PROSPECT GENERATION AGREEMENT
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This Prospect Generation Agreement ("Agreement") is executed as of May 1,
2004, ("Effective Date") between PETROSEARCH CORPORATION, A TEXAS CORPORATION
("Petrosearch") and XXXXXX EXPLORATION, INC. ("Xxxxxx Group").
RECITALS:
X. Xxxxxx Group, which is an organization comprised of several experienced
geologists, has identified to Petrosearch multiple, potentially productive,
geologic prospects within the area known as the Anadarko Basin of Western
Oklahoma, Eastern Colorado and Northern Texas, each of which is projected to
contain multiple drillsites and geologic zones of interest, subject to the
availability of the underlying leases which are not currently in place
(collectively, including future identified prospects, being herein called the
"Prospects").
X. Xxxxxx Group has offered to Petrosearch for its exploration subsidiaries
and Petrosearch desires to accept, the first and prior exclusive right and
opportunity to acquire any and all Prospects generated by Xxxxxx Group, and
Petrosearch and Xxxxxx Group desire to enter into this Agreement to stipulate as
to the terms and conditions of the strategic alliance, including specific
stipulations regarding the initial ten (10) Prospects.
TERMS OF AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
Petrosearch and Xxxxxx Group agree as follows:
1. FUNDING OF INITIAL TEN (10) PROSPECTS. Petrosearch shall pay to
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Xxxxxx Group, upon execution hereof, the sum TWENTY THOUSAND AND NO/100 DOLLARS
($20,000.00) [the "Initial Capital Costs Payment"], which shall be allocated to
the Prospects delivered to and accepted by Petrosearch in the month of May as a
portion of the acquisition costs related to each such Prospect. The Initial
Capital Costs Payment shall be considered non-refundable and shall be allocated
to the Prospects delivered and accepted by Petrosearch in the sole discretion of
Petrosearch. As to each accepted Prospect, Petrosearch shall thereafter design
and fund, in its sole discretion, a leasing program with area land personnel in
order to secure the oil and gas leases necessary to complete the Prospect
acreage, subject to lease availability. Commencing with the second month of
this Agreement and continuing for each additional month of the Term (defined
below), Petrosearch shall pay to Xxxxxx Group a like cash payment of $20,000.00
which shall be allocated as an advance Capital Costs Payment to be allocated
among the additional prospects delivered in that month.
2. ADDITIONAL CONSIDERATION FOR PURCHASE-COMMON STOCK. As additional
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consideration for the capital costs of the Prospects delivered by Xxxxxx Group
to Petrosearch, Petrosearch shall assign and deliver to Xxxxxx Group, or its
identified designees, ONE HUNDRED THOUSAND shares of Petrosearch Common Stock,
par value $0.001. The shares shall be restricted shares in accordance with the
provisions of SEC Rule 144(a)(3) and the certificate evidencing same shall
contain a customary Rule 144 legend. The shares shall be allocated to the
initial ten (10) Prospects as a part of the non refundable capital costs of
acquisition. Petrosearch and Xxxxxx Group further stipulate and agree that no
warranties and representations are made by Petrosearch or its officers,
directors or representatives regarding the current or future value of such
shares of Common Stock.
3. ADDITIONAL CONSIDERATION FOR PURCHASE-OVERRIDING ROYALTY INTEREST.
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As additional consideration for the Prospects delivered by Xxxxxx Group to
Petrosearch, Petrosearch shall assign to Xxxxxx Group or its identified
designees an overriding royalty in each oil and gas lease acquired by
Petrosearch in the identified Prospect an overriding royalty interest equal to
five and one quarter percent of one hundred percent (5.25% of 100%) of the oil
and gas produced and saved from the lands covered by the leases, all subject to
proportionate reduction for leases covering less than one hundred percent (100%)
of the underlying mineral fee simple interests. Such assignments shall be
delivered to Xxxxxx Group or designees promptly after acquisition of the oil and
gas leases by Petrosearch. Xxxxxx Group shall bear the costs associated with
recordation of the overriding royalty assignments. A form of Overriding royalty
assignment is attached hereto as Exhibit A.
4. TERM OF AGREEMENT. This Agreement shall continue for a term of six
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(6) months from the Effective Date, but shall automatically renew for like
six-month periods thereafter unless either party notifies the other party in
writing of its election to terminate this Agreement at least six (6) months
prior to the end of the particular period in which the notice is given.
5. REVIEW PERIOD, RIGHT TO REJECT AND PRESERVATION OF CONFIDENTIALITY.
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Petrosearch shall have up to sixty (60) days (the "Review Period") to review the
Prospect information provided by Xxxxxx Group in order to determine whether the
Prospect is suitable for its purposes. Petrosearch agrees to advise Xxxxxx Group
in writing of its rejection or acceptance of a Prospect within the Review
Period. If a Prospect is rejected, Xxxxxx Group may thereafter present the
Prospect to third parties for consideration. In order to preserve
confidentiality and to prevent competition for leases, Xxxxxx Group shall not
present its Prospects to any third parties for consideration during the Review
Period or after acceptance of a Prospect by Petrosearch. Petrosearch and Xxxxxx
Group agree that this covenant of exclusivity and confidentiality is a material
consideration for the cash, shares and overriding royalty consideration to be
provided to Xxxxxx Group under this Agreement, and, in connection therewith,
Xxxxxx Group shall cause its personnel to maintain confidentiality and to
refrain from participating in or assisting any third party from competing with
Petrosearch in the area of an accepted Prospect. Xxxxxx Group shall execute
contemporaneously with this Agreement the form of Confidentiality and
Non-Circumvention Agreement attached hereto as Exhibit "B" in order to further
these covenants and in order to allow the free flow of information between
Petrosearch and Xxxxxx Group regarding development of the Prospects without
violating Federal Securities guidelines regarding public disclosures, including
the guidelines set forth in Regulation FD.
6. RIGHT TO PARTICIPATE IN DEVELOPMENT. Future development operations
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on the Prospects shall be conducted by Purchaser's affiliate, Petrosearch
Operating Company, L.L.C. for the benefits of Petrosearch's various
subsidiaries. At Xxxxxx Group's election, Xxxxxx Group shall have the right to
participate, at cost and without promotion, as a non-operating working interest
owner of up to five percent (5%) interest (proportionately reduced where
Petrosearch does not own 100% of the working interest in the proposed well) in
each well to be drilled on a Prospect generated by Xxxxxx Group. Once Xxxxxx
Group elects a percentage participation level for the first well in a Prospect
(e.g. 3%, 4%, 5%, etc.), that percentage level shall be the maximum percentage
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(but not the minimum percentage) made available to Xxxxxx Group for the
additional xxxxx in that Prospect in order to facilitate Petrosearch's
responsibilities to other participants in the Prospect. Petrosearch shall
propose an AFE (Authority For Expenditures) to Xxxxxx Group as to each such well
and Xxxxxx Group shall have thirty (30) days within which to pay, in cash, the
dry hole costs reflected. Each participant, including Xxxxxx Group, shall be
given a 15-day cash call as to completion attempts and failure to fund the
completion cost cash call within the 15-day period shall be deemed an election
not to participate in completion. The parties shall enter into an A.A.P.L.
Model Form Operating Agreement (1989) providing for operation by Petrosearch
Operating Company, L.L.C. and containing "drill or drop" provisions governing
cash calls (i.e. failure to fund will result in the participant forfeiting
further participation in the particular well and all future xxxxx in that
Prospect). Xxxxxx Group shall have access, to all physical facilities (at its
sole risk), leases, title work, and Prospect records, including the right to
audit same at Xxxxxx Group's expense.
7. TIME IS OF ESSENCE/ATTORNEYS FEES. Time is of the essence with
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respect to this Agreement and each party hereto shall have the right to specific
performance as to the obligations set forth herein. In the event that either
party seeks enforcement of this Agreement in any legal or equitable proceeding,
the prevailing party in such proceeding shall be entitled to recover from the
other party all expenses attributable to such proceeding, including interest,
court costs and attorneys fees.
8. ENTIRE AGREEMENT. This Agreement, the documents to be executed
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hereunder, and each Exhibit attached hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties pertaining to the subject matter hereof.
9. WARRANTIES. There are no warranties, representations or other
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agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein or in documents delivered pursuant
hereto.
10. AMENDMENTS. No supplement, amendment, alteration, modification,
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waiver or termination of this Agreement shall be binding unless executed in
writing by the parties hereto.
11. WAIVER. No waiver of any of the provisions of this Agreement will
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be deemed or shall constitute a waiver of any other provisions hereof (whether
or not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided in writing.
12. CAPTIONS. The captions in this Agreement are for convenience only
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and may not be considered a part of or as affecting the construction or
interpretation of any provision of this Agreement.
13. ASSIGNABILITY. Purchaser may not assign any of its rights
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hereunder without Seller's written consent. This Agreement binds and inures to
the benefit of the Parties hereto and their respective heirs, successors,
representatives, assigns and transferees.
14. APPLICABLE LAW. THIS AGREEMENT, OTHER DOCUMENTS DELIVERED PURSUANT
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HERETO AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THE VALIDITY OF
THE VARIOUS CONVEYANCES AFFECTING THE TITLE TO REAL PROPERTY SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE PROPERTY IS
LOCATED. THIS AGREEMENT IS PERFORMABLE IN AND VENUE SHALL LIE IN XXXXXX COUNTY,
TEXAS TO THE EXCLUSION OF OTHER VENUES.
15. NOTICES. Any notice, communication, request, instruction or other
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document required or permitted hereunder shall be given in writing by certified
mail, return receipt requested, postage prepaid, or by overnight courier,
prepaid telegram, or personal delivery to following address, unless written
notice of an alternate address is delivered to the sending party prior to its
dispatch of the notice or communication:
If to Xxxxxx Group: Xx. Xxxx X. Xxxxxx
000 X. Xxxx, Xxxxx 000 Xxxxx
Xxxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
If to Petrosearch: Petrosearch Corporation
0000 Xxxxxxx Xxxxx
Xxxxx 000X
Xxxxxxx, Xxxxx 00000
FAX: (000) 000-0000
All notices will be deemed to have been given as of the date of receipt.
16. FEES AND TRANSACTION EXPENSES. Except as otherwise provided
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herein, each party shall be solely responsible for all expenses incurred by it
in connection with this transaction, including, without limitation, fees and
expenses of its own counsel and accountants, and shall not be entitled to any
reimbursement therefor from any other party hereto. The Parties warrant and
represent to each other that no brokerage commission shall become due or owing
to any party as a result of this transaction other than the overriding royalty
interest payable to X. X. Xxx by Petrosearch under a separate Consulting
Agreement of even date.
17. BINDING ARBITRATION. ANY CONTROVERSY OR CLAIM ARISING OUT OF OR
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RELATING TO THIS AGREEMENT, OR THE CONSTRUCTION, INTERPRETATION OR ALLEGED
BREACH THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN HOUSTON,
TEXAS IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES ("RULES") OF THE
AMERICAN ARBITRATION ASSOCIATION IN EFFECT AT THE TIME THE CONTROVERSY OR CLAIM
IS SUBMITTED TO ARBITRATION, PROVIDED, HOWEVER, THAT THE PARTIES MAY MUTUALLY
AGREE TO USE AN ARBITRATION BODY OTHER THAN THE AMERICAN ARBITRATION
ASSOCIATION. THE ARBITRATOR SHALL HAVE JURISDICTION TO DETERMINE ANY SUCH CLAIM
AND MAY GRANT ANY RELIEF OTHER THAN PUNITIVE OR EXEMPLARY DAMAGES AUTHORIZED BY
LAW FOR SUCH CLAIM, INCLUDING SPECIFIC PERFORMANCE. ANY SUCH ARBITRATION SHALL
BE CONCLUDED WITHIN 120 DAYS OF INITIATION OF THE ARBITRATION. ANY CONTROVERSY
OR CLAIM WHICH IS THE SUBJECT OF ARBITRATION SHALL BE DEEMED WAIVED AND SHALL BE
FOREVER BARRED IF ARBITRATION IS NOT INITIATED BY THE AGGRIEVED PARTY BY MAKING
DEMAND FOR ARBITRATION AND TENDERING THE APPLICABLE AMERICAN ARBITRATION
ASSOCIATION FILING FEE TO THE AMERICAN ARBITRATION ASSOCIATION WITHIN 6-MONTHS
OF THE DATE THE CONTROVERSY OR CLAIM FIRST ARISES. IN ANY ARBITRATION UNDER
THIS PARAGRAPH, ANY AND ALL RULES OF DISCOVERY SET FORTH IN THE TEXAS RULES OF
CIVIL PROCEDURE SHALL BE APPLICABLE. EACH PARTY TO THE ARBITRATION SHALL BEAR
THE INITIAL FILING FEES AND CHARGES REQUIRED BY THE ARBITRATION ADMINISTRATOR,
PROVIDED, HOWEVER, THAT THE ARBITRATOR SHALL AWARD REIMBURSEMENT OF ALL SUCH
COSTS AND FEES TO THE PREVAILING PARTY AS A PART OF ITS AWARD. THIS PARAGRAPH
SHALL LIKEWISE BE SPECIFICALLY ENFORCEABLE IN A COURT OF COMPETENT JURISDICTION
SHOULD THE PARTY NOT DEMANDING ARBITRATION REFUSE TO PARTICIPATE IN OR FULLY
COOPERATE WITH THE
ARBITRATION PROCESS.
18. COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be executed
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in counterpart originals, each of which shall be treated as a fully executed
original hereof when all parties hereto have executed such a counterpart. A
facsimile signature shall be treated as an original signature unless an original
signature is required by law.
EXECUTED effective as of the date set forth above.
PETROSEARCH CORPORATION
By: /s/
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Xxx Xxxxxx, COO & Exec. X. X.
XXXXXX EXPLORATION, INC.
By: /s/
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Xxxx X. Xxxxxx, President
EXHIBIT "A"
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[Form of Overriding Royalty Assignment]
EXHIBIT "B"
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[Form of Confidentiality Non-Circumvention Agreement]
AGREEMENT EXTENDING CONTRACT TERM
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This Agreement Extending Contract Term ("Agreement") is made this 18th day
of March, 2005, between PETROSERACH ENERGY CORPORATION, a Nevada corporation
("PEC"), successor by merger to PETROSEARCH CORPORATION ("Petrosearch") and
XXXXXX EXPLORATION, INC. ("Xxxxxx").
RECITALS:
A. Petrosearch Corporation, a Texas corporation, and Xxxxxx entered
into a certain Prospect Generation Agreement (the "Agreement") dated May 1,
2004.
B. The Agreement expires on April 1, 2005, but both Petrosearch and
Xxxxxx desire to effect an extension of the current term.
TERMS OF EXTENSION:
NOW, THEREFORE, FOR VALUE RECEIVED, Petrosearch and Xxxxxx agree as
follows:
1. LENGTH OF EXTENSION/AUTOMATIC RENEWAL. The Agreement is hereby
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amended to extend the current expiration date from April 1, 2005, to August 1,
2005. Thereafter, this Agreement shall automatically renew for successive
6-month periods unless either party notifies the other party in writing of its
election to terminate this Agreement at least 30 days prior to the expiration of
the particular 6-month period.
2. OTHER STIPULATIONS. Xxxxxx hereby consents to the transfer by
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merger of the Agreement to PEC. PEC and Xxxxxx hereby amend the first sentence
of paragraph 13 of the Agreement to read: "Xxxxxx may not assign any of its
rights hereunder without PEC's written consent."
3. BINDING ON HEIRS AND ASSIGNS. This Agreement shall inure to and be
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binding upon PEC and Xxxxxx and their respective heirs, representatives,
successors and assigns.
EXECUTED as of the Effective Date.
PETROSEARCH ENERGY CORPORATION
By:_____________________________
Name: _________________________
Title: ________________________
XXXXXX EXPLORATION, INC.
By:______________________________
Xxxx X. Xxxxxx, President
