CONSULTING SERVICES AGREEMENT
Exhibit
10.1
THIS
CONSULTING AGREEMENT ("Agreement") is made as of this 25th day of August 2006,
between Second Bridge LLC, a limited liability company based in Norman, Oklahoma
(hereinafter referred to as "Consulting Firm"), and Blast Energy Services,
Inc.
, and its successors and assigns (hereinafter
referred to as "Company..
1. Consulting.
The
Company hereby employs Consulting Firm, and Consulting Firm hereby accepts
engagement with the Company upon the terms and conditions set forth. This
Agreement contains the entirety of the terms and conditions of Consulting Firm's
engagement with the Company. No other document, handbook, manual or oral
agreements or promises shall constitute an engagement contract between
Consulting Firm and the Company.
2. Term.
The
Term
of this Agreement shall begin on or before August 25, 2006 and shall continue
for a period of three (3) years through August 24, 2009.
3.
Compensation and Employee Benefit Plans.
(a)
The
Company shall have no obligation to the Consulting Firm regarding employee
benefit plans of any kind.
(b)
As
compensation for said Consulting Services, Consulting Firm shall receive
Compensation as a Consulting Fee defined as follows:
The
Consulting Fee for the Consulting Services under this Agreement is set forth
in
an amount of one hundred fifty thousand United States Dollars (US$150,000.00)
per month installments for each succeeding month beginning September 1, 2006,
made to the order of “Second Bridge LLC” due, payable and delivered; and
thereafter, each monthly installment shall be paid to the Consulting Firm,
on or
before the first day of each month. Each monthly installment, defined above,
shall be paid on or before the first day of each month, as described above,
and
with all such payments received at the Consulting Firm’s offices on or before
the due date as set forth herein delivered to: 0000 Xxxxxxxx Xxxx Xxxxx, Xxxxxx,
Xxxxxxxx 00000 or sent by wire transfer at the direction of the Consulting
Firm.
The Compensation defined in this Section 3(b) may be paid in advance at any
time
without penalty. In addition, upon any breach by the Company of this Section
3(b), including, but not limited to, non-payment of a monthly installment,
the
unpaid total amount of the Consulting Fee shall draw interest at a rate of
15%
per annum assessed from the first day of such breach until the cure of the
breach or until fully paid by the Company. See also Section 6 below regarding
survival of damages beyond termination.
(c) Upon
execution of this Agreement, the Company shall pay to the Consulting Firm to
be
held in an expense account the amount of one hundred fifity thousand United
States dollars
(US$150,000.00).
The funds from this account shall be used to pay for all of the Company’s
ordinary and reasonable business expenses in relation to its work under this
Agreement, from date of execution of this Agreement up until September 30,
2006,
including, but not limited to, office expenses, air and ground transportation,
travel, lodging and meals, postage, telephone, contract labor, consumables,
and
utilities in relation to the work performed by the Consulting Firm under this
Agreement. The Consulting Firm shall submit to the Company an itemized written
statement summarizing, on a monthly basis, the expenditures from this account
on
or before the October 10, 2006. Errors or disputes related to the items set
forth on the written expense summary submitted by the Consulting firm shall
not
be deducted from the required payment to restore the Minimum Balance in this
Section 3(c). Within seven (7) days of the Company’s payment of the amount of
expenses set forth on the summary, the Company may submit a separate error
or
disputed charges written statement to the Consulting Firm with its reasons
and
evidence regarding the error or disputed items set forth in the written expense
summary. In the event the Consulting Firm agrees with the Company’s written
errors or disputed item(s), the Consulting firm shall deduct the same amount
from its next written expense summary and show the correction or credit thereon.
In the event the Consulting Firm disagrees with the Company’s written error or
disputed item(s), and the item exceeds the amount of $1,000.00, and the Parties
cannot resolve the dispute otherwise, then the Consulting Firm may elect, within
seven (7) business days of its receipt of the Company’s written error or
dispute, to submit the item to a binding arbiter, mutually agreeable to the
Parties, for final determination of payment, or not, under the terms of this
Agreement which decision shall be binding upon both Parties and with each party
to split equally the cost of Arbitration under this section 3 (c). Such
Arbitration shall take place in Cleveland County, Oklahoma at the Consulting
Firm’s offices or other mutually agreed upon location. The Company agrees not to
withhold any compensation as set forth in this section 3 (b) in relation to
any
dispute of a request for reimbursement under this section 3(c) as such payments
bear no direct correlation to one other under this Agreement.
4. Duties.
The
Company and the Consulting Firm shall agree from time to time upon the tasks
to
be completed by the Consulting Firm under this Agreement as agreed between
the
Manager of the Consulting Firm and the Company. Such tasks shall be upon written
agreement of the Parties and may be received and signed by the parties in
counterparts via facsimile as set forth herein. It is contemplated under this
Agreement that the Consulting Firm provides consulting services to the Company
related to all aspects of its Hydrocarbon Exploration Drilling business.
Consulting Firm shall have sole discretion and authority over how it completes
the tasks assigned to it by the Company. A general description of duties is
described on “Exhibit A” attached hereto, as amended from time to time by
written agreement of the parties. Additional Consulting Projects shall be agreed
upon in writing between the parties.
5. Termination.
Upon
the
expiration of the Term, set forth in Section 2, above, the engagement of the
Consulting Firm may be terminated at any time by the Company, with or without
cause or reason, and upon thirty (30) days prior written notice to the
Consulting Firm delivered before the end of the term. Upon the expiration of
90
days, the Consulting Firm may terminate this agreement with thirty (30) days
notice to the Company. All Compensation received by the Consulting Firm prior
to
a notice of termination is guaranteed and under this Section 5, shall be
retained by the Consulting Firm. This agreement may not be cancelled by the
Company during the Term of this Agreement and the Company agrees to pay the
total amount of the monthly installments defined in Section 3(b) for the Term
of
this Agreement.
6. Compensation
Upon Termination.
In
the
event of termination of the engagement for any reason, the remaining
Compensation that is due Consulting Firm from the amount of the Consulting
Fee
not yet paid at the time of termination must be paid and survives beyond
termination specifically as set forth pursuant to section 3, above. There shall
be no pro-ration or reimbursement of the Consulting Fee due as set forth in
3
(b) in relation to termination of the Agreement. Any Compensation due under
this
Agreement to the Consulting Firm that would be due during the thirty (30) days
from a notice under section 5, above, shall remain due and payable to the
Consulting firm until the total Compensation in the amount of the Consulting
Fee, set forth in Section 3(b), above, has been received and shall be retained
by the Consulting Firm after termination, and in the event such Compensation
is
unpaid by the Company such an act shall constitute a breach of this Agreement
and the damages to the Consulting Firm shall survive the termination of this
Agreement until paid, including and in addition, interest, as set forth in
Section 3(b), thereon at 15% per annum beginning from the due date of such
unpaid Compensation, and in addition, the Company agrees to pay costs and
attorney’s fees for collection of such Compensation if it remains unpaid. The
Consulting Firm shall submit, upon termination of this Agreement, its final
written expense summary of business expenses under Section 3(c), above, which
provision shall survive the termination of this Agreement until paid or any
error or dispute fully resolved as provided for therein. The Company is a
sophisticated oil and gas drilling firm and understands and assumes all risks
involved in the drilling of oil and gas xxxxx.
7.
Indemnification. The
Company hereby extends to the Consulting Firm indemnification regarding all
of
its work for the Company. The Consulting Firm’s Members, Officers, employees,
and agents shall be entitled to be indemnified by the Company to the fullest
extent provided under the law, and shall be entitled to advance of expenses,
including attorney fees, in the defense or prosecution of a claim against the
Consulting Firm or such person in such person’s capacity as member, officer,
employee, or agent of the Consulting Firm from any claim arising from, or
related in any manner to, its work for the Company under this Agreement except
in the case of gross negligence. Indemnification offered hereunder shall survive
the termination of this Agreement for two (2) years after the date of
termination.
8. Non-Compete.
In
consideration of the consulting services being provided under this Agreement
and
in recognition of the fact that Second Bridge will have access to the
confidential information of the Company and that the Company’s relationships
with its customers and potential customers constitute a substantial part of
its
goodwill, Second Bridge agrees that for One (1) year from and after termination
of this Agreement, for any reason, unless acting with the Company’s express
prior written consent, Second Bridge shall not, directly or indirectly, in
any
capacity, solicit or accept business from, provide consulting services of any
kind to, or perform any of the services offered by the Company, for any of
the
Company’s customers or prospects with whom Second Bridge had business dealings
in the year next preceding the termination of this Agreement.
9. Notice.
Any
notice, direction or other advice or communication required or permitted to
be
given hereunder shall, except as provided herein, be in writing and shall be
personally delivered, via facsimile, or mailed by registered or certified mail,
return receipt requested, addressed to the
Company
and Consulting Firm at the addresses set forth below, or at such other address
as such party may designate to the other in writing.
If
to
Company:
Xxxxx X.
Xxxxx President
and Co-CEO
00000
Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx, 00000
Facsimile:
000-000-0000
If
to
Consulting Firm: Xxxx
X’Xxxx, Manager
0000
Xxxxxxxx Xxxx Xxxxx
Xxxxxx,
Xxxxxxxx 00000.
Facsimile:
000-000-0000
Either
party may designate a different address or facsimile number by written notice
to
the other.
10. Waiver
or Breach.
The
waiver of either the Company or Consulting Firm of a breach of any provision
of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by either Consulting Firm or the Company. This Agreement sets forth
the
entire understanding of the parties with respect to the subject matter
herein.
11. Binding
Effect.
This
Agreement shall be binding upon and shall inure to the benefit of both the
Company and the Consulting Firm and their respective successors, heirs and
legal
representatives, but neither this Agreement nor any rights hereunder may be
assigned by Consulting Firm or the Company without the consent in writing of
the
other Party.
12. Amendments.
Except
as
provided specifically above, no amendments, modifications or variations of
the
terms and conditions of this Agreement shall be valid unless in writing and
signed by all of the parties.
13. Choice
of Law.
This
Agreement shall be governed by and construed under the laws of the State of
Oklahoma. In the event of any breach or threatened breach of this Agreement,
Consulting Firm and the Company irrevocably submit and consent to the
jurisdiction of a court of competent jurisdiction in Cleveland County, Oklahoma,
and irrevocably agree that venue for any action or proceeding shall be in the
County of Cleveland, State of Oklahoma and any higher courts within the State
of
Oklahoma. Both parties waive any objection, including, but not limited to,
Federal diversity jurisdiction, to the jurisdiction of these courts or to venue
in Cleveland County, State of Oklahoma.
14. Severability.
If
any
provision of this Agreement shall be held, declared or pronounced void,
voidable, invalid, unenforceable or inoperative for any reason, by any court
of
competent jurisdiction, government authority or otherwise, such holding,
declaration or pronouncement, shall not adversely affect any other provision
of
this Agreement, but shall otherwise remain in full force and effect.
Notwithstanding the foregoing sentence, the provisions of this Agreement that
specifically state
set
forth
their survival of the termination of this Agreement may not be severed or waived
by any act of a person, court, or termination of this Agreement as those
provisions are independently negotiated and fully agreed to by the Parties
hereto.
15. No
Third Party Benefit.
None
of
the provisions of this Agreement shall be for the benefit of or enforceable
by
any creditors of the Company or the Consulting Firm. Furthermore, this Agreement
is made solely and specifically for the benefit of the parties hereto, their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person, individual or entity,
governmental body, taxation authority, or their heirs, executors,
administrators, legal representatives, successors, and assigns shall have any
rights, interests,
[Remainder
of the page intentionally blank]
or
claims
hereunder or be entitled to any benefits under or on account of this agreement
as a third-party beneficiary or otherwise.
16. Assignment.
The
Parties may assign this Agreement or the proceeds due hereunder only with notice
and the written consent of the other Party, which consent shall not be
unreasonably withheld.
17. Entire
Agreement.
This
Agreement sets forth the entire agreement of the parties hereto, and all prior
discussions, oral or written and any such agreements are merged
herein.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first set forth above.
Blast
Energy Services, Inc., a California Corporation (The Company
herein)
By:
|
/s/
Xxxxx X. Xxxxx
|
Its:
President and Co-CEO, Xxxxx X. Xxxxx
Second
Bridge LLC (The Consulting Firm herein):
/s/
Xxxx X’Xxxx
|
By:
Xxxx
X’Xxxx, Managing Member
Exhibit
A
Consulting
Agreement Responsibilities & Duties
Advise
the Company on organization of day to day Drilling Operations and Contract
Management in terms of the following areas of the Company
operations:
·
|
Contract
negotiation support
|
·
|
Drilling
Field Operations support
|
·
|
Repairs
& Maintenance, including minor
construction/rebuilds
|
·
|
Vendor
management support
|
·
|
Rig
Inventory Management &
Procurement
|
·
|
Preventative
Maintenance Programs
|
·
|
Rig
recruitment including
hire/fire/promote/retain
|
·
|
Safety
Programs support
|
·
|
Accounting
services
|
Transition
of Office Services of Eagle Domestic Drilling Operations, LLC to the Company,
as
defined by Exhibit
B,
attached.
Rig
Assembly & Completion Responsibilities
·
|
Advise
the Company regarding its assembly of rig components for rigs, numbers
14
and 15.
|
·
|
Project
managements functions: advice
regarding
|
o
|
The
Company’s Material Procurement
|
o
|
The
Company’s Managing delivery times to a critical
path
|
o
|
Assistance
to the Company with Supervising welders, painters, mechanics,
electricians
|
o
|
Other
such actions to assist the Company to manage its cost & preserve its
revenue generation
|
Business
Development Consulting
Advising
and assisting the Company regarding the following:
·
|
Sourcing
of drilling rig components
|
·
|
Negotiating
terms and condition for the purchase of such
components
|
·
|
Drilling
rigs that Blast considers
purchasing
|
·
|
Negotiating
terms and conditions of such
purchases
|
·
|
Land
rig companies that Blast considers
purchasing
|
·
|
Negotiating
terms and conditions of such
purchases
|
·
|
Representing
Blast at industry auctions and other industry
events
|
·
|
Interfacing
with Rig Appraisal companies
|
·
|
Advising
on contract negotiation strategies
|
·
|
Advising
on rig upgrade and/or refurbishment
opportunities
|
EXHIBIT
“B”
The
Consulting Firm will assist the
Company
with the Company’s Office Services
B.
|
MORNING
REPORTS
-
Toolpushers must email or fax to office by 9:00 a.m. each
morning.
|
1.
|
Daily
reports received: drill reports, employee reports, injury
reports
|
2.
|
Check
for completion
|
3.
|
Scan
and email to management
|
4.
|
Place
in corresponding rig books
|
C.
|
PAYROLL
-
Bi weekly: Payroll starts at 6:00 a.m. Monday to 6:00 a.m.
Monday
|
1.
|
Employment
Forms - check for completion of forms. No worker allowed on rig without
completed forms
|
2.
|
Change
of Status - payrate, job position, address
etc.
|
3.
|
Rig
should Fedex packet every Monday for Tuesday morning delivery. Payroll
must be submitted by 2:00 p.m. on Wednesday. Checks mailed out on
Friday
or employees have option to direct
deposit.
|
D.
|
HEALTH
INSURANCE
-
Employees eligible for health insurance after 90 days of employment.
Eagle
pays for employee. Employee can pay for spouse and
dependents.
|
1.
|
Track
eligibility
|
2.
|
Enrollment
|
E.
|
DISABILITY
INSURANCE
-
Employee eligible for disability insurance after 90 days of
employment.
|
1.
|
Track
eligibility
|
2.
|
Enrollment
|
F.
|
WORKER’S
COMPENSATION
|
1.
|
Process
and report to insurance company within 24 hours of reported
accident
|
2.
|
Must
have injury reports from rig including supervisor, witness and injured
employee report (if possible)
|
3.
|
Verification
of 10 panel drug screen
|
4.
|
Management
of injured worker’s compensation
case.
|
G. VENDOR
PAYMENTS
1.
|
Sort
by office, yard, and appropriate
rig.
|
2.
|
Weekly
manager approval and coding of invoices and/or credits to proper
accounts.
|
3.
|
Enter
and track due date.
|
4.
|
Handle
any disputed invoices.
|
5.
|
Subcontractors
- gather insurance verification and invoice
approval.
|
H.
|
INVOICING
AND RECEIVABLES
|
1.
|
Check
daily drill reports for completion and accuracy each
day.
|
2.
|
Know
IADC contract for billing procedures and collection of
payment.
|
3.
|
Complete
daily drill report worksheet
|
4.
|
Calculate
per diem costs for billing
|
5.
|
Check
for pipe damage or any Operator equipment rental
costs
|
6.
|
Invoicing
needs to be sent to proper Operator personnel for
approval
|
7.
|
Need
contact person in Operator’s A/P to verify
payment.
|
8.
|
Handle
and track all payments and any shortages on
payments.
|
I.
|
INSURANCE
MANAGEMENT
|
1.
|
General
liability/umbrella - audit each quarter to make sure premiums are
reflected properly to match revenues/payroll (depends on G/L structure).
Must be responsible for subcontractor insurance verification of G/L.
Responsible for year-end audits.
|
2.
|
Rig
insurance - needs to be processed prior to rig going out in the field.
Start paperwork 2 weeks before xxxxxxx is raised in the
yard.
|
3.
|
Worker’s
Compensation - Audit each quarter to make sure premiums are reflected
by
payroll totals. Verify each employee has proper work compensation
codes.
Responsible for sub-contractor insurance verification and policy
year-end
audits.
|
4.
|
Auto
policy - Driver verification to insurance agent. Keep driver’s list
current.
|
J.
|
OPERATOR
REPORTS
|
1.
|
Rigs
that run in Texas have a deviation survey report due to operator
at the
completion of each hole for the Texas Railroad
Commission.
|
2.
|
Verify
with operator when reports are due and whom they need to be sent
to.
|
K.
|
SUPPLIES
TO RIGS
|
1.
|
Provide
rigs with IADC books, daily drill reports, forms, rig maintenance
reports
and any office supplies.
|
END
OF EXHIBIT B.