Exhibit 10.4
Agreement with Consolidated Stewards Inc., as amended
JOINT VENTURE AGREEMENT DATED NOVEMBER 16, 1999
BETWEEN:
SAN XXXXXXX OIL & GAS LTD., a corporation incorporated under the laws
of the State of Nevada and having an office in the City of Calgary, in
the Province of Alberta ("San Xxxxxxx")
and
CONSOLIDATED EARTH STEWARDS INC., a corporation incorporated under the
laws of the Province of British Columbia and having an office in the
City of Kelowna, in the Province of British Columbia ("CEW")
WHEREAS:
A. San Xxxxxxx is engaged in the exploration and development of oil and
gas prospects in the San Xxxxxxx and Sacramento basins in California;
and
B. The Parties wish to make provision for the granting of a right of first
refusal to CEW; and
C. The Parties wish to provide for the terms under which such right of
first refusal may be exercised; and
D. The Parties wish to provide for the terms of any resulting joint
ventures between San Xxxxxxx and CEW.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires, the following terms
shall have the following meanings:
"AGREEMENT" means this agreement and all schedules attached hereto.
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"INDIVIDUAL PROSPECT" means a Prospect described in a Prospect Notice.
FARMOUT AND JOINT OPERATION AGREEMENT" means an agreement in the form attached
hereto as Schedule "A", including the Exhibits attached thereto.
"PARTIES" means San Xxxxxxx and CEW and "Party" means either of them.
"PRIVATE PLACEMENT" means the private placement which was press released by CEW
on September 21, 1999.
"PROSPECT NOTICE" means a written notification containing the following
information:
(a) a map outlining the area covered by the Individual Prospect;
(b) information regarding any leases acquired to date and the cost
of such acquisitions; and
(c) the date, time and location of the Presentation to be
provided.
"PROSPECTS" means all petroleum and natural gas exploration prospects acquired
or generated by San Xxxxxxx in the San Xxxxxxx and Sacramento Basins located in
California, but shall not include:
(a) San Joaquin's interest in the Hilton Petroleum Greater San
Xxxxxxx Basin Joint Venture LLC; or
(b) any oil or gas production acquired by San Xxxxxxx in the San
Xxxxxxx and Sacramento basins located in California.
1.2 INTERPRETATION
(a) The headings of the articles and sections of this Agreement
are inserted for convenience of reference only and shall not
be used in construing or interpreting any provisions hereof.
(b) Whenever the singular or masculine or neuter is used in this
Agreement, the same shall be construed as meaning the plural
or feminine or body politic or corporate entity and vice versa
as the context or reference to the Parties may require.
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1.3 SCHEDULES
All schedules attached hereto are incorporated herein by reference as fully as
though contained in the body hereof. The schedules are as follows:
(a) Schedule "A" which is the form of Farmout Agreement and AAPL
Joint Operating Agreement.
(b) Schedule "B" which is the form of Confidentiality and
Exclusion Agreement.
Should there be a conflict between the provision of the body of this Agreement
and an agreement entered into in the form of Schedule "A", the latter shall
prevail.
ARTICLE 2 - RIGHT OF FIRST REFUSAL
2.1 RIGHT OF FIRST REFUSAL
CEW shall have a right of first refusal to participate for a nineteen percent
(19%) share of costs in all of the Prospects (hereinafter referred to as the
"ROFR") upon the terms contained herein.
2.2 TERM
Subject to Paragraph 8.1, the ROFR shall be in existence for a period of two
years, from October 1, 1999 to October 1, 2001 inclusive.
2.3 CONSIDERATION
The cost of the ROFR shall be $150,000.00 in US funds which sum shall be payable
by CEW within three (3) business days of the closing of the Private Placement.
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ARTICLE 3 - NOTICE OF PROSPECT
3.1 PROSPECT NOTICE
San Xxxxxxx shall provide notification to CEW of an Individual Prospect by
provision of a Prospect Notice.
3.2 ELECTION OF CEW
Within one week of receipt of a Prospect Notice, CEW must advise San Xxxxxxx in
writing whether it elects to review the Individual Prospect.
3.3 CONFIDENTIALITY AND EXCLUSION AGREEMENT
In the event that CEW elects to review the Individual Prospect, CEW shall
execute a Confidentiality and Exclusion Agreement in the form of Schedule "B".
3.4 ELECTION NOT TO REVIEW
In the event that CEW elects not to review the Individual Prospect, San Xxxxxxx
shall reimburse CEW for its share of any monies used to purchase leases and
incur seismic expenditures for the Individual Prospect if any. Such
reimbursement shall be provided to CEW within two weeks of its election not to
review the Individual Prospect.
3.5 CEW PROSPECTS
Nothing in this Article or in this Agreement shall be construed as creating an
obligation on CEW's part to show San Xxxxxxx prospects that it may have in the
San Xxxxxxx or Sacramento Basins.
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ARTICLE 4 - GEOLOGICAL AND GEOPHYSICAL PRESENTATION
4.1 SAN JOAQUIN'S OBLIGATIONS
Upon CEW electing to review an Individual Prospect as provided for in Paragraph
3.2, San Xxxxxxx shall provide to CEW a review of the Individual Prospect
(herein referred to as the "Presentation").
4.2 VENUE
The Presentation shall take place at a location to be determined by San Xxxxxxx.
4.3 CONTENTS OF PRESENTATION
The Presentation shall include the following:
(a) a geological and if available, geophysical review of the
Individual Prospect;
(b) a review of any petroleum and natural gas leases acquired to
date in relation to the Individual Prospect and the status of
the remaining land within the Individual Prospect boundaries;
(c) a review of the estimated seismic expenditures required to
define the Individual Prospect such that a test well can be
drilled on the Individual Prospect;
(d) a summary of the terms of earning an interest in the
Individual Prospect if those terms differ from the standard
earning terms contained in Article 6 of this Agreement;
(e) information regarding an area of mutual interest and exclusion
to be established; and
(f) information regarding test well contract depth.
4.4 ELECTION TO PARTICIPATE
Within fourteen days of viewing the Presentation, CEW shall notify San Xxxxxxx
in writing whether or not it wishes to participate in the Individual Prospect.
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ARTICLE 5 - LAND AND SEISMIC FUNDS
5.1 LAND FUND
Within eight (8) business days of the closing of the Private Placement, CEW
shall provide San Xxxxxxx with the initial sum of $130,000.00 in US funds to be
used as a land fund by San Xxxxxxx as follows:
(a) the aforementioned sum shall be held by San Xxxxxxx in a
segregated bank account and shall be used only for CEW's share
of costs associated with the acquisition of oil and gas leases
and the payment of land rentals and bonuses for Individual
Prospects;
(b) San Xxxxxxx may co-mingle funds provided by CEW with funds
provided by other participants in Individual Prospects but
shall keep an accounting of all monies exended;
(c) San Xxxxxxx shall be entitled to draw monies from the land
fund as necessary to acquire oil and gas leases for Individual
Prospects in which CEW is a participant;
(d) In the event that CEW's portion of the land fund is depleted
at any time below the amount of $30,000.00 US, San Xxxxxxx
shall notify CEW of same and CEW shall be obligated to provide
a further $100,000.00 US within one (1) month of receipt of
said notice, to San Xxxxxxx;
(e) all interest accrued in the land fund shall be for the
account; and
(f) CEW shall have the right to audit the land fund.
5.2 SEISMIC FUND
Upon execution of this agreement, CEW will pay to San Xxxxxxx the sum of
US$70,000 on the following terms.
(a) the funds will be received by San Xxxxxxx and used by it
exclusively toward its past and future costs of undertaking
and completing seismic work or acquiring seismic lines on
Prospects; and
(b) the funds will be an irrevocable payment by CEW of such
seismic costs.
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Following the expenditure of the said US$70,000, San Xxxxxxx shall notify CEW of
the same and CEW shall be obliged to provide a further US$70,000 within one
month of receipt of said notice, which funds will be received by San Xxxxxxx on
the following terms:
(a) The aforementioned sum shall be held by San Xxxxxxx in a
segregated bank account and shall be used only for CEW's share
of costs associated with acquiring, reprocessing, and
conducting seismic programs over the Individual Prospects;
(b) San Xxxxxxx may co-mingle funds provided by CEW with funds
provided by other participants in the Individual Prospects but
shall keep an accounting of all monies expended;
(c) San Xxxxxxx shall be entitled to draw monies from the seismic
fund as necessary for seismic expenditures associated with
Individual Prospects in which CEW is a participant;
(d) In the event that CEW's portion of the seismic fund is
depleted at any time below the amount of $15,000.00 US, San
Xxxxxxx shall notify CEW of same and CEW shall be obligated to
provide a further $70,000.00 US within one (1) month of
receipt of said notice; to San Xxxxxxx;
(e) all interest accrued in the seismic fund shall be for the
account; and
(f) CEW shall have the right to audit the seismic fund.
ARTICLE 6 - EARNING TERMS
6.1 STANDARD TERMS AND CONDITIONS
The provisions of this Article 6 contain the standard terms and conditions that
shall be included in the Farmout and Joint Operating Agreement in the form of
Schedule "A", to be entered into by the Parties for each Individual Prospect.
6.2 COSTS
CEW shall pay nineteen per cent (19%) of the following costs for each Individual
Prospect in which it participates:
(a) general and administrative costs associated with the
Individual Prospect including costs incurred by Xxxxx & Namson
Consulting Geologists, Canyon Oil & Gas
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Limited Liability Company, San Xxxxxxx Oil & Gas Ltd. and any
other parties or entities which perform services for the
Individual Prospect;
(b) the cost of any seismic data previously acquired in connection
with the Individual Prospect and the cost of any seismic
program deemed necessary by San Xxxxxxx, acting reasonably, to
define the Individual Prospect so that the test well can be
drilled;
(c) the cost of leases acquired covering the Individual Prospect
together with land agent fees, bonus costs and first year
rental payments; and
(d) test well costs including drilling to contract depth as
specified in the Presentation, testing, logging, capping,
abandoning or completing and equipping.
6.3 EARNING
Upon CEW incurring the costs referred to in Paragraph 6.2, it shall earn a
fourteen and one-quarter percent (14.25%) interest in all leases and lands
acquired in the Individual Prospect as well as a fourteen and one-quarter
percent (14.25%) interest in the test well associaed with the Individual
Prospect.
ARTICLE 7 - NET REVENUE INTEREST
7.1 NET REVENUE INTEREST IN LEASES
San Xxxxxxx shall attempt to provide CEW with leases that have a net revenue
interest of seventy eight percent (78%). However should San Xxxxxxx acquire a
lease which is subject to a lessor royalty as well as gross overriding royalties
which cause the net revenue interest to be less than 78%, San Xxxxxxx shall not
be permitted to further reduce the net revenue interest with a gross overriding
royalty payable to San Xxxxxxx.
ARTICLE 8 - TERMINATION
8.1 TERMINATION
Nothwithstanding Paragraph 2.2 hereof, the ROFR shall immediately terminate
under any of the following circumstances:
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(a) Where CEW fails to pay to San Xxxxxxx the initial sum as
provided for in Paragraphs 5.1 and 5.2;
(b) where CEW fails to pay to San Xxxxxxx amounts required in
accordance with Paragraphs 5.1(d) and 5.2(d);
(b) where CEW elects not to participate in two concurrent
Prospects offered by San Xxxxxxx by way of Prospect Notices;
or
(c) where CEW does not pay to San Xxxxxxx, the sum referred to in
Paragraph 2.3 on or before December 31, 1999.
ARTICLE 9 - JOINT OPERATIONS
9.1 JOINT OPERATING AGREEMENTS
Each Individual Prospect shall be governed by a separate Farmout Agreement and
Joint Operating Agreement in the form set forth in Schedule "A" to this
Agreement. A Farmout Agreement and Joint Operating Agreement in the form of
Schedule "A" shall be executed by CEW upon its election to participate in an
Individual Prospect as set forth in Paragraph 4.4.
9.2 OPERATOR
San Xxxxxxx shall be the operator under the Farmout and Joint Operating
Agreements referred to in Paragraph 9.1.
9.3 PARTICIPANTS
San Xxxxxxx shall be permitted to include other participants in an Individual
Prospect without the prior approval of CEW.
ARTICLE 10 - GENERAL CONTRACT PROVISIONS
10.1 NOTICES
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All notices, requests, demands or other communications (collectively "Notices")
by the terms hereof required or permitted to be given by one Party to the other,
or to any other person, shall be given in writing by personal delivery or by
prepaid courier, or by facsimile transmission to such other party at the
following address:
(a) to San Xxxxxxx at: 00 Xxxxxxxxx Xxxxx XX
Xxxxxxx, Xxxxxxx
X0X 0X0
Fax: (000) 000-0000
(b) to CEW at: 700, 000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
or such other address as may be given by a Party to the other Party hereto in
writing from time to time.
All such Notices shall be deemed to have been received when delivered or
transmitted.
10.2 FURTHER ASSURANCES
The Parties shall sign such further and other documents, cause such meetings to
be held, resolutions passed and by-laws enacted, exercise their vote and
influence, do and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part hereof.
10.3 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement and every part hereof and no
extension or variation of this Agreement shall operate as a waiver of this
provision.
10.4 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties with respect
to all the matters herein and its execution has not been induced by, nor do
either of the Parties rely upon or regard as material, any representations or
writings whatsoever not incorporated herein and
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made a part hereof. This Agreement may not be amended or modified in any respect
except by written instrument signed by the Parties.
10.5 ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective legal personal representatives, heirs, executors,
administrators or successors.
10.6 ASSIGNMENT
Neither San Xxxxxxx nor CEW may assign its rights and obligations under this
Agreement.
10.7 CURRENCY
Unless otherwise specifically provided for herein, all monetary amounts
specified herein shall refer to the lawful money of the United States of
America.
10.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of California and each Party irrevocably attorns to the non-exclusive
jurisdiction of the Courts of such State.
10.9 CALCULATION OF TIME
When calculating a period of time within which or following which any act is to
be done or step taken pursuant to this Agreement, the date which is the
reference date shall, unless otherwise specifically included, be excluded. If
the last day of a period is not a business day, then the time period in question
shall end on the first business day following such non-business day.
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10.10 SEVERABILITY
If any portion of this Agreement is determined to be invalid or unenforceable
for any reason whatsoever, that invalidity or uneforceability shall not affect
the validity or enforceability of remaining portions of this Agreement and such
invalid or unenforceable portion shall be severed from the remainder of this
Agreement.
IN WITNESS WHEREOF the Parties have executed this Agreement this 17 day of
NOVEMBER 1999.
SAN XXXXXXX OIL & GAS LTD. CONSOLIDATED EARTH STEWARDS INC.
Per: /S/ J. XXXXXXX XXXXX Per: /S/ UNKNOWN
------------------------------------ -----------------
J. Xxxxxxx Xxxxx
President and Assistant Secretary By: DIRECTOR (ALTERNATE)
-----------------------
THIS AMENDMENT AGREEMENT DATED FEBRUARY 8, 2000
BETWEEN:
SAN XXXXXXX OIL & GAS LTD., a corporation incorporated under the laws
of the State of Nevada and having an office at 00 Xxxxxxxxx Xxxxx XX,
Xxxxxxx, Xxxxxxx X0X 0X0. ("San Xxxxxxx")
AND:
CONSOLIDATED EARTH STEWARDS INC., a corporation incorporated under the
laws of Province of British Columbia and having an office at the Suite
106 - 0000 Xxxxxxx Xxxxxx, Xxxxxxx, X.X. X0X 0X0 ("CEW")
WHEREAS:
A. The parties entered into a Joint Venture Agreement dated November 16,
1999 (the "Joint Venture") providing CEW with a right of first refusal
to participate in the exploration and development of oil and gas
prospects in the San Xxxxxxx and Sacramento basins in California;
B. The Joint Venture has secured interests in a number of oil and gas
prospects in the San Xxxxxxx and Sacramento basins (the "Prospects")
and expenditures to date total approximately US$270,000;
C. CEW is responsible for 19% of the costs to date of the Joint Venture
calculated to be US$78,000 and CEW has advanced US$70,000 to San
Xxxxxxx for exploration and development expenditures on the Prospects;
and
D. The parties wish to amend the terms of the Joint Venture to suspend any
further obligations of CEW pending a review of developments in the San
Xxxxxxx and Sacramento basins.
THE PARTIES AGREE AS FOLLOWS:
1. The terms of the Joint Venture shall be amended to suspend any further
obligations of CEW pending a review of developments in the San Xxxxxxx
and Sacramento basins.
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2. CEW hereby confirms that any monies advanced to San Xxxxxxx to date may
be used by San Xxxxxxx to pay for any exploration and development
expenses incurred by the Joint Venture.
3. CEW shall advance to San Xxxxxxx a further US$8,000 to pay for its
share of Joint Venture administrative expenses.
4. Paragraph 2.3 of the Joint Venture agreement shall be amended by
replacing "within (3) business days of the closing of the Private
Placement" to "Within eight (8) business days of CEW electing to
participate in an Individual Prospect under paragraph 4.4."
5. Paragraph 5.1 of the Joint Venture agreement shall be amended by
replacing "of closing" to "of CEW electing to participate in an
Individual Prospect under paragraph 4.4."
6. Paragraph 5.2 of the Joint Venture agreement shall be amended by
replacing "Upon execution of this agreement" to "Within eight (8)
business days of CEW electing to participate in an Individual Prospect
under paragraph 4.4."
7. Sub-paragraph 8.1(c) is deleted of the Joint Venture agreement is
deleted.
8. The Joint Venture agreement continues in full force and effect, as
amended hereby.
IN WITNESS WHEREOF the Parties have executed this agreement this 14th day of
February, 2000.
SAN XXXXXXX OIL & GAS LTD. CONSOLIDATED EARTH STEWARDS
INC.
Per: /S/ J. XXXXXXX XXXXX Per:/S/XXXXXXXX XXXXXXXX
------------------------------------- ---------------------
J. Xxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx,
President President