MARKETING SERVICES AGREEMENT BETWEEN MAINLAND RESOURCES, INC. AND SEI ENERGY, LLC EFFECTIVE AS OF JANUARY 14, 2011Advertising or Marketing Agreement |
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EXHIBIT 99.1
MARKETING SERVICES AGREEMENT BETWEEN
MARKETING SERVICES AGREEMENT This Marketing Services Agreement (" Agreement "), is entered into this 19th day of January, 2011, but is effective as of January 14, 2011 (the " Effective Date "), between Mainland Resources, Inc. (" Company ") and SEI Energy, LLC (" Agent "). Company and Agent may be referred to collectively in this Agreement as the " Parties " or individually as a " Party ." WHEREAS, Company owns certain Buena Vista prospect acreage upon which Company expects production; WHEREAS, Company desires to obtain marketing services and to enter into a purchase agreement regarding the production from such Buena Vista prospect acreage; WHEREAS, Agent is in the business of providing marketing services and purchasing production; WHEREAS, Company desires to enter into this Agreement to procure Marketing Services from Agent; WHEREAS, Company and Agent will enter into a Natural Gas Purchase Agreement (" GPA "); NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set out in this Agreement, the Parties hereby agree as follows: 1. Scope of Marketing Services . Agent shall provide certain advice and services to Company (the " Marketing Services "). The Marketing Services are to be performed in the capacity of an independent contractor in connection with certain aspects of the Company's business. Agent shall advise and consult with Company from time to time as reasonably requested by Company in connection with the marketing and sale of Company's production. Agent shall perform the Marketing Services in a diligent manner, with the level of care and skill exercised by a reasonable, prudent professional agent engaged in the same profession and under similar circumstances, and in accordance with sound and generally accepted industry standards. Agent shall devote such time to the performance of the Marketing Services as is necessary to effectively carry out the Marketing Services. Agent shall adhere to best reasonable schedules established by the Parties for the completion of Marketing Services; however, Agent will not be deemed in breach of this Agreement should such schedules not be met due to events or circumstances beyond the control of Agent. The Marketing Services to be provided by Agent to Company shall include, but not be limited to, the following: (a) Gas Marketing Information . Agent shall gather detailed information regarding the gas marketing conditions and outlook for Company's Buena Vista prospect acreage. Such information shall include conditions for both the residue natural gas and the natural gas liquids, if present, as well as the availability of treating facilities. (b) Downstream Options . Agent shall identify and evaluate all available "downstream" options; such evaluation shall include information such as distance, tap cost(s), existing line pressure(s), gas quality specifications, viability of take-away capacity and anticipated net values for Company's natural gas and products (NGLs (hereinafter defined) and crude/condensate, if present). 1 (c) Midstream/Gathering and Downstream Installation Options . Agent shall work with Company on all aspects of the installation of midstream/gathering and downstream facilities including reviewing and negotiating all contracts. (d) Proper Procedures Regarding Downstream Transmission Pipeline(s) . Agent shall conduct operations with Company to facilitate the proper procedures with the downstream transmission pipeline(s) to ensure the downstream transmission pipeline(s) completes the installation of tap and measurement facilities to receive Company's residue natural gas. However, in the event a midstream/gathering provider installs the tap and measurement facilities, Agent will work with midstream/gathering provider and Company to ensure the tap and measurement facilities are designed to serve the best interest of Company. (e) Cost Benefit Analysis . Agent will provide Company with a cost benefit analysis to determine the best marketing arrangement for Company's residue gas. Using Agent's knowledge and expertise, Agent shall provide Company with the marketing arrangements that, in Agent's opinion, shall yield the highest netback value to Company. (f) Pricing Strategies . Agent shall provide Company with comprehensive pricing strategies such as first of the month pricing, daily pricing, and fixed pricing. Agent will also offer risk management, structured products, and portfolio pricing. (g) Possible Purchasers . Once the Parties have both executed the GPA, Agent shall disclose, to Company, all valid bids received for Company's production. Such disclosure shall fully detail the spectrum of all purchasers including a detailed description of each purchaser's offer to purchase Company's production. Agent shall provide Company with all necessary supporting documentation and pricing components to enable Company to verify proper pricing. (h) Natural Gas Liquids . If Natural Gas Liquids (" NGLs ") are present, Agent shall make recommendations regarding the best marketing options for Company's NGLs. Agent shall fully disclose available purchasers for Company's NGLs in the Buena Vista prospect acreage to Company; the disclosure shall include all documentation necessary to prove up the Agent's recommendation regarding the best marketing option for Company. It is expressly understood that Agent is an independent contractor and that Agent, Agent's partners, affiliates, employees, and subcontractors, if any, are not employees of Company. Agent will be responsible for determining his own work schedule; provided , however , Agent agrees to perform the Marketing Services required hereunder in such a manner as to allow Agent to meet any reasonable time deadlines required by Company. Agent shall be responsible for the supervision and control of Agent's employees, contractors and subcontractors, if any, and for determining the manner in which the Marketing Services are performed Agent shall furnish, at its own expense, all necessary machinery, computers, software, equipment, tools, transportation and whatever else is necessary in the performance of the Marketing Services. Neither Party has any authority to legally bind the other Party in any respect. 3. Term . This Agreement shall be deemed to have commenced on the Effective Date and shall continue for the latter of a period of one (1) year (the " Term "), or until Company produces its first production, at which time the Parties will have entered into a GPA, unless sooner terminated pursuant to the provisions of this Agreement. Agent shall bear and pay all expenses related to the performance of the Marketing Services. Company shall in no situation owe any compensation to Agent for Marketing Services performed or to be performed. Agent hereby waives any possible claims against Company for any and all Marketing Services performed or to be performed. Parties shall enter into a Natural Gas Purchase Agreement. Agent shall be compensated pursuant to Exhibit A, "Rates " In the course of performing the Marketing Services hereunder, Agent may come into possession of geological and geophysical maps and data, prospect information, software programs, trade secrets, client or customer lists, and other information regarding Company's business activities and opportunities (" Confidential Information "). Agent acknowledges that all such Confidential Information belongs to Company, constitutes specialized and highly Confidential Information not generally known in the industry; and, in some instances, constitutes trade secrets of Company. Accordingly, Agent recognizes and acknowledges that it is essential to Company to protect Company's Confidential and proprietary Information and Agent agrees to hold such Confidential Information in trust and confidence for Company's sole and exclusive use and benefit. During the Term of this Agreement and for a period of two (2) years thereafter, Agent shall not disclose any Confidential Information to any person, firm or association or other entity for any reason or purpose whatsoever, unless such Confidential Information has already become known to the general public or unless Agent is required to disclose the Confidential Information by a court of competent jurisdiction. In the event Agent is requested or required by judicial or administrative process to disclose such Confidential Information, Agent agrees to promptly notify Company of the request or requirement for disclosure, and to cooperate with Company should it seek an appropriate protective order or other appropriate remedy, and disclose only that portion of the Confidential Information that Agent is ordered to disclose or that Company agrees to allow to be disclosed. . Parties acknowledge and agree this Agreement may not be assigned by either party without the prior written consent of the other Party, which consent may be conditioned, delayed or withheld. This Agreement may be terminated prior to the end of the Term: (a) By the Parties upon the mutual written consent of both Parties; (b) By Company if Agent (i) breaches any covenant, term, or condition contained in this Agreement, or (ii) fails or refuses to perform the Marketing Services to be provided by Agent pursuant to this Agreement; 3 (c) By Company if Company discovers an existing viable alternative to deliver the Company's production in the Buena Vista prospect acreage to a market which provides a higher netback to Company which was not previously introduced by Agent; and (d) By Company pursuant to Section 9(b)(i) . If either Party terminates this Agreement, then Company shall not be obligated to enter into a Natural Gas Purchase Agreement with Agent. In the event this Agreement is terminated, all obligations of Section 4, 5 and 8 shall survive for a period of four (4) years beyond the termination. (a) " Company Group " shall mean all of (i) Company, (ii) all of those persons holding ownership interests, of any kind, in Company, (iii) all of Company's partners, joint venturers, co-lessees, and affiliates, and (iv) with respect to all of the foregoing, all of each such person's respective managers, members, stockholders, shareholders, partners, joint venturers, officers, directors, employees, agents (other than members of Agent), representatives, invitees, contractors and subcontractors of every tier, assigns and successors, and insurers and underwriters. (b) Agent shall release, defend, and indemnify Company Group and hold Company Group harmless from and against any claims, demands, causes of action (whether in tort, contract or otherwise), loss, expense, or damage which Company Group shall suffer or sustain in favor of any party, including but not limited to any judgment, award, settlement, attorneys' fees and other costs or expenses as they are incurred in connection with the investigation of, preparation for and defense of any actual or threatened action, proceeding or claim, (1) by reason of any breach by Agent of the terms of this Agreement or (2) by reason of any acts or omissions arising out Agent's performance, or attempted performance of the Marketing Services hereunder, "regardless of fault." Regardless of fault SHALL MEAN WITHOUT REGARD TO THE CAUSE(S) THEREOF INCLUDING, WITHOUT LIMITATION, PRE-EXISTING CONDITIONS, WHETHER SUCH CONDITIONS BE PATENT OR LATENT, IMPERFECTION OF MATERIAL, DEFECT OR FAILURE OF EQUIPMENT, BREACH OF REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED), ULTRAHAZARDOUS ACTIVITY, STRICT LIABILITY, TORT, BREACH OF CONTRACT, BREACH OF STATUTORY DUTY, BREACH OF ANY SAFETY REQUIREMENT OR REGULATION, OR THE NEGLIGENCE OF ANY PERSON OR PARTY, INCLUDING THE INDEMNIFIED PARTY OR PARTIES, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT AND/OR CONCURRENT, ACTIVE OR PASSIVE, OR ANY OTHER THEORY OF LEGAL LIABILITY. 4 (c) Subject to SECTION 8(d) below, but notwithstanding anything else contained in this agreement to the contrary, neither Party shall be liable to the other Party for, and each Party hereby releases the other Party from, any and all indirect, special, punitive, exemplary or consequential damages or losses (collectively, " Consequential Damages ") incurred by such Party, including, but not limited to, damages or losses for lost production, lost revenue, lost product, lost profits, lost business or business interruptions, REGARDLESS OF FAULT. (d) REGARDLESS OF FAULT, the limitation of damages agreed to in Paragraph 8(c) above shall not apply to "pass-through" Claims for Consequential Damages that could otherwise be made under the "knock-for-knock" indemnity provisions of this section above. 9. Natural Gas Purchase Agreement . (a) Natural Gas Purchase Agreement . Prior to Company's flow of initial production, the Parties shall enter into a GPA in substantially the same form attached hereto as Exhibit B , whereby Agent shall purchase and take title to Company's natural gas at Company's wellhead receipt point(s). (b) Provisions . If the Parties enter into a Natural Gas Purchase Agreement, such agreement shall include the following provisions: (i) Term . The " Initial Term " for such Natural Gas Purchase Agreement shall be three (3) years commencing on the first day of production. In order to ensure sufficient takeaway capacity on downstream gathering and or transmission pipeline(s) for Company's production, the Parties may enter into agreements (" Service Agreements ") beyond the initial three (3) year Initial Term, subject to Company's sole discretion. In the event the Parties enter into such subsequent Service Agreements, the term of the Natural Gas Purchase Agreement between the Parties shall be extended (" Extended Term ") for a term equivalent to the term of the Service Agreement. Provided there is no Extended Term after the two (2) year anniversary of the Initial Term, then Company shall have the right to solicit competing bids from other parties. In the event Company receives a competing bid that Company determines is superior to Agent's pricing, Company shall provide Agent the competing bid on letter head of competing company. After Agent's receipt of such competing bid, Agent shall have sixty (60) days to match or exceed the competing bid (exclusive of Agent's Fee). In the event Agent is unable to match or exceed the competing bid (exclusive of Agent's Fee) the Parties shall be released from any further obligation to one another and all existing agreements shall be deemed terminated. 5 (ii) Payment . Agent will remit payment to Company "net" of all fees. These fees include, but are not limited to, gathering, compression, processing, treating and marketing. Payment shall be made pursuant to Exhibit B, "Rates." (iii) NGLs . Agent shall purchase Company's NGLs (if present). (iv) Nominations and Scheduling Responsibilities . Agent shall handle all nominations required on all system/facilities and downstream facilities, as well as any other scheduling responsibilities required to effectuate efficient delivery of Company's residue gas. (v) Revenue Distribution, Joint Interest Billing and 1099 Reporting . If Company so desires and requests, Agent shall provide revenue distribution, 1099 reporting and joint interest billing. (a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. Company and Agent agree that in the event of a dispute arising between the Parties, the Parties agree to subject themselves to the jurisdiction of the District Courts of Harris County, Texas. (b) Modifications . No provision of this Agreement may be changed or modified, except by written agreement signed by the Parties. (c) Legal Compliance . Agent agrees to abide by all applicable laws and regulations, both state and federal, in the performance of his duties provided for in this Agreement. (d) Entire Agreement . This Agreement contains the entire understanding of the Parties in connection with its subject matter and supersedes all previous verbal or written agreements. (e) Notices . Any notice required or permitted to be given under this Agreement shall be in writing and shall be considered to have been given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by e-mail (with written confirmation or receipt) or (iii) when received, if sent by a recognized overnight delivery service, in each to the appropriate addresses and e-mail addresses set forth below (or to such other addresses as a Party may designate by written notice to the other Party). Agent at:
SEI
Energy, LLC 6 Company
at: Mainland Resources, Inc.
(f) Invalidity . If any of the provisions of this Agreement shall be held invalid, that invalidity shall not affect any other provisions which can be given effect without the invalid provisions. To this end, the provisions of this Agreement are intended to be and shall be deemed severable. (g) Descriptive Headings . The descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of its provisions. (h) Binding Effect . This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and assigns. (i) Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument. Signature Page Follows 7 This Agreement has been executed as of the Effective Date stated above. MAINLAND RESOURCES, INC. ("Company") By: "Nick Atencio"
SEI ENERGY, LLC ("Agent")
Exhibit A RATES Rates effective for Marketing Services performed by Agent: Once the Parties enter into a GPA, the price paid to Company shall be equal to 100% of the weighted average sales price for Company's production less Buyer's Fee Structure (below), less any and all applicable fees due, including, without limitation, gathering, treating, and processing fees, as set forth in the GPA. The Buyer's Fee Structure is as follows: Buyer's Fee Structure
Agent shall remit one-hundred percent (100%) of NGL revenue to Company or Company's designee attributable to Company's NGL production and delivery.
Exhibit B
GAS PURCHASE AGREEMENT
This Gas Purchase Agreement (" Agreement ") is made and entered into this 1st day of _____________, 2011 by and between SEI Energy, LLC (" Buyer ") and Mainland Resources, Inc. (" Seller "). WHEREAS, Seller and Buyer previously entered into a Marketing Services Agreement dated January 19, 2011, in which Buyer agreed to develop a marketing plan for Seller's gas produced within the Dedicated Acreage in exchange for Seller entering into this Agreement; WHEREAS , Buyer has satisfied its obligations under the Marketing Services Agreement; WHEREAS, Seller has supplies of gas available for sale from time to time from the Dedicated Acreage; and WHEREAS , Seller desires to sell and Buyer desires to purchase | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||




