CHALLENGER MINERALS INC.
A Subsidiary of Global Marine Inc.
[LOGO]
000 X. Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
000-000-0000 Fax 000-000-0000
October 30, 2001
REEF PARTNERS LLC
0000 X. Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Attn: Mr. X. Xxxx Xxxxxxx
Land Manager
Re: CMI Joint Venture Agreement
Offshore, U.S. Gulf of Mexico
Gentlemen:
Challenger Minerals Inc. ("CMI") and Reef Partners LLC, a Nevada Limited
Liability Company ("Reef") desire to enter into an agreement ("Agreement") to
facilitate the review of, and participation in, Opportunities in the U.S.
Gulf of Mexico located in water depths less than 450 feet. The terms and
conditions governing this Agreement are as follows:
1. TERM: The term of this Agreement shall be for a period of three (3)
years commencing January 31, 2002 ("Effective Date") and expiring
January 30, 2005 ("Termination Date"), each of which years shall be
deemed a "Participation Year"; PROVIDED, HOWEVER, that the
confidentiality and non-competition provisions hereof shall survive
termination of this Agreement for the contractual time period provided
herein or in any applicable agreement with a third party or, if no such
period is provided for, then for a period of one (1) year after the
Termination Date.
2. OPPORTUNITIES: Reef shall have the right and option, but not the
obligation, to acquire up to twelve and one-half percent (12.5%) of the
interest made available to CMI in all Opportunities located in water
depths less than 450 feet in the U.S. Gulf of Mexico ("Gulf of Mexico
Shelf Program") in Prospects identified and initially reviewed by CMI
during the term of this Agreement. For purposes of this Agreement, an
"Opportunity," sometimes herein also referred to as a "Prospect," is
defined as a specific geographic area which is related to the same
geologic structure and/or stratigraphic interval or other hydrocarbon
trapping mechanism, and which can be commercially developed for
hydrocarbons in accordance with standard oil and gas industry practices
from an open
REEF PARTNERS LLC
October 31, 2001
water drilling location or platform. All existing Prospects
previously or currently under review by CMI and leases currently owned
in whole or part by CMI are excluded from this Agreement.
3. PARTICIPATION FEE:
A. In consideration of its rights hereunder to consider participation
in Prospects, Reef shall pay CMI as a Participation Fee the total sum
of $1,125,000.00 during the term of this Agreement, with the first
annual payment in the amount of $375,000.00 due on or before
November 1, 2001, a second annual payment in the same amount due on
or before January 30, 2003 and a third annual payment in the same
amount due on or before January 30, 2004; PROVIDED, that the first
such payment shall not be due until a date ten (10) working days
after Xxxx's timely acceptance of this proposal. Other than such
Participation Fee, there shall be no fees or burdens in favor of CMI
as to the interest Reef may elect to acquire in any Prospect, and no
obligation upon Reef to acquire an interest in any particular
Prospect or in a minimum number of Prospects during the term of this
Agreement.
B. During each Participation Year (commencing from the Effective Date)
of the term of this Agreement, CMI shall present to Reef a minimum of
fifty (50) separate Prospects, as to which a working interest is
available for Reef's participation. If during any such Participation
Year the number of Prospects presented by CMI to Reef should be less
than such minimum number of Prospects for Reef to consider for
participation, Reef's Participation Fee provided for the above shall
be proportionately reduced such that CMI would REFUND to Reef a
portion of the fee in an amount based on the full annual fee amount
times the deficiency number of Prospects divided by the 50 Prospect
minimum, if requested by Reef in writing within thirty (30) days
after the end of the applicable Participation Year.
4. OPPORTUNITY EVALUATION: Upon CMI being presented with potential
opportunities to participate in Prospects generated by third parties
("Selling Parties"), CMI shall determine when or if a potential Prospect
may be worthy of further consideration, and as to each potential
Prospect, CMI shall immediately notify Reef, providing a brief
description of the Prospect, to include when available, location,
Operator, estimated leasehold and seismic costs and initial well costs,
water depth and reserve potential (collectively, the "Initial Prospect
Information"). Reef shall then promptly advise CMI whether Reef is
already pursuing the Prospect; and, if such is the case, Reef shall
advise CMI as to whether it will continue to pursue the Prospect on its
own or jointly with CMI under either the terms of this Agreement or on
other mutually acceptable terms. If Reef elects to continue to pursue
the Prospect on its own, the parties shall endeavor in good faith to
resolve any areas of competition, if possible. If Reef does not so
notify CMI of its separate pursuit of any such potential Prospect(s)
within ten (10) days after such initial notice by CMI (or such shorter
period for Reef's decision as is required to prevent loss of
opportunity), CMI and Reef shall jointly proceed as set forth in this
Agreement. WITH RESPECT TO ANY EVALUATIONS TO BE CONDUCTED BY EITHER
PARTY HEREUNDER, EITHER INDIVIDUALLY
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October 31, 2001
OR JOINTLY, INCLUDING AN INITIAL PROSPECT REVIEW OR A FURTHER REVIEW
UNDER THIS PARAGRAPH 4, EACH PARTY HEREBY ACKNOWLEDGES THAT ANY SUCH
REVIEW, AND THE METHODOLOGIES EMPLOYED THEREIN, ARE NECESSARILY
SUBJECTIVE. ACCORDINGLY, EXCEPT AS PROVIDED IN PARAGRAPH 4.B. BELOW,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY (WHETHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE) AS TO THE ACCURACY, COMPLETENESS OR
SUFFICIENCY OF ANY SUCH EVALUATION, AND EACH PARTY DISCLAIMS ANY
LIABILITY FOR ACCURACY OF ANY PROSPECT EVALUATION CONDUCTED BY THE
OTHER PARTY DURING THE TERM OF THIS AGREEMENT. EACH PARTY ACKNOWLEDGES
AND WARRANTS THAT IT IS INDEPENDENTLY QUALIFIED TO MAKE A DECISION
WHETHER TO INVEST IN ANY PARTICULAR PROSPECT REGARDLESS OF WHETHER IT
PARTICIPATES IN OR CONDUCTS A REVIEW EVALUATION.
A. Once CMI determines that a Prospect merits a detailed geo-technical
review with the Selling Party ("Initial Prospect Review"), it shall
promptly so notify Reef and coordinate with Reef's technical
personnel in scheduling the Initial Prospect Review as soon as
practicable.
B. In conducting the Initial Prospect Review, and all subsequent
geo-technical evaluations, CMI and Reef shall make a good faith
effort to share data, knowledge, expertise and work product except
as, and to the extent, restricted or prohibited by third-party
Confidentiality Agreements ("CAs") and/or Area of Mutual Interest
Agreements ("AMIAs"), to which both CMI and Reef are not similarly
bound. In such cases, Reef will be requested to sign and return
expeditiously the CA or AMIA to CMI before prospect reports or data
will be sent to Reef. In the event that Reef is unable to
participate in an Initial Prospect Review, CMI, as soon as
practicable thereafter, shall make a good faith effort to review with
Reef the Selling Party's data and interpretations and CMI's data and
interpretations regarding the Prospect in question, subject to any
restraints posed by such third party CAs and/or AMIs.
C. Following the Initial Prospect Review or other review, if conducted,
and if not, as soon as practicable after Xxxx's receipt of the
initial prospect summary from CMI, either CMI or Reef may propose
pursuing participation in a Prospect by providing written notice of
such intent to the other party. The party receiving such written
notification shall have no less than five (5) business days (or such
shorter response time as required to prevent a loss of opportunity)
within which to advise the other party as to whether it wishes to
pursue the Prospect and if so, at what level of working interest,
whether or not the parties have conducted an Initial Prospect Review
or other review. In the event that CMI and the Other Participants,
(as defined in Paragraph 7) do not wish to pursue the Prospect, then
Reef shall have the right to pursue the Prospect for its own account.
Upon CMI's request, Reef shall advise CMI the status of its pursuit
of such opportunity. In the event that Xxxx decides to submit a
formal participation offer to the Selling Party, Reef shall submit a
copy thereof to CMI, and CMI shall have twenty-four (24) hours within
which to elect to pursue the Prospect jointly with Reef in accordance
with this Agreement. If the participation opportunity originated
through a request
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REEF PARTNERS LLC
October 31, 2001
by the Selling Party for a turnkey bid from CMI's affiliate company,
Applied Drilling Technology, Inc. ("ADTI"), then CMI, subject to the
exercise of its reasonable business judgment and the terms and
conditions of Reef's proposed offer, shall control the timing and
content of offers to participate in the Prospect.
D. In the event that both CMI and Reef desire to pursue participation in
a Prospect, they shall jointly develop and agree as to the terms and
conditions of a written participation offer to the Selling Party.
CMI shall have sole responsibility for direct negotiations with the
Selling Party unless it requests the assistance of Reef. Xxxx agrees
not to directly contact the Selling Party regarding the Prospect
during the negotiation process unless otherwise agreed to by CMI.
However, CMI shall keep Reef advised of the progress of ongoing
negotiations and shall solicit Reef's input and suggestions regarding
counter-offers or subsequent revisions to original offers.
Notwithstanding any provision to the contrary herein, if CMI
determines any situation merits negotiation with a Selling Party
sooner than the response time periods provided for herein in order
to avoid a loss of opportunity to acquire an interest in a Prospect,
CMI shall have the right to do so and shall advise Reef of the
progress thereof.
E. Reef shall be an active participant with CMI in drafting, reviewing,
and formalizing participation agreements, joint operating agreements,
farmout agreements and all other contracts relating to its
participation in Prospects under this Agreement. In the event of
disagreement between CMI and Reef as to contract terms and
provisions, however, CMI will make the final decision as to what is
ultimately included in all agreements, with each party reserving the
right not to participate in the Prospect as outlined in Paragraph 5.
CMI shall advise the Selling Party of Reef's involvement with CMI
prior to the formulation of any such contracts, and Reef shall be a
signatory party to all agreements executed between CMI and Selling
Party. CMI and Reef shall each be entitled to concurrently receive,
directly from the Selling Party, an assignment of any ownership
interest acquired in a Prospect.
F. In the event that a Selling Party does not wish to include Reef as a
candidate for working interest participation, then CMI shall so
advise Reef, giving the reasons given by the Selling Party. If the
concerns raised by the Selling Party cannot be amicably resolved, CMI
shall have the right to pursue the Prospect for its own account and
the Prospect shall not be covered by this Agreement.
G. Except for Reef's obligation to pay to CMI the Participation Fee as
provided in Paragraph 3 above, and for CMI's obligation at its
expense to furnish to Reef the Initial Prospect Information and
other reports and data as provided in this Agreement, each party
shall bear its own costs and expenses associated with the evaluation
of each Prospect and any subsequent negotiation of a participation
agreement or other agreement with a Selling Party.
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REEF PARTNERS LLC
October 31, 2001
5. RIGHT TO WITHDRAW: CMI and Reef acknowledge that, at any time and for
any reason during the process contemplated by Paragraph 4 (prior to the
execution of a binding participation agreement with a Selling Party),
either party may elect to discontinue the effort to participate in a
Prospect. In the event either CMI or Reef elects not to participate in
a Prospect, the other party shall be free to continue to pursue the
Prospect for its own account (subject to the similar rights of Other
Participants), and the non-participating party shall not compete
directly or indirectly against the other party in pursuing the Prospect
for a period of one (1) year from the date of such election not to
participate.
6. PERSONNEL: During the term of this Agreement, CMI will provide and
maintain a technically proficient, multi-disciplined, veteran staff
comprising geology, geophysics, reservoir engineering and land expertise
to screen and evaluate Opportunities.
7. OTHER PARTICIPANTS: To facilitate the review of and participation in
Prospects in the U.S. Gulf of Mexico, CMI has entered into similar joint
venture agreements with other participants ("Other Participants")
covering Prospects as provided for herein. The joint venture agreements
entered into by CMI with Reef and with the Other Participants shall be
collectively referred to as the "CMI Joint Venture." CMI and Reef agree
that CMI reserves the right to terminate or amend its joint venture
agreement with any of the Other Participants and to enter into new joint
venture agreements with third parties. The mention within this Agreement
of Other Participants in the CMI Joint Venture is solely to provide Reef
with notice of the existence of such Other Participants and their right
to be allocated interests in Prospects under similar joint venture
agreements with CMI. The only relationship created pursuant to this
Agreement, express or implied, is between Reef and CMI. In no event
shall it be construed that this Agreement has created any relationship,
obligation or liability between Reef and any of the Other Participants.
The joint participation of Reef and any of the Other Participants shall
be pursuant to separate joint venture agreements, and any rights,
liabilities or obligations relating to such Prospect participation shall
be strictly limited to those as may be created by such separate joint
venture agreements. The term "Other Participants" in this Agreement
shall also include CMI as to its own interest in the CMI Joint Venture,
the CMI interest being defined as the percentage interest in the CMI
Joint Venture remaining after crediting the sum of respective percentage
interests in the CMI Joint Venture held by Reef, under this Agreement,
and by Other Participants (for this purpose, excluding CMI), under their
separate but similar joint venture agreements with CMI.
8. WEEKLY SUMMARIES: In order to provide for a smooth flow of information
between the parties, CMI shall timely provide to Reef a weekly prospect
summary. Such weekly prospect summaries shall be subject to the
confidentiality provisions of Paragraph 14 of this Agreement. CMI may
provide to Reef additional prospect summaries or updates, or additional
prospect data, as it deems appropriate, subject to the same
confidentiality provisions.
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REEF PARTNERS LLC
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9. ELECTIONS AND CONFIDENTIAL INFORMATION:
A. CMI and Reef shall provide each other with copies of all elections
made pursuant to joint operating agreements or any other agreements
governing the drilling, development and operation of Prospects.
CMI and Reef agree to freely share geological, geophysical,
engineering and other technical data and information concerning the
exploration, development and production of the Prospects except
when prohibited by third party confidentiality agreements. All
such data shall be held strictly confidential by Reef and CMI, and
both parties agree to abide by the terms and conditions of any
confidentiality agreements with the Selling Party and other
Prospect participants. Subject to the provisions of governing
confidentiality and similar agreements (as described in Paragraph
4.B. above) with Selling Party, all data and information regarding
Prospects that are disclosed by one party to the other under this
Agreement shall be held strictly confidential by the non-disclosing
party; PROVIDED, HOWEVER, that this provision shall not apply to
data and information that is (a) already in the public domain, (b)
already in a party's possession at the time of disclosure, (c)
developed by a party without the benefit or use of the confidential
data, (d) disclosed by a third party who has the lawful right to
make such disclosure, or (e) required to be disclosed in response
to a judicial or administrative process from a court or
governmental body with lawful authority to demand the production of
same. IN THE EVENT THAT A CLAIM IS ASSERTED AGAINST CMI OR REEF AS
A RESULT OF AN ALLEGED VIOLATION OF THIS PROVISION BY THE OTHER
PARTY, THE PARTY AGAINST WHOM VIOLATION IS ALLEGED SHALL DEFEND,
INDEMNIFY AND HOLD HARMLESS THE OTHER PARTY FROM AND AGAINST ANY
AND ALL CLAIMS, CAUSES OF ACTION AND JUDGMENTS ARISING THEREFROM,
INCLUDING LEGAL FEES AND COURT COSTS.
B. Reef and its affiliates may, from time to time, provide CMI with
certain confidential information regarding among other things,
trade secrets, customer lists, client information, including names,
addresses and financial information, securities brokerage firms and
other financial institutions with which Reef and its affiliates
transact business and certain other information regarding
operations and business conducted by Reef (collectively, the "Reef
Confidential Information"). CMI agrees that any confidential
information provided to it by Reef and designated as "Reef
Confidential Information" shall be held strictly confidential by
CMI. CMI further agrees that, except for the benefit of Reef, it
will not use the Reef Confidential Information or, for the term of
this agreement and for a period of two (2) years thereafter,
contact any persons, firms or entities designated in the Reef
Confidential Information; PROVIDED, that this provision shall not
relate to data and information that is already in CMI's possession
at the time of disclosure, disclosed to CMI by a third party who
has a lawful right to make such disclosure, or required to be
disclosed in response to a judicial or administrative process from
a court or governmental body with lawful authority to demand
production of same; AND PROVIDED FURTHER, that nothing herein shall
restrict in any way CMI's right to continue or to initiate a
business relationship of any nature with any third party doing
business with Reef, where such third party is already in a past or
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October 31, 2001
present business relationship with CMI or where CMI obtains Reef's
written permission, which permission shall not be unreasonably
withheld, to discuss a business relationship with such third party.
10. ADDITIONAL INTEREST: Reef acknowledges that, as provided in Paragraph
7 herein, the Other Participants (including CMI) in the CMI Joint Venture
are also entitled to purchase certain interest in Prospects. Reef
shall have preferential right to acquire its proportionate share of
an interest greater than its own original interest (i.e., the maximum
Reef interest stated in Paragraph 2 above) out of the available
interest in a Prospect, in the event CMI or any of the Other
Participants elect to participate for a lesser interest or no
interest at all in a Prospect. The non-participating party's(ies')
interest shall be available to the participating parties on a
proportionate basis relative to each participating party's interest
in the CMI Joint Venture.
11. DISCLAIMER OF JOINT LIABILITY: References herein to "partners" or to
any "partnership," or references herein to any "joint venture," are
solely for the convenience of the parties. It is not the purpose or
intention of this Agreement to create, and this Agreement shall never
be construed as creating, a joint venture, a partnership, a mining
partnership or any other legal relationship whereby CMI or Reef shall
be held liable for the acts, either by commission or omission, of the
other. The liabilities and obligations of CMI and Reef arising
hereunder shall be several, and not joint or collective.
12. NOTICES: All notices required herein to be given by one party to the
other shall be given to the other party in writing by personal
delivery, by U.S. Postal Service mail or by fax, or by telephone if
written confirmation is sent in a manner provided above within
twenty-four (24) hours. Notice shall be deemed to be effective upon
actual receipt by the party to whom notice is directed; however, any
fax received after 5:00 PM CST shall be deemed to be received on the
following business day, excluding legal holidays. Each party's
address, telephone and fax number shall remain as stated below (or as
subsequently changed under the procedure set out in this paragraph)
until such party shall give proper written notice to the other party
of different contact information to be used for the purposes of this
Agreement:
REEF PARTNERS LLC
0000 X. Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Mr. X. Xxxx Xxxxxxx, Land Manager
Phone: (000) 000-0000
Fax: (000) 000-0000
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October 31, 2001
CHALLENGER MINERALS INC.
000 X. Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attn: Xx. Xxx Xxxxxxx, Exploration Manager, or
Xx. Xxxx X. Xxxxxxx, V.P. - Field Development/East, or
Xx. Xxxxxxx X. Xxxx, V.P. - Field Development/West
Telephone: (000) 000-0000
Fax: (000) 000-0000
13. TURNKEY BIDS: Reef shall encourage drilling and completion turnkey bids
in its dealings with Selling Parties, but it will not be obligated or
penalized for any failure to do so. Although Reef is free to pursue
participation in any Prospect hereunder on any basis of participation
other than under a turnkey contract with ADTI (or other turnkey
affiliate of CMI), the parties acknowledge that mutual commitments
herein contemplate ADTI's (or other CMI affiliate's) continuation in
the business of providing turnkey drilling services in the Gulf of
Mexico. However, nothing herein shall imply that ADTI (or other CMI
affiliate) must make a turnkey drilling bid for any particular well
relating to any Prospect, or a bid therefor with any particular terms
or conditions.
14. CONFIDENTIALITY:
A. This Agreement is strictly confidential and shall not be shared
with nor copies made available to any third party, other than
third party professional consultants retained by Reef in connection
with the evaluation of the Opportunity or Prospect (the
responsibility for each such consultant's compliance with the
confidentiality and other provisions hereof being assumed by Reef),
in whole or part, without the prior written consent of the other
party.
B. Neither party shall release or distribute any information, data or
photographs to the press, media or other parties without prior
written approval of the other party. When both parties have reviewed
and approved release or distribution of the material under review,
the party requesting release or distribution shall have the principal
responsibility for issuance, but each party may thereafter release
or distribute such approved material without restriction.
C. Nothing in this Agreement shall preclude either party from making
such disclosures as may be required by any applicable law or
governmental order, rule, regulation or ordinance.
15. TRANSFER OF INTEREST:
A. This Agreement shall extend to and be binding upon and inure to the
benefit of CMI and Reef and their respective successors, assigns and
legal representatives. However, it is understood by the parties
hereto that this Agreement represents a "personal" covenant between
them, and consequently that Reef may not assign in
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REEF PARTNERS LLC
October 31, 2001
whole or part its interest in this Agreement itself, or in its right
hereunder to acquire any interest in any Prospect, without the
advance written consent of CMI; PROVIDED, that such consent not to
be unreasonably withheld; and PROVIDED FURTHER, that nothing
herein shall preclude Reef from assigning any such interest
hereunder if such transfer of interest is to any joint venture of
which Reef or an affiliate is managing venturer, any partnership
of which Reef or an affiliate is the managing partner, including
but not limited to any partnership formed as the result of, or
contemplated by, the Reef Global Energy Ventures Partnerships
Registration Statement filed with the United States Securities and
Exchange Commission, or to any Reef affiliate due to corporate
merger, reorganization of consolidation (collectively, "Reef's
Affiliates"). Notwithstanding the foregoing, Reef shall have the
right to assign all or part of its interest in any Prospect
acquired hereunder AFTER Reef shall have earned assignment of its
interest in the Prospect from the Selling Party, subject to
applicable restrictions in any agreements binding the participants
in such Prospect. In the event of an assignment of any interest
in a Prospect by Reef, other than as more fully set forth above
regarding assignment to Reef's Affiliates, Reef shall preserve the
confidentiality of this Agreement by not disclosing to assignee
the contents hereof in any form. If such assignment should be to
Reef's Affiliates, Reef may disclose to assignee the contents
hereof, but shall condition such assignment upon (a) provision
that assignee accepts all obligations of this Agreement, including
but not limited to the confidentiality provisions hereof, and (b)
provision that any further assignments shall be subject to the
same restrictions hereunder originally applicable to an assignment
by Reef, if such further assignment is made to assignor's
affiliate due to corporate merger, reorganization or
consolidation; PROVIDED, HOWEVER, that such confidentiality
provision shall not apply to disclosure by Reef if Reef believes
it is legally obligated to make such disclosure, based upon
written legal advice of its attorney.
B. In the event that CMI should be sold by its parent company, Global
Marine Inc., or undergo any type of corporate merger,
reorganization or consolidation resulting in Global Marine Inc.
owning less than majority interest in CMI, then CMI shall have the
option to terminate this Agreement, effective not less than thirty
(30) days after its written notice of same to Reef, in which event
CMI shall refund to Reef a portion of Reef's Participation Fee
representing the remaining portion (if any) of the current Joint
Venture Participation Year as to which Reef shall have already
paid such fee to CMI under Paragraph 3 of the Agreement, i.e., a
refund amount representing the base annual fee times the remaining
days of such Participation Year after the effective termination
date divided by the total number of days in such year (using 365
days). CMI and Reef agree that the pending merger of Global
Marine Inc. and Santa Fe International Corporation, if
accomplished as proposed, would not trigger this provision.
C. Nothing in this Agreement shall be construed to create in either
party any preferential right to purchase the interest of the other
party, in whole or part, in
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October 31, 2001
any Prospect, after a party has acquired the interest in question
in the Prospect under the provisions of this Agreement.
16. MISCELLANEOUS:
A. IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES AS TO THE PROVISIONS
OF THIS AGREEMENT, THE MATTER SHALL BE SUBMITTED TO ARBITRATION OR
OTHER FORM OF ALTERNATIVE DISPUTE RESOLUTION METHOD IN HOUSTON,
XXXXXX COUNTY, TEXAS, AT THE INSTANCE OF EITHER PARTY, UNDER SUCH
PROCEDURES AS THE PARTIES MAY AGREE UPON, OR, IF THEY CANNOT
AGREE, THEN UNDER THE APPLICABLE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION.
B. Failure of a party to enforce any or all of the provisions of this
Agreement shall not constitute a waiver of such provisions(s) or
preclude subsequent enforcement thereof.
C. No provision of this Agreement shall be altered or deleted except by
written agreement duly executed by both parties.
D. Any provision of this Agreement found to be illegal or unenforceable
shall be deemed stricken so as not to affect the legality or
enforceability of the remaining provisions.
17. DUE DILIGENCE: As sophisticated participants in the oil and gas
business, Reef and CMI agree that each party is responsible for the
scope and evaluation of its own independent "due diligence" efforts as
to whether the business relationship and transactions contemplated
hereunder are appropriate and suitable to their respective business
plans. Reef acknowledges that, in entering into this Agreement, it is
not relying upon any representations by CMI other than those expressly
set out herein, and that the results of Reef's participation in the
Joint Venture may vary significantly from past results of CMI and/or
its Joint Venture participants, for numerous reasons, including but
not limited to general industry conditions such as oil and gas
production pricing, drilling rig availability and the availability of
quality Prospects for CMI to consider hereunder, and Xxxx's right
hereunder to select specific Prospects for participation, and the
percentage interest of its participation, based on its own independent
judgment, with no obligation to participate in any particular Prospect
or any minimum number of Prospects.
18. CMI PARTNER BUYOUT: This proposal is subject to CMI's success in its
attempt to buy out or buy down the interest of Other Participants in
existing Joint Ventures, on or before January 31, 2002, for
consideration NOT LESS THAN Reef's monetary commitment hereunder, in
order to place Reef into the Joint Venture for the 12.5% participation
interest described above in Paragraph 2. Also, CMI reserves the right
to place any available interest in the Joint Venture with Other
Participants before placing any interest with Reef. If for any reason
CMI should not succeed in timely placing such 12.5%
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October 31, 2001
interest in the Joint Venture with Reef, then the parties hereto agree
that they would have no further obligation to each other under this
proposal.
19. INTRODUCTION OF REEF TO OTHER PARTICIPANTS: Reef has previously agreed
not to contact the Other Participants until CMI has introduced Reef to
them as a possible participant in the Joint Venture. Upon execution
of this Agreement, CMI shall promptly introduce Reef to the Other
Participants. Reef and CMI shall each have the option to terminate
the Agreement during a period of ten (10) working days after CMI has
given Reef written notice that CMI has introduced Reef to the Other
Participants. If either party has timely exercised such option to
terminate the Agreement, by providing the other party with written
notice of such election, the Agreement shall be considered null and
void from inception, and each party shall be relieved of all
obligations of any character hereunder, including but not limited to
Reef's obligation to pay its Participation Fee provided for in
Paragraph 3 above.
If the terms of this Agreement are acceptable to Reef, please confirm our
agreement by executing in the space provided below and returning to the
letterhead address one duplicate original to CMI's Business Development
Manager, Xxxx Xxxxxxx, no later than November 7, 2001, otherwise this
proposal shall terminate and be null and void.
Very truly yours,
CHALLENGER MINERALS INC.
/s/ Xxx Xxxxxx
X. X. Xxxxxx
President
ACCEPTED AND AGREED TO this 7 day of November, 2001:
REEF PARTNERS, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx
Managing Member
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