2001 EXPLORATION AGREEMENT
This 2001 Exploration Agreement (the "Agreement") is effective as of April
1, 2001 (the "Effective Date") by and among ▇▇▇▇▇▇▇▇ Resources, Inc., a Nevada
corporation ("CRI"), ▇▇▇▇▇▇▇▇ Offshore, LLC, a Nevada limited liability company
("▇▇▇▇▇▇▇▇"), Bois d'Arc Offshore, Ltd., a Texas limited partnership ("Bois
d'Arc Ltd."), Bois d'Arc Oil & Gas Company, LLC, a Texas limited liability
company ("Bois d'Arc LLC") (Bois d'Arc Ltd. and Bois d'Arc LLC are collectively
referred to herein as ("Bois d'Arc")), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ("Blackie").
WHEREAS, ▇▇▇▇▇▇▇▇ and Bois d'Arc desire to enter into a joint exploration
program with respect to certain oil and gas properties within the state coastal
waters of Louisiana and Texas and corresponding federal offshore waters (the
"Region"), as identified by Bois d'Arc;
WHEREAS, ▇▇▇▇▇▇ and Blackie are the principals of Bois d'Arc; and
WHEREAS, certain of the parties hereto previously entered into a Joint
Exploration Agreement dated December 8, 1997 (the "1997 Agreement") pursuant to
which Bois d'Arc (and its predecessors) identified prospects, acquired seismic
data and performed other work; the parties desire that such prospects be further
developed and completed pursuant to the terms of this Agreement and that the
1997 Agreement be terminated.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Bois d'Arc's responsibilities shall be as follows:
(a) Bois d'Arc shall identify oil and natural gas prospects within the Region.
A prospect shall be considered to be the entire lease(s) which is (are)
expected to be underlain by any portion of a potentially productive
reservoir(s) expected to be encountered by the initial test well.
(b) Bois d'Arc shall develop a budget for exploration activities with respect
to prospects within the Region, including the prospects initially
identified pursuant to the 1997 Agreement (as listed on the Schedule
hereto) (the "existing prospects"), which budget shall be subject to the
approval of ▇▇▇▇▇▇▇▇ (the "Budget"). If ▇▇▇▇▇▇▇▇ elects not to participate
in a particular prospect within thirty (30) days following submittal of the
prospect by Bois d'Arc to ▇▇▇▇▇▇▇▇ (by rejecting inclusion of such prospect
in the Budget), Bois d'Arc shall have the right to pursue such prospect on
its own and shall have no further obligation to ▇▇▇▇▇▇▇▇ under this
Agreement with respect to such prospect.
(c) With respect to potential prospects that the parties have approved, Bois
d'Arc shall acquire the seismic data, and if appropriate, the leasehold
interests. All costs for seismic data, leasehold acquisitions and other
exploration activities shall be in accordance with the Budget.
(d) Bois d'Arc shall be responsible for fully developing the acquired
prospects. Upon completion of the initial test well for a prospect
(resulting in a Successful Prospect (as defined below)), Bois d'Arc shall
assign the entire working interest 40% to ▇▇▇▇▇▇▇▇ and 60% to Bois d'Arc
(or their respective designees), except that (i) with respect to the
existing prospects, the interest to be assigned to each party shall be as
set forth on the attached Schedule and (ii) ▇▇▇▇▇▇▇▇ will receive a 50%
working interest in any potential prospect at Ship Shoal 67 or South ▇▇▇▇▇
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events be subject to (x) a 2% of 8/8ths overriding royalty interest to be
reserved for Bois d'Arc (or its designees), (y) the operating agreement
naming Bois d'Arc Ltd. as operator with respect to the prospects and (z)
the terms of this Agreement. Notwithstanding the foregoing, in the event
that all warrants available for issuance hereunder as provided in Section 3
below are earned and issued prior to the Expiration Date (as defined below)
and CRI does not make additional warrants available for issuance hereunder,
Bois d'Arc shall have the option to allocate the working interest to be
assigned for such future prospects (for which no warrants are issued) 20%
to ▇▇▇▇▇▇▇▇ and 80% to Bois d' Arc (and subject to the 2% of 8/8ths
override and other exceptions noted in the preceding sentence).
(e) ▇▇▇▇▇▇ and Blackie shall devote such amount of their time and energy as is
necessary for Bois d'Arc to identify, pursue and develop the prospects.
2. (a) ▇▇▇▇▇▇▇▇'▇ responsibilities shall be as follows: ▇▇▇▇▇▇▇▇ shall make
advances to Bois d'Arc to fund 100% of the costs for seismic data,
leasehold acquisitions and other exploration activities. Such advances
shall be made in accordance with the Budget. Bois d'Arc shall reimburse
▇▇▇▇▇▇▇▇ for these advances when a prospect is developed and assigned to
the parties. Lease acquisition costs, including any related delay rentals
and legal costs, will be reimbursed to ▇▇▇▇▇▇▇▇ when the working interest
is assigned, as provided in Section 1(d). Bois d' Arc shall determine and
charge a seismic fee for each developed prospect. The amount of the seismic
fee charged is to be based on past practices followed by Bois d'Arc with
the objective of recovering the amounts advanced by ▇▇▇▇▇▇▇▇ pursuant to
this Agreement. ▇▇▇▇▇▇▇▇ will be paid 100% of such seismic fees received by
Bois d'Arc until ▇▇▇▇▇▇▇▇ has recovered 100% of any advances made
hereunder. After such time, Bois d'Arc and ▇▇▇▇▇▇▇▇ will each receive 50%
of any excess fee income.
(b) The parties acknowledge and agree that ▇▇▇▇▇▇▇▇ and Bois d'Arc have
previously funded certain costs with respect to the existing prospects.
With respect to existing prospects and future prospects developed on leases
acquired prior to the Effective Date and pursuant to the 1997 Agreement,
any previously advanced leasehold and seismic costs that are recovered upon
drilling will be allocated 80% to ▇▇▇▇▇▇▇▇ and 20% to Bois d'Arc. Upon
execution of this Agreement, ▇▇▇▇▇▇▇▇ shall reimburse Bois d'Arc $1,226,491
for costs advanced by Bois d'Arc with respect to certain federal leases
acquired in May and June 2001 and the Fairfield Industries and Western GeCo
seismic data acquired in June and July 2001.
3. As part of the exploration program described herein, CRI shall issue to
Bois d'Arc (or its designees) on August 1, 2001 and on each January 1 and
July 1 (a "Grant Date") of each calendar year thereafter that the
exploration program is in effect warrants exercisable for shares of the
common stock, $.50 par value ("Common Stock"), of CRI. The number of
warrants to be issued on each Grant Date shall equal the product of (i) the
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total number of Successful Prospects developed pursuant to the terms of
this Agreement during the six (6) month period immediately preceding the
applicable Grant Date (or from the Effective Date through July 31, 2001
with respect to the August 1, 2001 Grant Date and for the five (5) month
period with respect to the January 1, 2002 Grant Date) and (ii) 60,000;
provided, however, that in no event shall the number of warrants to be
issued hereunder exceed 1,620,000 in the aggregate. For purposes hereof, a
prospect shall be deemed a "Successful Prospect" at such time ▇▇▇▇▇▇▇▇
agrees to set production casing on the initial test well or a substitute
therefor with respect to the prospect (including existing prospects but for
which warrants have not been issued pursuant to the 1997 Agreement), but
excluding successful development ▇▇▇▇▇ drilled and completed in a
previously proven reservoir. Once a prospect is deemed a Successful
Prospect, additional warrants will be earned if additional exploratory
▇▇▇▇▇ are drilled on an acquired lease and ▇▇▇▇▇▇▇▇ agrees to set
production casing thereon. The exercise price shall be the average closing
price of the Common Stock, as reported on the New York Stock Exchange, for
the 30-calendar day period immediately prior to the applicable Grant Date.
Notwithstanding the foregoing, with respect to the August 1, 2001 Grant
Date only, Bois d'Arc may at its option chose either the 30-day average or
the closing price of the Common Stock on the date of execution of this
Agreement as the exercise price for the warrants to be issued on such Grant
Date. All unexercised warrants issued hereunder shall terminate five (5)
years after the Expiration Date or the earlier termination of this
Agreement.
4. This Agreement shall be for a period commencing on the Effective Date and
ending on December 31, 2006 (the "Expiration Date"). Notwithstanding the
foregoing, Bois d'Arc shall have the right to terminate this Agreement upon
a Change of Control (as defined below). Bois d'Arc may exercise its right
to terminate by giving written notice to ▇▇▇▇▇▇▇▇ within 30 days following
such Change of Control. In connection with such a termination, ▇▇▇▇▇▇▇▇
will be assigned a 40% interest in any prospects not previously assigned to
the parties and will have no further obligations to make advances. For
purposes hereof, a "Change of Control" shall mean (a) the acquisition by
any person, or two or more persons acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of more than 50% of
the outstanding shares of voting stock of CRI or (b) the Board of Directors
of CRI shall not consist of a majority of the directors in office on the
date hereof or such other directors as are recommended by a majority of the
Board of Directors in office on the date hereof.
5. If ▇▇▇▇▇▇▇▇ fails to fund a minimum of $5,000,000 in the aggregate
hereunder for the acquisition of seismic data within forty-five (45) days
of receipt of invoices from Bois d'Arc for such expenditures, Bois d'Arc
shall have the right upon thirty (30) days prior written notice to
terminate this Agreement. Upon such termination, Bois d'Arc shall have no
further obligations to ▇▇▇▇▇▇▇▇ hereunder other than to submit to ▇▇▇▇▇▇▇▇
prospects on previously acquired leaseholds in accordance with Section 1(b)
above. For purposes of computing ▇▇▇▇▇▇▇▇'▇ obligation under this Section
5, all amounts funded since the Effective Date shall be taken into account.
6. Bois d'Arc, ▇▇▇▇▇▇ and Blackie agree that they will not, directly or
indirectly, develop any properties in the Region other than pursuant to
this Agreement (or the 1997 Agreement), unless ▇▇▇▇▇▇▇▇ elects not to
participate with Bois d'Arc as provided herein.
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7. This Agreement is not intended to create a partnership or similar
relationship between ▇▇▇▇▇▇▇▇ and Bois d'Arc. Except as specifically
provided herein, no party shall have the authority to enter into any
agreement on behalf of the other party without such other party's prior
written approval.
8. If any provision of this Agreement is held to be illegal, invalid or
unenforceable, the legality, validity and enforceability of the remaining
provisions hereof shall not be affected thereby.
9. This Agreement and the transactions contemplated between Bois d'Arc and
▇▇▇▇▇▇▇▇ relating to the subject matter hereof and supersedes all prior
agreements, written or oral, including without limitation the 1997
Agreement with the effective date of the termination of the 1997 Agreement
being the Effective Date.
10. This Agreement shall not be amended unless in writing signed by all
parties.
11. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns and legal
representatives. No party shall assign this Agreement or any rights
hereunder without the prior written consent of the other party.
Notwithstanding the foregoing, Bois d'Arc shall have the right to assign
this Agreement and all rights and obligations hereunder to an entity
controlled by ▇▇▇▇▇▇ and Blackie. For purposes hereof, an entity shall be
controlled by ▇▇▇▇▇▇ and Blackie if ▇▇▇▇▇▇ and Blackie own, directly or
indirectly, in the aggregate 100% of the ownership interest in such entity.
12. This Agreement may be executed in counterparts, each of which shall be
deemed an original and together shall constitute one instrument.
13. Each party agrees to perform, execute and deliver any such additional
documents as may reasonably be requested to consummate or effect the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of July 31,
2001.
▇▇▇▇▇▇▇▇ RESOURCES, INC.
By: /s/M. ▇▇▇ ▇▇▇▇▇▇▇
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M. ▇▇▇ ▇▇▇▇▇▇▇, President
▇▇▇▇▇▇▇▇ OFFSHORE, LLC
By: /s/M. ▇▇▇ ▇▇▇▇▇▇▇
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M. ▇▇▇ ▇▇▇▇▇▇▇, President
BOIS D'ARC OFFSHORE, LTD.
By: Bois d'Arc Oil & Gas Company, LLC,
General Partner
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Manager
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇, Manager
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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