EXHIBIT 10.4
PURCHASE AND
JOINT EXPLORATION AGREEMENT
This Joint Exploration Agreement (the "Agreement") is entered into this
21st day of February, 1996 by and between COSTILLA ENERGY, L.L.C., a Texas
limited liability company ("Costilla") and RESOURCE DEVELOPMENT COMPANY LIMITED,
L.L.C. (DE), a Delaware limited liability company ("Redeco").
R E C I T A L S
(a) Redeco has entered into a Concession Agreement (the "Concession"),
dated July 6, 1995, with the Republic of Moldova ("Moldova") under the terms of
which Redeco has acquired rights to explore, develop and produce oil, gas and
other minerals within the geographic boundaries of Moldova, together with other
rights related to said production. The Concession is incorporated herein and
made a part hereof by reference.
(b) By Option Agreement dated October 17, 1995, as extended by Extension
of Option Agreement dated November 21, 1995 (collectively, the "Option"), for
the consideration of $25,000 paid to Redeco, Costilla has acquired from Redeco
an option to acquire an undivided 50% interest in the Concession. The Option is
incorporated herein and made a part hereof by reference.
(c) By this Agreement, Costilla is exercising its option and Redeco and
Costilla are agreeing to their respective rights and obligations under the
Concession.
I.
EXERCISE OF OPTION
1.1 EXERCISE OF OPTION. Contemporaneously with the execution of this
Agreement, Costilla has paid Redeco the sum of $90,000 and has agreed to bear
the first $750,000 of joint activities expenses, including but not limited to
direct and indirect drilling costs, travel, and related overhead expenses for
office operations and technical analysis, in Direct Oil and Gas Projects. By
such payment and agreement, Costilla has exercised its option under the Option.
In the event any provision of this Agreement conflicts with any provision of the
Option, this Agreement shall prevail.
1.2 ASSIGNMENT OF RIGHTS UNDER CONCESSION. Immediately upon execution of
this Agreement, Redeco shall execute and deliver to Costilla a conditional
assignment of an undivided 50% of Redeco's rights and obligations under the
Concession. Redeco and Costilla understand that the assignment by Redeco to
Costilla is subject to Moldova granting its written consent to the assignment
and, possibly, its consent to this Agreement and all other subsequent agreements
between Redeco and Costilla and satisfaction of the conditions precedent
recited
above. In the event Moldova refuses to grant such written consent, Costilla's
exercise of the Option shall be void and Redeco shall be obligated to
immediately refund to Costilla all sums of money heretofore and hereafter paid
by Costilla to Redeco in connection with its exercise of the Option, as well as
all funds expended by Costilla, or its affiliates, relating to Concession
activities, in Moldova.
II.
NATURE OF RELATIONSHIP
2.1 DISCLAIMER OF PARTNERSHIP. This Agreement is not intended to create,
and shall not construed to create, a partnership, mining partnership, joint
venture, or other type of relationship pursuant to which a party hereto shall
have liability for the actions of the other (except as specified in Article III
hereof) in connection with the Concession Agreement, or otherwise. The
relationship of the parties hereto shall be as co-owners of the rights granted
to Redeco pursuant to the Concession Agreement, and such rights shall be
governed solely by the terms of this Agreement; provided however, as between
Redeco and Costilla, there shall be a fiduciary duty owed one to the other in
connection with all their dealings involving their business activities within
Moldova.
2.2 NAMING OF OPERATOR AND CONCESSIONAIRE. Costilla, or its designee,
shall be designated the Operator under this Agreement. Redeco, or its designee,
shall be designated the Concessionaire under this Agreement. The duties and
responsibilities of Costilla and Redeco in their respective roles shall be set
forth in Article III hereof.
2.3 ESTABLISHMENT OF ADDITIONAL ENTITIES. Costilla and Redeco acknowledge
and agree that each of them may form one or more domestic or foreign
subsidiaries to carry out the activities contemplated by the Moldovan
Agreements. Each of Costilla and Redeco consent to the formation of such
additional entities (domestic or foreign) as may be recommended by their
advisors; provided however, that any agreements between such entities will
either incorporate this Agreement by reference or restate the terms and
conditions of this Agreement. Costilla has caused to be formed Costilla Redeco
Energy, L.L.C. to succeed to all its rights (other than its rights as Operator)
under this Agreement, and the parties hereto, by their signatures below (as well
as the signature of Costilla Redeco Energy, L.L.C.) recognize that the Costilla
Redeco Energy, L.L.C. has succeeded to all such rights. Costilla additionally
intends to cause to be formed a subsidiary or affiliate which will succeed to
its rights as operator hereunder.
2.4 COVERAGE OF THIS AGREEMENT. The parties intend that this Agreement
cover their rights and responsibilities with respect to the Concession
Agreement, and such projects as may be ancillary thereto. Specifically, the
parties intend that this Agreement shall cover the following activities:
(a) Development of the abandoned field of Valeni.
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(b) Development of the Victorophka gas fields.
(c) Exploration or development of other oil and gas properties.
(d) Geophysical, geological or geochemical studies for exploration and
development of hydrocarbons.
(e) General and administrative expenses associated with the activities
described in (a) through (d) above, including but not limited to
travel and lodging expenses, as well as the payments made pursuant to
Article VI hereof.
(f) Costs and expenses associated with any attempts made by Costilla to
obtain third party financing for the activities described in (a)
through (d) above.
(g) Refineries.
(h) Distribution and transportation pipelines (excluding gathering lines
or gathering line systems which shall be considered part of the
facilities relating to the exploratory or development wells to which
they pertain.)
(i) Liquified natural gas facilities.
(j) Wholesale and retail oil terminals and gas and gasoline stations.
(k) Development of any other mineral resources, including geophysical,
geological or geochemical studies, subject to the time limitations
imposed in the Concession for the development of said resources.
The matters covered by subsection (a) through (k) of this Section 2.4 are
referred to herein as "Direct Projects" and the matters covered by subsections
(a) through (f) are also referred to as "Direct Oil and Gas Projects". In
addition, this Agreement may cover certain projects and opportunities which
shall be referred to herein as "Indirect Projects". Indirect Projects are those
projects and opportunities that, although not specifically mentioned in the
Concession, arise by virtue of or "spin-off" from, the Concession. Unlike
Direct Projects which are initially proposed by the Operator, Indirect Projects
may also be proposed by any non-operator. Indirect Projects must relate to the
Direct Projects in some manner. It is recognized that Indirect Projects may
impact Direct Projects and Direct Projects shall take precedence unless jointly
agreed otherwise. The proposal of an Indirect Project and scope thereof will be
subject to review by the Operator for potential conflict with Direct Projects.
Assuming that the Operator does not find that a proposed Indirect Project
conflicts with a Direct Project, the Indirect Project, at the option of the
party proposing same, shall be conducted under such terms as the parties
participating in the Indirect Project may agree.
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In addition to Direct and Indirect Projects, either Redeco or Costilla may
propose "Miscellaneous Projects", being projects unrelated to the Concession
either directly or indirectly but which were acquired or envisioned as a result
of the parties' contacts in Moldova and which directly relate to doing business
either with Moldova or with citizens of Moldova. If either Redeco or Costilla
has a Miscellaneous Project it will be obligated to disclose same and offer it
to the other party on a right of first refusal basis. Bona fide disputes as to
whether a project is a Miscellaneous Project or an Indirect Project shall be
resolved in favor of its being an Indirect Project. Costilla and Redeco
recognize that a Miscellaneous Project may impact Direct or Indirect Projects
and the parties recognize that Direct or Indirect Projects shall take precedence
unless jointly agreed otherwise. Prior to proposing a Miscellaneous Project,
the form and scope of the project will be brought before the Operator for
discussion of potential conflicts with existing or proposed Direct and Indirect
Projects. Opportunities in the nature of personal service shall not give rise
to this right of first refusal and shall not be considered a Miscellaneous
Project.
2.5 CREATION OF OPERATING COMMITTEE. An Operating Committee shall be
formed which shall consist of the principals of Costilla and Redeco. Meetings
of the Operating Committee may be held as frequently as desired by Costilla and
Redeco, but not less than frequently than quarterly. At meetings of the
Operating Committee, other invited persons may attend and participate, if such
attendance and participation is agreed upon by both parties. The role of the
Operating Committee shall be advisory only; it being acknowledged and understood
that Costilla, in its capacity as Operator and Redeco, in its capacity as
Concessionaire, shall exercise the rights and duties granted to them under
Article III of this Agreement, but that the Operating Committee shall be free to
advise either Costilla or Redeco with respect to any matter covered by this
Agreement.
III.
DUTIES OF OPERATOR
3.1 POWER AND AUTHORITY OF OPERATOR. The Operator shall conduct, direct
and exercise full control over all activities to be conducted pursuant to the
Concession Agreement. Except as otherwise expressly provided in Sections 3.2
and 3.3 and elsewhere in this Agreement (including the advisory role of the
Operating Committee described in Section 2.5), all management powers over the
business and affairs of the activities to be conducted pursuant to the
Concession Agreement shall be exclusively vested in the Operator. The parties
recognize that Redeco is best poised to offer expert opinions regarding the
cultural and political aspects of the Concessions, as well as the Concession
inherent obligations and requirements, and Operator agrees to give serious
consideration to this counsel, giving it fair weight in all strategic decisions.
The Operator shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the activities to be conducted pursuant
to the Concession Agreement without limitation (except as aforesaid), including
the right and power to:
(a) propose and adopt a budget for expenditures pursuant to
activities to be conducted pursuant to Direct Projects and Indirect
Projects, and cause a copy of said
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budget to be delivered to Redeco not later than December 1 of the year
preceding the year for which expenditures have been budgeted, except as to
calendar year 1996 as to which the budget will be delivered not later than
_________, 1996. Costilla will update the budget quarterly throughout a
calendar year and furnish all such updated revisions to Redeco. The rights
and obligations of Redeco with respect to its participation in such
activities are set forth in Article IV hereof;
(b) conduct and/or supervise all field operations, including drilling
and reworking of wells, and ordering equipment and all other ancillary
matters related thereto:
(c) purchase or otherwise acquire other real or personal property of
every nature considered necessary or appropriate to carry on and conduct
the activities contemplated by the Concession Agreement.
(d) contract with third parties for such purposes and to do any and
all other things necessary or appropriate to carry out the activities
contemplated by the Concession Agreement which could or might be done by a
normal and prudent operator in the development, operation and management of
its own property;
(e) purchase, lease, rent or otherwise acquire or obtain the use of
facilities, machinery, equipment, tools, materials and all other kinds and
types of real or personal property that may in anyway be deemed necessary,
convenient, or advisable in connection with carrying on the activities
contemplated by the Concession Agreement;
(f) make and enter into such agreements and contracts with such
parties and to give such receipts, releases and discharges with respect to
any and all of the foregoing and any matters incident thereto as the
Operator may deem advisable or appropriate;
(g) procure and maintain in force such insurance as the Operator
shall deem prudent to serve as protection against liability for loss and
damage as required by the Concession Agreement or which may be occasioned
by the activities contemplated by the Concession Agreement on behalf of
Costilla and Redeco or their assigns;
(h) prepay in whole or in part, refinance, recast, increase, modify
or extend any liabilities affecting the activities to be conducted pursuant
to the Concession Agreement and in connection therewith execute any
extensions or renewals of encumbrances on any or all of the property or
interest pledged to secure same;
(i) contract on behalf of Costilla and Redeco for the employment and
services of employees and/or independent contractors, such as independent
legal counsel and accountants; provided, however, that on disputed matters
with third parties involving more than $50,000, Redeco may elect to supply
its own legal counsel at its own expense;
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(j) take, or refrain from taking, all actions, not expressly reserved
or limited by this Agreement, as may be necessary or appropriate to
accomplish the activities to be conducted pursuant to the Concession
Agreement;
(k) institute, prosecute, defend, mediate, arbitrate and settle
lawsuits or other judicial or administrative proceedings brought on or in
behalf of, or against Costilla or Redeco in connection with joint
activities to be conducted pursuant to the Concession Agreement, and to
engage counsel or others in connection therewith;
(l) take such other acts as may be incidental to the acts and things
expressly authorized by this Agreement; and
(m) take such other actions as may be permitted by the Operator under
the Operating Agreement, to the extent not inconsistent with the terms of
this Agreement.
In accomplishing all of the foregoing and in fulfilling its obligations
pursuant to this Agreement, the Operator may, in its sole discretion, retain or
use any affiliates' personnel, properties and equipment or the Operator may hire
or rent those of third parties and may employ on a temporary or continuing basis
outside accountant, attorneys, consultants and others on such terms as the
Operator deems advisable. No person, firm or corporation dealing with the
Operator shall be required to inquire into the authority of the Operator to take
any action or make any decision.
3.2 CERTAIN RESTRICTIONS ON OPERATOR'S POWER AND AUTHORITY.
Notwithstanding anything else expressed or implied to the contrary to this
Agreement, the Operator shall not have the power or authority to and shall not
perform or authorize any of the following acts without having previously
obtained the consent of Redeco:
(a) do any act in contravention of this Agreement;
(b) confess a judgment which could affect the rights of the parties
pursuant to the Concession Agreement;
(c) possess property interests arising from the Concession Agreement,
or assign rights in specific property interest arising from the Concession
Agreement, for other than the joint and mutual benefit of the parties
hereto or their assigns;
(d) use the property interests arising from the Concession Agreement
for other than the joint and mutual benefit of the parties hereto or their
assigns; and
(e) except as expressly provided herein, take any action with respect
to the property interests arising from the Concession Agreement which
benefits the Operator or an Affiliate thereof to the detriment of Redeco.
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3.3 POWER AND AUTHORITY OF CONCESSIONAIRE; LIMITATIONS.
(a) The Concessionaire shall be responsible for relations with the
Republic of Moldova and its duly authorized representatives, as well as the
administration of matters covered by the Concession within the Republic of
Moldova. In addition, the Concessionaire shall be primarily responsible
for related research with respect to the Concession; non-oil and gas
logistical matters such as the obtaining of housing, transportation, food
and the like; and the acquisition of leasehold interests or other similar
interests necessary to carry out the purposes of the Concession.
(b) In carrying out its duties as Concessionaire, Redeco agrees to
consult with Costilla, either through the Operating Committee, or
otherwise, but in the event of any disagreement with respect to the powers
to be exercised by the Concessionaire under Section 3.3(a), Redeco's
judgment shall be conclusive unless: (i) the action proposed to be taken by
Redeco would increase the financial commitment otherwise required pursuant
to the terms of the Concession; or (ii) would otherwise have a material
adverse effect on the Concession, or the transactions to be conducted
pursuant thereto.
3.4 LIABILITY OF PARTIES AND INDEMNIFICATION.
(a) Costilla, Redeco and their affiliates, members, managers,
officers, employees and agents, shall not be liable, responsible or
accountable in damages or otherwise to the other party hereto for any acts
or omissions that do not constitute gross negligence, willful misconduct,
or a breach of the express terms of this Agreement, and each party to this
Agreement shall indemnify and save harmless the other parties hereto and
their affiliates, members, managers, officers, employees and agents
(individually, "Indemnitee") from all liabilities relating to the
Concession Agreement or the activities conducted pursuant thereto. Any act
or omission performed or omitted by an Indemnitee on advice of legal
counsel or an independent consultant who has been employed or retained by
the Operator in accordance with Section 3.1 shall be presumed to have been
performed or omitted in good faith without gross negligence or willful
misconduct. THE PARTIES RECOGNIZE THAT THIS PROVISION SHALL RELIEVE ANY
SUCH INDEMNITEE FROM ANY AND ALL LIABILITIES, OBLIGATIONS, DUTIES, CLAIMS,
ACCOUNTS AND CAUSES OF ACTION WHATSOEVER ARISING OR TO ARISE OUT OF ANY
ORDINARY NEGLIGENCE BY ANY SUCH INDEMNITEE, AND SUCH INDEMNITEE SHALL BE
ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE
ORDINARY NEGLIGENCE.
(b) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 3.4 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
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3.5 TAX ELECTIONS. The Operator shall make such tax elections as agreed
by the parties on behalf of Costilla and Redeco relating to the joint activities
to be conducted pursuant to the Concession Agreement.
IV.
PAYMENT OF COSTS AND DIVISION OF REVENUES
4.1 INITIAL ALLOCATION. Except as provided in this Section 4.1 and the
remainder of this Article IV, Costilla and Redeco shall each pay 50% of all
costs associated with activities conducted pursuant to the Concession Agreement
including the fees and expenses of advisors retained pursuant to Section 3.1(i)
of this Agreement. However, Costilla agrees that it shall be solely responsible
for and shall pay the initial sum of $2,000,000 (the "Initial Tranche"), which
shall include the $750,000 expenditure contemplated by Section 1.1 for the joint
account of Costilla and Redeco in Direct Oil and Gas Projects. Costilla and
Redeco acknowledge and agree that as of the date of this Agreement, $450,000 of
the Initial Tranche has been expended by Costilla.
4.2 UTILIZATION OF REVENUES TO PAY EXPENSES. Although no partnership is
intended to be created pursuant to this Agreement, Costilla and Redeco each
agree that all revenues which accrue to their respective interests shall be
initially paid to Costilla in its capacity as Operator. At such time that
Redeco has participated under alternative 4.4 (a) or (b) below and Costilla has
been paid all Reimbursable Amounts, Redeco may elect to either receive its
revenue directly or take its share of production in kind, provided, however that
Operator shall have continuing rights to market Redeco's share of production
should Redeco fail to timely make such arrangements. The Operator shall utilize
such revenues initially to pay budgeted expenses and to maintain a prudent cash
reserve, provided that such cash reserve is not anticipated to exceed 20% of the
authorized budget. Only when all budgeted expenses have been paid and adequate
reserves established will the Operator disburse any remaining funds.
4.3 PROJECT FINANCING. Recognizing that initial income to the parties as
a result of their operations to the Concession may be insufficient to meet
current financial obligations incurred as a result of the operations, both
Redeco and Costilla shall make a concerted effort to raise additional capital
either for the two of them, jointly, or, at least, for the benefit of Redeco.
Such funding may occur either in the form of debt financing or in the form of
equity funding from third parties, the latter being an acknowledged goal of
Redeco, either on its own or in concert with Costilla. At any time during the
expenditure of the Initial Tranche, and specifically at such time as the Initial
Tranche has been expended, Costilla may (prior to the expenditure of the Initial
Tranche) and shall (for a period of up to six months following the expenditure
of the Initial Tranche) use best efforts to secure project financing primarily
for the joint account of Costilla and Redeco, but at least for the benefit of
Redeco. Such funding may occur either in the form of debt financing or in the
form of equity funding from third parties. Such funding necessary to meet all
financial obligations relating to the parties' operations involving the
Concession shall herein, collectively, be referred to as "Project Financing."
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4.4 RIGHTS OF REDECO AFTER EXPENDITURE OF INITIAL TRANCHE. Once the
Initial Tranche has been expended, if Operator has a good faith belief that
revenues from the Concession will not be sufficient to fund anticipated
expenditures for Direct or Indirect Projects, it shall promptly provide a
written notice to such effect to Redeco. Redeco shall have a period of 180 days
from receipt of the notice (the "Notice Period") to elect one of the
alternatives set forth in this Section 4.4. Notwithstanding any existing
budgets or anything else to the contrary herein, Costilla agrees that during the
Notice Period, the total sums expended by Costilla for the joint account in
Direct Oil and Gas Projects shall not exceed $2,500,000, including expenditures
made by Costilla during the Notice Period. To the extent Redeco does not
provide notice of election by the conclusion of the Notice Period, it will be
deemed to have elected the alternative set forth in Section 4.4(c). The
alternatives available to Redeco during the Notice Period are:
(a) Accept the Project Financing obtained for the account of both
parties. In this connection, Redeco agrees to execute any documents, in
the same form as executed by Costilla, necessary to accomplish this
purpose; provided however, that should Costilla fail to execute such
documents, Redeco may satisfy this alternative by accepting and executing
the Project Financing as to its interest.
(b) Pay Costilla the sum of the following (the "Reimbursable
Amount"):
(i) 50% of all amounts spent by Costilla with respect to Direct
Oil and Gas Projects under the Concession, subject to a maximum amount
of $2,500,000, less $750,000; and
(ii) interest computed on the amount specified in Section
4.4(b)(i) from the date of each such expenditure until repayment
thereof at a floating rate equal to Nations Bank of Texas, N.A. prime
rate, plus .75%.
In the event Redeco pays the Reimbursable Amount, it will retain its
50% interest in the Direct Oil and Gas Projects under the Concession;
provided, however, that should Redeco subsequently fail to pay its share of
a budgeted expenditure, it shall forfeit its entire interest in the Direct
Oil and Gas Projects under the Concession in accordance with the terms of
the Operating Agreement; or
(c) Convert its interest in the Direct Oil and Gas Projects under the
Concession to a 7.5% Non-Participating Revenue Interest and not be
required to bear any of the Reimbursable Amount, or future costs, with
respect to the Direct Oil and Gas Projects under the Concession. Such Non-
Participating Revenue Interest shall be equal to 7.5% of the gross proceeds
attributable to the sales of oil, gas and other hydrocarbons from the lands
covered by the Concession and shall be owned by Redeco free and clear of
all costs and expense, except that it shall bear and pay its 7.5% share of
all royalties, taxes on production and any other levies imposed by the
Republic of Moldova not separately due and payable by Redeco on its Non-
Participating Revenue Interest.
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Amounts due and payable to Redeco will be paid in the same currency and at
the same exchange rate as payments are made to Costilla.
At any time during the Initial Tranche up until the end of the Notice
Period, Redeco may elect to proceed under alternative 4.4(b) above by
paying the Reimbursable amount as of that date.
4.5 NON OIL AND GAS PROJECTS. Notwithstanding the obligation of Costilla
and Redeco to pay 50% of all costs associated with activities conducted pursuant
to the Concession Agreement, either party may elect not to participate in the
costs of either a Direct Project (other than a Direct Oil and Gas Project) or an
Indirect Project at the time that such project is proposed, and may convert its
interest in such project to a non-cost-bearing interest functionally equivalent
to the Non-Participating Revenue Interest defined above in Section 4.4(c),
adjusted for the risks and cost structure of the business contemplated by such
project.
4.6 EARLY WITHDRAWAL BY COSTILLA. Should Costilla elect at any time to
cease participation under the Concession Agreement and withdraw from activities
conducted thereunder, it shall cede its interest in the Concession back to
Redeco, subject to a right to convert its interest in the Concession to a non-
cost-bearing interest functionally equivalent to the Non-Participating Revenue
Interest defined above in Section 4.4(c), adjusted for the risks and cost
structure of the business contemplated by such project.
V.
ASSIGNABILITY; RIGHT OF FIRST REFUSAL
5.1 ASSIGNABILITY. Either party may sell, assign, transfer, pledge,
hypothecate or otherwise dispose of its interest in the Concession, or its
rights or obligations thereunder or under any specific Direct or Indirect
Project, subject only to the provisions of Section 5.2.
5.2 RIGHT OF FIRST REFUSAL. In the event that any party shall receive a
bona fide offer for the purchase of such parties interest under the Concession
Agreement or one or more Direct or Indirect Projects, the terms of which it
desires to accept, it shall not sell any such interest without first complying
with this Section 5.2. First, it shall immediately send a notice in writing of
all of the terms and conditions of such offer, including, but not limited to,
the following:
(a) the name and address of the offeror;
(b) nature of the interest in the Concession Agreement or the Direct
or Indirect Projects proposed to be purchased;
(c) the price which the offeror proposes to pay;
(d) the financial arrangements for the payment of the purchase price;
and
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(e) all other material terms of the proposed transaction.
to the other party, and, in connection therewith, shall certify that such
offer is bona fide and genuine and that it intends to accept it according
to its terms. Such notice and certification shall be mailed to the other
party at its address as specified herein by registered or certified United
States mail, return receipt requested, with postage thereon prepaid. The
other party shall thereupon have the irrevocable right and option to
purchase and acquire the interest subject to such offer giving such notice
on the same terms and for the same purchase price as set forth in the
written notice. The other party shall be entitled to exercise its right
and option until the expiration of thirty (30) calendar days from the date
the notice was received by the other party; but shall not contact or
negotiate with the offeror during that thirty (30) day period.
VI.
MONTHLY PAYMENT TO REDECO
Commencing 1 January 1996 and through 31 December 1997, Costilla will pay
to Redeco (or to its assigns) the sum of $12,500 per month, with payments to be
made on the 1st day of each month. This payment amount will be renegotiated
upwards if and when total production exceeds 1,000 barrels per day equivalent
(oil or gas), assuming that the oil or gas is selling at a fair market price.
Costilla will also compensate Redeco for up to sixteen round-trip tickets per
year, and will pay term life insurance premiums for Mr. and Mrs. William J. Cox
up to a total face value of $1 million, with beneficiaries to be designated by
William J. Cox.
VII.
MISCELLANEOUS
7.1 ENTIRE AGREEMENT. Subject to the provisions of Section 2.3, this
Agreement constitutes the entire agreement of the parties with regard to the
subject matter of this Agreement and replaces and supersedes all other written
and oral agreements and statements of the parties relating to the subject matter
of this Agreement.
7.2 WAIVER. The failure of a party to insist in any one or more instances
on the performance of any term or condition of this Agreement shall not operate
as a waiver of any future performance of that term or condition.
7.3 HEADINGS. The headings used in this Agreement appear strictly for the
parties' convenience in identifying the provisions of this Agreement and shall
not affect the construction or interpretation of the provisions of this
Agreement.
7.4 BINDING EFFECT. This Agreement binds and inures to the benefit of the
parties and their respect successors, legal representatives and permitted
assigns.
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7.5 AMENDMENTS. No amendments to this Agreement shall become effective or
binding on the parties, unless agreed to in writing by all of the parties.
7.6 TIME. Time constitutes an essential part of each and every part of
this Agreement.
7.7 NOTICE. Except as otherwise provided in this Agreement, when this
Agreement makes provision for notice or concurrence of any kind, the sending
party shall deliver or address the notice to the other party by certified mail,
telecopy or nationally-recognized overnight delivery service to the following
address or telecopy number:
Costilla: Costilla Energy, LLC
511 West Texas
Midland, Texas 79701
(fax) (915) 686-6080
Redeco: Resource Development Company
Limited, LLC (DE)
2700 Liberty Tower
Oklahoma City, Oklahoma 73102
(fax) (405) 239-7337
7.8 GOVERNING LAW. The law of Texas shall govern this Agreement.
7.9 FOREIGN CORRUPT TRADE PRACTICES ACT AND OTHER FEDERAL LAWS. Each
party pledges and commits to the other that it will fully comply with the
Foreign Corrupt Trade Practices Act, as well as any other federal laws relating
to its activities in and with Moldova, its governmental representatives and
citizens and each party pledges immediate disclosure to the other of any
incident that may give rise to a potential complaint under the Foreign Corrupt
Trade Practices Act or any other federal law relating to their activities under
this Agreement.
7.10 MULTIPLE COUNTERPARTS. This Agreement may be executed in a number of
identical separate counterparts, each of which for all purposes is to be deemed
an original, but all of which shall constitute, collectively, one agreement. No
party to this Agreement shall be bound hereby until a counterpart of this
Agreement has been executed by all parties hereto.
7.11 DISPUTE RESOLUTION. The terms of the Dispute Resolution Procedure
attached as Exhibit A dealing with the resolution of disputed matters shall be
specifically incorporated into and made a part of this Agreement.
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EXECUTED as of the day and year first set forth above.
COSTILLA ENERGY, LLC
By: /S/ MICHAEL J. GRELLA
--------------------------------
Name: MIKE GRELLA
--------------------------------
Title: President
--------------------------------
RESOURCE DEVELOPMENT COMPANY
LIMITED, L.L.C. (DE)
By: /S/ WILLIAM J. COX
--------------------------------
Name: WILLIAM J. COX
--------------------------------
Title: President
--------------------------------
COSTILLA REDECO ENERGY, L.L.C.
By: /S/ MICHAEL J. GRELLA
--------------------------------
Name: MIKE GRELLA
--------------------------------
Title: President
--------------------------------
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