PARTICIPATION AGREEMENT
This Participation Agreement is entered into this 28th day of March, 1994, by
and between BuenaVentura Resources Corporation, a Utah corporation, of 000 Xxxxx
Xxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000 ("BVRC"), and Asphalt Ridge
Limited Partnership, a Texas limited partnership (the "Participant").
WITNESSETH
WHEREAS, BVRC has entered into a Letter of Understanding for Tar Sands Project
dated November 24, 1993 with Swaco Geolograph ("Swaco"), Xxxxxx Petroleum
Corporation and Post Petroleum Company (collectively, the "Joint Venture"), a
copy of which is attached hereto as Exhibit "A" and by this reference
incorporated herein (the "Letter Agreement").
WHEREAS, under paragraph 5 of the Letter Agreement, it is acknowledged that
BVRC may relinquish up to 2 1/2% of its interest in the proposed tar sands
project within the area of mutual interest to any investors who fund the Initial
Production Facility ("IPF"). The area of mutual interest under the Letter
Agreement is the Uintah Basin, Utah.
WHEREAS, Participant has expressed its intent to contribute $250,000 to
partially fund the IPF under certain conditions which conditions have been
agreed to by BVRC.
NOW, THEREFORE, for ten dollars, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by all parties, it is
agreed that:
1. Upon:
(a)Swaco providing its written acknowledgment to BVRC confirming its
unqualified intention to proceed with the IPF in accordance with its
turnkey proposal,
(b)a determination by BVRC in good faith that all other material
preconditions necessary to proceed with the IPF project have been
satisfied, including receipt by BVRC of written notification from Swaco
of its receipt of cash (or equivalent irrevocable letter of credit in
enforceable form) aggregating at least $250,000 from Xxxxxx and/or Post,
to fund a portion of the IPF.
Participant shall contribute $250,000 in cash or by a letter of credit (in
customary form reasonably acceptable to Swaco) to partially fund the IPF
operations as contemplated under the Letter Agreement. BVRC shall hold such cash
or letter of credit in escrow (subject to an obligation to immediately refund
same to Participant without deduction in the event the foregoing conditions are
not fully satisfied) until the requirements of this paragraph have been
satisfied. Participant shall have no further or continuing obligation to provide
funding for the IPF over and above the $250,000.
2. Upon contributing the $250,000 funding for the IPF, Participant will be
entitled to the following:
(a)An economic interest in the first "Commercial Facility" (as that term is
used in the Letter Agreement) which interest shall be a percentage of the
"Net Proceeds" as that term will be defined in the Mining Joint Venture
Agreement contemplated in paragraph 5 of the Letter Agreement utilizing
the Rocky Mountain Mineral Law Foundation Form 5 Mining Venture Agreement
("MVA"). A copy of Exhibit "D" entitled "Net Proceeds Calculation" to the
Form 5 MVA is attached hereto as Exhibit "B" for illustrative purposes
only, it being understood that the final form may require modification
depending on the operational and other circumstances surrounding the
project. It is the intent of the parties hereto, however, that "Net
Proceeds" shall be defined the same for Participant as that term is
defined for BVRC under the MVA, that Net Proceeds shall include, without
limitation, a percentage of the Net Proceeds from the production of crude
oil produced from that certain real property referred to on Exhibit "C"
attached hereto, that BVRC shall give fair consideration to the interests
of Participant in such negotiations, and that BVRC shall seek the consent
of Participant to the MVA before signing, which consent shall not be
unreasonably withheld and is not required as a precondition of BVRC
signing the MVA. Additionally, BVRC shall not seek to diminish the
economic interest of Participant by manipulating the definition of Net
Proceeds so as to enhance other fees, compensation or returns that BVRC or
its affiliates may be entitled to receive from the Commercial Facility.
Further, the definition of Net Proceeds shall not be interpreted to impose
any double deduction for capital costs or operating expenses that have
already been paid for by the investments in the Commercial Facility made
by Participant and the Joint Venturers.
Participant's Net Proceeds Interest in the first Commercial Facility shall
be two and one-half percent (2 1/2%) of 8/8ths of the Net Proceeds
realized from commercial activity or production from the first Commercial
Facility, subject to the following provisions.
If (1) the cost (excluding any fees or other compensation paid to BVRC and
its affiliates) to place the first Commercial Facility into commercial
operation (the "Initial Cost") exceeds $12 million, or (2) the first
Commercial Facility is subsequently expanded and the cost (excluding any
fees or other compensation paid to BVRC and its affiliates) for placing
the expanded facility into commercial operation, when added to the Initial
Cost, exceeds $12 million (the excess cost above $12 million being in each
instance referred to as the "Excess Cost", and the Initial Cost plus the
Excess Cost equalling the "Total Cost"), Participant shall be notified in
writing with a full accounting and explanation, and shall have the
election to:
(i) Maintain their 2 1/2% of 8/8ths Net Proceeds Interest by timely
contributing, as provided in the MVA, 2 1/2% of the Excess Cost; or
(ii) Make no additional contribution and continue to own a Net Profits
Interest in the first Commercial Facility equal to a percentage that
is proportionately reduced by the Excess Cost. The formula for
determining such proportionate reduction shall be as follows:
multiply 2 and 1/2% by 12,000,000 and divide the product by the
Total Cost. The result thus derived is the proportionately reduced
interest.
(b)The option to participate in each additional tar sands project of BVRC
under an MVA (or any amendment thereto), including any other tar sands
operations or facilities proposed under an MVA within the Uintah Basin,
to the extent of a 2 1/2% of 8/8ths Net Proceeds Interest, which shall be
exercised under the same time frame (and with full access to all
information) in which the other parties make their election(s) under such
MVA and based upon an investment proportional to the interest. In the
event Participant (or if Participant is dissolved, all or some of its
partners acting collectively) does not elect to participate for the full
2 1/2% interest in a subsequent tar sands project, Participant shall
thereafter have no further interest in the particular project for which
such option terminated.
3. Participant shall not be a party to the MVA, but shall be expressly
acknowledged therein as being entitled to the Net Proceeds Interest, and the MVA
shall contain appropriate language to assure that Participant's share of the Net
Proceeds is appropriately and timely paid. Furthermore, to assure that
Participant's option to participate in future projects is protected even in the
event BVRC elects not to participate in such future projects for its own
interest under the MVA, BVRC shall reserve, on Participant's behalf, an express
right for Participant to make a separate election for its own interest in all
future projects attributable to Participant's option in accordance with
paragraph 2(b) above.
4. BVRC shall have the right of first refusal to purchase the interest, or any
part thereof, of Participant granted and earned under this Agreement by matching
any bona fide cash offer that Participant desires to accept, with cash, or with
the equivalent value of common stock in Crown Energy Corporation registered on a
nationally recognized securities exchange, such as NASDAQ, the American Stock
Exchange or the New York Stock Exchange, consisting of a number of shares having
a total value based on the bid price on the day of closing equal to such cash
offer. Participant shall not sell, or otherwise transfer, or offer to sell or
transfer, any interest except for cash in U.S. Dollars or securities registered
on a nationally recognized securities exchange, such as NASDAQ, the American
Stock Exchange or the New York Stock Exchange, having an aggregate bid price on
the day of closing equal to such cash offer. BVRC shall have thirty-three (33)
days after receipt of written notice from Participant to make its election.
Participant's notice to BVRC shall set forth in reasonable detail all material
aspects of the bona fide offer to enable BVRC to make an informed business
decision concerning its election. BVRC shall make its election to exercise its
first right of refusal in writing, delivered to the Participant at the address
specified in the notice. BVRC's election shall be deemed delivered three (3)
2
days after being mailed to Participant at the specified address, properly
addressed, postage prepaid, by certified mail, return receipt requested.
5. BVRC will consult with a representative appointed by Participant in
negotiating the MVA contemplated in the Letter Agreement; provided, however,
that all final decisions respecting the MVA, or any part or aspect thereof, are,
subject to the terms set forth above, expressly reserved by, and shall be at the
sole discretion of, BVRC.
6. It is recognized that Participant is a Texas Limited Partnership. In the
event Participant dissolves, the limited partners to whom undivided interests in
the Limited Partnership are distributed in connection with such dissolution
shall be deemed Participants hereunder, provided that (a) as to any decisions
required to be made by Participant under this Agreement, the individuals shall
designate one common representative and all actions shall be determined by a
majority in interest of the Participants, and (b) as to the elections available
to the Participant hereunder, if fewer than all of the distributees desire to
make such elections, such elections may nonetheless be effectively made by fewer
than all of the individual distributees as long as the electing distributees (in
the aggregate) commit all of the funds and take all of the actions required to
be taken on the part of the Participant hereunder within the timeframe allowed
to the Participant.
7. This Agreement constitutes the entire agreement between the parties hereto.
No amendment or modification shall be binding on any party unless made in
writing and duly executed.
8. Failure of any party to enforce any provision hereof at any time shall not
be construed as a waiver of such provision or any other provisions hereof.
9. This Agreement shall be interpreted and governed by the laws of the State of
Utah. If any provision hereof is, for any reason, declared to be invalid or
unenforceable, the validity of the remaining portion shall not be affected
thereby.
10. This Agreement may be signed in counterpart originals, each of which, or a
copy or legible facsimile thereof, shall be deemed an original for all purposes.
11. A memorandum of this Agreement will be executed by the parties and may be
recorded in the real property records of Uintah County, Utah.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the day and year first above written.
BUENAVENTURA RESOURCES CORPORATION
-----------------------------------------------
Xxxxxx X. Xxxxxxxx
President
ASPHALT RIDGE LIMITED PARTNERSHIP
By: ASPHALT RIDGE DEVELOPMENT COMPANY, its
General Partner
By:
--------------------------------------------
Xxxxx X. Xxxxxxxx, President
3
