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EXHIBIT NO. (10)
BLUE RIDGE ENERGY, INC.
MATERIAL CONTRACTS
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1. Turnkey Drilling Contracts with the various oil and gas Partnerships.
2. Turnkey Drilling Contract with Blue Ridge Group, Inc. for the drilling of
various wells.
3. Purchase Contracts for Drilling Rigs
4. The agreement in 1996 for Blue Ridge Group, Inc. to loan Blue Ridge
Energy, Inc. $126,000 and purchase 1,000,000 shares of stock of Blue Ridge
Energy.
5. The 1998 Agreement with Group for BRE to acquire and develop oil and gas
wells in Appalachian Basin and acquire two drilling rigs.
6. Overhead Agreement for $20,000 per month with Blue Ridge Group, Inc.
7. Option Agreements for Blue Ridge Group, Inc. to acquire 2,000,000 shares
and 5,000,000 shares of Blue Ridge Energy, Inc. common stock.
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TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 1st day of August, 1996 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Blue Ridge Energy Production Fund
Address: 1953 Scottsville Road, Suite 201
Bowling Green, Kentucky 42104
Contractor: Blue Ridge Energy, Inc.
Address: 1953 Scottsville Road, Suite 201
Bowling Green, Kentucky 42104
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to acquire, rework, drill, test, and
complete its portion of eight oil and gas wells to be located in Fayette County,
Texas, (referred to herein as "wells") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the wells to
specified depths, (ii) to assure that Contractor will be available to drill,
test and complete the subject wells for the Joint Venture, (iii) to assure that
Contractor will make available on a preferential basis sufficient drilling and
completion apparatus needed to drill, test and complete the wells at the
earliest possible time, (iv) to obtain a preferential use of Contractor's
services, and (v) to assure competent supervisory personnel are available in the
drilling and completion of the subject wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such wells.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF WELLS: See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the wells by March 31, 1997, and Contractor
and the Joint Venture agree that time is of the essence under this Agreement.
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3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Acquisition Price": $748,445
"Drilling, Completion, and Equipping Price": $293,455
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 6), the wells shall be drilled to the depth as
specified in Exhibit "1" or to the depth at which the production casing (oil
string) is set, whichever depth is first reached, which depth is hereinafter
referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon execution of this Agreement. Neither
commencement nor completion of Contractor's performance shall be a
condition precedent to this obligation to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the wells, Contractor shall plug the wells, remove all drilling
apparatus from the well sites and the obligations of the parties hereunder shall
cease. In the event the Joint Venture directs Contractor to set an oil string
and makes timely payment to the Contractor of the completion price, Contractor
shall commence the operations necessary to complete the wells for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil from the wells. If Contractor should enter
into an assignment with another entity to undertake the Completion Program,
Contractor may bill Joint Venture, and Joint Venture will pay for any completion
costs over and above the Completion Price set forth herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depth and even though Contractor has made no default hereunder. If
Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the Drilling Price to the intangible cost of
another well that the Joint Venture shall specify. The unused portion of the
Drilling Price will be determined as follows:
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Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
wells. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the wells or other property of the Joint Venture or
the land upon which said wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
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12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor
in the conduct of drilling operation on the wells, including, but not limited to
depth, formations penetrated, the results of coring, testing and surveying,
shall be considered confidential and shall not be divulged by Contractor or its
employees, to any person, firm or any corporation other than the Joint Venture's
designated representative.
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16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
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Robert D. Burr, President
BLUE RIDGE ENERGY PRODUCTION FUND
A KENTUCKY JOINT VENTURE
By: Blue Ridge Energy, Inc.
Joint Venture Manager
By: /s/ ROBERT D. BURR
--------------------------------
Robert D. Burr, President
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EXHIBIT "1" TO EXHIBIT "D"
AUGUST 01, 1996
FAYETTE AND REAGAN PROSPECTS: The primary investment objective of the Joint
Venture is the acquisition of approximately 52% of the Working Interest, which
is approximately 39% of the Net Revenue Interest in seven producing wells (the
Equity #1, Justice Wilcox #2, Justice Wilcox #4, Schultz Pietsch #1, Andrew
Pietsch #1, Showdown Justice #1-H and the Showdown Justice #2-H and the drilling
and completion attempt of an eighth oil well (the Reagan #1) on the Fayette and
Reagan Prospects (hereinafter referred to as "Venture Wells"), which consists of
more than 1,142 acres of oil and gas leases in Fayette County, Texas, and the
production and sale of oil and/or gas therefrom. The eighth Venture Well will be
drilled to a depth of 5,400', or a depth sufficient to test the Wilcox Sandstone
formation.
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TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 1st day of October, 1996 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Smackover / Woodbine I Joint Venture
Address: 1953 Scottsville Road, Suite 201
Bowling Green, Kentucky 42104
Contractor: Blue Ridge Energy, Inc.
Address: 1953 Scottsville Road, Suite 201
Bowling Green, Kentucky 42104
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of a Venture Well to be located in Navarro County, Texas, (referred to
herein as "Venture Well") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Well to specified depths, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Well for the Joint Venture, (iii)
to assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Well at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Well.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Well.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELL: See Exhibit "1" attached hereto and made a part
hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Well by March 31, 1997, and
Contractor and the Joint Venture agree that time is of the essence under this
Agreement.
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3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Acquisition Price": $ 70,000
"Drilling, Completion, and Equipping Price": $547,500
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 6), the Venture Well shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon execution of this Agreement. Neither
commencement nor completion of Contractor's performance shall be a
condition precedent to this obligation to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Venture Well, Contractor shall plug the Venture Well, remove all
drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Joint Venture directs Contractor to set
an oil string and makes timely payment to the Contractor of the completion
price, Contractor shall commence the operations necessary to complete the
Venture Well for commercial production, including the setting of an oil string
and the acquisition, delivery and installation of a pump jack, holding tank and
all other necessary equipment needed to extract and contain oil from the Venture
Well. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill Joint Venture, and Joint
Venture will pay for any completion costs over and above the Completion Price
set forth herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depth and even though Contractor has made no default hereunder. If
Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the Drilling Price to the intangible cost of
another well that the Joint Venture shall specify. The unused portion of the
Drilling Price will be determined as follows:
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Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Well. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Venture Well or other property of the Joint
Venture or the land upon which said Venture Well is located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
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12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor in
the conduct of drilling operation on the Venture Well, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
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16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
SMACKOVER / WOODBINE I JOINT VENTURE
A KENTUCKY JOINT VENTURE
By: Blue Ridge Energy, Inc.
Joint Venture Manager
By: /s/ ROBERT D. BURR
--------------------------------
Robert D. Burr, President
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EXHIBIT "1" TO EXHIBIT "D"
OCTOBER 01, 1996
WEST CURRIE PROSPECT: The primary investment objective of the Joint Venture is
the acquisition of approximately 65.37% of the Working Interest, which is
approximately 49.02% of the Net Revenue Interest in a well site on the West
Currie Prospect which consists of approximately 1,500 acres of oil and gas
leases in Navarro County, Texas and the well to be drilled thereon (hereinafter
referred to as "Venture Well"), and the production and sale of oil and/or gas
therefrom. The Venture Well will be drilled to a depth of 8,800', or a depth
sufficient to test the Norpthlet Sand formation.
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TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 1st day of October, 1996 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Blue Ridge Energy, Inc.
Address: 1953 Scottsville Road, Suite 201
Bowling Green, Kentucky 42104
Contractor: Blue Ridge Group, Inc.
Address: 1953 Scottsville Road, Suite 201
Bowling Green, Kentucky 42104
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of a Venture Well to be located in Navarro County, Texas, (referred to
herein as "Venture Well") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Well to specified depths, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Well for the Joint Venture, (iii)
to assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Well at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Well.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Well.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELL: See Exhibit "1" attached hereto and made a part
hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Well by March 31, 1997, and
Contractor and the Joint Venture agree that time is of the essence under this
Agreement.
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3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Completion, and Equipping Price": $402,500
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 6), the Venture Well shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon execution of this Agreement. Neither
commencement nor completion of Contractor's performance shall be a
condition precedent to this obligation to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Venture Well, Contractor shall plug the Venture Well, remove all
drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Joint Venture directs Contractor to set
an oil string and makes timely payment to the Contractor of the completion
price, Contractor shall commence the operations necessary to complete the
Venture Well for commercial production, including the setting of an oil string
and the acquisition, delivery and installation of a pump jack, holding tank and
all other necessary equipment needed to extract and contain oil from the Venture
Well. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill Joint Venture, and Joint
Venture will pay for any completion costs over and above the Completion Price
set forth herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depth and even though Contractor has made no default hereunder. If
Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the
D-2
16
Drilling Price to the intangible cost of another well that the Joint Venture
shall specify. The unused portion of the Drilling Price will be determined as
follows:
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Well. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the wells or other property of the Joint Venture or
the land upon which said wells are located.
D-3
17
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
D-4
18
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor
in the conduct of drilling operation on the wells, including, but not limited to
depth, formations penetrated, the results of coring, testing and surveying,
shall be considered confidential and shall not be divulged by Contractor or its
employees, to any person, firm or any corporation other than the Joint Venture's
designated representative.
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ JAMES T. COOK, JR.
-------------------------------
James T. Cook, Jr.,
Vice President--Finance & C.F.O.
D-5
19
EXHIBIT "1" TO EXHIBIT "D"
OCTOBER 01, 1996
WEST CURRIE PROSPECT: The primary investment objective of the Joint Venture is
the acquisition of approximately 65.37% of the Working Interest, which is
approximately 49.02% of the Net Revenue Interest in a well site on the West
Currie Prospect which consists of approximately 1,500 acres of oil and gas
leases in Navarro County, Texas and the well to be drilled thereon (hereinafter
referred to as "Venture Well"), and the production and sale of oil and/or gas
therefrom. The Venture Well will be drilled to a depth of 8,800', or a depth
sufficient to test the Norpthlet Sand formation.
D-6
20
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 24th day of February, 1997 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Paluxy Joint Venture, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of a Venture Well to be located in Smith County, Texas, (referred to
herein as "Venture Well") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Well to specified depths, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Well for the Joint Venture, (iii)
to assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Well at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Well.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Well.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELL: See Exhibit "1" attached hereto and made a part
hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Well by June 30, 1997, and
Contractor and the Joint Venture agree that time is of the essence under this
Agreement.
D-1
21
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $647,280
"Completion and Equipping Price": $190,948
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 7), the Venture Well shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Joint Venture of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Venture Well, Contractor shall plug the Venture Well, remove all
drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Joint Venture directs Contractor to set
an oil string and makes timely payment to the Contractor of the completion
price, Contractor shall commence the operations necessary to complete the
Venture Well for commercial production, including the setting of an oil string
and the acquisition, delivery and installation of a pump jack, holding tank and
all other necessary equipment needed to extract and contain oil from the Venture
Well. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill Joint Venture, and Joint
Venture will pay for any completion costs over and above the Completion Price
set forth herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depth and even though Contractor has made no default hereunder. If
Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the Drilling Price to the intangible cost of
another well that the Joint Venture shall specify. The unused portion of the
Drilling Price will be determined as follows:
D-2
22
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
wells. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the wells or other property of the Joint Venture or
the land upon which said wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe,
D-3
23
drill collars and tool joints, and the Joint Venture shall be under no
liability to reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor
in the conduct of drilling operation on the Venture Well, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
D-4
24
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
PALUXY JOINT VENTURE, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Joint Venture Manager
By: /s/ ROBERT D. BURR
--------------------------------
Robert D. Burr, President
D-5
25
EXHIBIT "1" TO EXHIBIT "D"
FEBRUARY 24, 1997
MOLLY JANE PROSPECT: The primary investment objective of the Joint Venture is
the acquisition of approximately a 50.00% Working Interest, which is
approximately a 35.00% Net Revenue Interest in a well site on the Molly Jane
Prospect and the production and sale of oil and/or gas therefrom. This prospect
consists of approximately 80 acres of oil and gas leases in Smith County, Texas
and the well to be re-entered and drilled thereon (the "Venture Well"). The
Venture Well will be drilled to a depth of 7,700', or a depth sufficient to test
the Paluxy Sandstone formation.
D-6
26
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 24th day of February, 1997 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street. Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of a Venture Well to be located in Smith County, Texas, (referred to
herein as "Venture Well") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Well to specified depths, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Well for the Joint Venture, (iii)
to assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Well at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Well.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Well.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELL: See Exhibit "1" attached hereto and made a part
hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Well by June 30, 1997, and
Contractor and the Joint Venture agree that time is of the essence under this
Agreement.
D-1
27
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $445,800
"Completion and Equipping Price": $164,200
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 7), the Venture Well shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Joint Venture of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Venture Well, Contractor shall plug the Venture Well, remove all
drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Joint Venture directs Contractor to set
an oil string and makes timely payment to the Contractor of the completion
price, Contractor shall commence the operations necessary to complete the
Venture Well for commercial production, including the setting of an oil string
and the acquisition, delivery and installation of a pump jack, holding tank and
all other necessary equipment needed to extract and contain oil from the Venture
Well. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill Joint Venture, and Joint
Venture will pay for any completion costs over and above the Completion Price
set forth herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depth and even though Contractor has made no default hereunder. If
Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the Drilling Price to the intangible cost of
another well that the Joint Venture shall specify. The unused portion of the
Drilling Price will be determined as follows:
D-2
28
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Well. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Venture Well or other property of the Joint
Venture or the land upon which said Venture Well is located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe,
D-3
29
drill collars and tool joints, and the Joint Venture shall be under no
liability to reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor
in the conduct of drilling operation on the Venture Well, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
D-4
30
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE INC.
By: /s/ JAMES T. COOK, JR.
--------------------------------
James T. Cook, Jr.,
Vice President-Finance & C.F.O.
D-5
31
EXHIBIT "1" TO EXHIBIT "D"
FEBRUARY 24, 1997
MOLLY JANE PROSPECT: The primary investment objective of the Joint Venture is
the acquisition of approximately a 50.00% Working Interest, which is
approximately a 35.00% Net Revenue Interest in a well site on the Molly Jane
Prospect and the production and sale of oil and/or gas therefrom. This prospect
consists of approximately 80 acres of oil and gas leases in Smith County, Texas
and the well to be re-entered and drilled thereon (the "Venture Well"). The
Venture Well will be drilled to a depth of 7,700', or a depth sufficient to test
the Paluxy Sandstone formation.
D-6
32
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 21st day of May, 1997 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Home Stake Joint Venture, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of a Re-Entry Well to be located in Lea County, New Mexico and a
Venture Well to be located in Throckmorton County, Texas, (referred to herein as
"Re-Entry and/or Venture Wells") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Re-Entry
and/or Venture Wells to specified depths, (ii) to assure that Contractor will be
available to drill, test and complete the subject Re-Entry and/or Venture Wells
for the Joint Venture, (iii) to assure that Contractor will make available on a
preferential basis sufficient drilling and completion apparatus needed to drill,
test and complete the Re-Entry and/or Venture Wells at the earliest possible
time, (iv) to obtain a preferential use of Contractor's services, and (v) to
assure competent supervisory personnel are available in the drilling and
completion of the subject Re-Entry and/or Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Re-Entry
and/or Venture Wells. Contractor agrees that the work to be conducted under the
terms of this Agreement will be done with diligence and care in a good and
workmanlike manner and agrees to provide competent supervision of the work
performed hereunder. Unless specifically otherwise provided for herein, all the
required equipment, services and labor are furnished for the price set forth
herein.
1. LOCATION OF RE-ENTRY AND/OR VENTURE WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Re-Entry and/or Venture Wells by
September 30, 1997, and Contractor and the Joint Venture agree that time is of
the essence under this Agreement.
D-1
33
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Acquisition Price": $ 80,000
"Drilling Price": $552,684
"Completion and Equipping Price": $438,500
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 7), the Re-Entry and/or Venture Wells shall be
drilled to the depths as specified in Exhibit "1" or to the depths at which the
production casing (oil string) is set, whichever depth is first reached, which
depth is hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Joint Venture of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Re-Entry and/or Venture Wells, Contractor shall plug the Re-Entry
and/or Venture Wells, remove all drilling apparatus from the well sites and the
obligations of the parties hereunder shall cease. In the event the Joint Venture
directs Contractor to set an oil string and makes timely payment to the
Contractor of the completion price, Contractor shall commence the operations
necessary to complete the Re-Entry and/or Venture Wells for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil from the Re-Entry and/or Venture Wells. If
Contractor should enter into an assignment with another entity to undertake the
Completion Program, Contractor may bill the Joint Venture, and the Joint Venture
will pay for any completion costs over and above the Completion Price set forth
herein.
7. STOPPAGE OF WORK BY THE JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depths and even though Contractor has made no default hereunder. If
the Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of
D-2
34
the Drilling Price to the intangible cost of another well that the Joint Venture
shall specify. The unused portion of the Drilling Price will be determined as
follows:
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Re-Entry and/or Venture Wells. The resulting difference shall be the unused
portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Re-Entry and/or Venture Wells or other property
of the Joint Venture or the land upon which said Re-Entry and/or Venture Wells
are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
35
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor in
the conduct of drilling operation on the Re-Entry and/or Venture Wells,
including, but not limited to depth, formations penetrated, the results of
coring, testing and surveying, shall be considered confidential and shall not be
divulged by Contractor or its employees, to any person, firm or any corporation
other than the Joint Venture's designated representative.
D-4
36
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
HOME STAKE JOINT VENTURE, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Joint Venture Manager
By: /s/ ROBERT D. BURR
--------------------------------
Robert D. Burr, President
D-5
37
EXHIBIT "1" TO EXHIBIT "D"
MAY 21, 1997
HOME STAKE PROSPECT: The primary investment objectives of the Joint Venture are
the acquisition of approximately a 66.67% Working Interest, which is
approximately 50.00% of the Net Revenue Interest, in a well site on the Home
Stake Prospect and the acquisition of a 100.00% Working Interest, which is
approximately 75.00% of the Net Revenue Interest in the Kelly Prospect and the
production and sale of oil and/or gas therefrom. The Home Stake Prospect
consists of approximately 160 acres of oil and gas leases in Lea County, New
Mexico, and the well to be re-entered and drilled thereon (the "Re-Entry Well").
The Re-Entry Well will be drilled to a depth of 11,200', or a depth sufficient
to test the Strawn Limestone formation. The Kelly Prospect consists of
approximately 70 acres of oil and gas leases in Throckmorton County, Texas and
the well to be drilled thereon (the "Venture Well"). The Venture Well will be
drilled to a depth of 4,600', or a depth sufficient to test the Mississippian
Chapel Limestone formations.
D-6
38
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 21st day of May, 1997 by and
between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Group, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of a Re-Entry Well to be located in Lea County, New Mexico and a Venture
Well to be located in Throckmorton County, Texas, (referred to herein as
"Re-Entry and/or Venture Wells") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Re-Entry
and/or Venture Wells to specified depths, (ii) to assure that Contractor will be
available to drill, test and complete the subject Re-Entry and/or Venture Wells
for the Joint Venture, (iii) to assure that Contractor will make available on a
preferential basis sufficient drilling and completion apparatus needed to drill,
test and complete the Re-Entry and/or Venture Wells at the earliest possible
time, (iv) to obtain a preferential use of Contractor's services, and (v) to
assure competent supervisory personnel are available in the drilling and
completion of the subject Re-Entry and/or Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Re-Entry
and/or Venture Wells. Contractor agrees that the work to be conducted under the
terms of this Agreement will be done with diligence and care in a good and
workmanlike manner and agrees to provide competent supervision of the work
performed hereunder. Unless specifically otherwise provided for herein, all the
required equipment, services and labor are furnished for the price set forth
herein.
1. LOCATION OF RE-ENTRY AND/OR VENTURE WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Re-Entry and/or Venture Wells by
September 30, 1997, and Contractor and the Joint Venture agree that time is of
the essence under this Agreement.
D-1
39
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $682,500
"Completion and Equipping Price": $485,000
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 7), the Re-Entry and/or Venture Wells shall be
drilled to the depth as specified in Exhibit "1" or to the depth at which the
production casing (oil string) is set, whichever depth is first reached, which
depth is hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Joint Venture of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Re-Entry and/or Venture Wells, Contractor shall plug the Re-Entry
and/or Venture Wells, remove all drilling apparatus from the well sites and the
obligations of the parties hereunder shall cease. In the event the Joint Venture
directs Contractor to set an oil string and makes timely payment to the
Contractor of the completion price, Contractor shall commence the operations
necessary to complete the Re-Entry and/or Venture Wells for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil from the Re-Entry and/or Venture Wells. If
Contractor should enter into an assignment with another entity to undertake the
Completion Program, Contractor may bill Joint Venture, and Joint Venture will
pay for any completion costs over and above the Completion Price set forth
herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depths and even though Contractor has made no default hereunder. If
Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of
D-2
40
the Drilling Price to the intangible cost of another well that the Joint Venture
shall specify. The unused portion of the Drilling Price will be determined as
follows:
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Re-Entry and/or Venture Wells. The resulting difference shall be the unused
portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Re-Entry and/or Venture Wells or other property
of the Joint Venture or the land upon which said Re-Entry and/or Venture Wells
are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
41
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor in
the conduct of drilling operation on the Re-Entry and/or Venture Wells,
including, but not limited to depth, formations penetrated, the results of
coring, testing and surveying, shall be considered confidential and shall not be
divulged by Contractor or its employees, to any person, firm or any corporation
other than the Joint Venture's designated representative.
D-4
42
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ JAMES T. COOK, JR.
--------------------------------
James T. Cook, Jr., Vice
President-Finance & C.F.O.
D-5
43
EXHIBIT "1" TO EXHIBIT "D"
MAY 21, 1997
HOME STAKE PROSPECT: The primary investment objectives of the Joint Venture are
the acquisition of approximately a 66.67% Working Interest, which is
approximately 50.00% of the Net Revenue Interest, in a well site on the Home
Stake Prospect and the acquisition of a 100.00% Working Interest, which is
approximately 75.00% of the Net Revenue Interest in the Kelly Prospect and the
production and sale of oil and/or gas therefrom. The Home Stake Prospect
consists of approximately 160 acres of oil and gas leases in Lea County, New
Mexico, and the well to be re-entered and drilled thereon (the "Re-Entry Well").
The Re-Entry Well will be drilled to a depth of 11,200', or a depth sufficient
to test the Strawn Limestone formation. The Kelly Prospect consists of
approximately 70 acres of oil and gas leases in Throckmorton County, Texas and
the well to be drilled thereon (the "Venture Well"). The Venture Well will be
drilled to a depth of 4,600', or a depth sufficient to test the Mississippian
Chapel Limestone formations.
D-6
44
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 26th day of September, 1997 by
and between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Sherman / Moore #1 Joint Venture, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and
complete its portion of two Venture Wells to be located in Sherman County,
Texas, (referred to herein as "Venture Wells") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the wells to
specified depths, (ii) to assure that Contractor will be available to drill,
test and complete the subject Venture Wells for the Joint Venture, (iii) to
assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Wells at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Wells.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Wells by December 31, 1997, and
Contractor and the Joint Venture agree that time is of the essence under this
Agreement.
D-1
45
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $704,860
"Completion and Equipping Price": $391,530
4. DEPTH:
Subject to the right of the Joint Venture to direct the stoppage of work at any
time (as provided in paragraph 7), the Venture Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depths at which the production
casing (oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Joint Venture of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Venture Wells, Contractor shall plug the Venture Wells, remove all
drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Joint Venture directs Contractor to set
an oil string and makes timely payment to the Contractor of the completion
price, Contractor shall commence the operations necessary to complete the
Venture Wells for commercial production, including the setting of an oil string
and the acquisition, delivery and installation of a pump jack, holding tank and
all other necessary equipment needed to extract and contain oil from the Venture
Wells. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill the Joint Venture, and the
Joint Venture will pay for any completion costs over and above the Completion
Price set forth herein.
7. STOPPAGE OF WORK BY THE JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depths and even though Contractor has made no default hereunder. If
the Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the Drilling Price to the intangible cost of
another well that the Joint Venture shall specify. The unused portion of the
Drilling Price will be determined as follows:
D-2
46
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Wells. The resulting difference shall be the unused portion of the
price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Venture Wells or other property of the Joint
Venture or the land upon which said Venture Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
47
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor in
the conduct of drilling operation on the Venture Wells, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
D-4
48
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
SHERMAN / MOORE #1 JOINT VENTURE, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Joint Venture Manager
By: /s/ ROBERT D. BURR
--------------------------------
Robert D. Burr, President
D-5
49
EXHIBIT "1" TO EXHIBIT "D"
SEPTEMBER 26, 1997
SHERMAN/MOORE #1 PROSPECT: The primary investment objectives of the Joint
Venture are the acquisition of approximately a 100.00% Working Interest, which
is approximately 75.00% of the Net Revenue Interest, in two well sites on the
Sherman/Moore Prospect and the production and sale of oil and/or gas therefrom.
The Sherman/Moore Prospect consists of approximately 1,120 acres of oil and gas
leases in Sherman County, Texas, and the wells to be reentered and drilled
thereon (the "Venture Wells"). The Venture Wells will be drilled to a depth of
3,200', or a depth sufficient to test the Brown Dolomite formation.
D-6
50
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 26th day of September, 1997 by
and between the parties herein designated as "Joint Venture" and "Contractor."
Joint Venture: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Group, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Joint Venture engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and
complete its portion of two Venture Wells to be located in Sherman County,
Texas, (referred to herein as "Venture Wells") in search of oil and/or gas.
The Joint Venture will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Wells to specified depths, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Wells for the Joint Venture, (iii)
to assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Wells at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Wells.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF WELLS: See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Wells by December 31, 1997, and
Contractor and the Joint Venture agree that time is of the essence under this
Agreement.
D-1
51
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $625,000
"Completion and Equipping Price": $292,900
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Venture Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Joint Venture to the Contractor of the Drilling
Price becomes due and payable upon receipt by the Joint Venture of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Joint Venture agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Joint Venture shall determine whether Contractor shall set an oil string. In
the event the Joint Venture directs that drilling operations cease and to
abandon the Venture Wells, Contractor shall plug the Venture Wells, remove all
drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Joint Venture directs Contractor to set
an oil string and makes timely payment to the Contractor of the completion
price, Contractor shall commence the operations necessary to complete the
Venture Wells for commercial production, including the setting of an oil string
and the acquisition, delivery and installation of a pump jack, holding tank and
all other necessary equipment needed to extract and contain oil and/or gas from
the Venture Wells. If Contractor should enter into an assignment with another
entity to undertake the Completion Program, Contractor may bill the Joint
Venture, and the Joint Venture will pay for any completion costs over and above
the Completion Price set forth herein.
7. STOPPAGE OF WORK BY JOINT VENTURE:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Joint Venture shall have the right to direct the stoppage of the
work to be performed by the Contractor hereunder at any time prior to reaching
the Contract Depth and even though Contractor has made no default hereunder. If
the Joint Venture exercises its right to discontinue drilling a well, the Joint
Venture will not receive a refund for any unused portion of the Drilling Price
allocable to the discontinued well but the Joint Venture may direct Contractor
to apply the unused portion of the Drilling Price to the intangible cost of
another well that the Joint Venture shall specify. The unused portion of the
Drilling Price will be determined as follows:
D-2
52
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Joint Venture notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Wells. The resulting difference shall be the unused portion of the
price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Joint Venture an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Joint Venture. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Joint Venture.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Joint Venture shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Joint Venture shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Venture Wells or other property of the Joint
Venture or the land upon which said Venture Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
53
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
12.3 Joint Venture's Equipment: The Joint Venture shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Joint Venture for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Joint Venture, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Joint Venture, information obtained by Contractor in
the conduct of drilling operation on the Venture Wells, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
D-4
54
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Joint Venture respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-----------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ JAMES T. COOK, JR.
-----------------------------------
James T. Cook, Jr., Vice
President--Finance & C.F.O.
D-5
55
EXHIBIT "1" TO EXHIBIT "D"
SEPTEMBER 26, 1997
SHERMAN/MOORE #1 PROSPECT: The primary investment objectives of the Joint
Venture are the acquisition of approximately a 100.00% Working Interest, which
is approximately 75.00% of the Net Revenue Interest, in two well sites on the
Sherman/Moore Prospect and the production and sale of oil and/or gas therefrom.
The Sherman/Moore Prospect consists of approximately 1,120 acres of oil and gas
leases in Sherman County, Texas, and the wells to be re-entered and drilled
thereon (the "Venture Wells"). The Venture Wells will be drilled to a depth of
3,200', or a depth sufficient to test the Brown Dolomite formation.
D-6
56
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 10th day of February, 1998 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Phillips / Blue Ridge Joint Venture #1, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of one Venture Well to be located in Sherman County, Texas, (referred
to herein as "Venture Well") in search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Well to specified depth, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Well for the Partnership, (iii) to
assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Well at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Well.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Well.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELL:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Well by May 31, 1998,
and Contractor and the Partnership agree that time is of the essence under this
Agreement.
D-1
57
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $651,580
"Completion, and Equipping Price": $323,790
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Venture Well shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the Venture Well, Contractor shall plug the Venture Well, remove all drilling
apparatus from the well sites and the obligations of the parties hereunder shall
cease. In the event the Partnership directs Contractor to set an oil string and
makes timely payment to the Contractor of the completion price, Contractor shall
commence the operations necessary to complete the Venture Well for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil and/or gas from the Venture Well. If
Contractor should enter into an assignment with another entity to undertake the
Completion Program, Contractor may bill the Partnership, and the Partnership
will pay for any completion costs over and above the Completion Price set forth
herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
D-2
58
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Well. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Partnership, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Venture Well or other property of the
Partnership or the land upon which Venture well is located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
59
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Venture Well, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Partnership's designated representative.
D-4
60
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
PHILLIPS / BLUE RIDGE JOINT VENTURE #1, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Managing General Partner
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
D-5
61
EXHIBIT "1" TO EXHIBIT "D"
FEBRUARY 10, 1998
PHILLIPS PUGH PROSPECT: The primary investment objective of the Partnership is
the acquisition of approximately a 93.75% Working Interest, which is
approximately 70.31% of the Net Revenue Interest, in one well site on the
Phillips Pugh Prospect and the production and sale of oil and/or gas therefrom.
The Phillips Pugh Prospect consists of approximately 640 acres of oil and gas
leases in Sherman County, Texas, and the well to be drilled thereon (the
"Venture Well"). The Venture Well will be drilled to a depth of 2,900', or a
depth sufficient to test the Brown Dolomite formation.
D-6
62
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 10th day of February, 1998 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Group, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of one Venture Well to be located in Sherman County, Texas, (referred
to herein as "Venture Well") in search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Well to a specified depth, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Well for the Partnership, (iii) to
assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Well at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Well.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELL:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Well by May 31, 1998, and
Contractor and the Partnership agree that time is of the essence under this
Agreement.
D-1
63
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Price": $457,625
"Completion and Equipping Price": $228,390
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Partnership Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the Texas and Kentucky Venture Wells, Contractor shall plug the Venture Well,
remove all drilling apparatus from the well site and the obligations of the
parties hereunder shall cease. In the event the Partnership directs Contractor
to set an oil string and makes timely payment to the Contractor of the
completion price, Contractor shall commence the operations necessary to complete
the Venture Well for commercial production, including the setting of an oil
string and the acquisition, delivery and installation of a pump jack, holding
tank and all other necessary equipment needed to extract and contain oil and/or
gas from the Venture Well. If Contractor should enter into an assignment with
another entity to undertake the Completion Program, Contractor may bill the
Partnership, and the Partnership will pay for any completion costs over and
above the Completion Price set forth herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
D-2
64
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Well. The resulting difference shall be the unused portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Partnership, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Venture Well or other property of the
Partnership or the land upon which said Venture Well is located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
65
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Venture Well, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Partnership's designated representative.
D-4
66
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ JAMES T. COOK, JR.
-------------------------------
James T. Cook, Jr., Vice
President - Finance & C.F.O.
D-5
67
EXHIBIT "1" TO EXHIBIT "D"
FEBRUARY 10, 1998
PHILLIPS PUGH PROSPECT: The primary investment objective of the Partnership is
the acquisition of approximately a 93.75% Working Interest, which is
approximately 70.31% of the Net Revenue Interest, in one well site on the
Phillips Pugh Prospect and the production and sale of oil and/or gas therefrom.
The Phillips Pugh Prospect consists of approximately 640 acres of oil and gas
leases in Sherman County, Texas, and the well to be drilled thereon (the
"Venture Well"). The Venture Well will be drilled to a depth of 2,900', or a
depth sufficient to test the Brown Dolomite formation.
D-6
68
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 1st day of December, 1998 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: 1998 Year End Drilling Programs, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of one Venture Well to be located in Shelby County, Texas, (referred to
herein as "Texas Venture Well") and nine Venture Wells to be located in Bell and
Knox Counties, Kentucky (referred to herein as "Kentucky Venture Wells") in
search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Texas and
Kentucky Venture Wells to a specified depth, (ii) to assure that Contractor will
be available to drill, test and complete the subject Texas and Kentucky Venture
Wells for the Partnership, (iii) to assure that Contractor will make available
on a preferential basis sufficient drilling and completion apparatus needed to
drill, test and complete the Texas and Kentucky Venture Wells at the earliest
possible time, (iv) to obtain a preferential use of Contractor's services, and
(v) to assure competent supervisory personnel are available in the drilling and
completion of the subject Texas and Kentucky Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Texas and
Kentucky Venture Wells. Contractor agrees that the work to be conducted under
the terms of this Agreement will be done with diligence and care in a good and
workmanlike manner and agrees to provide competent supervision of the work
performed hereunder. Unless specifically otherwise provided for herein, all the
required equipment, services and labor are furnished for the price set forth
herein.
1. LOCATION OF VENTURE WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Texas and Kentucky Venture Wells by
March 31, 1999, and Contractor and the Partnership agree that time is of the
essence under this Agreement.
D-1
69
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid $1,482,500 for the drilling, completion and equipping.
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Texas and Kentucky Venture Wells shall be
drilled to the depth as specified in Exhibit "1" or to the depth at which the
production casing (oil string) is set, whichever depth is first reached, which
depth is hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the Texas and Kentucky Venture Wells, Contractor shall plug the Texas and
Kentucky Venture Wells, remove all drilling apparatus from the well sites and
the obligations of the parties hereunder shall cease. In the event the
Partnership directs Contractor to set an oil string and makes timely payment to
the Contractor of the completion price, Contractor shall commence the operations
necessary to complete the Texas and Kentucky Venture Wells for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil and/or gas from the Texas and Kentucky Venture
Wells. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill the Partnership, and the
Partnership will pay for any completion costs over and above the Completion
Price set forth herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
D-2
70
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the Texas
and Kentucky Venture Wells. The resulting difference shall be the unused portion
of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Partnership, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Texas and Kentucky Venture Wells or other
property of the Partnership or the land upon which said Texas and Kentucky
Venture Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Joint Venture shall be under no liability to
reimburse Contractor for any such loss.
D-3
71
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Texas and Kentucky Venture Wells,
including, but not limited to depth, formations penetrated, the results of
coring, testing and surveying, shall be considered confidential and shall not be
divulged by Contractor or its employees, to any person, firm or any corporation
other than the Joint Venture's designated representative.
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
D-4
72
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
1998 YEAR END DRILLING PROGRAM, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Managing General Partner
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
D-5
73
EXHIBIT "1" TO EXHIBIT "D"
DECEMBER 1, 1998
The primary investment objectives of the Partnership are: (i) the acquisition of
the following Working Interests and Net Revenue Interests in ten oil and gas
wells:
PARTNERSHIP PARTNERSHIP
WORKING NET REVENUE TARGET
WELL NAME INTEREST INTEREST COUNTY, STATE DEPTH FORMATION
- --------- -------- -------- ------------- ----- ---------
Huber-EREC #15 25.0% 18.2500% Bell, KY 2,500' Maxon Sand
Huber-EREC #16 25.0% 18.2500% Bell, KY 2,500' Maxon Sand
Huber-EREC #20 25.0% 18.2500% Bell, KY 2,500' Maxon Sand
Evan Big Sandy #158 25.0% 18.2500% Johnson, KY 3,500' Devonian Shale
Evan Big Sandy #159 25.0% 18.2500% Magoffin, KY 3,500' Devonian Shale
Evan Big Sandy #160 25.0% 18.2500% Letcher, KY 3,500' Devonian Shale
Evan Big Sandy #162 25.0% 18.2500% Johnson, KY 3,500' Devonian Shale
Evan Big Sandy #133 50.0% 36.5000% Knott, KY 3,500' Devonian Shale
Evan Harlan $531 15.9% 12.6535% Harlan, KY 6,000' Coniferous Sand
USA-Thomas Hailey #1 30.0% 23.0000% Shelby, KY 6,400' James Limestone
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TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 1st day of December, 1998 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Group, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of one Venture Well to be located in Shelby County, Texas, (referred to
herein as "Texas Venture Well") and nine Venture Wells to be located in Bell and
Knox Counties, Kentucky, (referred to herein as "Kentucky Venture Wells") in
search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the
Texas and Kentucky Venture Wells to a specified depth, (ii) to assure that
Contractor will be available to drill, test and complete the subject Texas and
Kentucky Venture Wells for the Partnership, (iii) to assure that Contractor will
make available on a preferential basis sufficient drilling and completion
apparatus needed to drill, test and complete the Texas and Kentucky Venture
Wells at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Texas and Kentucky
Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Texas and
Kentucky Venture Wells. Contractor agrees that the work to be conducted under
the terms of this Agreement will be done with diligence and care in a good and
workmanlike manner and agrees to provide competent supervision of the work
performed hereunder. Unless specifically otherwise provided for herein, all the
required equipment, services and labor are furnished for the price set forth
herein.
1. LOCATION OF VENTURE WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Texas and Kentucky Venture Wells by
March 31, 1999, and Contractor and the Partnership agree that time is of the
essence under this Agreement.
D-1
75
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid $1,050,000 for the drilling, completion and equipping.
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Texas and Kentucky Venture Wells shall be
drilled to the depth as specified in Exhibit "1" or to the depth at which the
production casing (oil string) is set, whichever depth is first reached, which
depth is hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the Texas and Kentucky Venture Wells, Contractor shall plug the Texas and
Kentucky Venture Wells, remove all drilling apparatus from the well sites and
the obligations of the parties hereunder shall cease. In the event the
Partnership directs Contractor to set an oil string and makes timely payment to
the Contractor of the completion price, Contractor shall commence the operations
necessary to complete the Texas and Kentucky Venture Wells for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil and/or gas from the Texas and Kentucky Venture
Wells. If Contractor should enter into an assignment with another entity to
undertake the Completion Program, Contractor may bill the Partnership, and the
Partnership will pay for any completion costs over and above the Completion
Price set forth herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
D-2
76
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Texas and Kentucky Venture Wells. The resulting difference shall be the unused
portion of the price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Partnership, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Texas and Kentucky Venture Wells or other
property of the Partnership or the land upon which said Texas and Kentucky
Venture Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
D-3
77
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Texas and Kentucky Venture Wells,
including, but not limited to depth, formations penetrated, the results of
coring, testing and surveying, shall be considered confidential and shall not be
divulged by Contractor or its employees, to any person, firm or any corporation
other than the Partnership's designated representative.
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
D-4
78
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ JAMES T. COOK, JR.
-------------------------------
James T. Cook, Jr.
Sr. Vice President - Finance &
C.F.O.
D-5
79
EXHIBIT "1" TO EXHIBIT "D"
DECEMBER 1, 1998
The primary investment objectives of the Partnership are: (i) the acquisition of
the following Working Interests and Net Revenue Interests in ten oil and gas
wells:
PARTNERSHIP PARTNERSHIP
WORKING NET REVENUE TARGET
WELL NAME INTEREST INTEREST COUNTY, STATE DEPTH FORMATION
- --------- -------- -------- ------------- ----- ---------
Huber-EREC #15 25.0% 18.2500% Bell, KY 2,500' Maxon Sand
Huber-EREC #16 25.0% 18.2500% Bell, KY 2,500' Maxon Sand
Huber-EREC #20 25.0% 18.2500% Bell, KY 2,500' Maxon Sand
Evan Big Sandy #158 25.0% 18.2500% Johnson, KY 3,500' Devonian Shale
Evan Big Sandy #159 25.0% 18.2500% Magoffin, KY 3,500' Devonian Shale
Evan Big Sandy #160 25.0% 18.2500% Letcher, KY 3,500' Devonian Shale
Evan Big Sandy #162 25.0% 18.2500% Johnson, KY 3,500' Devonian Shale
Evan Big Sandy #133 50.0% 36.5000% Knott, KY 3,500' Devonian Shale
Evan Harlan $531 15.9% 12.6535% Harlan, KY 6,000' Coniferous Sand
USA-Thomas Hailey #1 30.0% 23.0000% Shelby, KY 6,400' James Limestone
D-6
80
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 4th day of March, 1999 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Harlan County Limited Partnership, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of five Venture Wells to be located in Harlan County, Kentucky,
(referred to herein as "Venture Wells") in search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the Venture
Wells to specified depths, (ii) to assure that Contractor will be available to
drill, test and complete the subject Venture Wells for the Partnership, (iii) to
assure that Contractor will make available on a preferential basis sufficient
drilling and completion apparatus needed to drill, test and complete the Venture
Wells at the earliest possible time, (iv) to obtain a preferential use of
Contractor's services, and (v) to assure competent supervisory personnel are
available in the drilling and completion of the subject Venture Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Venture Wells.
Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF VENTURE WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Venture Wells by March 31, 2000, and
Contractor and the Partnership agree that time is of the essence under this
Agreement.
D-1
81
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Completing, and Equipping Price": $705,600
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Venture Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the Venture Wells, Contractor shall plug the Venture Wells, remove all drilling
apparatus from the well sites and the obligations of the parties hereunder shall
cease. In the event the Partnership directs Contractor to set an oil string and
makes timely payment to the Contractor of the completion price, Contractor shall
commence the operations necessary to complete the Venture Wells for commercial
production, including the setting of an oil string and the acquisition, delivery
and installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil and/or gas from the Venture Wells. If
Contractor should enter into an assignment with another entity to undertake the
Completion Program, Contractor may bill the Partnership, and the Partnership
will pay for any completion costs over and above the Completion Price set forth
herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
D-2
82
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Venture Wells. The resulting difference shall be the unused portion of the
price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the wells or other property of the Partnership or
the land upon which said Venture Wells is located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
83
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Venture Wells, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Partnership's designated representative.
D-4
84
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
HARLAN COUNTY LIMITED PARTNERSHIP, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Managing General Partner
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
D-5
85
EXHIBIT "1" TO EXHIBIT "D"
MARCH 4, 1999
The primary investment objective of the Partnership is the acquisition of
approximately a 30.00% Working Interest, which is approximately 18.75% of the
Net Revenue Interest in five well sites out of fifteen to be drilled on the
Harlan County Prospect and the production and sale of oil/gas therefrom. William
W. Kelley, Jr., an Independent Petroleum Geologist to the Managing General
Partner, will select the five wells to be acquired by the Partnership. Mr.
Kelley will utilize various criteria including production notes, sand thickness,
sand porosity, sand permeability, and geographical location. The Harlan County
Prospect consists of approximately 6,500 acres of oil and gas leases in Harlan
County, Kentucky and the wells to be drilled thereon (the "Partnership Wells").
The Partnership Wells will be drilled to depths of approximately 6,000' or
depths sufficient to test the Maxon Sand formation.
D-6
86
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 4th day of March, 1999 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Group, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of five Partnership Wells to be located in Harlan County, Kentucky,
(referred to herein as "Partnership Wells") in search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the
Partnership Wells to a specified depth, (ii) to assure that Contractor will be
available to drill, test and complete the subject Partnership Wells for the
Partnership, (iii) to assure that Contractor will make available on a
preferential basis sufficient drilling and completion apparatus needed to drill,
test and complete the Partnership Wells at the earliest possible time, (iv) to
obtain a preferential use of Contractor's services, and (v) to assure competent
supervisory personnel are available in the drilling and completion of the five
Partnership Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Partnership
Wells. Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF PARTNERSHIP WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the five Partnership Wells by March 31,
2000, and Contractor and the Partnership agree that time is of the essence under
this Agreement.
D-1
87
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Completing, and Equipping Price": $565,000
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Partnership Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the five Partnership Wells, Contractor shall plug the Partnership Wells, remove
all drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Partnership directs Contractor to set an
oil string and makes timely payment to the Contractor of the completion price,
Contractor shall commence the operations necessary to complete the Partnership
Wells for commercial production, including the setting of an oil string and the
acquisition, delivery and installation of a pump jack, holding tank and all
other necessary equipment needed to extract and contain oil and/or gas from the
Partnership Wells. If Contractor should enter into an assignment with another
entity to undertake the Completion Program, Contractor may bill the Partnership,
and the Partnership will pay for any completion costs over and above the
Completion Price set forth herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
D-2
88
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Partnership Wells. The resulting difference shall be the unused portion of the
price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Partnership, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Partnership Wells or other property of the
Partnership or the land upon which said Partnership Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
89
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Partnership Wells, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
D-4
90
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
D-5
91
EXHIBIT "1" TO EXHIBIT "D"
MARCH 4, 1999
The primary investment objective of the Partnership is the acquisition of
approximately a 30.00% Working Interest, which is approximately 18.75% of the
Net Revenue Interest in five well sites out of fifteen to be drilled on the
Harlan County Prospect and the production and sale of oil/gas therefrom. William
W. Kelley, Jr., an Independent Petroleum Geologist to the Managing General
Partner, will select the five wells to be acquired by the Partnership. Mr.
Kelley will utilize various criteria including production notes, sand thickness,
sand porosity, sand permeability, and geographical location. The Harlan County
Prospect consists of approximately 6,500 acres of oil and gas leases in Harlan
County, Kentucky and the wells to be drilled thereon (the "Partnership Wells").
The Partnership Wells will be drilled to depths of approximately 6,000' or
depths sufficient to test the Maxon Sand formation.
D-6
92
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 13th day of April, 1999 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Cumberland Gap 10 Limited Partnership, Ltd.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of ten Partnership Wells to be located in Harlan County, Kentucky,
(referred to herein as "Partnership Wells") in search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the
Partnership Wells to a specified depth, (ii) to assure that Contractor will be
available to drill, test and complete the subject Partnership Wells for the
Partnership, (iii) to assure that Contractor will make available on a
preferential basis sufficient drilling and completion apparatus needed to drill,
test and complete the Partnership Wells at the earliest possible time, (iv) to
obtain a preferential use of Contractor's services, and (v) to assure competent
supervisory personnel are available in the drilling and completion of the ten
Partnership Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Partnership
Wells. Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF PARTNERSHIP WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the ten Partnership Wells by March 31,
2000, and Contractor and the Partnership agree that time is of the essence under
this Agreement.
D-1
93
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Completing, and Equipping Price": $1,411,200
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Partnership Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the five Partnership Wells, Contractor shall plug the Partnership Wells, remove
all drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Partnership directs Contractor to set an
oil string and makes timely payment to the Contractor of the completion price,
Contractor shall commence the operations necessary to complete the Partnership
Wells for commercial production, including the setting of an oil string and the
acquisition, delivery and installation of a pump jack, holding tank and all
other necessary equipment needed to extract and contain oil and/or gas from the
Partnership Wells. If Contractor should enter into an assignment with another
entity to undertake the Completion Program, Contractor may bill the Partnership,
and the Partnership will pay for any completion costs over and above the
Completion Price set forth herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
D-2
94
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Partnership Wells. The resulting difference shall be the unused portion of the
price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Partnership, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Partnership Wells or other property of the
Partnership or the land upon which said Partnership Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
95
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
12.3 Partnership's Equipment: The Partnership shall assume liability at
all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Partnership Wells, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Joint Venture's designated representative.
D-4
96
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-----------------------------------
Robert D. Burr, President
CUMBERLAND GAP 10 LIMITED PARTNERSHIP, LTD.
A KENTUCKY LIMITED PARTNERSHIP
By: Blue Ridge Energy, Inc.
Managing General Partner
By: /s/ ROBERT D. BURR
-----------------------------------
Robert D. Burr, President
D-5
97
EXHIBIT "1" TO EXHIBIT "D"
APRIL 13, 1999
The primary investment objectives of the Partnership are: (1) the acquisition of
approximately a 30.00% Working Interest, which is approximately 23.00% of the
Net Revenue Interest in ten well sites to be drilled on the Cumberland Gap 10
Prospect and the production and sale of oil/gas therefrom. The Cumberland Gap 10
Prospect consists of approximately 6,500 acres of oil and gas leases in Harlan
County, Kentucky and the wells to be drilled thereon (the "Kentucky Partnership
Wells"). The Kentucky Partnership Wells will be drilled to depths of
approximately 6,000' or depths sufficient to test the Corniferous Sand formation
and (2) the assignment of income from a 25% Working Interest which is an 18.75%
Net Revenue Interest in the Colton Williams #44-1 Well ("Texas Well") to be
drilled on the 960 acre Rocksprings Prospect in Edwards County. The Texas Well
will be drilled to a depth of 7,000 feet or a depth sufficient to test the
Holman Sands. There will be no cost to the Partnership for the assignment of
income from the Colton Williams #44-1 well and the assignment of income is
limited to when twice the partners' original capital contributions, or
$3,600,000, is received by the Partners from the production of all Partnership
wells.
D-6
98
TURNKEY DRILLING CONTRACT
THIS AGREEMENT, is made and entered into as of 13th day of April, 1999 by and
between the parties herein designated as "Partnership" and "Contractor."
Partnership: Blue Ridge Energy, Inc.
Address: 632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Contractor: Blue Ridge Group, Inc.
Address: 632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment, labor and services to drill, test, and complete its
portion of ten Partnership Wells to be located in Harlan County, Kentucky,
(referred to herein as "Partnership Wells") in search of oil and/or gas.
The Partnership will make the specified payments to Contractor in order (i) to
obtain a price from Contractor for the drilling and completion of the
Partnership Wells to specified depths, (ii) to assure that Contractor will be
available to drill, test and complete the subject Partnership Wells for the
Partnership, (iii) to assure that Contractor will make available on a
preferential basis sufficient drilling and completion apparatus needed to drill,
test and complete the Partnership Wells at the earliest possible time, (iv) to
obtain a preferential use of Contractor's services, and (v) to assure competent
supervisory personnel are available in the drilling and completion of the ten
Partnership Wells.
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the completion of such Partnership
Wells. Contractor agrees that the work to be conducted under the terms of this
Agreement will be done with diligence and care in a good and workmanlike manner
and agrees to provide competent supervision of the work performed hereunder.
Unless specifically otherwise provided for herein, all the required equipment,
services and labor are furnished for the price set forth herein.
1. LOCATION OF PARTNERSHIP WELLS:
See Exhibit "1" attached hereto and made a part hereof.
2. TERMINATION DATE:
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Partnership Wells by March 31, 2000,
and Contractor and the Partnership agree that time is of the essence under this
Agreement.
D-1
99
3. BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:
Contractor shall be paid at the following rate for the work performed hereunder:
"Drilling, Completing, and Equipping Price": $1,125,000
4. DEPTH:
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7), the Partnership Wells shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(oil string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
5. TIME OF PAYMENT:
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling
Price becomes due and payable upon the receipt by the Partnership of an
invoice from the Contractor. Neither commencement nor completion of
Contractor's performance shall be a condition precedent to this obligation
to pay.
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an
attorney for collection of any sums due hereunder, or suit is brought on
same, or sums due hereunder are collected through bankruptcy or probate
proceedings, then the Partnership agrees that there shall be added to
the amount due reasonable attorneys' fees and costs.
6. COMPLETION PROGRAM:
The Partnership shall determine whether Contractor shall set an oil string. In
the event the Partnership directs that drilling operations cease and to abandon
the five Partnership Wells, Contractor shall plug the Partnership Wells, remove
all drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Partnership directs Contractor to set an
oil string and makes timely payment to the Contractor of the completion price,
Contractor shall commence the operations necessary to complete the Partnership
Wells for commercial production, including the setting of an oil string and the
acquisition, delivery and installation of a pump jack, holding tank and all
other necessary equipment needed to extract and contain oil and/or gas from the
Partnership Wells. If Contractor should enter into an assignment with another
entity to undertake the Completion Program, Contractor may bill the Partnership,
and the Partnership will pay for any completion costs over and above the
Completion Price set forth herein.
7. STOPPAGE OF WORK BY THE PARTNERSHIP:
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Partnership shall have the right to direct the stoppage of the work
to be performed by the Contractor hereunder at any time prior to reaching the
Contract Depth and even though Contractor has made no default hereunder. If the
Partnership exercises its right to discontinue drilling a well, the Partnership
will not receive a refund for any unused portion of the Drilling Price allocable
to the discontinued well but the Partnership may direct Contractor to apply the
unused portion of the Drilling Price to the intangible cost of another well that
the Partnership shall specify. The unused portion of the Drilling Price will be
determined as follows:
D-2
100
Contractor shall determine a sum equal to all the actual expenses reasonably and
necessarily incurred up to the date the Partnership notified Contractor to
discontinue drilling plus such additional expenses reasonably and necessarily
incurred in order for Contractor to cease operations, including plugging and
abandoning the hole, and dismantling the rig plus the sum of 15% of such total
actual expenses. This sum shall be deducted from the Drilling Price of the
Partnership Wells. The resulting difference shall be the unused portion of the
price.
8. REPORTS TO BE FURNISHED BY CONTRACTOR:
8.1 Contractor shall keep and furnish to the Partnership an accurate
record of the work performed and formations drilled on the IADC-API Daily
Drilling Report form or other form acceptable to the Partnership. A
legible copy of said form signed by Contractor's representative shall be
furnished by Contractor to the Partnership.
8.2 Delivery tickets, if requested by the Joint Venture, covering any
material or supplies furnished by the Partnership shall be turned in
each day with the daily drilling report. The quantity, description and
condition of materials and supplies so furnished shall be checked by
Contractor and such tickets shall be properly certified by Contractor.
9. RESPONSIBILITY FOR A SOUND LOCATION:
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout. In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
10. RESPONSIBILITY FOR ROAD AND LOCATIONS:
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
11. PAYMENT OF CLAIMS:
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Partnership Wells or other property of the
Partnership or the land upon which said Partnership Wells are located.
12. RESPONSIBILITY FOR LOSS OR DAMAGE:
12.1 Contractor's Surface Equipment: Contractor shall assume liability at
all times for damage to or destruction of Contractor's surface equipment,
including but not limited to all drilling tools, machinery and appliances,
for use above the surface, regardless of when or how such damage or
destruction occurs.
D-3
101
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume
liability at all times for damage to or destruction of Contractor's
in-hole equipment, including but not limited to drill pipe, drill collars
and tool joints, and the Partnership shall be under no liability to
reimburse Contractor for any such loss.
12.3 Partnership's Equipment: The Partnership shall assume liability
at all times for any defective equipment owned by it, including but not
limited to casing, tubing, well head equipment, and Contractor shall be
under no liability to reimburse the Partnership for any such loss or
damage.
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole
for any cause attributable to Contractor's operators be lost or damaged
while Contractor is engaged in the performance of work hereunder, all such
loss of or damage to the hole including cost of regaining control of a
fire or blowout, shall be borne by Contractor; and if the hole is not in
condition to be carried to the Contract Depth as herein provided,
Contractor shall, if requested by the Partnership, commence a new hole
without delay at Contractor's cost; and the drilling of the new hole shall
be conducted under the terms and conditions of this Agreement in the same
manner as though it were the first hole and Contractor shall be
responsible for replacement of any casing lost in a junked and abandoned
hole as well as the cost of preparing a new drill site for the new hole
and the road thereto. In such case, Contractor shall not be entitled to
any payment or compensation for expenditures made or incurred by
Contractor on or in connection with the abandoned hole.
13. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
14. FORCE MAJEURE:
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible.
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement. The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint.
15. INFORMATION CONFIDENTIAL:
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Partnership Wells, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Partnership designated representative.
D-4
102
16. ASSIGNMENT:
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that materially alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
17. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
BLUE RIDGE ENERGY, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
BLUE RIDGE GROUP, INC.
By: /s/ ROBERT D. BURR
-------------------------------
Robert D. Burr, President
D-5
103
EXHIBIT "1" TO EXHIBIT "D"
APRIL 13, 1999
The primary investment objectives of the Partnership are: (1) the acquisition of
approximately a 30.00% Working Interest, which is approximately 23.00% of the
Net Revenue Interest in ten well sites to be drilled on the Cumberland Gap 10
Prospect and the production and sale of oil/gas therefrom. The Cumberland Gap 10
Prospect consists of approximately 6,500 acres of oil and gas leases in Harlan
County, Kentucky and the wells to be drilled thereon (the "Kentucky Partnership
Wells"). The Kentucky Partnership Wells will be drilled to depths of
approximately 6,000' or depths sufficient to test the Corniferous Sand formation
and (2) the assignment of income from a 25% Working Interest which is an 18.75%
Net Revenue Interest in the Colton Williams #44-1 Well ("Texas Well") to be
drilled on the 960 acre Rocksprings Prospect in Edwards County. The Texas Well
will be drilled to a depth of 7,000 feet or a depth sufficient to test the
Holman Sands. There will be no cost to the Partnership for the assignment of
income from the Colton Williams #44-1 well and the assignment of income is
limited to when twice the partners' original capital contributions, or
$3,600,000, is received by the Partners from the production of all Partnership
wells.
D-6
104
NOLAND COMPANY
DRILLING EQUIPMENT BRANCH
DRILL RIG - QUOTATION AND BUYER'S ORDER
QUOTATION AND/OR CONTRACT NO.
--------------------------------------------------
DATE: February 6, 1998
-------------------------
NOLAND REPRESENTATIVE Charles H. Powell
----------------------------------------------------------
QUOTED TO (BUYER):
NAME Blue Ridge Group
---------------------------------------------------------------------------
ADDRESS 632 Adams Street Suite #700
------------------------------------------------------------------------
CITY Bowling Green STATE KY ZIP 42101
-------------------- ------- -----------------------------------
PHONE NUMBER 502-842-2421
-------------------------------------------------------------------
SELLER:
NOLAND COMPANY
2227 SHENANDOAH AVENUE, N.W.
ROANOKE, VA 24017
(703) 982-8001
NO LIABILITY INSURANCE INCLUDED
I. WE ARE PLEASED TO QUOTE ON THE WITHIN STATED EQUIPMENT:
Rig: Ingersoll-Rand RD-20 S/N
---------------------- --------------------------------------
Drill Mounted On CMC 4 Axle Carrier
------------------------------------------------------
Other (Specify) S/N
------------------- -------------------------------
Compressor Ingersoll-Rand HR 2.5 1250 CFM@ 350 PSI
----------------------------------- ------ ------
Power Unit Cummins QSK 19C 700 Horsepower @ 1800 RPM
------------------------------------------------------------
Vehicle Identification No. New Equipment - VIN # will be provided when
--------------------------------------------
available
-----------------------------------------------------------------------
-----------------------------------------------------------------------
7/95 Page 1 of 6
105
WITH FOLLOWING EXTRA EQUIPMENT: Yes No
Optional Truck 4 Axle CMC Carrier [ ] [ ]
----------------------------------
Optional Compressor I - R 1250 / 350 [X] [ ]
-----------------------------
Air Line Lubricator 60 gal [X] [ ]
-----------------------------
Air Pressure Regulator [X] [ ]
--------------------------
Heavy Hoist Package 110,000 Lb Pullback [X] [ ]
-----------------------------
Hot Box Pre-Heater Diesel Fired [X] [ ]
------------------------------
Water Injection System 25 gpm [X] [ ]
--------------------------
Night Lighting [X] [ ]
----------------------------------
Water Mud Pump [ ] [X]
----------------------------------
Petol Wrench [X] [ ]
------------------------------------
Table Bushing 4 1/2" Solid [X] [ ]
----------------------
Table Bushing Split 5 3/8" [ ] [X]
----------------------
4 1/2" x 9 1/2" Spindle Sub [ ] [X]
---------------------
4 1/2" x 24" Spindle Sub [ ] [X]
------------------------
4 1/2" x 48" Spindle Sub [X] [ ]
------------------------
Drill Steel [ ] [X]
-------------------------------------
Hammer [ ] [X]
------------------------------------------
Hammer Bits [ ] [X]
-------------------------------------
Stabilizer [ ] [X]
--------------------------------------
4 1/2" x 3 1/2" Bit Sub Reg. API [ ] [X]
----------------
Roller Bits [ ] [X]
-------------------------------------
Auxiliary 175 Gallon Fuel or Water Tank [ ] [X]
---------
Rapid Travel Kit [ ] [X]
--------------------------------
6 1/4" Bit Basket [X] [ ]
--------------------------------
8" Bit Basket [X] [ ]
-----------------------------------
10" Bit Basket [ ] [X]
----------------------------------
7/95 Page 2 of 6
106
YES NO
Hammer Sub 3 1/2" API Box & Pin 18" Long [ ] [X]
--------
Includes Hammer breakout tools for [X] [ ]
--------------
6" and 8" Hammers [X] [ ]
--------------------------------
Special Paint [ ] [ ]
-----------------------------------
[ ] [ ]
-------------------------------------------------
Total Quoted Price $741,000.00
------------------
Sales Tax
------------------
Total
------------------
II. DESCRIPTION OF TRADE-IN:
Year 1989 Make I-R T4WLT
------- ---------------------------------------------------
Model No. 900/350 Long Derrick RIG S/N 3057
------------------------- --------------------------
Power Unit KT-19 Cumming Compressor I-R HR2 900 CFM@ 350 PSI
---------------- ------------- ------
Drill Mounted On: Year 1986 Make Pettibone
----------- -----------------------------------
Model Crane Carrier Chassis Vehicle I.D.# 2P9428HC2F0002513
---------------------- ---------------------------
Truck Engine Detroit 6-71
---------------------------------------------------------
Water Injection 25 gpm Cast DHD Lube 50 gal
------------------- -------------------------
Rotary Head 2-Motor Spur
----------------------------------------------------------
III. PAYMENT AND DELIVERY AGREEMENTS:
Quoted Price (Excluding Taxes and Titling Fees): $ 741,000.00
---------------
(A) State Sales Tax: $
---------------
(B) Local Sales Tax: $
---------------
Less:
(A) Trade-In Allowance: $
---------------
(B) Lease Conversion: $
---------------
(C) Deposit With Order: $
---------------
BALANCE DUE: $
-----------------
(Plus other fees as itemized on page 4)
Terms of Sale:
[ ] Cash on Delivery [X] To be financed by
------
Center Capital
------------------------
Any applicable sales taxes will be added. /s/ CHP
2/6/98
7/95 Page 3 of 6
107
Additional Amount to be Collected For:
Registration Fee $ N/A Title Fee $ N/A
----- -----
Uninsured Motor Vehicle Fee $ N/A Other Fees $ N/A
----- -----
Amount of processing fee charged, if any. If no processing fee is
charged, please indicate "none": none
---------------------------------
Local dealer's business license tax: none
-----------------------------
Delivery Terms F.O.B.
Eastern Kentucky
-----------------------------------------------------------------
IV. ADDITIONAL TERMS AND CONDITIONS:
In the event the foregoing quotation and its terms and conditions are
acceptable to the Buyer, then it is the intent and agreement of Buyer
and Noland Company ("Seller") that this document shall become a
contract and subject to the additional terms and conditions as follows:
a. Unless otherwise provided herein, the prices quoted apply to this
quotation only, are subject to change without notice prior to
acceptance, are based upon current market costs, are subject to any
applicable manufacturer price escalation and, except where noted, do
not include shipping or transportation charges. Any change in
quantities, delivery dates, handling or destination may incur a price
adjustment. Federal, state or local applicable taxes or titling charges
are not a part of the quoted price and are the responsibility of the
Buyer. It is the responsibility of the Buyer to provide the proper
authorities or certificates whenever a tax exempt status is claimed.
b. Terms of sale are cash unless otherwise provided herein. The title and
right to possession of the machinery and materials quoted herein and
any replacements or substitutions shall remain with the Seller until
all amounts due are fully paid and, if financing is provided by the
Seller, a security interest is hereby granted until full remittance is
made for all negotiated documents including specified late charges,
interest, collection and attorney's fees, etc.
c. If Seller arranges financing for this purchase, the following notice is
applicable: "This sale is conditioned upon approval of buyer's
proposed retail installment sale contract as submitted to or through
the Seller. If that proposed retail installment sale contract is not
approved under the terms agreed to with the Seller, the buyer may
cancel this sale and any down payment and/or trade-in submitted by the
buyer will be returned to the buyer, provided that any vehicle
delivered to the buyer by the Seller pursuant to this agreement is
returned to the Seller in the
7/95 Page 4 of 6
108
same condition as delivered to the buyer, normal wear and tear
excepted, within twenty-four hours of written or oral notice to the
buyer of the credit denial".
d. Seller shall not be responsible for delay caused by fires or other
casualties, strikes, lockouts, differences with workmen, accidents,
war insurrections, government regulations, delay in transportation,
delay by suppliers of materials, or contingencies beyond its control.
Receipt of the machinery or materials covered by this contract from a
common carrier shall constitute an acceptance and release or waiver of
any responsibility on the part of the Seller for damages in transit or
loss due to delay in delivery.
e. Seller does not manufacture the goods it sells but will pass on to the
buyer, to the extent possible, all benefits realized under whatever
warranty, if any, which may be extended by the manufacturer of the
goods sold. Seller hereby disclaims any and all warranties, expressed
or implied, including but not limited to the warranties of
merchantability and fitness for a particular purpose or any warranties
arising from a course of dealing or usage of trade. No employee of
Seller is authorized to make or assume any warranty, liability or
responsibility with regard to the goods on behalf of Seller.
f. When material defects are discovered, Buyer shall comply with all
requirements of any applicable manufacturer's warranty before
proceeding with replacement or repairs. The goods are sold "as is" and
the Seller assumes no liability in the event the goods are defective in
any way. Seller shall not be liable under any circumstances for
consequential, special or punitive damages, or lost profits arising
from faulty installation, application or operation by Buyer; or those
caused by defective goods and any attendant labor, repairs, or other
expense incident to their removal and replacement; or on account of the
use or resale of goods.
g. On refurbished or used equipment, no warranties are stated or implied
by the Seller except as otherwise noted in writing. The Seller has no
liability for damage or failure due to negligence, misuse, accident,
improper operation, improper application or installation caused by the
Buyer. On components manufactured by others and contained on
refurbished or used equipment, Seller assigns to the Buyer, to the
extent assignable, the manufacturer's standard warranty and any
transferrable extended warranties which may be in effect.
The Buyer shall pay all expenses of removal, installation and/or
transportation costs to and from the location where warranty service is
performed. Such repair on replacement shall be done at the soonest
practical time. Defective goods will be returned within 10 days to
Seller, freight prepaid, for inspection and credit if applicable. Under
no circumstances will Seller be liable for incidental or consequential
damages.
h. Cancellation of this quotation/buyer's order or any other failure of
buyer to consummate the purchase contemplated hereby for any reason
other than Seller's failure to give final acceptance of this
quotation/buyer's order will result in forfeiture of any deposit paid
to Seller and liability for any damages exceeding the deposit amount.
Page 5 of 6
109
i. All contracts or agreements are subject to the approval of the
Seller's corporate headquarters, to be indicated by the written
acceptance of an authorized agent of the Seller. This agreement shall
become effective on the date and at the place of such acceptance.
j. THIS QUOTATION WILL EXPIRE UNLESS ACCEPTED ON OR BEFORE THE ___ DAY (OR
IF THIS BLANK IS NOT FILLED IN, THE SEVENTH DAY) FOLLOWING THE DATE SET
FORTH ON THE FIRST PAGE HEREOF, AND IN ANY EVENT IS SUBJECT TO RECEIPT
BY SELLER OF SATISFACTORY CREDIT INFORMATION AND CREDIT APPROVAL.
k. Seller makes no warranty that the description or performance of
equipment contained herein conforms to any plans, specifications or
requirements of Buyer, who is cautioned to compare this quotation with
actual specified requirements to avoid error. Seller assumes no
responsibility for any addenda and/or alternates unless expressly
stated in this quotation. Any alternate offered is based on Seller's
interpretation of the specifications and Buyers is cautioned to
carefully compare the alternate with actual requirements.
SUBMITTED BY: NOLAND COMPANY
By: /s/ CHARLES H. POWELL
------------------------
Title: Sales Representative
----------------------
THE FOREGOING QUOTATION IS HEREBY ACCEPTED AS A CONTRACT THIS 6th day of
FEBRUARY, 1998, SUBJECT TO FURTHER ACCEPTANCE OF THE SELLER, AND BUYER
ACKNOWLEDGES RECEIPT OF A COPY OF THIS CONTRACT.
BUYER: /s/ BLUE RIDGE GROUP
----------------------
(Print full corporate,
partnership or individual name)
By: /s/ [ILLEGIBLE]
-------------------------
Title: Vice President
----------------------
FINAL ACCEPTANCE:
NOLAND COMPANY
Title:
----------------------
Date:
----------------------
2/6/98
110
BILL OF SALE
COMMONWEALTH OF KENTUCKY, )
County of Warren )
That Blue Ridge Group, Inc. of the County and Commonwealth aforesaid, for
and in consideration of the sum of Four Hundred Ninety Five Thousand and no/xx
Dollars as applied to the sale of an Ingersoll Rand T-4 Drilling Rig by Blue
Ridge Group, Inc. of 632 Adams Street, Ste. 700, Bowling Green, Kentucky 42101
to Blue Ridge Energy, Inc. of 632 Adams Street, Ste. 710, Bowling Green,
Kentucky 42101, the receipt for which is hereby acknowledged, have BARGAINED,
SOLD AND DELIVERED, and by these presents do BARGAIN, SELL and DELIVER unto the
said Blue Ridge Energy, Inc. of 632 Adams Street, Ste. 710 Bowling Green,
Kentucky 42101, the following described personal property in Warren County,
Kentucky, to-wit:
Ingersoll Rand T-4 Drilling Rig, Serial #29801
And we do hereby bind ourselves and our heirs, executors, administrators and
assigns, to forever WARRANT and DEFEND to title to the said property unto the
said Blue Ridge Energy, Inc. of 632 Adams Street, Ste. 710, Bowling Green,
Kentucky 42101, and its heirs, executors, administrators and assigns, against
every person whomsoever lawfully claiming, or to claim the same, or any part
thereof.
WITNESS my hand at Bowling Green, Kentucky, this 30th day of June, 1999.
1999.
BLUE RIDGE GROUP, INC. BLUE RIDGE ENERGY, INC.
By: /s/ GREGORY B. SHEA By: /s/ JAMES T. COOK, JR.
----------------------------------- -----------------------------------
Gregory B. Shea, Sr. Vice President James T. Cook, Jr. Vice President
111
PROMISSORY NOTE
$126,000.00 Bowling Green, Kentucky
June 30, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Blue
Ridge Group, Inc. the principal sum of One Hundred Twenty Six Thousand AND
no/100 ($126,000.00) with interest from date at the rate of 8% per annum on the
unpaid balance until paid. The entire principal balance and all accrued interest
shall be payable on the 30th day of September, 1996.
Privilege is reserved to prepay at any time, without premium or fee, or any
penalty whatsoever the entire indebtedness or any part thereof at any time prior
to maturity.
If any deficiency in the payment of this note is not made on the due date,
the entire principal balance plus accrued interest shall at once become due and
payable without notice at the option of the Holders/Payees.
In the event of foreclosure or collection proceedings, the undersigned
shall reimburse the Holders/Payees for all reasonable attorney fees and court
costs as permitable by the Kentucky Revised Statutes.
This note shall not be assumed without the prior written consent of the
Holders/Payees, nor the financing assumed by anyone without the consent of the
Holders/Payees.
The undersigned shall be bound and waives presentment for payment, demand,
protest, and notice of demand, protest and nonpayment.
/s/ JAMES T. COOK, JR.
------------------------------------
Blue Ridge Energy, Inc.
112
August 31, 1998
Blue Ridge Group, Inc.
632 Adams Street, Suite 710
Bowling Green, KY 42101
Dear Mr. Burr:
When executed by you, this letter shall serve as an agreement by and
between Blue Ridge Energy, Inc., (herein "Energy") and Blue Ridge Group, Inc.
(herein "Group") regarding the acquisition by Energy of a 25% Working Interest
in up to fifty (50) oil and gas wells located in the Appalachian Basin as well
as the acquisition of drilling rigs and ancillary equipment to drill oil and gas
wells. Our agreement with respect to these acquisitions is as follows:
1: Group intends to locate, drill and develop up to fifty (50) wells in the
Appalachian Basin. Energy will purchase a 25% Working Interest resulting in
an 18.75% Net Revenue Interest in each well located, drilled and developed
for $55,000.
2: Energy intends to acquire drilling rigs and related equipment for ongoing
operations in the Appalachian Basin. Group may sell to Energy, at
historical cost any excess drilling rigs and equipment in its possession
that would suit Energy's ongoing needs.
3: In order to facilitate the foregoing, Energy agrees to extend a line of
credit of $1,500,000 to Group for a period of one year from which Group may
draw funds as required. Group will pay interest of 12% per annum on all
outstanding balances under this arrangement. Amounts due under this line of
credit will be repaid as funds generated by Group's operations become
available, by the sale of drilling rigs and equipment to Energy and/or by
the exchange of 25% Working Interest in oil and gas wells located in the
Appalachian Basin at a rate of $55,000 per 25% Working Interest conveyed.
If the foregoing fully describes your understanding of the agreement between
Blue Ridge and Premier, please acknowledge your assent to the terms and
conditions hereof by signing in the space provided below.
Truly Yours,
/s/ JAMES T. COOK, JR.
James T. Cook, Jr.
Sr. Vice President-Finance
Agreed and accepted this 31st day
August, 1998 by Blue Ridge Energy, Inc.
/s/ ROBERT D. BURR
- -----------------------------------
By: Robert D. Burr
--------------
Its: President
---------
113
MANAGEMENT SERVICES CONTRACT
September 30, 1996
Blue Ridge Group, Inc. hereby agrees to provide Blue Ridge Energy, Inc. with the
following services:
1. General Management
2. Administration
3. Financial and Accounting Records
4. Tax and Audit Preparation
As compensation for these services Blue Ridge Group, Inc. will receive a monthly
fee of $20,000.00 on the 30th day of the month in which such services are
performed. This contract will continue in force indefinitely or until such time
as it is terminated by either party with a 30 day written notice.
Agreed to and Accepted by: Agreed to and Accepted by:
Blue Ridge Group, Inc. Blue Ridge Energy, Inc.
/s/ ROBERT D. BURR /s/ JAMES T. COOK, JR.
- ----------------------------------- ------------------------------------
114
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
THE HOLDER OF THIS WARRANT AND/OR SHARES DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
BLUE RIDGE ENERGY, INC.
COMMON STOCK PURCHASE WARRANT
Expiring June 30, 2001
THIS CERTIFIES THAT, for value received, Blue Ridge Group, Inc. (the "Warrant
Holder"), at any time and from time to time on any Business Day on or prior to
5:00 p.m., Central Time, on June 30, 2001 (the "Expiration Date") is entitled to
subscribe for and purchase from BLUE RIDGE ENERGY, INC., a Nevada corporation
(the "Company"), 2,000,000 shares of Common Stock at a price per share equal to
the Exercise Price.
1. CERTAIN DEFINITIONS
The following terms, as used herein, have the following meanings:
"Business Day" means any day except a Saturday, Sunday, or other day on
which commercial banks in Bowling Green, Kentucky, are authorized by law to
close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's currently authorized common stock, $.01
par value, and stock of any other class or other consideration into which
such currently authorized common stock may hereafter have been changed.
"Exercise Price" means Five cents ($0.05) per share.
"Securities Act" means the Securities Act of 1933, or any successor Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect a the time.
"Warrant Shares" means the 2,000,000 shares of Common Stock issued or
issuable upon exercise for this Warrant.
115
2. EXERCISE OF WARRANT
The Warrant Holder or its assignee may exercise this Warrant, in whole or in
part, at any time or from time to time on any Business Day prior to the
Expiration Date, by delivering to the Company a duly executed notice (a "Notice
of Exercise") in the form of Exhibit A hereto and by payment to the Company of
the Exercise Price per Warrant Share by cashier's check in an amount equal to
the product of (I) the Exercise Price time (ii) the number of Warrant Shares as
to which this warrant is being exercised.
As soon as reasonably practicable but not later than twenty Business Days after
the Company shall have received such Notice of Exercise and payment, the Company
shall execute and deliver certificates representing the number of shares of
Common Stock specified in such Notice of Exercise, issued in the name of the
Warrant Holder. This Warrant shall be deemed to have been exercised and such
share certificate or certificates shall be deemed to have been issued, and such
Warrant Holder shall be deemed for all purposes to have become a holder of
record of shares of Common Stock, as of the first Business Day after the date
that such Notice of Exercise and payment shall has been received by the Company.
The Warrant Holder shall surrender this Warrant Certificate to the Company when
it delivers the Notice of Exercise, and in the event of a partial exercise of
the Warrant, the Company shall execute and deliver to the Warrant Holder, at the
time the Company delivers the share certificate or certificates issued pursuant
to such Notice of Exercise, a new Warrant Certificate for the unexercised
balance of the Warrant.
Each Certificate for Warrant Shares issued upon exercise of this Warrant, unless
at the time of exercise such Warrant Shares are registered under the Securities
Act, shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS THE HOLDER OF THE
SHARES DELIVERS TO THE COMPANY AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Any certificate for Warrant Shares issued at any time in exchange or
substitution for any certificate bearing such legend shall also bear such legend
unless, in the written opinion of counsel, which counsel and opinion shall be
reasonably accepted to the Company, the Warrant Shares represented thereby need
no longer be subject to restrictions on resale under the Securities Act.
The Company shall not be required to issue fractions of shares of Common Stock
upon an exercise
2
116
of the Warrant. If any fraction of a share would, but for this restriction, be
issuable upon an exercise of the Warrant, in lieu of delivering such fractional
share, the Company shall pay to the Warrant Holder, in cash, an amount equal to
the same fraction times the Closing Price on the trading day immediately prior
to the date -of such exercise.
3. INVESTMENT REPRESENTATION
By accepting the Warrant, the Warrant Holder represents that he is acquiring the
Warrant for his own account for investment purposes and not with the view to any
sale or distribution, and that the Warrant Holder will not offer, sell or
otherwise dispose of the Warrant or the Warrant Shares except under
circumstances as will not result in a violation of applicable securities laws.
4. VALIDITY OF WARRANT AND ISSUANCE OF SHARES
The Company represents and warrants that this Warrant has been duly authorized
and is validly issued.
The Company further represents and warrants that on the date hereof it duly
authorized and reserved, and the Company hereby agrees that it will at all times
until the Expiration Date have duly authorized and reserved, such number of
shares of Common Stock as will be sufficient to permit the exercise in full of
the Warrant, and that all such shares are and will be duly authorized and, when
issued upon exercise of the Warrant, will be validly issued, fully paid and
non-assessable, and free and clear of all security interests, claims, liens,
equities and other encumbrances.
5. ADJUSTMENTS
The Exercise Price in effect at any time, and the number of Warrant Shares that
may be purchased upon any exercise of the Warrant, shall be subject to change or
adjustment as follows:
(a) Common Stock Reorganization. If the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, by way
of stock split, stock dividend or otherwise, or consolidate its outstanding
shares of Common Stock into a smaller number of shares (any such event
being herein call a "Common Stock Reorganization"), then (I) the Exercise
Price shall be adjusted, effective immediately after the effective date of
such Common Stock Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such effective date by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such effective date before giving effect to such
Common Stock Reorganization and the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization, and (ii) the number of shares of Common Stock
subject to purchase upon exercise of this Warrant shall be adjusted,
effective at such time, to a number determined by multiplying the number of
shares of Common Stock subject
3
117
to purchase immediately before such Common Stock Reorganization by a
fraction, the numerator of which shall be the number of shares outstanding
after giving effect to such Common Stock Reorganization and the denominator
of which shall be the number of shares of Common Stock outstanding
immediately before giving effect to such Common Stock Reorganization.
(b) Capital Reorganization. If there shall be any consolidation or merger
to which the Company is a party, other than a consolidation or a merger of
which the company is the surviving corporation and which does not result in
any reclassification of, or change (other than a Common Stock
Reorganization) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the company as an entirety or substantially
as an entirety, or any recapitalization of the Company (any such event
being called a "Capital Reorganization"), then, effective upon the
effective date of such Capital Reorganization, the Warrant holder shall no
longer have the right to purchase Common Stock, but shall have instead the
right to purchase, upon exercise of this Warrant, the kind and amount of
shares of stock and other securities and property (including cash) which
the Warrant Holder would have owned or have been entitled to receive
pursuant to such Capital Reorganization if this Warrant had been exercised
immediately prior to the effective date of such Capital Reorganization. As
a condition to effecting any Capital Reorganization, the Company or the
successor or surviving corporation, as the case may be, shall execute and
deliver to the Warrant Holder an agreement as to the Warrant Holder's
rights in accordance with this Section 5(b), providing, to the extent of
any right to purchase equity securities hereunder, for subsequent
adjustments as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5. The provisions of this Section 5 (b) shall
similarly apply to successive Capital Reorganizations.
(c) Notice of Adjustment. The Company shall give notice to the Warrant
Holder of any event which requires an adjustment pursuant to this Section
5, describing such event in reasonable detail and specifying the record
date or effective date, as the case may be, and, if determinable, the
required adjustment and computation thereof. If the required adjustment is
not determinable as the time of such notice, the Company shall give notice
to the Warrant Holder of such adjustment and computation as soon as
reasonably practicable after such ad adjustment becomes determinable.
6. LOST, MUTILATED OR MISSING WARRANT CERTIFICATES
Upon receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant Certificate, and, in the case of loss,
theft or destruction, upon receipt of an indemnification or bond satisfactory to
the Company, or, in the case of mutilation, upon surrender and cancellation of
the mutilated Warrant Certificate, the Company shall execute and deliver a new
replacement Warrant Certificate of like tenor and representing the right to
purchase the same
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aggregate number of Warrant Shares. The recipient of any such Warrant
Certificate shall reimburse the Company for all reasonable expenses incidental
to the replacement of such missing or mutilated Warrant Certificate.
7. NOTICES
All notices, requests, demands and other communications under this Warrant must
be in writing and will be deemed duly given: (i) when personally delivered, (ii)
upon receipt of a facsimile transmission with a confirmed transmission answer
back, (iii) three (3) days after having been deposited in the United States
mail, certified or registered, return receipt requested, postage prepaid, or
(iv) one (1) business day after having been dispatched by a nationally
recognized overnight courier service, addressed to the parties as follows:
If to the Company: Blue Ridge Energy, Inc.
1953 Scottsville Road
Bowling Green, Kentucky 42104
If to the
Warrant Holder: Blue Ridge Group, Inc.
1953 Scottsville Road
Bowling Green, Kentucky 42104
Any party may change its address for notice purposes by giving notice of such
change of address in accordance with the foregoing provisions.
8. MISCELLANEOUS
(a) This Warrant shall not entitle the Warrant Holder, prior to the
exercise of the Warrant, to any rights as a shareholder of the Company.
(b) In case any one or more of the provisions contained in this Warrant
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby. The parties shall endeavor in good
faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
(c) This Warrant is personal to the Warrant Holder and may not be assigned
without the prior written consent of the Company and any attempt to assign
without such written consent shall be null and void. All of the provisions
of this Warrant by or for the benefit of the Company or the Warrant Holder
bind and inure to the benefit
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of their respective successors and permitted assigns.
(d) This Warrant, the construction, interpretation and enforcement hereof
and the rights of the parties hereto shall be determined under, governed by
and construed in accordance with the laws of the State of Kentucky without
regard to principles of conflicts of interest.
(e) The section headings used herein are for convenience of reference only
and shall not be construed in any way to affect the interpretation of any
provisions of the Warrant.
(f) This Warrant constitutes the entire agreement between the Company and
the Warrant Holder regarding the subject matter hereof and supersedes all
previous agreements. There are no verbal agreements, representations,
warranties, undertakings or agreements among the parties. This Warrant may
not be amended or modified in any respect, except by a written instrument
signed by the Company and the Warrant Holder.
IN WITNESS WHEREOF, the Company and the Warrant Holder agree to the foregoing
terms and conditions and have executed this Warrant as of the day and year first
above written.
COMPANY
BLUE RIDGE ENERGY, INC.,
a Nevada Corporation
/s/ ROBERT D. BURR
--------------------------------------
By: Robert D. Burr, President and CEO
BLUE RIDGE GROUP, INC.
/s/ JAMES T. COOK, JR.
--------------------------------------
By: James T. Cook, Jr. Vice President
- Finance
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EXHIBIT A
COMMON STOCK WARRANT
FORM OF NOTICE OF EXERCISE
TO: BLUE RIDGE ENERGY, INC.
Reference is made to the Common Stock Purchase Warrant dated June 30, 1996
(the "Warrant"). Initially capitalized terms used herein have the meaning
as defined in the Warrant.
The undersigned, pursuant to the provisions set forth in the Warrant,
hereby irrevocably elects and agrees to purchase 2,000,000 shares of Common
Stock, and makes payment herewith in full therefor at the Exercise Price of
Five cents ($0.05) by cash or check.
The undersigned hereby represents that it is exercising the Warrant for its
own account for investment purposes and not with the view to any sale or
distribution and that the Warrant Holder will not offer, sell or otherwise
dispose of the Warrant or any underlying Warrant Shares in violation of
applicable securities laws.
------------------------------------
Printed Name: Blue Ridge Group, Inc.
Date:
-------------------------------
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WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
THE HOLDER OF THIS WARRANT AND/OR SHARES DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
BLUE RIDGE ENERGY, INC.
COMMON STOCK PURCHASE WARRANT
Expiring February 28, 2003
THIS CERTIFIES THAT, for value received, Blue Ridge Group, Inc. (the "Warrant
Holder"), at any time and from time to time on any Business Day on or prior to
5:00 p.m., Central Time, on February 28, 2003 (the "Expiration Date") is
entitled to subscribe for and purchase from BLUE RIDGE ENERGY, INC., a Nevada
corporation (the "Company"), 5,000,000 shares of Common Stock at a price per
share equal to the Exercise Price.
1. CERTAIN DEFINITIONS
The following terms, as used herein, have the following meanings:
"Business Day" means any day except a Saturday, Sunday, or other day on
which commercial banks in Bowling Green, Kentucky, are authorized by law to
close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's currently authorized common stock, $.01
par value, and stock of any other class or other consideration into which
such currently authorized common stock may hereafter have been changed.
"Exercise Price" means Five cents ($0.05) per share.
"Securities Act" means the Securities Act of 1933, or any successor Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
"Warrant Shares" means the 2,000,000 shares of Common Stock issued or
issuable upon exercise for this Warrant.
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2. EXERCISE OF WARRANT
The Warrant Holder or its assignee may exercise this Warrant, in whole or in
part, at any time or from time to time on any Business Day prior to the
Expiration Date, by delivering to the Company a duly executed notice (a "Notice
of Exercise") in the form of Exhibit A hereto and by payment to the Company of
the Exercise Price per Warrant Share by cashier's check in an amount equal to
the product of (I) the Exercise Price time (ii) the number of Warrant Shares as
to which this warrant is being exercised.
As soon as reasonably practicable but not later than twenty Business Days after
the Company shall have received such Notice of Exercise and payment, the Company
shall execute and deliver certificates representing the number of shares of
common Stock specified in such Notice of Exercise, issued in the name of the
Warrant Holder. This Warrant shall be deemed to have been exercised and such
share certificate or certificates shall be deemed to have been issued, and such
Warrant Holder shall be deemed for all purposes to have become a holder of
record of shares of Common Stock, as of the first Business Day after the date
that such Notice of Exercise and payment shall has been received by the Company.
The Warrant Holder shall surrender this Warrant Certificate to the Company when
it delivers the Notice of Exercise, and in the event of a partial exercise of
the Warrant, the Company shall execute and deliver to the Warrant Holder, at the
time the Company delivers the share certificate or certificates issued pursuant
to such Notice of Exercise, a new Warrant Certificate for the unexercised
balance of the Warrant.
Each Certificate for Warrant Shares issued upon exercise of this Warrant, unless
at the time of exercise such Warrant Shares are registered under the Securities
Act, shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS THE HOLDER OF THE
SHARES DELIVERS TO THE COMPANY AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Any certificate for Warrant Shares issued at any time in exchange or
substitution for any certificate bearing such legend shall also bear such legend
unless, in the written opinion of counsel, which counsel and opinion shall be
reasonably accepted to the Company, the Warrant Shares represented thereby need
no longer be subject to restrictions on resale under the Securities Act.
The Company shall not be required to issue fractions of shares of common Stock
upon an exercise
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of the Warrant. If any fraction of a share would, but for this restriction, be
issuable upon an exercise of the Warrant, in lieu of delivering such fractional
share, the Company shall pay to the Warrant Holder, in cash, an amount equal to
the same fraction times the Closing Price on the trading day immediately prior
to the date of such exercise.
3. INVESTMENT REPRESENTATION
By accepting the Warrant, the Warrant Holder represents that he is acquiring the
Warrant for his own account for investment purposes and not with the view to any
sale or distribution, and that the Warrant Holder will not offer, sell or
otherwise dispose of the Warrant or the Warrant Shares except under
circumstances as will not result in a violation of applicable securities laws.
4. VALIDITY OF WARRANT AND ISSUANCE OF SHARES
The Company represents and warrants that this Warrant has been duly authorized
and is validly issued.
The Company further represents and warrants that on the date hereof it duly
authorized and reserved, and the Company hereby agrees that it will at all times
until the Expiration Date have duly authorized and reserved, such number of
shares of Common Stock as will be sufficient to permit the exercise in full of
the Warrant, and that all such shares are and will be duly authorized and, when
issued upon exercise of the Warrant, will be validly issued, fully paid and
non-assessable, and free and clear of all security interests, claims, liens,
equities and other encumbrances.
5. ADJUSTMENTS
The Exercise Price in effect at any time, and the number of Warrant Shares that
may be purchased upon any exercise of the Warrant, shall be subject to change or
adjustment as follows:
(a) Common Stock Reorganization. If the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, by way
of stock split, stock dividend or otherwise, or consolidate its outstanding
shares of Common Stock into a smaller number of shares (any such event
being herein call a "Common Stock Reorganization"), then (I) the Exercise
Price shall be adjusted, effective immediately after the effective date of
such Common Stock Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such effective date by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such effective date before giving effect to such
Common Stock Reorganization and the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization, and (ii) the number of shares of Common Stock
subject to purchase upon exercise of this Warrant shall be adjusted,
effective at such time, to a number determined by multiplying the number of
shares of Common Stock subject
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to purchase immediately before such Common Stock Reorganization by a
fraction, the numerator of which shall be the number of shares outstanding
after giving effect to such Common Stock Reorganization and the denominator
of which shall be the number of shares of Common Stock outstanding
immediately before giving effect to such Common Stock Reorganization.
(b) Capital Reorganization. If there shall be any consolidation or merger
to which the Company is a party, other than a consolidation or a merger of
which the company is the surviving corporation and which does not result in
any reclassification of, or change (other than a Common Stock
Reorganization) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the company as an entirety or substantially
as an entirety, or any recapitalization of the Company (any such event
being called a "Capital Reorganization"), then, effective upon the
effective date of such Capital Reorganization, the Warrant holder shall no
longer have the right to purchase Common Stock, but shall have instead the
right to purchase, upon exercise of this Warrant, the kind and amount of
shares of stock and other securities and property (including cash) which
the Warrant Holder would have owned or have been entitled to receive
pursuant to such Capital Reorganization if this Warrant had been exercised
immediately prior to the effective date of such Capital Reorganization. As
a condition to effecting any Capital Reorganization, the Company or the
successor or surviving corporation, as the case may be, shall execute and
deliver to the Warrant Holder an agreement as to the Warrant Holder's
rights in accordance with this Section 5(b), providing, to the extent of
any right to purchase equity securities hereunder, for subsequent
adjustments as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5. The provisions of this Section 5 (b) shall
similarly apply to successive Capital Reorganizations.
(c) Notice of Adjustment. The Company shall give notice to the Warrant
Holder of any event which requires an adjustment pursuant to this Section
5, describing such event in reasonable detail and specifying the record
date or effective date, as the case may be, and, if determinable, the
required adjustment and computation thereof. If the required adjustment is
not determinable as the time of such notice, the Company shall give notice
to the Warrant Holder of such adjustment and computation as soon as
reasonably practicable after such adjustment becomes determinable.
6. LOST, MUTILATED OR MISSING WARRANT CERTIFICATES
Upon receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of any Warrant Certificate, and, in the case of loss,
theft or destruction, upon receipt of an indemnification or bond satisfactory to
the Company, or, in the case of mutilation, upon surrender and cancellation of
the mutilated Warrant Certificate, the Company shall execute and deliver a new
replacement Warrant Certificate of like tenor and representing the right to
purchase the same
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125
aggregate number of Warrant Shares. The recipient of any such Warrant
Certificate shall reimburse the Company for all reasonable expenses incidental
to the replacement of such missing or mutilated Warrant Certificate.
7. NOTICES
All notices, requests, demands and other communications under this Warrant must
be in writing and will be deemed duly given: (i) when personally delivered, (ii)
upon receipt of a facsimile transmission with a confirmed transmission answer
back, (iii) three (3) days after having been deposited in the United States
mail, certified or registered, return receipt requested, postage prepaid, or
(iv) one (1) business day after having been dispatched by a nationally
recognized overnight courier service, addressed to the parties as follows:
If to the Company: Blue Ridge Energy, Inc.
632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
If to the
Warrant Holder: Blue Ridge Group, Inc.
632 Adams Street, Suite 700
Bowling Green, Kentucky 42101
Any party may change its address for notice purposes by giving notice of such
change of address in accordance with the foregoing provisions.
8. MISCELLANEOUS
(a) This Warrant shall not entitle the Warrant Holder, prior to the
exercise of the Warrant, to any rights as a shareholder of the Company.
(b) In case any one or more of the provisions contained in this Warrant
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby. The parties shall endeavor in good
faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
(c) This Warrant is personal to the Warrant Holder and may not be assigned
without the prior written consent of the Company and any attempt to assign
without such written consent shall be null and void. All of the provisions
of this Warrant by or for the benefit of the Company or the Warrant Holder
bind and inure to the benefit
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126
of their respective successors and permitted assigns.
(d) This Warrant, the construction, interpretation and enforcement hereof
and the rights of the parties hereto shall be determined under, governed by
and construed in accordance with the laws of the State of Kentucky without
regard to principles of conflicts of interest.
(e) The section headings used herein are for convenience of reference only
and shall not be construed in any way to affect the interpretation of any
provisions of the Warrant.
(f) This Warrant constitutes the entire agreement between the Company and
the Warrant Holder regarding the subject matter hereof and supersedes all
previous agreements. There are no verbal agreements, representations,
warranties, undertakings or agreements among the parties. This Warrant may
not be amended or modified in any respect, except by a written instrument
signed by the Company and the Warrant Holder.
IN WITNESS WHEREOF, the Company and the Warrant Holder agree to the foregoing
terms and conditions and have executed this Warrant as of the day and year first
above written.
COMPANY
BLUE RIDGE ENERGY, INC.,
a Nevada Corporation
/s/ ROBERT D. BURR
--------------------------------------
By: Robert D. Burr, President and CEO
BLUE RIDGE GROUP, INC.
/s/ JAMES T. COOK, JR.
--------------------------------------
By: James T. Cook, Jr. Vice President-
Finance
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EXHIBIT A
COMMON STOCK WARRANT
FORM OF NOTICE OF EXERCISE
TO: BLUE RIDGE ENERGY, INC.
Reference is made to the Common Stock Purchase Warrant dated February 28,
1998 (the "Warrant"). Initially capitalized terms used herein have the
meaning as defined in the Warrant.
The undersigned, pursuant to the provisions set forth in the Warrant,
hereby irrevocably elects and agrees to purchase 5,000,000 shares of Common
Stock, and makes payment herewith in full therefor at the Exercise Price of
Five cents ($0.05) by cash or check.
The undersigned hereby represents that it is exercising the Warrant for its
own account for investment purposes and not with the view to any sale or
distribution and that the Warrant Holder will not offer, sell or otherwise
dispose of the Warrant or any underlying Warrant Shares in violation of
applicable securities laws.
------------------------------------
Printed Name: Blue Ridge Group, Inc.
Date:
-------------------------------
7