AGREEMENT
MEMORANDUM OF AGREEMENT MADE BETWEEN
M III CORPORATION
(a Native American Company registered in the State of Utah )
and
Environmental Remediation Holding Corp.
(a U.S. Public Company registered in the State of Colorado)
1. INTERPRETATION
1.1. In this Agreement the following acronyms, words and expressions shall,
where context permits, be deemed to have the following meanings.
1.1.1 "ERHC" means Environmental Remediation Holding Corp.
1.1.2 "BAPCO" means Bass American Petroleum Company
1.1.3 "M III" means M III Corporation
1.1.4 "Agreement" means this Agreement
1.1.5 "Dollars" means U.S. Dollars
1.1.6 "Effective Date" means the day this Agreement is signed
1.1.7 "Allotted Xxxxx" means oil and gas xxxxx owned to Allotted members of
the Ute Tribe.
1.1.8 "Tribal Xxxxx" means oil and gas xxxxx owned by all members of the Ute
Tribe.
1.1.9 "MSCF" means Thousand Standard Cubic Feet
1.1.10 "Commercial Production" means production being a rate of thirty-five
(35) barrels of oil per day or more)
1.1.11 "A.F.E" means Authorized Funds Expenditure
1.1.12 "BIA" means Bureau of Indian Affairs
1.2 Words importing the singular meaning include, unless the context other-
wise demands, the plural meaning and visa versa.
1.3 The clause headings in the Agreement are for convenience and ease of
reference and shall not affect its construction or interpretation.
1.4 Reference to clauses and sub-clauses of the Agreement unless the context
clearly indicates otherwise.
2. TERMS AND CONDITIONS OF THE AGREEMENT
2.1 This Agreement is for the formation of a joint venture between M III
and ERHC and shall concern the recovery, workover and operations of
all available oil and gas xxxxx located within the boundaries of the
Uintah & Ouray Reservation located in Fort Duchesne, Utah. These oil
and gas xxxxx belong to the Allotted members of the Ute Tribe or all
members of the Ute Tribe.
2.2 This Agreement is entered into between ERHC and M III, for the purpose
of returning all available oil and gas xxxxx to commercial production
through the recovery of the leases of these xxxxx and the workover of
these xxxxx and the drilling of any future production that may be
required.
2.3 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 Agreement. All costs of these
studies will be borne by ERHC/BAPCO up front but all costs will be
recovered from production.
2.4 M III undertakes to make available to ERHC/BAPCO within 21 days any
maps, data, xxxxx runs, production histories 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.
2.5 M III as an Indian owned and registered Company with "Tribal Preference"
on the Uintah and Ouray Reservation, shall apply for any and/or all
available oil and gas leases.
2.6 ERHC/BAPCO shall provide M III with a seventy-five thousand ($75,000)
dollars bond plus the necessary funds to complete the 26 leases
estimated at Fifty Five Thousand ($55,000) of the Allotted Members with
in 7 business days from the signing of this Agreement. M III will also
apply for the available leases and operation contract in the Roosevelt
Unit.
2.7 M III upon the presentation of the funds will assign 26 Allotted oil and
gas leases plus ERHC/M III 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.
2.8 ERHC/BAPCO shall provide all the necessary funds for this project, with
the funding having a maximum of Eight Million Five Hundred Thousand
($8,500,000) Dollars. These funds shall be used in accordance with
the "Use of Funds Statement" attached per addendum A.
2.9 M III/ERHC agree to repay the funds provided by ERHC a maximum of 10
years or a minimum of three years as cash allows from oil and gas
production on 28 xxxxx in the Roosevelt Unit. ERHC/M III retain the
right to prepay the loan early.
3.0 MIII agrees to enter into a joint venture with ERHC that shall provide a
"Working Interest in all xxxxx/leases obtained by M III, either Allotted
or Tribal in addition to a contract to operate said xxxxx.
3.1 ERHC agrees that after "Debt Service" is paid, the main objective is the
recovery and workover of additional xxxxx, for the return to commercial
production, therefore ERHC agrees, that after the costs of workover
of additional xxxxx as selected by M III/ERHC all funds shall be divided
between M III and ERHC on a basis of twenty percent (20%) to the Tribe,
(10.595%) percent to the original investor until such time as they are
bought out or repaid, the remaining
69.405% to M III and ERHC this being "Working Interest" in all xxxxx/
leases that are obtained by M III on behalf of the venture. The 69.405%
to be split 41.643% to M III and 27.762% to ERHC/BAPCO. If M III and
ERHC can purchase the 10.595% from the original investors the split will
be as follows 33.762% to ERHC/BAPCO and 41.634% to M III.
3.2 The Leases being obtained by MIII on behalf of the joint venture will be
for a minimum of five years (as allowed under BIA rules and regulation)
and will be automatically renewable in five year increments as long as
M III/ERHC keep the xxxxx in production.
3.3 It is agreed by M III and ERHC that once production of Natural Gas from
all of the xxxxx/leases obtained by M III reaches a daily rate of Five
Thousand MSCF, a gas plant shall be hired by M III and ERHC. Said Gas
Processing Plant shall process the Natural Gas into Dry Natural Gas,
suitable for injection into a pipeline and into Natural Gas Liquids,
(NGL's) Until such production is reached, all Natural Gas produced by
the oil and gas xxxxx will be gathered and injected back into the
formation.
3.4 It is agreed by MIII and ERHC that once the Gas Plant begins operation,
producing dry gas for injection into the pipeline and Ngl's for delivery
into commercial truck sales, ERHC will release five percent of its work-
ing interest in the xxxxx/leases and obtain a twenty-five ( 25%) percent
of the Gas Plant. This Twenty Five (25%) percent of the net profits from
the operation of the Gas Plant shall continue with the Gas Plant start-
ing as a 5,000 MSCF processing plant and will grow into a 15,000 MSCF
Gas processing plant.
3.5 M III agrees to provide ERHC an "Assignment of Lease" document on all
leases obtained by MIII from either members of the Allotted Land Owners
or from the Tribal Council, with respect to all Tribal Leases. All such
leases to have xxxxx on said leases. M III also agrees that a UCC-1
Document shall be issued on all truck, tools, and other equipment and
any and all surface equipment as belonging to each well/lease.
3.6 It is agreed by both parties to this Agreement, this Agreement and the
project to which it concerns shall be funded by ERHC under the schedule
as agreed to by M III and ERHC with the first funds being used to
purchase a seventy five ($75,000) thousand dollar bond and the balance
to be deposited in J.R. Xxxxxx Attorneys Trust Account for use close on
the 26 Allotted leases.
3.7 ERHC as part of this Agreement agrees to compensate MIII in the follow-
ing manner. ERHC upon signing of the contract will issue 250,000 shares
of ERHC 144 stock and an additional 250,000 shares of ERHC 144 stock
upon the assignment of the following leases two (2) xxxxx producing
between one thousand (1,000) and twelve hundred (1,200) barrels per
day of oil production; two (2) xxxxx producing five hundred (500)
barrels per day of oil production and five(5) xxxxx producing one (100)
barrels per day of oil production, and an additional 250,000 shares
of warrants at seventy five ($0.75) per share to be exercised within
two years.
Whereas, this Agreement shall become valid on the date signed
by both parties below, and shall remain in full force and affect until such time
as all of the terms and conditions as described above shall be met by both
parties.
Whereas, It is agreed by both parties to this Agreement, that
the first funds shall be as listed in Addendum One (1) of this Agreement, Said
Addendum shall become part and parcel to this Agreement and accepted by both
parties.
Whereas, It is agreed by both parties to this Agreement, that
M III shall provide ERHC with 26 lessees, to be used as collateral for the first
funds described in Addendum One (1) of 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 and may be used as collateral for any required
funding. It is agreed that all leases shall become part of this Agreement as
they are obtained by M III from either Allotted Land Owners or The Tribal
Council.
This Agreement is entered into and signed this 28th day of June, 1997
M III Corporation Environmental Remediation Holding Corp.
/s/ J.R. Xxxxx /s/ Xxx X. Xxxx, Xx.
J. R. Xxxxxx Xxx X. Xxxx Xx.
President President
/s/ Xxxxxx Xxxxxxxxx /s/ Xxxx Xxxx
Witness Witness
