CONSULTING AGREEMENT
This
Consulting Agreement (the “Agreement”) is entered into effective as of September
1, 2006 (the “Effective Date”), between Reef Exploration, L.P., a Texas limited
partnership (the “Company”) and Xxxxxxx X. Xxxxx, dba, DXN Associates, (the
“Consultant”). Company and Consultant may be referred to collectively in this
Agreement as the “Parties” or individually as a “Party.” The Parties desire to
enter into an agreement setting forth the terms and conditions under which
Consultant will provide services to Company. For and in consideration of the
mutual covenants and agreements set out in this Agreement, the Parties agree as
follows:
1. Consultant Services. Consultant represents that he is qualified
and has sufficient experience and expertise to review and evaluate exploration,
exploitation and development drilling opportunities as well as producing
property evaluations and to provide Company with an evaluation and analysis to
enable the Company to determine whether or not it wishes to acquire any of such
properties.
Consultant
will review for the Company, all properties that are relatively close in, low
risk, and that have some kind of a downdip show. This criteria may be altered
and amended from time to time by written notice to Consultant. Consultant agrees
to give Company the first right of refusal on all prospects that it reviews that
fit within the Company’s criteria, as may be amended (a
“prospect”).
Consultant
shall devote sufficient time to his duties hereunder to locate and provide the
Company with prospects and provide a sufficient review and analysis of such
prospects to minimize the time spent by Company in making its determination
whether or not to come to Consultant’s offices in Midland to make a further
review.
2. Term. This Agreement shall commence on the
Effective Date and shall continue for a period of one year (the “Initial Term”)
unless sooner terminated pursuant to Article 8 hereof. The term of this
Agreement will be automatically extended thereafter (the “Extended Term”) until
such time as either Party terminates it upon 30 days written notice, unless
sooner terminated pursuant to Article 8 hereof.
3.
Compensation.
3.1 Consulting Fee. Company shall pay Consultant during the term
of this Agreement the sum of $11,250.00 per month in advance on the first of
each month. This fee may be offset by any amounts due and owing by Consultant to
Company whether such amounts arise out of this Agreement or unrelated
transactions between the Parties. Consultant shall not be an employee of Company
and shall not participate in any group health, accident and life insurance
plans, or any pension or other benefit plan sponsored by Company.
3.2
Expenses.
|
|
a.
|
Company
shall acquire the following equipment for Consultant’s use. Consultant
shall provide Company the necessary equipment specifications for each
item.
|
1.
Desktop PC with dual screens and supporting hardware and software
2. A 36
inch (minimum) or 42 inch large-scale color printer (plotter)
3. An
electric log copier/scanner
4. A
black and white, computer-compatible copier capable of 11/17 prints
All
equipment provided by the Company for use by Consultant shall remain the
property of Company and shall, upon request to do so, be returned to the
Company.
b. Company
shall establish a revolving account with Consultant to reimburse Consultant for
all third party and other expenses pit-approved by the Company in writing.
Company shall fund the account initially with $5,000.00. Consultant shall
reconcile the account monthly with supporting expenses documentation and Company
shall provide the necessary funds to maintain a $5,000.00 monthly balance in the
account at the beginning of each month. These expenses shall include but not be
limited to:
1.
Geotech, filing and secretarial services
2.
Expenses associated with the preparation and reproduction of maps and other
geological, geophysical, land and engineering exhibits
3.
Acquisition of geologic, land and other data required in the evaluation of
individual projects.
|
|
c.
|
Company
shall reimburse Consultant for all normal monthly expenses incurred by
Consultant in carrying out its duties hereunder that have been approved by
Company in writing, in advance. Consultant shall, on presenting Company
with documentation reasonably acceptable to Company, be reimbursed by
Company for all such pit-approved expenses, including transportation,
meals, lodging, long distance phone calls, and related miscellaneous
expenses incurred by Consultant in connection with the performance of the
services provided by Consultant pursuant to this
Agreement.
|
3.3
Additional Consultant Participation.
|
|
a.
|
Assignment
of Overriding Royalty – Third Party
Deals.
|
Company
shall assign Consultant a 1% of 8/8ths overriding royalty interest (ORRI) on all
leases either acquired and/or earned by Company on all projects submitted by
third parties, which have been previously recommended by Consultant or will be
recommended by Consultant during the Term of this Agreement, and which are
acquired by Company after September 1, 2006. The ORRI shall be proportionately
reduced to the Company’s working interest ownership in each lease.
|
|
b.
|
Consultant
Participation – Generated
Deals
|
Mutually
agreeable terms shall be negotiated between Company and Consultant on all deals
generated by Consultant (including those deals generated in association with
other parties) and committed to by Company during the Term of this Agreement.
Consultant shall provide Company a 15-day exclusive on all such generated deals.
Should Company elect not to participate in any given generated project submitted
by Consultant within this 15-day exclusive period, then Consultant shall be free
to market the deal to other potential industry participants.
4. Exclusive Services. Consultant agrees that it will not, during
the term of this Agreement, do any work, perform any services, or serve as a
consultant for a third party where those activities would, in the reasonable
judgment of Company, create a conflict of interest with or prevent Consultant
from fulfilling its duties, obligations, and responsibilities as set forth in
this Agreement.
5. Confidentiality. Consultant recognizes that during the term of
this Agreement, Consultant may have access to confidential and proprietary
information and trade secrets of Company (the “Confidential Information”).
Consultant agrees that it will not divulge, distribute, or disseminate any
Confidential Information to any third party during or after the term of this
Agreement, or use any Confidential Information for any purpose other than as
required to carry out its duties hereunder.
Consultant
agrees that, upon termination of this Agreement, it shall immediately return to
Company all Confidential Information.
6. Personal Services
Contract. Consultant acknowledges
and agrees this Agreement is a personal services contract and may not be
assigned by Consultant.
7. Work Product. Consultant agrees that it will promptly and
completely inform and disclose to Company all studies undertaken with respect to
its duties and the findings and analyses that Consultant may create or obtain
during the term of this Agreement for the benefit of the Company. All such
findings and analyses and discoveries shall be the exclusive property of the
Company and shall be included in the definition of Confidential
Information.
8. Termination. This Agreement may be terminated at any time
during the Initial Term or the Extended Term:
|
|
a.
|
By
the mutual written consent of both
Parties;
|
|
|
b.
|
By
Company if Consultant (i) breaches any covenant, term, or condition
contained in this Agreement, (ii) commits an act of theft, fraud, or
dishonesty against Company, or, (iii) fails or refuses to satisfactorily
perform the services to be provided by Consultant pursuant to this
Agreement;
|
|
|
c.
|
By
Consultant if Company fails without cause to pay the Consultant Fee for a
period of 30 days after written notice from
Consultant.
|
|
|
d.
|
By
30 days written notice from either Party during the Initial or Extended
Term of this Agreement.
|
If this
Agreement is terminated for the reasons stated in a., b., or d. above, any
obligations of Company to pay Consulting Fees to Consultant shall terminate
effective as of the date of termination of this Agreement, and those fees will
be prorated through the date of termination. If Consultant terminates this
Agreement pursuant to c. above, Consultant shall be entitled to the fees that
would be due to Consultant during the remainder of the Term or the Extended
Term, as appropriate.
9.
Miscellaneous.
9.1 Independent
Contractor. Nothing contained in
this Agreement shall be construed as a partnership agreement and Consultant
shall not be deemed to be an employee or agent of Company. Neither Party has any
authority to bind the other in any respect. It is intended, understood, and
agreed that Consultant is an independent contractor responsible for his own
actions.
9.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas. Company and
Consultant agree that in the event of a dispute arising between the Parties, the
Parties agree to subject themselves to the jurisdiction of the Courts of Dallas
County, Texas.
9.3 Modifications. No provision of this Agreement may be changed
or modified, except by written agreement signed by the Parties.
9.4 Legal Compliance. Consultant agrees to abide by all applicable
laws and regulations, both state and federal, in the performance of his duties
provided for in this Agreement.
9.5 Entire Agreement. This Agreement contains the entire
understanding of the Parties in connection with its subject matter and
supersedes all previous verbal or written agreements.
9.6 Notices. My notice required or permitted to be given
under this Agreement shall be in writing and shall be considered to have been
given if sent by certified mail, return receipt requested,
To
Consultant at:
000 X.
Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
(000)
000-0000
Attention:
Xxxx Xxxxx
Or, to
Company at:
0000 X.
Xxxxxxx Xxxxxxxxxx Xxxxx 000
Xxxxxxxxxx,
Xxxxx 00000
(000)
000-0000
Attention:
Xxxx Xxxxxxx
9.7 Invalidity. If any of the provisions of this Agreement
shall be held invalid, that invalidity shall not affect any other provisions
which can be given effect without the invalid provisions. To this end, the
provisions of this Agreement are intended to be and shall be deemed
severable.
9.8 Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of its
provisions.
This
Agreement has been executed as of the Effective Date stated above.
Company:
Reef
Exploration, LP , by Reef Exploration, GP, LLC, its general
partner.
|
By:
|
 |
Consultant:
Xxxxxxx X.
Xxxxx dba DXN Associates
|
By:
|
 |
