EXHIBIT 10.4
LETTER AGREEMENT AMONG DOLPHIN ENERGY CORPORATION,
HARBOR PETROLEUM, LLC AND FLORIDA ENERGY, INC.
DATED MARCH 6, 2003
DOLPHIN ENERGY CORPORATION
0000 XXXXXXXX XXX XXXXX
XXXXX 0000
XXXXX, XXXXXXX 00000
March 6, 2003
Harbor Petroleum, LLC Florida Energy, Inc.
000 Xxxxx Xxxxxx Xxxxx 000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx, Manager Attention: Xxxxxxx X. Xxxxxx,
President
Dear Sirs:
This letter will confirm and reduce to writing our common understanding with
respect to amounts advanced by and on behalf of Dolphin Energy Corporation, a
Nevada corporation ("Dolphin") to Harbor Petroleum, LLC, a Texas limited
liability company ("Harbor") and/or Florida Energy, Inc., a Florida corporation
("Florida") and will constitute an ongoing agreement (the "Agreement") by,
between and among the parties hereto.
In this connection, Dolphin, Harbor and Florida, in consideration of the mutual
covenants and premises set forth below, agree and each agrees:
1. ADVANCES. From May 31, 2002 through November 30, 2002, Harbor has
received advances in accordance with Exhibit "A" hereto on behalf of
Dolphin for the purpose of acquiring oil, gas and mineral leases in
Rusk and Nacogdoches Counties in the State of Texas. Through the date
hereof, Harbor has continued to take leases as above and continues to
receive advances from Dolphin. The advances are intended to cover all
of the acquisition costs of the oil, gas and/or mineral interests
acquired, including Harbor's out-of-pocket expenses and including any
costs related to title searches, recordation, additional land work,
geology and engineering. Further, Florida has taken certain leases in
Nacogdoches County on behalf of Dolphin.
2. LEASES. Although all of the oil, gas and mineral leases acquired in
Xxxx and Nacogdoches Counties through the date hereof by Harbor and
Florida are held in the name of Harbor or Florida, such leases are held
as such on behalf of Dolphin, and it is understood that neither Harbor
nor Florida has any equitable interests in
such leases. Further, within fifteen (15) days of any request from
Dolphin, Harbor and/or Florida will cause any and/or all such leases to
be assigned directly to Dolphin or its nominee.
3. TERM. Except as otherwise herein provided, this Agreement shall be
deemed to be effective with respect to acquisitions of leases as of May
31, 2002 and shall continue in full force and effect for a term of one
(1) year from the date hereof, provided that by common consent the
parties may extend the term of this Agreement from year to year
thereafter and provided that either party may terminate this Agreement
at any time by providing prior written notice to the other of no fewer
than thirty (30) days
4 SCOPE OF TERMINATION. For a period of five (5) years after this
Agreement terminates, all of the provisions of this Agreement shall
continue in effect and remain applicable to those leases and mineral
interests acquired by the parties during the term of this Agreement.
5. PARTICIPATION; BENEFICIAL INTEREST. Except as otherwise herein
provided, the parties shall participate in the ownership of all
geological and geophysical information acquired as a result of
operations conducted hereunder, and Dolphin shall have ownership of all
working interests acquired under any lease or other mineral interest
hereunder, provided that there shall be a two percent (2%) overriding
royalty interest ("ORRI") reserved under any such lease or mineral
interest, with one half (1/2) of such ORRI being reserved in the name
of Harbor and the other one half (1/2) being reserved in the name of
Florida. In addition, within fifteen days (15) of the date hereof,
Florida shall designate 400 contiguous acres (the "Designated Acreage")
of the leased acreage in the prospect area of Nacogdoches County known
as "Xxxxxxx," and Florida shall be entitled to a one thirty-second ORRI
on the Designated Acreage which amount shall be reserved in the name of
Florida rather than the one percent (1%) ORRI which shall be applicable
to the other leased acreage hereunder.
6. BONUS TO FLORIDA. In recognition of the fact that Florida first
identified the lease play in Xxxx and Nacogdoches Counties and in
further consideration hereof, Dolphin agrees to pay Florida a bonus of
$50,000.00 which shall be satisfied by Dolphin's giving Florida a
promissory note in the principal amount of $50,000.00 payable in full
one year and one day from the date of Florida's acceptance hereof and
bearing interest at an annual rate of seven and one-half percent (7
1/2%).
7. INITIAL OPERATOR. Harbor shall be operator for and shall have full
control of all operations conducted under the provisions of this
Agreement; provided, however, that, if and when the leases hereunder
are assigned to Dolphin or its nominee, Dolphin or such nominee will
have the right to be named operator. Operator shall conduct all such
operations in a good and workmanlike manner, but it shall have no
liability as operator to the nonoperator for losses sustained or
liabilities incurred, except as may result from its gross negligence or
willful misconduct.
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8. ACQUISITIONS. Should Harbor identify an oil, gas or mineral lease or
any mineral interest covering all or any portion of lands located in
Xxxx or Nacogdoches Counties, Harbor shall notify Dolphin of such
potential acquisition, specifying the price to be paid therefor and the
other conditions of such acquisition. Dolphin shall have the right and
option to acquire all of the working interest in such acquisition by
notifying Harbor within thirty (30) days from the date of receipt of
said notice, of its election to participate in the acquisition. If
Dolphin elects to participate in an acquisition, Dolphin shall pay
Harbor the acquisition costs as set forth above and shall take the
acquisition, without warranty of title and free of additional burdens
imposed thereon by the original acquiring party, other than those set
forth in paragraph 5 above..
9. ACQUISITION AND OPERATING COSTS. Except as otherwise specifically
provided in this Agreement, all costs of any acquisition hereunder and
all costs, charges and expenses of operations conducted hereunder shall
be charged to and borne by Dolphin.
10. ACCOUNTING INFORMATION AND REPORTS. If possible prior to and, in any
event, as soon as practicable after Harbor incurs any acquisition or
other chargeable costs, Harbor shall provide Dolphin with an accounting
of such expenditures, including the amount and purpose thereof. In
addition, Harbor shall promptly furnish to Dolphin all data and
information acquired in operations hereunder, and Harbor shall consult
freely with Dolphin and keep it informed of all important matters.
Harbor shall make all reports to governmental agencies required in
connection with the conduct of operations hereunder.
11. MAINTENANCE OF LEASES. Harbor shall make a good faith effort to pay
all rentals due or payable under the terms of leases acquired by it
pursuant to this Agreement, but the burden of all such payments shall
be borne by Dolphin. If possible, Harbor shall notify Dolphin of the
dates upon which rentals are due under leases acquired hereunder by the
parties at least seventy-five (75) days prior to such due dates.
12. CONFIDENTIALITY. Unless otherwise specifically provided for herein,
all maps, reports, interpretations, records, data and information
pertaining to the leases acquired hereunder and obtained or shared by
the parties pursuant to the provisions hereof, shall be and remain held
strictly confidential by the parties hereto, their successors, assigns,
agents, employees and contractors engaged in the performance of any
work hereunder, during the entire term of this Agreement, and shall not
be disclosed to any other person or entity, unless such disclosure is
required by applicable law.
13. RELATIONSHIP OF PARTIES. Harbor and Florida have acquired, and Harbor
is acquiring the leases hereunder for and on behalf of Dolphin.
However, the duties,
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obligations and liabilities of the parties hereto are intended to be
several and not joint or collective. This Agreement is not intended to
create, and shall not be construed to create, any association or trust,
or to impose a partnership duty, obligation, or liability with regard
to any one or more of the parties hereto. Each party hereto shall be
individually responsible for its own obligations as herein provided.
This Agreement is not intended to provide, and shall not be construed
to provide, directly on indirectly, for any joint refining or marketing
of oil, gas or other minerals.
14. NOTICES. Each party's proper address for notices shall be the
addresses given above until such party specifies another address by
written notice to the other party.
15. SUCCESSORS AND ASSIGNS. This Agreement shall extend to, be binding
upon, and inure to the benefit of the parties hereto and their
respective successors and assigns, and shall constitute a covenant
running with the lands, leases and interest covered hereby.
16. COUNTERPARTS; FACSIMILES. This Agreement may be executed by signing
the original or a counterpart thereof. If this Agreement is executed in
counterparts, all counterparts taken together shall have the same
effect as if all parties had signed the same instrument. This agreement
may also be executed by signing and returning by facsimile a copy
hereof, and such facsimile copy shall have the same force as signed
original counterpart.
17. FURTHER COOPERATION ON SUBSEQUENT DOCUMENTS. Dolphin and Harbor agree
to cooperate at all times from and after the date hereof with respect
to the supplying of any information requested by the other regarding
any of the matters described herein and each agrees to execute such
further bills of sale, assignments, releases or other documents as may
be reasonably requested for the purpose of giving effect to, evidencing
or giving notice of the transactions described herein. Specifically, it
is anticipated that there will be assignments of the oil, gas and
mineral leases or other mineral interests from Harbor and Florida
Energy, Inc. into Dolphin and that Dolphin and Harbor may enter into a
joint operating agreement or agreements.
18. MODIFICATION AND WAIVER. No supplement, modification, waiver or
termination of this Agreement or any provisions hereof shall be binding
unless executed in writing by the parties to be bound thereby. No
waiver of any of the provisions of this Agreement shall constitute a
waiver of any other provision (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
19. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
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If the foregoing correctly states your understanding of our Agreement, please
sign and return one copy hereof to the undersigned.
Very truly yours,
Dolphin Energy Corporation
By /s/ XXXX X. XXXXXX
----------------------------------
Xxxx X. Xxxxxx
Title: President
AGREED AND ACCEPTED AGREED AND ACCEPTED
Harbor Petroleum, LLC Florida Energy, Inc.
By /s/ XXXXX X. XXXXX By /s/ XXXXXXX X. XXXXXX
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Xxxxx X. Xxxxx Xxxxxxx X. Xxxxxx
Title: Manager Title: President
Date: 3/6/03 Date: 3/7/03
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