Exhibit 10.32
AGREEMENT
This letter agreement ("Agreement") is entered into this 30th day of June 1997,
by and among Cliffwood Exploration Company ("CEXCO"), Cliffwood Production Co.
("CPCO"), Xxxxxxx Exploration Company ("Bechtel") and Blue Moon Exploration
Company ("Blue Moon").
WHEREAS, Blue Moon and CEXCO intend to acquire certain 3-D seismic data ("Data")
pursuant to the terms and conditions of a contract with Seitel Data Ltd.,
Contract # 00-00-000 EPC ("Contract"), a full and complete copy of which is
attached hereto as Exhibit A; and
WHEREAS, Blue Moon requires funding for the acquisition of the Data and further
requires funding to hire or otherwise secure the services of certain technical
personnel, which will be used to generate or otherwise acquire drilling
prospects in, but not limited to, the area over which the Data has been or will
be acquired; and
Whereas, CEXCO desires to fund the hydrocarbon prospecting efforts of Blue Moon
as described herein, and Blue Moon desires to perform such hydrocarbon
prospecting efforts;
NOW THEREFORE, CEXCO, CPCO and Blue Moon hereby agree as follows.
1. CEXCO and Blue Moon will form Cliffwood-Blue Moon Joint Venture, Inc.
("CBJV") for the purpose of acquiring the data and to conduct hydrocarbon
prospecting efforts. CBJV will execute the Contract. CBJV will initially have
one class of capital stock, that being Common Stock. CBJV will issue 800,000
shares of Common Stock to CEXCO and 200,000 shares of Common Stock to Blue Moon.
The Board of Directors of CBJV ("Board") shall initially be Xxxxx X. Xxxxxxxxx,
Xxxxxxx X. Xxxx and Xxxxxx X. Xxxxxxx. CEXCO agrees that should Blue Moon
request that Xxxxxx X. XxXxxxxxx be appointed to the Board, CEXCO shall vote for
his appointment as an additional director. Blue Moon agrees that CEXCO shall
have the right to appoint up to three additional members to the Board. The
officers of CBJV shall initially be Xxxxx X. Xxxxxxxxx, Chief Executive Officer,
Xxxxxx X. Xxxxxxx, President and Treasurer and Xxxxxx X. XxXxxxxxx, Vice
President and Secretary and Xxxxxxx X. Xxxx, Vice President. Blue Moon and CEXCO
agree that, if allowed under by the Internal Revenue Code, CBJV may elect to be
a limited liability company (LLC) or a Subchapter S corporation under the
Internal Revenue Code.
2. CEXCO will fund the acquisition of the Data in the amount of $500,000 plus
nominal costs of reproduction shipping, etc., not to exceed $ 2,500, by making
cash payments to CBJV three days prior to the due dates for payments established
by the Contract.
3. CEXCO and Blue Moon will enter into a shareholders agreement substantially in
the form attached as Exhibit B hereto.
4. In addition to the payments specified in Section 1 above, CEXCO will fund up
to $500,000 over one year commencing August 1, 1997, specifically for the
funding of additional technical staff for CBJV including, a geologist,
geophysicist and geo-tech and the cost of additional data acquisition,
professional fees and other costs directly associated with the prospect
generation or acquisition. CEXCO shall make this payment in installments. The
first installment shall be $41,666 and shall be paid to CBJV on or before August
1, 1997. The second installment shall be $41,666 and shall be paid to CVJV on or
before September 1, 1997. Thereafter, CEXCO shall reimburse CBJV monthly for
expenses actually incurred pursuant to a budget to be agreed upon by CEXCO and
Blue Moon prior to August 1, 1997. Expenses for any single item in excess of
$5,000 must be approved by CEXCO prior to being incurred
5. All funds advanced by CEXCO and payments made by CEXCO pursuant to this
Agreement, including without limitation the outstanding portion of Lease Fund
(as defined below), shall be recorded on the books and records of CBJV as a debt
payable to CEXCO, and shall be evidenced by a promissory note, in a form
acceptable to CBJV, from CBJV to CEXCO. Payment of the promissory note shall be
secured by all of the issued and outstanding shares of the capital stock of
CBJV.
6. Blue Moon will be granted a 3 % overriding royalty interest in each prospect
generated or acquired hereunder.
7. All prospects generated or acquired by CBJV, its officers, staff, employees,
contract employees, consultants (except to the extent that said consultants are
performing services for others and/or themselves using data and information of
others) or any affiliates of CBJV, whether or not as a result of the Data, shall
be the property of CBJV. Prospects shall be identified and reported monthly to
the CEXCO along with a brief status report related to lease availability,
economic analysis, reserve potential, etc. CBJV shall submit all prospects to
CEXCO for review. Within 15 days of submittal of a prospect, CEXCO shall either
(i) accept such prospect for further evaluation, sale, leasing, exploration or
development or, (ii) defer making a decision on the prospect, (iii) reject such
prospect. Should CEXCO reject any prospect, such prospect shall thereafter no
longer be subject to this Agreement and shall thereafter no longer be the
property of CBJV.
8. Upon the full repayment of all debt owed by CBJV to CEXCO pursuant to this
Agreement, CEXCO shall transfer and assign 50,000 shares of the Common Stock of
CBJV to Blue Moon.
9. CEXCO will use commercially reasonably efforts to dedicate or otherwise raise
$1,000,000 for a revolving lease fund ("Lease Fund") to be loaned by CEXCO to
CBJV when and to the extent necessary for the acquisition of prospects acquired
or generated pursuant to this Agreement and to be used exclusively for those
purposes.
10. CPCO shall operate all prospects generated or acquired pursuant to the terms
of this Agreement, provided however that CPCO will, if so requested by Blue
Moon, relinquish operations to reputable third party industry operators who
acquire interests in prospects greater than those owned or controlled by CEXCO.
CEXCO, Blue Moon and CPCO shall enter into an operating agreement for each
prospect. All such operating agreements shall contain provisions with respect to
consents to assign and preferential rights whereby all parties to the operating
agreement must consent to any assignment of an interest in the prospect and/or
operating agreement, providing that such consent shall not be unreasonably
withheld and whereby each party to the operating agreement shall have the
preferential right to acquire the interest being offered for sale to a third
party under the same terms and conditions as offered to such third party.
11. The parties acknowledge that the funds referred to in Section 4 above are
estimated to be sufficient to pay for the items set forth in Section 4 above for
one year from August 1, 1997. It is the intent of the parties that prospect
generation continue under this Agreement after July 31, 1998. Accordingly, it
will be necessary at that time to agree upon how the cost of the items referred
to in Section 4 above will be funded. The parties agree that it is their present
intent to continue to fund this Agreement and to pay for the cost of such items
from proceeds from prospects theretofore generated and in proportion to their
ownership of CBJV, provided however that neither party shall be obligated to do
so. If the parties are unable to agree upon continued funding for the cost of
the items referred to in Section 4 above after July 31, 1998, then all unspent
cash advanced or paid by CEXCO to CBJV pursuant to this Agreement, including
without limitation cash remaining in the Lease Fund shall immediately be
returned to CEXCO and the debt of CBJV to CEXCO shall be reduced by the amount
of such cash returned.
12. The parties agree that this Agreement delineates the major provisions of
their agreement and acknowledge that time is of the essence due to time
constraints imposed by the Contract. The parties agree to enter into any and all
reasonable amendments to this Agreement or additional agreements and to execute
all documents and instruments which counsel to CEXCO deems necessary or
appropriate to memorialize the intent of the parties hereto.
13. CPCO will provide all accounting services, including accounting, financial
statements, payroll, accounts payable etc. to CBJV at no cost during the first
year of this Agreement; thereafter such services will be provided at cost. CPCO
shall also provide land and engineering services at cost. Bechtel will provide
services to CBJV, including but not limited to geological, geophysical and other
technical services. The parties agree that such services shall be provided to
CBJV at Xxxxxxx'x cost.
The agreement of the parties are evidenced by their signatures below.
Blue Moon Exploration Company Cliffwood Production Co.
/S/ XXXXXXX X. XXXXXXX /S/ XXXXX X. XXXXXXXXX
Xxxxxx X. Xxxxxxx , President Xxxxx X. Xxxxxxxxx,President
Cliffwood Exploration Company Bechtel Exploration Company
/S/ XXXXX X. XXXXXXXXX /S/ XXXXXX X. XXXXXXX
Xxxxx X. Xxxxxxxxx, President Xxxxxx X. Xxxxxxx, President
