly
organized, validly existing, corporations in good standing under the laws of the
State of Colorado, and have all requisite power and authority to own and operate
the Oil and Gas Interests to be acquired under the terms of this Agreement.
B. Authorization. JPC possesses all authority necessary to enter into this
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf. This Agreement shall constitute a
legal, valid, and binding obligation of JPC, enforceable in accordance with its
terms, except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
C. Power. Subject to restrictions on assignment of the type typically found
in the oil and gas industry, and to rights to consent by, required notices to,
and filings with or actions by other governmental entities, JPC's execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby will not: (i) violate or conflict with any provision of its certificate
of incorporation, by-laws, or other governing documents; (ii) result in the
breach of any term or condition of, or constitute a default or cause the
acceleration of any obligation under any agreement or instrument to which JPC is
a party or by which it is bound; or (iii) violate or conflict with any
applicable judgment, decree, order, permit, law, rule, or regulation.
D. Brokers. JPC has incurred no liability, contingent or otherwise, for
brokers', finders' or similar fees or commissions of an intermediary in respect
of the execution, delivery or performance of this Agreement and the transactions
contemplated by this Agreement, for which JPC shall have any responsibility
whatsoever.
E. Foreign Person. Status. JPC is not a "foreign person" within the meaning
of the Internal Revenue Code of 1986, as amended (the "Code"), Articles 1445 and
7701 (i.e. JPC is not a nonresident alien, foreign corporation, foreign
partnership, foreign trust, or foreign estate as those terms are defined in the
Code and any regulations promulgated thereunder).
F. No Development. Neither JPC nor any of its affiliates have conducted oil
and gas drilling, development or production operations in the Contract Area.
Except as expressly contemplated by this Agreement, JPC has not entered into any
commitments for expenditures for the development or operation of the Contract
Area, and has no proposals currently outstanding to drill ▇▇▇▇▇ or conduct other
exploration or development operations within the Contract Area.
G. Records. To the best of JPC's knowledge, there are no unrecorded
documents or agreements which would result in the impairment or loss of JPC's
title to the Oil and Gas Interests in the Contract Area, the reduction in the
value thereof, or that would impede operations thereon.
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VII. REPRESENTATIONS OF SYNERGY
A. Existence. Synergy is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Colorado, and has all
requisite power and authority to own, operate the Pre-Owned Leases, acquire
additional oil and gas leases in the Contract Area, and make the assignments of
oil and gas leases provided for in this Agreement.
B. Authorization. Synergy has all authority necessary to enter into this
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf, and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
C. Power. Synergy`s execution, delivery, and performance of this Agreement
and the transactions contemplated hereby will not: (i) violate or conflict with
any provision of its certificate of incorporation, by-laws, or other governing
documents; (ii) result in the breach of any term or condition of, or constitute
a default or cause the acceleration of any obligation under any agreement or
instrument to which it is a party or by which it is bound; or (iii) violate or
conflict with any applicable judgment, decree, order, permit, law, rule, or
regulation.
D. Brokers. Synergy has incurred no liability, contingent or otherwise, for
brokers', finders' or similar fees or commissions of an intermediary in respect
of the execution, delivery or performance of this Agreement and the transactions
contemplated by this Agreement, for which Synergy shall have any responsibility
whatsoever.
E. No Development. Neither Synergy nor any of its Affiliates have conducted
oil and gas drilling, development or production operations in the Contract Area.
Except as expressly contemplated by this Agreement, Synergy has not entered into
any commitments for expenditures for the development or operation of the
Contract Area, other than expenses incurred in connection with acquiring the
Pre-Owned Leases within the Contract Area, and has made no other proposals that
are currently outstanding to drill ▇▇▇▇▇ or conduct other exploration or
development operations within the Contract Area.
F. Records. To the best of Synergy's knowledge, there are no unrecorded
documents or agreements which would result in the impairment or loss of
Synergy's title to the Pre-Owned Leases of the Oil and Gas Interests in the
Contract Area, the reduction in the value thereof, or that would impede
operations thereon.
VIII. ADDITIONAL PROVISIONS
A. No Mining Partnership. The liability of the Parties under this Agreement
shall be several, not joint or collective. Each party shall be responsible only
for its obligations, and shall be liable only for its proportionate share of the
costs of developing and operating the Contract Area. It is not the intention of
the parties to create, nor shall this agreement be construed as creating, a
mining or other partnership, joint venture, agency relationship or association,
or to render the parties liable as partners, co-venturers, or principals.
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B. No Partnership or Tax Partnership. This Agreement in not intended to
create, nor shall it be construed to create, a relationship of partnership or an
association for profit among the Parties. If, for federal income tax purposes,
this Agreement and the operations hereunder are regarded as a partnership, each
party thereby affected elects to be excluded from the application of all of the
provisions of Subchapter "K," Chapter 1, Subtitle "A," of the Internal Revenue
Code of the 1986, as amended ("Code"), as permitted and authorized by Section
761 of the Code and the regulations promulgated thereunder.
C. Limitations on the Creation of Additional Burdens on the Pre-Owned
Leases. During the term of this Agreement, both Parties are prohibited from
creating any additional ORI burdens on production from the Pre-Owned Leases
other than the ORI burdens existing of record as of the date of execution of
this Agreement and the ORI provided for in Section III.C. above. However,
notwithstanding anything in this provision or the attached JOA to the contrary,
once Synergy has assigned JPC an interest in a Pre-Owned Lease pursuant to the
terms of this Agreement, for as long as this Agreement and the JOA attached as
Exhibit C to this Agreement remains in force and effect, either Party may create
additional burdens on their share of the working interest and net revenue
interest in said Pre-Owned Leases (referred to hereinafter as an "Excess
Burden") except that during the term of this Agreement, an Excess Burden created
by one Party shall never be a burden on the share of production of the other
Party, including but not limited to the share of production that a Party is
entitled to receive from the wellbore of a well as a result of an election by
the other Party to "non-consent" any operation proposed by the Operator in the
Contract Area.
D. Recording of Documents. In any transaction described in this Agreement
wherein one Party (the "Assignor") is obligated to assign or convey an Oil and
Gas Interest in the Contract Area to the other Party (the "Assignee"), the
Assignee shall be responsible for the filing or recording of the Assignment in
the applicable County records, and shall pay all documentary, filing, and
recording fees incurred in connection with the filing and recording of the
Assignment. The Assignee shall provide the Assignor with copies of all recorded
and filed instruments.
E. Further Assurances. The Parties shall execute, acknowledge, and deliver
any other documents and shall take such other actions as may be reasonably
necessary to carry out their obligations under this Agreement and fulfill the
intent of the transactions contemplated hereby.
F. Notices. All notices under this Agreement must be in writing. Any notice
under this Agreement, except notice of an Acquired Interest as provided for in
Section IV.C., may be given by personal delivery, e-mail transmission with
receipt confirmed by recipient, U.S. mail (postage prepaid), or commercial
delivery service, and will be deemed duly given when received by the party
charged with such notice and addressed as follows:
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JPC and Kodiak: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Office: 303-970-7550
Mobile: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Synergy: ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Office: 970-737-1073
Email: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Email: ▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
G. Notice of Change. Any Party may, by written notice, properly delivered
to the other Party, change the name or address of the individual to whom
delivery of all notices shall thereafter be made.
H. Compliance with Laws. This Agreement is subject to all valid and
applicable statutes, laws, rules, regulations and ordinances of any federal,
state or local regulatory body or governmental authority having jurisdiction
thereof, and all operations hereunder shall be conducted in conformity
therewith.
I. Amendment. This Agreement may not be amended, nor any rights hereunder
waived, except by an instrument in writing signed by the Parties.
J. Entire Agreement. This Agreement (and all the Exhibits hereto)
constitute the entire understanding among the parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions, and
prior agreements and understandings relating to such subject matter.
K. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of, the Parties hereto and, except as otherwise prohibited,
their respective successors and assigns. Except as otherwise stated herein,
nothing contained in or implied from this Agreement, is intended to confer upon
any other person or entity any benefits, rights, or remedies.
L. Severability. If a court of competent jurisdiction determines that any
clause or provision of this Agreement is void, illegal, or unenforceable, the
other clauses and provisions of the Agreement shall remain in full force and
effect and the clauses and provisions which are determined to be void, illegal,
or unenforceable shall be limited so that they shall remain in effect to the
extent permissible by law.
M. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Colorado
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N. Expenses. All expenses incurred by a Party in connection with or related
to the authorization, preparation or execution of this Agreement or the
documents to be delivered hereunder shall be borne and paid entirely by that
Party.
O. Counterpart. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document. Delivery of an executed counterpart signature page of this Agreement
by facsimile or by electronic transmittal is as effective as executing and
delivering this Agreement in the presence of the other Parties to this
Agreement.
P. Assignment. This Agreement shall not be assigned by either Party without
the prior written consent of the other Party, which consent shall not be
unreasonably withheld.
Q. Interpretation. The Parties stipulate and agree that this Agreement
shall be deemed and considered for all purposes to have been jointly prepared by
the Parties, and shall not be construed against any Party (nor shall any
inference or presumption be made) on the basis of who drafted this Agreement or
any particular provision hereof, who supplied the form of Agreement, or any
other event of the negotiation, drafting or execution of this Agreement. Each
Party agrees that this Agreement has been purposefully drawn and correctly
reflects the transaction contemplated by the Party.
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IN WITNESS WHEREOF, this Agreement is executed to be effective as of the
Effective Date.
▇▇▇▇▇▇▇ PRODUCTION CORPORATION,
a Colorado corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ August 15, 2014
------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: President
KODIAK PETROLEUM, INC.,
a Colorado corporation
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ August 15, 2014
------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: President
SYNERGY RESOURCES CORPORATION,
a Colorado corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. August 16, 2014
------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Co-Chief Executive Officer
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EXHIBIT A
To Joint Development Agreement
dated effective August 1, 2014
PRE-OWNED LEASES
17
EXHIBIT B
To Joint Development Agreement
dated effective August 1, 2014
PLAT OF CONTRACT AREA / AREA OF MUTUAL INTEREST
18
19
EXHIBIT C
To Joint Development Agreement
dated effective August 1, 2014
JOINT OPERATING AGREEMENT
19