Exhibit 10.4
AGREEMENT
This Agreement is made effective as of September 30, 2003, by and among
Xxxxxx X. Low ("Low"), Sunrise Securities Corporation ("Sunrise"), Cadence
Resources Corporation Limited Partnership (the "Partnership") and Cadence
Resources Corporation ("Cadence").
RECITATIONS
1. On August 8, 2002, Cadence and Low formed the Partnership with Cadence as
the sole general partner and Low as the sole limited partner.
2. Cadence contributed, partly in kind and partly in cash, $12,500 to the
Partnership as consideration for its general partnership interest and Low
contributed $250,000 in consideration for his limited partnership interest.
Cadence also agreed to grant Low a security interest in the equipment and
fixtures affixed to xxxxx 1A and 1B in Wilbarger and Cadence's share of the
cash flows it received from these two xxxxx.
3. Cadence, the Partnership, Sunrise, an entity controlled by Low, Low and
Low's assigns are parties to the Side Letter Agreement of Certain Terms of
Limited Partnership Drawdown Facility dated August 1, 2002 (the "Drawdown
Facility"), which was a $20 million funding agreement intended to provide
equity investments in the Partnership. In partial consideration for
entering into the Drawdown Facility, Low was given a right of first refusal
to provide funding for any drilling project contemplated by the
Partnership.
4. Effective December 1, 2002, Cadence granted a 5% working interest in its
West Electra Lake #1 well (the "#1 Well") to Low.
5. In June 2003, Low advanced $300,000 to Cadence pursuant to the Additional
Contribution to Limited Partnership Agreement among Cadence, the
Partnership and Low dated June 20, 2003 (the "Additional Contribution
Agreement"), to explore natural gas interests in the Black Bean Unit in
Michigan (the "Black Bean Unit") in exchange for 120,000 shares of Cadence
common stock and a working interest in each of Cadence's xxxxx in the Black
Bean Unit drilled using the $300,000 (the "Black Bean Unit Xxxxx"). In this
Agreement, the term "Black Bean Unit Xxxxx" is used to mean only those
xxxxx in the Black Bean Unit that were drilled prior to September 30, 2003
using the $300,000 advanced by Low and no other or future xxxxx in the
Black Bean Unit. The working interest to be granted under the Additional
Contribution Agreement is a 2.25% working interest until "unitized well
payout," the point at which the Partnership receives 100% of its
contribution back in the form of revenues from the well unit. After
unitized well payout, Low's working interest in these xxxxx is to be
reduced to a 2.00% working interest.
6. Cadence has repaid Low the $300,000 advance and has paid Low $250,000 for
his limited partnership interest in the Partnership.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and on the terms and subject to
the conditions set forth herein, the parties agree as follows:
Article I
Conveyance
1.1 Low hereby conveys to Cadence his limited partnership interest in the
Partnership free and clear of all liens, claims and encumbrances and Cadence
shall be the successor to Low with respect to all of Low's rights as a limited
partner.
1.2 Low acknowledges and agrees that Cadence, upon conveyance, as holder of
all of the general partnership rights and interests and limited partnership
rights and interests in the Partnership, Cadence may, in its sole discretion,
dissolve the Partnership and liquidate its assets. Low further acknowledges and
agrees that he has no rights to any assets now or heretofore held by the
Partnership or by Cadence on behalf of the Partnership or any distributions from
the Partnership either on the date hereof, at any time prior hereto or upon
winding up and liquidation of the Partnership.
1.3 Low hereby conveys to Cadence all of his rights, title and interest in
and to any working interests in the #1 Well free and clear of any and all claims
and encumbrances created by him.
1.4 Low, Cadence and the Partnership hereby terminate the Additional
Contribution Agreement effective as of September 30, 2003 based upon repayment
to Low by Cadence of his $300,000 advance. Cadence hereby agrees to execute and
record an instrument of conveyance to Low conveying to him a 2.00% working
interest in the Black Bean Unit Xxxxx. The reduction of Low's working interest
in all of the Black Bean Unit Xxxxx from 2.25% to 2.00% is effective as of
September 30, 2003.
1.5 Cadence, the Partnership, Sunrise and Low hereby terminate the Drawdown
Facility effective as of September 30, 2003. The termination of the Drawdown
Facility terminates the right of first refusal granted therein. The parties
hereto agree that neither Low nor Sunrise is to have a security interest in any
assets of Cadence or the Partnership after September 30, 2003 and to the extent
that Low or Sunrise hold any such security interests, Low agrees to terminate
all such security interests and to release Cadence and the Partnership from any
and all obligations set forth in the Drawdown Facility.
Article II
Representations and Warranties
2.1 Low has all requisite power and authority to execute, deliver and be
bound by this Agreement on his own behalf and on behalf of his assigns and to
consummate the transactions contemplated hereby.
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2.2 Sunrise has all requisite power and authority to execute, deliver and
be bound by this Agreement.
2.3 Low hereby represents and warrants that he has not pledged or
encumbered his working interest in the #1 Well or the Black Bean Unit Xxxxx.
2.4 Cadence has all requisite power and authority to execute, deliver and
be bound by this Agreement on its own behalf and in its capacity as general
partner of the Partnership.
Article III
Miscellaneous
3.1 Entire Agreement. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
3.2 Costs, Expenses and Legal Fees. Each party hereto shall bear its own
costs and expenses (including attorneys' fees) of preparation, negotiation and
consummation of this Agreement and the transactions contemplated hereby.
3.3 Severability. If any provision of this Agreement is held to be
unenforceable under present or future laws effective during the term hereof,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such unenforceable provision never comprised a part hereof;
and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the unenforceable provision. Furthermore, in lieu of
such unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such unenforceable provision
as may be possible and be legal, valid and enforceable.
3.4 Survival of Representations and Warranties. Notwithstanding any
investigation by any party hereto, the representations and warranties and other
agreements contained herein shall survive the for a period of six calendar
months following the date of this Agreement.
3.5 Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Texas.
3.6 Amendment. This Agreement may be amended only by an instrument in
writing executed by the party against which enforcement of the amendment is
sought.
3.7 Assignment. Neither this Agreement nor any right created hereby shall
be assignable by any party hereto.
3.8 Further Assurances. Each party covenants that at any time, and from
time to time prior to and after the consummation of the transactions
contemplated by this Agreement, it will execute such additional instruments and
take such actions as may be reasonably requested by the other parties to confirm
or perfect or otherwise to carry out the intent and purposes of this Agreement.
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3.9 Dissolution of Partnership. Low and Sunrise recognize that at some time
after the consummation of the transactions contemplated by this Agreement, the
Partnership will dissolve and wind up its operations (collectively, the
"Dissolution"). Low and Sunrise acknowledges that the Dissolution of the
Partnership shall not cause a breach of the covenant set for the in Section 3.8
hereof.
3.10 Notice. Any notice or communication must be in writing and given by
depositing the same in the United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested, by delivering the same by telecopy, in person or electronically. Such
notice shall be deemed received on the date on which it is hand-delivered,
confirmation of delivery is received, on the third business day following the
date on which it is so mailed or on the date on which it is transmitted
electronically. For purposes of notice, the addresses of the parties shall be:
If to Cadence: 0000 Xxxx Xxxxxx, #000
Xxxxxx Xxxx Xxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxx
Telecopier: (000) 000-0000
Xxxxxx0000@xxx.xxx
If to Low or Sunrise: Sunrise Securities Corporation
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Low
Telecopier: (000) 000-0000
Xxxxxx@xxxxxxxxxxx.xxx
Any party may change his or its address for notice by written notice given
to the other parties.
(Signature page follows)
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day
and year first written above.
CADENCE RESOURCES CORPORATION
By: /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
Executive Vice President
CADENCE RESOURCES CORPORATION LIMITED PARTNERSHIP
By Cadence Resources Corporation
Its Limited Partner
By: /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
Executive Vice President
SUNRISE SECURITIES CORPORATION
By: /s/ Xxxxxx X. Low
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Xxxxxx X. Low
President
/s/ Xxxxxx X. Low
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XXXXXX X. LOW
