EXHIBIT 10.3
JOINT VENTURE AGREEMENT BETWEEN CORPORATIONS TO
JOINTLY SEEK, CONSTRUCT, AND OPERATE OIL LEASES WITH THE
BOUNDARIES AND GAS OF THE UINTAH AND OURAY RESERVATIONS
AGREEMENT dated this day of July, 1997, between M III
CORPORATION, (hereinafter referred to as "M III"), a native American Company,
registered in the State of Utah and ENVIRONMENTAL REMEDIATION HOLDING
CORPORATION, (hereinafter referred to as "ERHC"), a U.S. Public Corporation
registered in the State of Colorado, with offices located 000 Xxxxxxx Xxxxxxxx,
Xxxxxxx, Xxx Xxxx 00000.
W I T N E S S E T H :
WHEREAS, the parties desire to confirm the existence of a
Joint Venture for the purpose of complementing one another in jointly entering a
venture for the recovery, workover and operation of oil and gas xxxxx and/or
leases located within the boundaries of the Uintah and Ouray Reservations,
located in the Fort Duchesne area, State of Utah; and
WHEREAS, the oil and gas xxxxx/leases belong to the
Allotted members of the Ute Tribe and/or all the members of the Ute Tribe; and
WHEREAS, M III and ERHC desire to operate in a joint manner;
and
WHEREAS, M III and ERHC are both corporations duly qualified
to furnish such oil and gas services in the area of the State of Utah; and
WHEREAS, it is the intent of the joint venture to return to
production and operate all available oil and gas xxxxx/leases located on the
Uintah and Ouray Reservations; and
WHEREAS, to enable the joint venture to perform in accordance
with this Agreement, M III will cause to have transferred and/or establish oil
and gas leases for the workover, commercial operation and development of oil and
gas resources located on the Uintah & Ouray Reservations, now and in the future;
and
WHEREAS, the parties shall develop the gas rights and
when appropriate, construct a gas refinery; and
WHEREAS, M III will also provide the oil and gas leases
and operation contract for the Roosevelt Unit; and
WHEREAS, ERHC shall form a wholly owned subsidiary as the
joint venture partner for this project to be known as "M III/ERHC/BAPCO"; and
WHEREAS, ERHC is utilizing its Corporate counsel in New
York State and has prepared the within Agreement; and
NOW, THEREFORE, the parties agree as follows:
I. Formation of Joint Venture
(a) The parties hereto have agreed and formed, in accordance
with the provisions of the Agreement, a Joint Venture, which is hereinafter
referred to as the "Joint Venture".
(b) The Joint Venture may conduct business as
"M III/ERHC/BAPCO", or such other name as the parties shall agree.
II. Powers and Purposes of the Joint Venture
The Joint Venture is formed for the purposes of (1) the
recovery, workover and operation of the oil and gas leases located within the
boundaries of the Uintah & Ouray Reservations located in the State of Utah; (2)
the recovery, workover and operation of the Roosevelt Unit; (3) borrowing money
for the purposes of the Joint Venture and pledging or mortgaging the capital
commitments of the parties and all or any part of the Joint Venture oil and gas
leases/properties therefor; (4) to return all available oil and gas xxxxx to
commercial production through the issuance and/or transfer of the oil and gas
leases referred to herein and in the Agreement dated the 28th day of June, 1997,
including the workover of these xxxxx and the drilling of any future production
that may be required; (5) M III herewith grants ERHC/BAPCO the right to perform
a full and complete evaluation and feasibility study of the oil, gas and mineral
reserves on the xxxxx obtained under this Joint Venture; (6) selling, exchanging
or otherwise disposing of any or all of the properties of the Joint Venture for
cash, stock, securities or any combination thereof upon such terms and
conditions as the Parties may determine; and (7) employing such agents,
managers, laborers and other employees as may be necessary to carry out the
purposes of the said Joint Venture.
III. Properties
(a) The properties of the Joint Venture shall consist of
certain oil and gas leases and/or xxxxx situated and all equipment necessary for
the establishment of said joint venture together with such other related
equipment as shall be necessary to carry out the intent of this Joint Venture,
including the easements and rights appurtenant thereto or which may be received
in connection with the use of the land, fixtures, machinery and equipment to be
located on such real property or used in connection with the operations of the
Joint Venture in the State of Utah and all other property, real or personal,
tangible or intangible, owned or acquired by the Joint Venture.
IV. Contributions
(1) M III herewith grants ERHC/BAPCO the right to perform a
full and complete evaluation and feasibility study of the oil, gas and mineral
reserves on the xxxxx obtained under this
Joint Venture. All costs of these studies will be initially borne by ERHC/BAPCO
but all costs shall be recovered from production; (2) M III undertakes to make
available to ERHC/BAPCO within 21 days of the signing of this Agreement, any and
all maps, data, xxxxx runs, production histories and/or feasibility studies
which may be utilized in the planning of the project. ERHC/BAPCO shall undertake
to treat such information and data with utmost confidentially and not to
communicate it with third parties without prior approval by M III; (3) M III, as
an Indian owned and registered Company with "Tribal Preference" on the Uintah
and Ouray Reservation, shall apply for any and all available oil and gas leases,
now and in the future; (4) ERHC/BAPCO shall provide M III with a Seventy-Five
Thousand ($75,000.00) Dollar bond plus the necessary funds estimated at
Fifty-Five Thousand ($55,000.00) Dollars by the Allotted Members within seven
(7) business days from the signing of the Agreement. The Fifty-Five Thousand
($55,000.00) Dollars shall be deposited into the Attorney Trust Account of J.R.
Xxxxxx to close on the twenty-six (26) allotted leases; (5) M III upon the
presentation of the funds, will assign twenty-six (26) Allotted oil and gas
leases plus M III/ERHC/BAPCO will select an additional 175 oil and gas xxxxx
from the 1995 Reserve Report, 132 oil and gas xxxxx from the 1993 Report and 28
oil and gas xxxxx from the Roosevelt Unit, either Allotted or Tribal, located on
the Uintah or Ouray Reservation; (6) M III will apply for the available leases
and operation contract in the Roosevelt Unit; (7) ERHC/BAPCO shall provide all
necessary funds for this project, with a maximum
of Eight Million Five Hundred Thousand ($8,500,000.00) Dollars. These funds
shall be used in accordance with the "Use of Funds Statement" attached per
Addendum A and reimbursed from production; (8) M III/ERHC/BAPCO hereby agree
that ERHC/BAPCO shall have a priority for reimbursement of its investment as set
forth in paragraph IV, the term of which shall be a maximum of ten (10) years
and a minimum of three (3) years, as cash permits from oil and gas production. M
III/ERHC/BAPCO retain the right to prepay the loan; (9) ERHC/BAPCO shall have a
"Working Interest" in all xxxxx/leases obtained by M III, either Allotted or
Tribal, in addition to, a contract to operate said xxxxx; (10) M III agrees to
provide ERHC/BAPCO "Assignment of Lease" documents on all leases obtained by M
III from either members of the Allotted Land Owners or from the Tribal Council,
with respect to all Tribal Leases. All leases obtained shall have xxxxx on said
property/leased regions; (11) M III agrees to issue any and all property and
appropriate UCC-1 Documentation on all trucks, tools, equipment and any and all
surface equipment as belonging to each well/lease; (12) to compensate M III,
ERHC will issue, upon transfer of the first 100 xxxxx, 250,000 shares of ERHC
Rule 144 stock, and thereafter, an additional 250,000 shares of ERHC Rule 144
stock and warrants for 250,000 shares at ($0.75) per share to be exercised
within two (2) years upon the assignment of the following leases: two (2) xxxxx
each producing between one thousand (1,000) and one thousand two hundred (1,200)
barrels per day of oil production; two (2) xxxxx each producing five hundred
(500) barrels per day of oil production
and five (5) xxxxx each producing One Hundred (100) barrels per day of oil
production; and, (13) M III shall provide ERHC/BAPCO with 26 leases to be used
as collateral for the first funds described in this Agreement.
Further, it is agreed by both parties that the additional
leases shall be obtained by M III through the use of funds as provided by
ERHC/BAPCO and may be used as collateral for any required funding.
V. Allocation of Income and Losses
1. The joint venture parties agree that the Debt incurred by
ERHC/BAPCO for its investment (maximum $8,500,000.00) shall take priority over
all allocations for a maximum of ten (10) years and full payment of ERHC/BAPCO's
investment. The minimum yearly amount payable to ERHC/BAPCO shall be determined
by the loan requirments.
2. ERHC/BAPCO, as operator of said fields, shall receive two
dollars and fifty cents ($2.50) per barrel produced from any and all
xxxxx/leases in accordance with this Agreement.
3. All sums released after the payment of ERHC/BAPCO's
Debt Service shall be as follows:
I. As to all productions except the twenty-eight (28)
xxxxx on the Roosevelt Unit:
(a) 20% to the Tribe;
(b) 10.59% to the original M III investors, until such
time as the loan is repaid or ERHC/BAPCO purchases its interest;
(c) 41.643% to M III;
(d) 27.762% to ERHC/BAPCO.
II. As to the twenty-eight (28) xxxxx located on the
Roosevelt Unit:
(a) 16.5% to the UTE Tribe;
(b) 41.75% to M III; and
(c) 41.75% to ERHC/BAPCO.
4. ERHC/BAPCO has the option to purchase an additional
five (5%) percent share of the oil and gas leases from the original
investor.
5. Further, the parties agree that until such time as natural
gas production reaches Five Thousand (5,000) MSCF, such production shall be
gathered and injected back into the Formation.
6. That at such time as the natural gas production achieves a
daily production of Five Thousand (5,000) MSCF, M III shall with the assistance
of War Eagle Corporation, arrange to fund the construction of an oil and gas
refinery for the Uintah and Ouray Reservations.
Further, it is agreed that once the Refinery begins operation,
ERHC/BAPCO will release a five (5%) percent working interest in the xxxxx/leases
then in effect to M III and M III shall grant to ERHC/BAPCO a twenty-five (25%)
percent interest in the Refinery under a separate joint venture to be formed.
VI. Terms of Agreement
This Joint Venture shall continue for a period of ten (10)
years from the date of this Agreement and shall be renewed for the same time
periods as the concession continues, unless it is sooner terminated pursuant to
the provisions herein.
VII. Governing Committee
(a) The Board of Directors of ERHC shall select three (3)
persons and M III will select two (2) persons, which three (3) persons who,
together with two (2) persons, shall constitute the Governing Committee of the
Joint Venture. A vacancy in the Governing Committee caused by death, resignation
or removal shall be filled by the Board of Directors that shall have appointed
the departed member to the position which has become vacant and by both of the
said Boards of Directors if the vacancy shall have occurred in the office of a
member appointed by both of said Boards of Directors, as the case may be.
(b) The Governing Committee shall conduct the ordinary
business operations of the Joint Venture. The Committee shall
appoint ERHC/BAPCO as the Operational Managing Agent who, subject to its
control, shall have the power to execute contracts in the name of the Joint
Venture, to appoint and discharge agents and employees, and to take such other
steps as shall be necessary to carry out the day to day operations of the Joint
Venture.
(c) Regular meetings of the Governing Committee may be held
without call or notice at such times and places as the Governing Committee at a
meeting of all of its members from time to time may fix; other meetings of the
Governing Committee may be called by any member thereof either by oral,
telegraphic or written notice, not later than the three (3) days prior to the
date set for such meeting. Such notice shall state the time and place of the
meeting and shall be sent by overnight mail and/or Federal Express and by
facsimile transmission to each member at his address and facsimile number as
shown on the records of the Joint Venture.
(d) At any meeting of the Governing Committee, all of the
members shall constitute a quorum. Members of the Committee may be present
through telephonic methods. No action of the Governing Committee shall be
effective unless authorized by the affirmative vote of a majority of the members
thereof.
(e) Minutes of the meetings of the Governing Committee
shall be kept by an individual designated by the Committee and the
said minutes shall be presented to each of the parties hereto for their
information.
VIII. Termination of Joint Venture
(a) The Joint Venture shall be terminated upon:
(i) the expiration of the term specified in
Article VI hereof;
(ii) consent of all of the parties.
(b) Upon the termination of the Joint Venture for any reason,
its liabilities and obligations to creditors shall be paid from cash on hand, or
if such cash on hand is insufficient, then first from the proceeds of the sale
of personal property of the Joint Venture, including automobiles, trucks,
machinery and equipment and next, from the sale of other properties of the Joint
Venture. Any liabilities still remaining shall then be borne in the portion set
forth herein, by the parties in accordance with paragraph V hereof. Or, if any
assets remain after payment of all liabilities, they shall then be distributed
in the following manner, but not to any party who shall be deemed to have
abandoned all of its rights in the Joint Venture, to wit:
(i) All cash on hand shall first be
distributed to each party in an amount
equal to the unliquidated balance of its
capital account plus the amount of the
credit balance of its income account and
the remainder if any, shall be
distributed to the said party in
accordance with Article V hereof; and
(ii) All tangible personal property of the
Joint Venture shall be segregated and
either be distributed in accordance with
subparagraph (i) above, or shall be sold and
the proceeds thereof shall be distributed in
the manner described in subparagraph (i)
above; and
(iii) All real property and all intangible
personal property of the Joint Venture shall
be distributed in the manner described in
subparagraph (i) above.
(c) In the event that a distribution under the terms of this
Article shall be other than cash, then the value to be applied to such property
shall be its market value as of the termination date, provided, that in the case
of real property such market value shall be determined by a competent
professional appraiser of real property to be selected by the parties or their
legal representatives, as the case may be.
IX. Fiscal Year; Accounting Basis; Income and Capital
Account
The fiscal year of the Joint Venture shall be the fiscal year
of ERHC/BAPCO, a public company. The Joint Venture's books and records shall be
kept in the same manner and fashion as ERHC/BAPCO and in accordance with
standard accounting procedures. The priority of income distribution under
Article V shall be after payment of the necessary and ordinary business expenses
and satisfaction of the capital contribution/loan provided by ERHC/BAPCO under
Article IV. Thereafter, the income account of each party shall be credited with
its share, if any, of the net income of the Joint Venture for each fiscal year
and shall be
charged with (i) its share, if any, of the net loss of the Joint Venture for
each fiscal year, and (ii) any amounts distributed to it by the Joint Venture,
but only to the extent of the credit balance of its income account before
charging such distributions. The capital account of each party shall be credited
with the capital contributions, if any, made by it under Article IV above, and
such account shall be charged with any amounts distributed to it, if any, which
pursuant to the preceding sentence, are not properly chargeable to its income
account. The balance in a party's capital account at any time shall be referred
to as its undistributed capital account.
X. Banking
(a) The funds of the Joint Venture shall be kept in an account
designated, or in any other manner which may be agreed upon between the parties,
on deposit in a bank designated by the Joint Venture Governing Committee to be
drawn upon checks jointly signed by the designees of the Governing Committee or
any other duly authorized officer (or representative) of each party.
(b) A separate account entitled the ERHC/BAPCO Working Account
may be established by the parties, at such place and in such manner as they
shall determine, to be used in the day to day operation of the Joint Venture.
All funds in such account shall be subject to the control of the Governing
Committee and may be drawn upon checks signed by any two of the members of the
Governing Committee or by the Operational Managing Agent acting alone if so
authorized by the Governing Committee.
XI. Transfer Restrictions
Without the written consent of the other party, a party shall
not sell, assign or transfer all or any part of its interest in the Joint
Venture except in accordance with the following procedures:
(a) Initial Offer:
The selling party shall first deliver to the other party a
written Notice of Intention to sell, offering all (but not less that all) of the
interest of the selling party in the Joint Venture at the purchase price and on
the terms specified therein, whereupon the other party shall have the right and
option for a period of sixty (60) days following receipt of such Notice, to
accept the offer made in such Notice, to all of the said interest at the
purchase price and upon the terms stated therein. Such acceptance shall be made
by delivering a written Notice of Acceptance to the selling party within said
sixty (60) day period.
(b) Sale to Outside Purchaser:
If an effective acceptance shall not be received pursuant to
paragraph (a) above, then the selling party may sell all (but not less than all)
of its interest to any outside purchaser, at a price not less than and on terms
not more favorable than the price
and terms stated in the original Notice of Intention to sell, at any time during
the period of sixty (60) days next following the expiration of the offers
required by said paragraph (a); provided, that such transferee shall agree to be
bound by the terms of this Article XI.
(c) Failure to Sell to an Outside Purchaser:
If the selling party shall fail to sell all of its
interest as contemplated by paragraph (b) above within the sixty (60) day
period, then the provisions of the said Article shall continue to apply to such
interest as if no Notice of Intention to sell had been originally given in
connection therewith.
XII. Definition
For the purposes of this Agreement, the terms net income and
net loss shall mean the income (including the gain, if any, resulting from the
sale of all or any part of the properties of the Joint Venture) or loss of the
Joint Venture as reflected in its books as audited by the accountant or
accounting firm servicing the Joint Venture.
XIII. General Provisions, Miscellaneous
(a) All notices, requests, consents and statements hereunder
shall be deemed to have been properly given if mailed from by Federal Express,
Express Mail or by certified U.S. mail, postage prepaid, or if sent by
prepaid telegram, addressed in each case as follows:
(i) If to ERHC/BAPCO, care of:
Xxxxx X. Xxxxxxx, Esq.
000 Xxxxxxx Xxxxxxxx,
Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000
(ii) If to M III, care of:
J.R. Xxxxxx
c/o
(b) This Agreement shall be deemed a contract made under the
laws of the State of New York and together with the rights and obligations of
the parties hereunder shall be construed and enforced in accordance with and
governed by the laws of such State.
(c) Each party agrees to execute and file all such
certificates, counterparts, amendments, instruments or other documents as may be
required by the laws of the State of New York and by the laws of any other
state, county or municipality, to comply with any fictitious or assumed name
statutes, and to qualify the Joint Venture for the transaction of business
therein.
(d) The parties hereto agree to take such further action as
shall be necessary to carry out the intention of this Agreement including the
execution and filing of such documents and taking such steps as may be required
by any appropriate statute or regulation.
(e) This Agreement shall be binding upon and shall inure to
the benefit of the respective heirs, successors, assigns and legal
representatives of the parties hereto.
(f) This Agreement may be executed simultaneously in two
or more counterparts, all of which together shall constitute one
and the same instrument.
(g) The headings of Articles are solely for the convenience of
reference and if there be any conflict between such headings and the text of
this Agreement, the text shall control.
XIV. MANAGEMENT, DUTIES AND RESTRICTIONS
Both parties to the joint venture shall participate in the
business of the company's affairs and each party shall devote a portion of his
time thereto. The managing partner shall be ERHC/BAPCO. Neither of the companies
in this joint venture, M III and ERHC/BAPCO, shall directly or indirectly,
engage in any other business without the consent of the other partners, but
nothing herein contained shall prohibit the activity of either joint venture
company from investing in any forms of investment for their own benefit provided
such investments do not infringe on the running of the joint venture.
XV. EXPENSES
No person shall charge through the joint venture any expenses
for automobiles, entertainment, professional dues, conventions, charitable
contribution, or any item connected with the operation and maintenance of his or
her home or personal affairs unless agreed upon by all the parties.
IN WITNESS WHEREOF,
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
Dated: July 28, 1997
/s/ Xxx X. Xxxx
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XXX X. XXXX, CEO
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX, SECRETARY
BASS AMERICA PETROLEUM COMPANY
Dated: July 28, 1997
/s/ Xxxxxx Xxxxxx
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XXXXXX XXXXXX, VICE PRESIDENT
/s/ Xxxxx X. Xxxxxxx
------------------------------------
XXXXX X. XXXXXXX, SECRETARY
M III
Dated: July 28, 1997
/s/ J. R. Xxxxxx
------------------------------------
J. R. XXXXXX, ESQ.
business.ven\miii.jv
