TREK OIL AND GAS, INC.
000 XXXXXX XXXXXX, XXXXX 0000
HOUSTON, TEXAS 77002
(000) 000-0000
March 27, 1998
Saratoga Resources, Inc.
0000 X. Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxx Xxxx
Re: GEOPHYSICAL/GEOLOGICAL DATA REVIEW AGREEMENT
Gentlemen:
Reference is made to the discussions regarding Saratoga Resources'
("Saratoga") engagement of Trek Oil and Gas, Inc. ("Consultant") to perform the
following ("Services"): identify and develop opportunities to explore for,
exploit and produce, oil, gas and other minerals within the Project Area, as
defined below ("Prospects"). In the performance of the Services, Consultant
shall review, evaluate, analyze and where applicable reprocess certain
geophysical and geological data and information compiled by Saratoga including
but not limited to, seismic lines and records, shotpoint maps, velocity
surveys, geophysical and geological interpretations, well logs and other
similar or related geophysical and geological data and/or information ("Data").
Pursuant thereto, Saratoga and Consultant, on behalf of themselves and their
respective successors and assigns, agree as follows:
I.
ENGAGEMENT
Saratoga hereby engages Consultant to provide the Services on an exclusive
basis in consideration of, and in accordance with, the further conditions and
covenants of Saratoga and Consultant set forth herein. As used herein, the term
"Project Area" means those ONSHORE lands which are identified on the plat
attached as Exhibit "A" hereto.
II.
PROSPECT GENERATION
Consultant will assign certain of its employees or representatives to
perform the Services at Trek's offices, during Trek's normal business hours, in
an effort to identify and develop Prospects within the Project Area for
recommendation to Saratoga, subject to the following:
A. Saratoga and Consultant shall keep all such interpreted data strictly
confidential for as long as this Agreement remains in effect. Saratoga
agrees to allow Consultant the right to maintain copies of shot point
base maps and tapes and seismic lines in Consultant's offices for any
Prospect generated or in the process of being generated by Consultant.
B. As a result of performing the Services, Consultant may determine, as a
matter of its reasonable judgment, that it is necessary or appropriate to
acquire additional seismic data with respect to one or more potential
Prospects. In such circumstances, Consultant may
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(but shall not be obliged to attempt to obtain additional seismic data
from third parties covering portions of the Project Area without the
necessity of giving notice to, or receiving approval from, Saratoga;
PROVIDED THAT (1) any additional seismic data obtained by the Consultant
pursuant to this Section II.B. shall be at the Consultant's sole cost and
expense, subject to reimbursement by Saratoga solely, upon the conditions,
and limited to the extent, provided in Section III of this Agreement; and
(2) any additional seismic data acquired by Consultant from third parties
shall be retained by Consultant in accordance with any applicable license,
confidentiality or other agreements.
III.
PROSPECT PROPOSALS
If Consultant identifies or develops any Prospects during the term of this
Agreement, Consultant shall submit a recommendation to Saratoga by means of a
formal presentation to appropriate Saratoga personnel which shall include,
without limitation, an outline of the Prospect Area, maps, plats, logs,
additional seismic data acquired or purchased by Consultant provided in II.B
above, written memoranda and all other appropriate materials relating to the
identification, costs, time-tables, exploration and development, of the
Prospect and designation of an area of mutual interest ("AMI") to the extent
reasonably necessary to promote the orderly development of, and protect the
interests of Saratoga and Consultant in, a Prospect ("Prospect Analysis"). In
all cases, Consultant or its designee shall act as Operator of the Prospect.
A. Saratoga shall have thirty (30) days ("Election Period") in which to
evaluate the Prospect PROVIDED THAT, the Election Period shall not begin
until Consultant has delivered, and Saratoga has received, written notice
that the Election Period has begun which shall be no earlier than the
formal presentation date of the Prospect Analysis. Any Prospect which
Saratoga accepts shall be referred to as an "Approved Prospect" and any
Prospect which Saratoga rejects shall be referred to as a "Rejected
Prospect". If Saratoga fails or refuses to provide written notice to
Consultant accepting a Prospect on or before the end of the applicable
Election Period, Saratoga shall be deemed to have rejected that Prospect.
B. During or after the Election Period, Saratoga, or Consultant on behalf
of Saratoga, may offer third parties the opportunity to acquire all or a
portion of its rights to participate in operations on a Prospect,
subject to all of the terms, conditions and covenants of this Agreement.
C. All operations contemplated by a Prospect Analysis would be conducted in
accordance with the terms and provisions of an operating agreement
governing the Prospect in the form attached as Exhibit "C" hereto, to
obtain access to the necessary rights, titles and interest in the
acreage included in the Prospect or AMI, if applicable ("Operating
Agreement").
X. Xxxxxxxxxx of its election to accept or reject a Prospect, Saratoga
shall be assigned an overriding royalty interest equal to one and
one-half percent (1.5%) of eight-eighths (8/8ths) in leases or interests
owned and/or acquired by Consultant or its agents pursuant to this
Agreement (the "Prospect Override"). The Prospect Override shall only be
applicable to leases or interests in which Consultant, its assigns,
agents or designees have a net revenue ownership interest greater than
75%, proportionally reduced to the interest originally acquired and
shall not be applicable to acreage or interests owned by third parties
whether or not such interests are pooled with leases or interests owned
or acquired by Consultant. The Prospect Override shall apply to the
interest as acquired by, through or under Consultant and shall not be
subject to any additional burdens, encumbrances, or promotes placed upon
it by Consultant in such leases or interests covering the Prospect or
AMI ("Prospect Override"). Such Prospect Override shall be
proportionately reduced to the working interest originally acquired of
Consultant and/or its assigns. The Prospect Override shall be in
addition to any other interests Saratoga may participate in, earn or
acquire in an Approved Prospect. If the
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NRI acquired is equal to or less than 75% then a mutually agreeable
substitute compensation will be assigned to Saratoga and be based on a
3.5% carried working interest of the interest originally acquired to
sales point.
E. As compensation for the Services, Consultant shall own (1) each Prospect
Analysis exclusively for a period of 2 years from the date of formal
presentation to Saratoga and (2) all rights, titles and interests, if
any, which may hereafter be acquired subject to (a) Saratoga's Prospect
Override and (b) election to approve and participate in operations
conducted on and obtain a working interest in Leases covering acreage
in, an Approved Prospect.
IV.
APPROVED PROSPECTS
Upon acceptance of a Prospect Analysis from Consultant ("Approved
Prospect"), Saratoga shall participate in all operations on the Prospect to the
extent of, and be entitled to earn and/or acquire up to a twenty-five percent
(25%) of eight-eighths (8/8ths) working interest, proportionately reduced to
the aggregate interest acquired by Consultant, Saratoga or third parties
acquiring an interest by, through or under Saratoga as may be applicable, in
the Prospect or AMI, if applicable and subject to the burdens mentioned in this
agreement. Within twenty (20) days of receipt of an invoice from Consultant,
Saratoga shall reimburse twenty-five percent (25%) of eight-eighths (8/8ths) of
Consultants actual aggregate costs attributable to generating the Prospect
(excluding the monthly overhead by Consultant, if any, obtaining access to the
necessary rights, titles or interests in leases covering acreage within the
Prospect or AMI, if applicable, or other actions undertaken or costs incurred
by, the Consultant with respect to the Prospect and shall bear twenty-five
percent (25%) of eight-eighths (8/8ths) of all future costs and liabilities,
subject to the Operating Agreement. Despite anything to the contrary in this
Agreement or otherwise, failure by Saratoga to timely reimburse Consultant as
provided herein shall be an automatic election not to participate for a working
interest in the Prospect. In the event that Saratoga accepts a Prospect on
behalf of a third party, Xxxxxxxx's acceptance shall disclose the identity of,
and the consideration paid by, the third party and Xxxxxxxx's acceptance shall
be subject to the following additional conditions.
A. Consultant shall have a preferential right to acquire the working
interest offered to a third party on the same terms offered by the third
party for a period of five (5) days after Consultant's receipt of notice
of Saratoga's acceptance.
B. If Consultant fails or refuses to exercise its preferential right to
acquire Saratoga's interest within the period specified in Section III.A
above, then Saratoga shall assign all or part of its rights, titles, and
interests in the Prospect to the third party subject to the this
Agreement. Thereafter, Xxxxxxxx's assignee shall be vested with certain
rights, duties and obligations related to the Prospect as described in
this Agreement provided that Saratoga was in compliance with all
provisions of this Agreement at the time of the assignment to assignee.
V.
REJECTED PROSPECTS
Upon rejection of a Prospect Analysis ("Rejected Prospect"), Consultant
may (but shall be under no obligation to) proceed with operations to explore
and develop the Prospect without further notice to, or approval by, Saratoga
PROVIDED THAT (1) any and all undertakings, activities or operations
attributable, or in any way related, to a Rejected Prospect shall be at
Consultant's sole risk, cost and expense, and (2) after Project Payout,
Saratoga's Prospect Override shall automatically increase to three percent (3%)
of eight-eighths (8/8ths) proportionately reduced to the entire interest
acquired by Consultant in the leases covering the Prospect or the AMI, as
applicable. For purposes hereof, Project Payout shall mean that point in time
when the proceeds Consultant has actually received from production of all xxxxx
located with the Prospect or AMI, if applicable, (after subtracting the
royalties paid to the Lessor(s) under the lease(s), Xxxxxxxx's Prospect
Override, transportation charges, third party processing or handling fees and
any taxes) equal all costs incurred by
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4.
Consultant including, but not limited to existing seismic data purchases, new
seismic data acquisition including the costs of permitting, acquisition,
damages, brokerage and processing and all costs incurred by Consultant for
leases, lease brokerage, title curative, location preparation, damages
drilling, completing and equipping all xxxxx thereon, reworking, constructing
and installing all platforms, caissons, production equipment, processing
facilities and pipelines associated therewith, and operating and maintaining
those xxxxx and facilities. All costs included in this Article shall be
reasonable and adequately documented. Saratoga agrees that for a period of one
(1) year following the termination of this Agreement, it shall not acquire an
interest in any Rejected Prospect either along or in conjunction with others,
except for the Project Override, and have no further claim or right to the
rejected prospect and its surrounding AMI.
VI.
LEASE ACQUISITION AND MAINTENANCE
Prior to Saratoga committing to participate as to its proportionate
interest in an Approved Prospect and/or as to any Rejected Prospect(s) as
elsewhere herein provided, Consultant, its agents, successors or assigns, may
in its sole discretion, seek to acquire oil, gas and mineral leases, mineral
interests or other oil and gas rights ("Leases") whether by purchase, farmin,
farmout, option acreage contribution, or otherwise in such prospects generated
by Consultant in accordance with this Agreement. The acquisition of such leases
and the terms, conditions and maintenance thereof shall be solely within the
discretion of Consultant. If and until such time as Consultant and Saratoga
become joint working interest owners as elsewhere herein provided Consultant
shall have no duty or obligation to maintain any leases in force and effect
whether by payment of delay rentals, shut-in royalty payments, operations or
otherwise. Further, it is agreed and understood that prior to the parties
becoming joint working interest owners hereby, Saratoga or any third party
acting on behalf of Saratoga shall not acquire any oil and gas leases, mineral
leases, or other rights within any Prospect generated by Consultant in
accordance with this Agreement or any Areas of Mutual Interest established
under the Joint Operating Agreement attached hereto as Exhibit "C". Consultant
shall not commence or cause to be commenced any drilling activity of any nature
on any Leases acquired hereunder until the elections have been made by Saratoga
or any third party as provided in Article III.A above.
VII.
CONFIDENTIALITY
As between Saratoga and Consultant, all the Data shall remain the
property of, and be owned by, Saratoga. Consultant shall not provide the Data,
including copies or extracts thereof, to third parties without the prior
written consent of Saratoga. Notwithstanding the foregoing, Saratoga and
Consultant agree:
A. In the event Saratoga should receive notice that Consultant has
abrogated the terms of an applicable license or other agreement,
Consultant shall not utilize the affected Data covered by that
license or other agreement thereafter and shall return to
Saratoga's personnel the affected Data, including copies or
extracts thereof and any work product prepared by or for
Consultant therefrom, which may have previously been utilized by
Consultant in performing the Services hereunder.
B. Consultant understands and hereby acknowledges that neither
Saratoga nor any of its employees, agents or representatives
makes any representation or warranty as to the accuracy or
completeness of the Data, and Consultant agrees that Saratoga
shall not be held liable in any way to Consultant, its
representatives or any other person as a result of Consultant's
review of or reliance upon any of the Data. Consultant shall
further fully defend, protect, indemnify and hold Saratoga, its
officers, employees, representatives, and agents harmless from
and against any and all claims, demands, suits, and causes of
action of every kind and character, relating to, or arising out
of, or in any way incidental to the use, review and reliance on
the Data. This indemnity shall apply, without limitation, to any
liability imposed upon any party indemnified hereunder as a
result of any statute, rule, regulation or theory of strict
liability.
5.
C. Consultant shall have the right to show Saratoga's proprietary
data pertinent to a Prospect to third parties with Xxxxxxxx's
written authorization which shall not be unreasonably withheld.
D. The provisions of this Article VII shall survive as long as
Consultant or its assigns, heirs or successors maintain any
leases within the AMI which are subject to this Agreement.
VIII.
ASSIGNABILITY
Consultant shall not assign this Agreement, or its obligation to
provide the Services, to any third party without the written consent of
Saratoga. In the event that Consultant is able to generate one or more
Prospects and obtain access to the necessary rights, titles and interests in
the acreage included in a Prospect or AMI, if applicable, Consultant, Saratoga
or such third parties as may participate in the Prospect through Consultant or
Saratoga shall enter into an Operating Agreement, and thereafter those parties
may assign an interest in their respective rights in the Prospect or AMI, if
applicable, subject to the provisions of the Operating Agreement. Consultant,
shall not include in any Operating Agreement entered into by Contractor terms,
conditions or provisions that favor Consultant to the detriment of Saratoga.
IX.
OTHER AGREEMENTS
This Agreement is specifically subject to that certain Seismic Data
Licensing Agreement dated the 30th day of January, 1998, by and between Seiutel
Data, Ltd. And Lobo Energy, Inc. In the event there is a conflict between the
terms of this agreement and the terms of the Seismic Licensing Agreement, the
terms of the Seismic Licensing Agreement will control.
X.
TERM
This Agreement shall be for a term of one year from the date hereof
unless extended by mutual agreement. Notwithstanding the foregoing, either
party may terminate this Agreement upon thirty (30) days written notice to the
other party beginning ninety days after the effective date of this Agreement.
Either Party may terminate this Agreement immediately in the event of any
material breach hereof.
XI.
NOTICES
Any notice or other communication hereunder between the parties hereto
shall be in writing and shall be deemed to have been given only upon receipt
thereof. The address of each party for such purpose shall be:
Saratoga Resources, Inc.
0000 X. Xxxxx Xxxxxxx, #000
Xxxxxxx, Xxxxx 00000
Tel. (000) 000-0000
Fax (000) 000-0000
Trek Oil and Gas Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Tel. (000) 000-0000
Fax
6.
Each party may change their address by delivering their new address to the
other party.
XII.
BUSINESS OPPORTUNITIES
Saratoga and Consultant expressly reserve the right to develop or
participate in additional businesses or business opportunities as may be
presented to, or discovered by, either during the term hereof, including,
without limitation, conducting or participating in operations for the
exploration and development of oil and gas except as provided in Section V
herein. Without limiting the generality of the foregoing, Saratoga and
Consultant hereby acknowledge:
A. Each party is actively engaged in various aspects of the oil and
gas business, and anticipate conducting, or participating in,
activities to generate, explore and develop opportunities
similar to those contemplated by this Agreement pursuant to
existing agreements and relationships, which (1) each party has
disclosed to the reasonable satisfaction of the other, (2)
neither party's interest should be impaired, restricted or
otherwise affected hereby, and (3) may be conducted
simultaneously with those contemplated hereby. Consultant, to
the extent Consultant believes reasonable or necessary, may
pursue opportunities with third parties within the Project Area
except where such actions would foreseeably result in the damage
to, or loss of, a Prospect or AMI, if applicable, generated
pursuant to this Agreement.
B. As a result of participating in opportunities similar to those
set forth herein, each party acknowledges that the successful
generation, exploration and development of any Prospect pursuant
to this Agreement is subject to numerous risks and may be
influenced by numerous factors beyond either party's control. In
addition to the customary risks of conducting exploratory or
development operations on, and obtaining production of oil and
gas in paying quantities from, leases owned by a party at the
time an exploration project is agreed upon, Saratoga and
Consultant acknowledge that there is no assurance that access to
the necessary rights, titles and interests in acreage included
in any Prospect or AMI, if applicable, can be obtained.
Consequently, neither party shall have any obligation to the
other pursuant to this Agreement, in the event Consultant is
unable to generate, or to obtain oil and gas production from,
any Prospects in the Project Area.
XIII.
RELATIONSHIP OF THE PARTIES
This Agreement is not intended to create, and shall not be construed
to create, a relationship or partnership, joint venture or an association for
profit between or among the parties hereto, it being understood that Consultant
is an independent contractor and is not to be deemed an agent of Saratoga.
XIV.
GOVERNING LAW
This Agreement and all matters pertaining hereto shall be governed and
determined by the law of the State of Texas.
XV.
INTEGRATION
This Agreement constitutes the entire agreement of the parties and
supersedes all prior agreements, understandings, conversations or other
correspondence concerning the subject matter hereof.
This Agreement shall not be amended, except by written instrument
executed by both parties hereto.
7.
If the foregoing correctly sets forth the agreement and understandings
between the parties, please execute both copies and return one to the attention
of the undersigned whereupon this proposal shall constitute our agreement as to
the matters herein set forth.
Very truly yours,
SARATOGA RESOURCES, INC.
By: /s/ Xxxxxx X. Xxxx
------------------
Xxxxxx X. Xxxx
President
ACCEPTED AND AGREED TO THIS 8TH DAY OF MARCH, 1998.
TREK OIL AND GAS, INC.
By: /s/ Xxxx X. Mount
-------------------
Xxxx X. Xxxxx
Vice President
Accepted and Agreed to this 7th day of May, 1998.
Exhibit "A" -Contract Area Plat
Seismic Data Programs
TREK OIL AND GAS, INC.
000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000 fax
March 24, 1999
Saratoga Resources, Inc.
ATTENTION: Mr. Xxx Xxxx
0000 X. Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
RE: GEOPHYSICAL/GEOLOGICAL DATA REVIEW AGREEMENT
Dear Xxx:
This letter shall serve as formal notification to Saratoga Resources,
Inc. ("Saratoga") that Trek Oil and Gas, Inc. ("Trek"), wishes to exercise its
right to extend the above referenced Agreement dated March 27, 1998, (the
"Agreement") for an additional six months. This will extend the term of that
Agreement to September 27, 1999. All other terms of the original Agreement shall
remain the same unless changed in writing by mutual agreement.
If Saratoga agrees to extend the term of the Agreement, please sign and
date in the space below and fax a signed copy to Trek's office at 713/651-3104.
Sincerely,
/s/ Xxxx X. Mount
------------------
XXXX X. XXXXX
AGREED TO BY:
/s/ Xxxxxx X. Xxxx
------------------
DATE: March 19, 1999
