July 22, 1997
VIA FACSIMILES (000) 000-0000, (000) 000-0000
AND FEDERAL EXPRESS
Xx. X. X. Xxxxxxxx, Xx., Manager
Xxxxxxxx and Company 0 X Xxxxxxx X, X.X.X.
0000 Xxxxx Xxxxx Tower
00 Xxxx Xxxxx Xxxxxx
Xxxxx, XX 00000-4331
Mr. Xxxx Xxxxxxxxxx, President
Willisco, Inc.
00000 Xxxxx Xxxxxx'x Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000-0000
Re: Letter of Agreement
Bayou Sorrel Prospect
Iberville Parish, Louisiana
Gentlemen:
This Letter Agreement shall evidence the mutual understanding and agreement of
National Energy Group, Inc. ("NEG"), and Xxxxxxxx and Company 3 D Program I,
L.L.C. ("Xxxxxxxx") and Willisco, Inc. ("Willisco") with respect to various
discussions, proposals and agreements among the parties relating to a 3 D
seismic survey, known as the Bayou Sorrel 3 D Survey Project (the "Project").
Xxxxxxxx and Xxxxxxxx are sometimes hereinafter collectively referred to as
("Xxxxxxxx / Willisco").
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
(1) The Project shall be comprised of an approximate 55 square
mile area encompassing the lands and leaseholds more fully
described on the map designated as Exhibit "A", attached
hereto and incorporated herein.
Xx. X. X. Xxxxxxxx, Xx., Manager
Xxxxxxxx and Company 3 D Program I, L.L.C.
Mr. Xxxx Xxxxxxxxxx, President
Willisco, Inc.
July 22, 1997
Page Two
(2) Xxxxxxxx and Xxxxxxxx shall assign to NEG 100% of all permits,
leasehold agreements, options and/or other forms of interests
relating to ownership and/or authority to conduct the Project
survey (the "Permits") more fully described on Exhibit "B",
attached hereto and incorporated herein, which are presently
controlled by Xxxxxxxx and/or Willisco or at anytime
hereinafter acquired; provided that Xxxxxxxx/Willisco agree
that as of the date of execution hereof, neither shall execute
any additional Permits without the express written consent of
NEG.
(3) In consideration hereof, NEG shall make a cash payment to
Xxxxxxxx / Willisco in the aggregate amount of $625,000 (which
amount shall be subject to audit by NEG and supported by
actual, direct third party charges paid by Xxxxxxxx and/or
Willisco), together with assignment of a 3% overriding royalty
interest (the "ORRI") up to and including an amount which
shall not exceed $625,000, net of severance taxes, to be
derived from production attributable to all leases owned of
record on June 6, 1997, and those leases acquired and or
renewed between June 6, 1997 and June 30, 2000 in the Project
area, except for and excluding those certain leases in the
East Bayou Sorrel Field and existing, current production
attributable to the Bayou Sorrel Field, all of which are more
fully described on Exhibit "C", attached hereto and
incorporated herein.
(4) NEG shall own all data acquired and processed in the Project
area (the "Data") until the earlier of (i) a period of thirty
(30) months following completion of the field survey by the
seismic crews accessing the Data or (ii) a period of thirty
(30) months after July 1, 1998, at which time the Data shall
become an undivided joint ownership of NEG in an amount equal
to 50% and to Xxxxxxxx / Willisco in an aggregate amount equal
to 50%; provided that Xxxxxxxx / Willisco acknowledge and
agree that the ownership interest acquired by NEG and/or
Xxxxxxxx / Willisco may be in the form of a license in the
event NEG shall determine that it is in its best interest to
participate in a speculative 3-D seismic survey, rather than a
proprietary 3-D seismic survey over the Project.
(5) NEG shall have a fourteen (14) day period following receipt of
a fully executed copy of this Letter Agreement to review all
materials, maps, financial records, Permits, Data or other
information (the "Information") related to the Project which
it deems necessary and proper to conduct its due diligence
investigation of the Project (the "Due Diligence Review").
(6) Neither party shall engage in any activities, directly or
indirectly, which shall act to circumvent the other with
respect to the subject matter hereof, and Xxxxxxxx / Willisco
specifically agree that for a period of two (2) years after
January 1, 1998 it shall not engage in any activities,
directly or indirectly, which compete with NEG in the Project
area; provided that following execution and delivery of this
Letter Agreement, NEG shall be permitted to contact any and
all parties within the Project area, including those parties
which have executed Permits with Xxxxxxxx / Willisco or have
been contacted by Xxxxxxxx / Willisco with respect to the
Project.
Xx. X. X. Xxxxxxxx, Xx., Manager
Xxxxxxxx and Company 3 D Program I, L.L.C.
Mr. Xxxx Xxxxxxxxxx, President
Willisco, Inc.
July 22, 1997
Page Three
(7) Subject only to the Due Diligence Review of NEG, the parties
hereto agree to execute, deliver and perform as contemplated
herein, including, but not limited to, the execution, delivery
and performance of such documents and take such actions as the
other party or parties may reasonably request in order to more
effectively consummate the transaction's contemplated hereby;
provided that in the event NEG shall discover during its Due
Diligence Review a material fact or facts which shall have a
material effect on the Project as contemplated herein, then in
such event, NEG shall have the right, upon written notice to
Xxxxxxxx / Willisco, to terminate this Letter Agreement and
any obligations contained herein, except with respect to the
confidentiality of the Information as provided herein.
(8) MISCELLANEOUS.
a. This Letter Agreement and the Information described herein shall be
confidential and shall remain confidential and shall not be disclosed
to any third party, except as otherwise contemplated herein; as may be
mutually agreed in writing, or to the extent required by law, rule,
regulation of governmental agencies or court order.
b. THIS LETTER AGREEMENT AND ALL OF THE RIGHTS AND OBLIGATIONS OF THE
PARTIES ARISING FROM OR RELATING TO THE SUBJECT MATTER HEREOF OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING
THE CONFLICT OF LAWS AND RULES OF SUCH STATE.
c. This Letter Agreement supersedes any prior agreements between the
parties with respect to the subject matter of hereof.
d. In the event any dispute regarding this Letter Agreement cannot be
reconciled by the parties, then they shall attempt to resolve any such
dispute through (i) mediation, using a mutually acceptable mediator,
and, if necessary, through (ii) binding arbitration, using a mutually
acceptable arbitrator. No dispute related hereto shall be brought
before any court of law or equity. Any arbitration will be conducted
in Dallas County, Texas using the commercial rules of the American
Arbitration Association.
Xx. X. X. Xxxxxxxx, Xx., Manager
Xxxxxxxx and Company 3 D Program I, L.L.C.
Mr. Xxxx Xxxxxxxxxx, President
Willisco, Inc.
July 22, 1997
Page Four
If the foregoing reflects our mutual understanding and agreement of the subject
matter contained herein, please so indicate by executing in the appropriate
space below. This Letter Agreement shall be effective as of June 6, 1997.
Sincerely,
NATIONAL ENERGY GROUP, INC.
By:
Xxxxx X. Xxxxxx
President and CEO
MDB:ljg
ACCEPTED AND AGREED to
this day of July, 1997.
XXXXXXXX AND COMPANY 3 D PROGRAM I, L.L.C.
By:
X. X. Xxxxxxxx, Xx.
Program Manager
WILLISCO, INC.
By:
Xxxx Xxxxxxxxxx
President
