EXHIBIT 10.7
[VERDISYS(TM) LOGO]
VERDISYS, INC.
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LATERAL DRILLING SERVICE STANDARD AGREEMENT
EDGE CAPITAL GROUP AND VERDISYS, INC.
This Lateral Drilling Services Agreement ("Agreement") is dated as of September
27th, 2003, by and between Verdisys, Inc., a California corporation
("Verdisys"), and Edge Capital Group, a California corporation ("ECG"). Edge
Capital Group ("ECG") seeks to engage Verdisys, Inc. ("Verdisys") to provide
lateral drilling services in ECG's Franklin Gas Field in Franklin, Louisiana
(the "Franklin Field").
1.0 LATERAL DRILLING
1.1 LOCATION OF SERVICES
Verdisys will provide lateral drilling to pay zones within ECG's existing well
base in the Franklin Field identified with greater specificity as to location on
the attached Term and Pricing Invoice, which may be updated by the constituent
corporations from time to time.
1.2 PARAMETERS OF DRILLING
Laterals will be drilled at a depth of no more than 5800' with a horizontal
maximum of 300'.
2.0 SERVICE FEES AND ROYALTY
2.1 LATERAL DRILLING SERVICE FEES
Verdisys Lateral Drilling Services ("Drilling Services") will be billed at the
time of commencement of drilling at the package rate set forth in the attached
Term and Pricing Invoice. The Drilling Services are for each individual well
site pertaining to this Contract. ECG shall receive the Drilling Services at the
minimum number of ▇▇▇▇▇ and at the prices identified on the Term and Pricing
Invoice attached hereto. Verdisys will ▇▇▇▇ ECG upon completion of each
individual well, including any additional laterals requested, with payment due
upon completion of the well based upon financing provided by a to be determined
third party lender. Drilling will be done in eight (8) well segments for a total
of 100 ▇▇▇▇▇.
2.2 PAYMENT TO SECURE FRANKLIN FIELD AND FINANCING
ECG hereby agrees to purchase the Franklin Field from Verdisys within ten (10)
days of the date of this contract with a payment of $200,000.00. ECG will also
be responsible to provide any financial guarantees necessary to establish
financing for drilling enhancement revenues paid to Verdisys..
Service Contract - ECG and Verdisys, Inc. 1
2.3 ROYALTY
In addition to the fee for Drilling Services, Verdisys shall receive a 66 2/3%
interest in the net operating income from ECG's Franklin Gas Properties (the
"Verdisys Royalty"). The Verdisys Royalty will be calculated as 66 2/3% of the
net lease after recovery by ECG and/or its third party financing sources of
ECG's costs related to the Drilling Services, including principal, interest,
fees and costs for financing such Drilling Services; landowner royalties or
other royalties to third parties other than ECG or Verdisys; and field operating
costs.
To provide for payment of the Verdisys Royalty, ECG will secure for Verdisys a
66 2/3% listing with Shiloh Resources (the "Gatherer") for direct payment of
proceeds after the development of the field (horizontally) and Drilling Services
has been completed, all costs plus 10% have been received by ECG, Verdisys will
then receive said 66 2/3% royalty of said net lease.
Verdisys shall not be directly or indirectly liable or obligated in any way to
ECG or to any third party for any financing or other payment obligations related
to the Drilling Services, including principal, interest, fees or other costs
related thereto. The obligations of Verdisys are specifically limited to
compliance with the terms of this agreement related to the assignment of funds
by Verdisys to the Drilling Services Financing Escrow Account for the limited
time period described herein.
ECG will remain operator, but will subcontract to Verdisys the management and
operation of the Franklin field. On a monthly basis, Verdisys will be reimbursed
for 33 1/3% of mutually agreed to field operating costs by ECG for the preceding
month's expenses, such costs to include management personnel, office costs,
pumping, maintenance, repair, and any other costs reasonably related to field
production and management.
3.0 RESPONSIBILITIES OF PARTIES
3.1 VERDISYS SERVICES
Verdisys will provide lateral drilling to a depth of 5800' in the existing well
structure with four (4) laterals to a maximum horizontal distance of 300' from
the center of the well bore.
3.2 THIRD PARTY SERVICES
ECG hereby agrees that to the extent that third party services are reasonably
determined by Verdisys as needed to maximize the results of the Drilling
Services or the overall output from the Franklin field, ECG will be responsible
for twenty percent (25%) of all costs related to these services.
The determination as to the appropriate number of laterals to be drilled to
obtain maximum return from the well will be made by the on-site consulting
geologist (or if not on-site consulting geologist is present at the site, by any
third party consulting geologist mutually acceptable to the parties).
3.3 ECG SUPPORT
ECG agrees to provide sufficient, free and safe access to the Franklin Field and
the ECG facilities located thereon to permit timely performance of the Drilling
Services and field management. Verdisys is responsible for preworking of the
well to the described condition set forth in the "Verdisys Statement of Work",
and will ▇▇▇▇ such services to ECG as an operating cost. Verdisys will also
provide or subcontract necessary "cleanup" of the well and strata.
Service Contract - ECG and Verdisys, Inc. 2
4.0 WARRANTIES AND LIMITATIONS
4.1 TERMS AND CONDITIONS
All warranties related to Verdisys Lateral Drilling Services are contained in
the separate "Service Level Agreement" (SLA) document included with this
Contract.
4.2 PERFORMANCE
Verdisys will provide a minimum of four laterals per well to at a depth not to
exceed 5800' with laterals horizontal distance not to exceed 300'.
4.3 INDEMNIFICATION
Verdisys, at its own expense, shall indemnify, release and hold harmless ECG,
its subsidiaries, affiliates or assignees, and their directors, officers,
employees and agents and defend any action brought against same with respect to
any claim, demand, cause of action, debt, loss or liability, including
attorneys' fees and court costs, to the extent that it is based upon a claim
that the equipment used or Services provided hereunder infringes or violates any
patents, copyrights, trade secrets, licenses, or other property rights of any
third party. ECG may, at its own expense, assist in such defense if it so
chooses, provided that as long as Verdisys can demonstrate sufficient financial
resources, Verdisys shall control such defense and all negotiations relative to
the settlement of any such claim and further provided that any settlement
intended to bind ECG shall not be final without ECG' written consent, which
shall not be unreasonably withheld. In the event that Verdisys cannot
demonstrate sufficient financial resources to provide such defense, the ECG
shall have the right to advance legal expenses and direct such legal defense.
ECG shall promptly provide Verdisys with written notice of any claim which ECG
believes falls within the scope of this paragraph.
Verdisys agrees to indemnify, release, defend and hold harmless ECG for any
liability or expense due to claims for personal injury or property damage (i)
arising out of the furnishing or performance of the equipment or the Services
provided hereunder or (ii) arising out of the fault or negligence of Verdisys,
its employees or agents.
5.0 MISCELLANEOUS
5.1 CONFIDENTIALITY
Each party agrees that it shall not disclose to any third party any information
concerning the customers, trade secrets, methods, processes or procedures or any
other confidential business information of the other party which it learns
during the course of its performance of this Contract, without the prior written
consent of such other party. This obligation will survive the cancellation or
other termination of this Contract.
5.2 GOVERNING LAW
This Contract shall be governed by and construed under the laws of the State of
California.
5.3 ASSIGNMENT
Service Contract - ECG and Verdisys, Inc. 3
Either party may assign its rights under this contract with the prior written
notice to the other party, except the management responsibilities undertaken by
Verdisys herein may only be subcontracted or assigned with the prior consent of
ECG. This Contract is binding upon the parties and their successors and assigns.
5.4 AUTHORITY
Each party has all requisite power and authority to execute, deliver and perform
this Agreement. All necessary corporate proceedings of each party have been
taken to authorize the execution, delivery and performance of this Agreement.
This Agreement has been duly authorized, executed and delivered by each party,
constitutes the legal, valid and binding obligation of each party, and is
enforceable in accordance with its terms. Except as set forth elsewhere herein,
no consent, authorization, approval, order, license, certificate, or permit of
or from, or declaration or filing with, any federal, state, local or other
governmental authority or any court or other tribunal is required by either
party for the execution, delivery or performance of this Agreement. No consent
of any party to any contract, agreement, instrument, lease, arrangement or
understanding to which either party is a signer, or to which any of its
properties or assets are subject, is required for the execution, delivery or
performance of this Agreement
5.5 FURTHER ACTIONS
At any time and from time to time, each party agrees, at its expense, to take
such actions and to execute and deliver such documents as may be reasonably
necessary to effectuate the purposes of this Agreement.
5.6 AMENDMENTS
This Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof and supersedes all existing agreements among them
concerning such subject matter. This Agreement may be amended prior to the
Effective Time (notwithstanding stockholder adoption and approval) by a written
instrument executed by the Constituent Corporations with the approval of their
respective Boards of Directors.
5.7 NOTICES
Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be mailed by certified mail, return receipt
requested, or by Federal Express or similar overnight delivery or courier
service or delivered in person against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement.
Notices hereunder shall be deemed delivered only upon actual delivery against a
signed receipt.
ECG: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Edge Capital Group, Inc.
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VERDISYS: Verdisys, Inc.
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5.8 WAIVER
Any waiver by any party of a breach of any provision of this Agreement shall not
operate as or be construed to be a waiver of any other breach of that provision
or of any breach of any other
Service Contract - ECG and Verdisys, Inc. 4
provision of this Agreement. Any waiver must be in writing and be authorized by
a resolution of the Board of Directors of the waiving party.
5.9 BINDING EFFECT
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Constituent Corporations and their respective successors and assigns and
shall inure to the benefit of each indemnity.
5.10 SEPARABILITY
If any provision of this Agreement is invalid, illegal or unenforceable, the
balance of this Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
5.11 HEADINGS
The headings in this Agreement are solely for convenience of reference and shall
be given no effect in the construction or interpretation of this Agreement.
5.12 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, this Agreement has been approved by resolutions duly adopted
by the Board of Directors of each party and has been signed by duly authorized
officers of each party, all as of the date first above written.
EDGE CAPITAL GROUP VERDISYS, INC.
By: ______________________ By: ______________________
Title: _____________________ Title: _____________________
Date: ______________ Date: _____________
Service Contract - ECG and Verdisys, Inc. 5
TERMS AND PRICING INVOICE
Effective Date: September 27th, 2003
This Lateral Drilling Service Agreement ("AGREEMENT") is entered into by
Verdisys, Inc., a California corporation ("Verdisys") and EDGE CAPITAL GROUP, A
CALIFORNIA CORPORATION ("CUSTOMER") as of the Effective Date indicated above.
This Agreement includes and incorporates the Terms and Pricing Invoice attached
hereto and the following Annexes indicated below and executed by the parties:
[ ] Service Level Agreement (SLA) [ ] Statement of Work
[ ] ________________________ [ ] _________________________
VERDISYS, INC. Edge Capital Group
("VERDISYS") ("CUSTOMER")
BY: ___________________________________ BY: ______________________________
NAME: ▇▇▇ ▇▇▇▇▇▇▇▇ NAME: ▇▇▇▇▇ ▇▇▇▇▇▇
TITLE: PRESIDENT AND CEO TITLE: CEO
DATE: 9/27/03 DATE: 9/27/03
Verdisys Sales Representative or Agent Information
SALES REPRESENTATIVE OR AGENT PHONE FAX EMAIL
Customer Information: IT IS YOUR RESPONSIBILITY TO NOTIFY VERDISYS OF ANY CHANGE
IN CONTACT INFORMATION.
PRIMARY BUSINESS CONTACT EMAIL PHONE, WITH AREA CODE
MAILING ADDRESS WITH STREET, CITY, STATE, AND ZIP CODE FAX, WITH AREA CODE CELLULAR, WITH AREA CODE
Selected Services:
BASE PACKAGE: 4 1/2 OR 3 1/2 INCH ▇▇▇▇▇ (WITH UP TO four (4) LATERALS PER WELL):
Minimum Number of ▇▇▇▇▇: Fee Per Well Fee per additional laterals:
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100 65,000.00 $3,750.00 Up to 12 per zone
ADDITIONAL: 2 7/8 INCH ▇▇▇▇▇ (WITH UP TO four (4) LATERALS PER WELL):
Number of ▇▇▇▇▇: Fee Per Well Fee per additional laterals:
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65,000.00 $3,750.00 Up to 12 per zone
PAYMENT SOURCE (IF ANY): not applicable
ADDITIONAL SERVICES: Monthly Bandwidth INSTALLATION FEE PAYMENT TERMS
Customer Fee
Payment Terms
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