EXHIBIT 10.2
SARATOGA RESOURCES INC,
A TEXAS CORPORATION
000 XXXXXXXX XXX, XXXXX 0000
XXXXXX, XXXXX 00000
Phone (000) 000-0000
Fax (000) 000-0000
March 22, 1999
Via Telefax (000) 000-0000
Xx. Xxxx Xxxxxx, President
DBX Geophysical Corporation
00000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Re: Letter Agreement
Stonewall Prospect
Xxxxxx Farms #1 Well
Xxxxxx County, Texas
Dear Xx. Xxxxxx:
Article I
Saratoga Resources, Inc., a Texas Corporation, 000 Xxxxxxxx Xxxxxx,
Xxxxx 0000 Xxxxxx, Xxxxx 00000, ("Saratoga") has reviewed the documentation
prepared and furnished by DBX Geophysical Corporation, 00000 Xxxxxxx Xxxxx,
Xxxxxx, Xxxxx 00000, ("DBX") related to the geologic merit and developmental
potential of the above referenced "Prospect" and the associated 00 xxxxxx xxxx
Xxxx of Mutual Interest, ("AMI") as more fully identified on the AMI Plat
attached hereto as Exhibit "A". Saratoga and DBX shall collectively be referred
to as the ("Parties") and individually as a ("Party").
Article II
Although DBX is not currently vested with any leasehold interest within
the AMI, DBX has access to, and an option to acquire ownership of, certain
proprietary 3-D seismic data, ("Data") covering the AMI. To facilitate the
acquisition of the Data, DBX and their potential investors have the right to
view, work, process and/or reprocess the Data within the AMI for the limited
purpose of generating prospects to raise the necessary funds, (through promoted
working interest participants) to exercise DBX's option to acquire the Data. DBX
has identified certain prospects located within the boundaries of the AMI,
including the prospect associated with the Xxxxxx Farms #1 Well, ("Xxxxxx Farms
Prospect"). Saratoga is interested in acquiring a license to utilize the Data to
promote exploration capital and entice the "Saratoga Partners", (promoted
working interest participants acquired by Saratoga for the purpose of developing
prospects within the AMI), to invest such capital to acquire the necessary
leasehold acreage to develop the Xxxxxx Farms Prospect and other prospects
within the AMI.
Article III
Now therefore, for Ten Dollars, ($10.00) and other good and valuable
consideration in hand paid by Saratoga, the receipt and sufficiency of which is
hereby acknowledged, DBX grants and conveys to Saratoga the exclusive right to
acquire a license to the Data and all leasehold interest in the AMI during the
term of and in accordance with this Agreement. Saratoga agrees to make best
efforts to acquire the Data in accordance with this Agreement and cause the
Xxxxxx Farms Prospect and other relevant prospects within the AMI to be acquired
and developed by the Saratoga Partners. The Parties agree that the first
prospect to be developed within the AMI shall be the Xxxxxx Farms prospect. In
consideration of the foregoing, the Parties agree that the Data acquisition and
proposed exploration and development of prospects located within the AMI shall
be in accordance with the following terms and conditions of this Letter
Agreement, ("Agreement").
Article IV
Upon execution of this Agreement, Saratoga shall commence the necessary
due diligence to determine the status of record title, the status of the
leasehold estate and the rights of any parties vested with an interest in the
Xxxxxx Farms Prospect, including the rights of any parties conducting operations
thereon. The Parties agree that Saratoga shall not acquire legal title to any
leasehold interest in the name of Saratoga. Saratoga shall cause the Saratoga
Partners to make best efforts to negotiate and secure the leasehold estate of
any relevant prospect from the rightful owners. Legal title to the leasehold
interest acquired by the Saratoga Partners shall be held in the name of the
individual or entity mutually agreed upon by the Saratoga Partners. In addition,
the Saratoga Partners shall designate the party to serve as the operator of
record of any prospect obtained under the terms of this Agreement. The Parties
agree that the Saratoga Partners and any entity selected by such parties to hold
legal title to the acquired leasehold or selected to be the operator of record
shall be subject to this Agreement and shall be considered as part of the class
comprising the Saratoga Partners.
Article V
As additional consideration, Saratoga agrees to cause the Saratoga
Partners to deliver a 3% overriding royalty interest, ("Override") to DBX in any
leasehold acquired by the Saratoga Partners in the Xxxxxx Farms Prospect. DBX
shall be entitled to an Assignment of the Override from the Saratoga Partners
upon request. The Override shall be proportionately reduced to the leasehold
interest originally acquired by the Saratoga Partners. Under the terms of this
Agreement, all such leases shall be subject to the Override when acquired
whether or not a formal assignment has been executed and delivered by the
Saratoga Partners to DBX.
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Article VI
The Parties agree that DBX shall be free to view, work, process and/or
reprocess the Data within the AMI during the term of this Agreement. However,
DBX grants to and agrees that Saratoga shall be vested with an exclusive option
to acquire any prospect generated by DBX within the AMI. In the even DBX
generated additional prospects within the AMI, other than the Xxxxxx Farms
Prospect, ("Additional Prospects") DBX shall present the final prospect package,
including all relevant data, to Saratoga after which Saratoga shall have an
option for 30 days, ("Option Period") to review the data, collaborate with DBX
on the merits of the prospect and conduct any other necessary due diligence. In
the event Saratoga timely a properly exercises their option by giving DBX notice
within the option period of their election to participate in the prospect,
Saratoga shall have 120 days from the end of the option period in which to
commence operations on the prospect. In the event operations are not timely
commenced and the Parties do not mutually agree to an extension of the 120 day
period, DBX shall be free to promote the prospect to any outside third party or
parties. DBX shall be entitled to a 3% override on any leasehold acquired by the
Saratoga Partners in any Additional Prospects generated and submitted to
Saratoga by DBX in accordance with this Agreement. The Parties agree that no
more than one prospect may be presented at any one time during either the option
period or the 120 day period in which operations are to be commenced or during
any period in which operations are being conducted on a proposed prospect.
Article VII
In the event the Saratoga Partners acquire any leasehold interest in
Additional Prospects and operations are not commenced on such prospect within
the required 120 day period, or any extension thereof mutually agreed to between
the Parties, any promotion by DBX to a third party shall include the cost
incurred by the Saratoga Partners prior to commencement of any operations by
either DBX or any third party. After timely receipt of such payment, the
Saratoga Partners shall assign the leasehold interest to the parties tendering
timely payment therefore.
Article VIII
As additional consideration, Saratoga agrees to pay DBX $100,000.00 for
the seismic Data in accordance with the following payment schedule.
(a) Saratoga shall tender $25,000.00 to DBX for the Data upon the
spudding or commencement of the drilling operations associated
with the first prospect to be developed within the AMI, which the
Parties agree shall be the Xxxxxx Farms Prospect. As further
consideration for the Data, DBX shall receive an additional
$25,000.00 in the form of a production payment out of a 25%
working interest in the first well.
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(b) Saratoga shall tender an additional $25,000.00 to DBX for the
Data upon the spudding or commencement of the drilling operations
associated with the second well drilled under this Agreement
whether it being the Xxxxxx Farms Prospect or a subsequent
prospect within the AMI. As further consideration for the Data,
DBX shall receive an additional $25,000.00 in the form of a
production payment out of a 25% working interest in the second
well.
Article IX
If either one of the first two xxxxx drilled by the Saratoga Partners
within the AMI result in a dry hole, or if prior to achieving payout of either
of the $25,000.00 production payments either one of the first two xxxxx
referenced above, fails to maintain production in paying quantities or otherwise
ceases to produce, or if the well is offline but is capable of delivering
production in paying quantities operations are not conducted on such well or
other actions taken which would be sufficient to perpetuate the oil and gas
leasehold estate under the terms of the oil, gas and mineral lease or leases
covering the property where such well is located, any portion of the $25,000.00
production payment which was not paid out of production prior to that time,
hereinafter referred to as "deficiency", may be added to and shall be paid out
of either of the first two xxxxx which is capable of delivering production in
paying quantities. While a well is either in production, or operations are being
conducted thereon or operations are being conducted with regard thereto which
would be sufficient to perpetuate the leasehold estate with regard to each
respective well, no such deficiency shall be applicable.
Article X
If additional xxxxx are drilled within the AMI under the terms of this
Agreement subsequent to the drilling of the first two xxxxx and deficiency as
set forth above exists for either one or both of the first two xxxxx, then the
Parties agree that the portion of the production payment/s which constitute a
deficiency shall attach to, burden, carry over and be payable out of 25% of the
working interest in any subsequent well drilled or developed by Saratoga within
the AMI until the two $25,000.00 production payments are paid in full. Upon
payout of the production payments, DBX shall have no further interest in the
working interest of any prospect within the AMI under the terms of this
Agreement and shall properly and timely execute and deliver such division or
transfer orders, assignments or other such documents as reasonably requested.
Article XI
The Parties agree that DBX shall only be entitled to receive the
proceeds associated with the two $25,000.00 production payments out of revenues
generated from production as set forth above and neither Saratoga nor the
Saratoga Partners shall otherwise be liable to DBX for any deficiency.
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Article XII
Prior to obtaining a license to the Data, DBX shall make the Data
available to Saratoga. DBX shall make best efforts to provide documentation and
assist Saratoga in reviewing, working, processing and/or reprocessing the Data
associated with the AMI. However, prior to obtaining a license to the Data
Saratoga shall have the right to view, work, process and or reprocess the Data
only insofar as it relates to the Xxxxxx Farms Prospect. Saratoga shall not
utilize the Data for any purpose other than development under the terms of this
Agreement. Saratoga shall keep the Data confidential and shall not disseminate
the Data or any information related thereto to any outside third party,
including the work product generated by Saratoga in reviewing, working,
processing and/or reprocessing the Data.
Article XIII
DBX agrees to deliver to Saratoga a properly executed seismic license
to the Data, ("Seismic License") at the same time Saratoga timely and properly
tenders the initial $25,000.00 to DBX upon the spudding or commencement of the
drilling operations associated with the first prospect to be developed within
the AMI. Thereafter, Saratoga shall be entitled to freely utilize the Data in
accordance with the Seismic License. The Parties agree that the Seismic License
may be assignable to the Saratoga Partners and shall remain vested in any
successor of Saratoga by virtue of merger, consolidation, liquidation,
reorganization, bulk sale, acquisition or other such transaction.
Article XIV
This agreement shall remain in full force and effect for not less than
12 months after proper execution by the Parties hereto, and shall remain in full
force and effect thereafter with regard to the entire AMI for not less than six
months after the expiration of all Saratoga's leasehold interest in the AMI.
Article XV
It is mutually agreed by and between the parties hereto that all of the
representations, covenants, and agreements herein contained shall extend to and
be obligatory upon the heirs, executors, administrators, devisees, trustees,
assigns of the respective parties hereto.
Article XVI
If any clause or provision of this Agreement is illegal, invalid or
unenforceable under any present or future law, the remainder of this Agreement
will not be effected thereby. It is the intention of the undersigned parties
that if any such provision is held to be illegal, invalid or unenforceable,
there will be added in lieu thereof a legal, valid and enforceable provision
which is an similar terms to such provision/s as possible.
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Article XVII
This Agreement may be executed in any number of counter parts, each of
which when so executed and delivered will be deemed an original and which
together will constitute one and the same instrument. The effective date of this
Letter Agreement shall be the date the parties agree to and accept this
Agreement by dating and affixing their signatures below.
Article XVIII
If this is your understanding of the terms and provisions of our
Agreement, please signify your agreement and acceptance by signing in the space
provided below and return one (1) original of this Letter Agreement for our
files.
Sincerely,
Saratoga Resources Inc,
A Texas Corporation
/s/ Xxxxxx X. Xxxxx
__________________________
Xxxxxx X. Xxxxx, President
AGREED TO AND ACCEPTED this 5th of April 1999
DBX Geophysical Corporation
/s/ Xxxx Xxxxxx
__________________________
Xx. Xxxx Xxxxxx, President
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