Document:

bayou_10q-ex1003.htm

 

Exhibit 10.3

 

 

 

TURNKEY DRILLING CONTRACT

 

THIS AGREEMENT is made and entered into as of the 5th day of October, 2011 by and between the parties herein designated as "Partnership" and "Contractor."

 

	
Partnership:

	
2011 Bayou City Year End Drilling Program, L.P.

	
Address:

	
632 Adams Street, Suite 710

	  	
Bowling Green, Kentucky 42101

	
Contractor:

	
Bayou City Exploration, 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 working interest portion, as per Exhibit "1", of the well to be drilled on the Partnership Prospect in Brooks County, Texas in search of oil and/or gas.

 

As a Management Fee for the supervision and management of the affairs of the Partnership during the work over, drilling and testing periods of Initial Operations, the Managing General Partner will receive an amount equal to the excess, if any, of the Turnkey Drilling Price over the actual cost of such operations. Likewise, during the completion period of Initial Operations, if completion is attempted on the Prospect Well, the Managing General Partner will receive an amount equal to the excess, if any, of the Turnkey Completion Price over the actual costs of such operations. The Managing General Partner intends to enter into one or more Operating Agreements (the "Operating Agreements") with third party operators which will perform certain services with respect to the work over, drilling, testing and, if applicable, completion of the Prospect Well. We cannot accurately predict the actual amount constituting compensation to be paid to any third party operator for its services under the Operating Agreements and therefore, it also cannot accurately predict the excess amount, if any, of the Turnkey Drilling Price over the actual cost of such operations that the Managing General Partner will receive. Costs to be expended under the Operating Agreements are a direct result of the work over, drilling, testing and completion risks encountered. During work over, drilling, testing and completion operations, a variety of conditions may be encountered, such as loss of circulation, blowouts, detachment and/or loss of drilling equipment, necessity for the purchase and installation of down-hole equipment to keep the wellbore intact, and repair of inadequate cement to hold production casing in place. As such costs are unpredictable with any degree of certainty, in the event of totally uneventful operations, compensation payable pursuant to the Operating Agreements could equal or exceed the actual work over, drilling, testing and completion costs. Likewise, in the event that a series of major difficulties are encountered, these costs could equal or exceed the amount of Initial Capital, and Bayou City Exploration, Inc. would be responsible for such excess costs. Bayou City Exploration, Inc. may use any funds it receives from management fees and/or profits, if any, for any purpose, including payment of General and Administrative Expenses of Bayou City Exploration, Inc. such as employee salaries and office expenses.

 

1.           LOCATION OF PARTNERSHIP WELL(S):

 

See Exhibit "1" attached hereto and made a part hereof.

 

 

  

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2.           TERMINATION DATE:

 

Contractor agrees to use its best efforts to complete operations for the acquisition, drilling and testing of the Partnership Well by March 31, 2012, and Contractor and the Partnership agree that time is of the essence under this Agreement.

 

3.           BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR:

 

 Contractor shall be paid at the following rate for the work performed hereunder:

 

Turnkey Drilling Price ($1,050,000) and Completion Price in the event that completion is attempted ($228,000) = Total $1,278,000.

 

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 Well shall be drilled to the depth as specified in Exhibit "1" or to the depth at which the production casing (production 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 Contractor, in its capacity as Managing General Partner of the Partnership (the "Managing General Partner"), along with other participating Partnership Well working interest owners, shall determine whether Contractor shall set a production string on the Prospect Well. In the event the Managing General Partner directs that drilling operations cease and to abandon the Partnership Well, Contractor shall plug the Partnership Well, remove all drilling apparatus from the well site and the obligations of the parties hereunder shall cease. In the event the Managing General Partner directs Contractor to set a production string on the Prospect Well and makes timely payment to the Contractor of the Completion Price, Contractor shall commence the operations necessary to attempt to complete the Prospect Well for commercial production, including the setting of a production 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 Well.

 

7.           STOPPAGE OF WORK BY THE PARTNERSHIP:

 

Notwithstanding the provisions of paragraph 3 with respect to the depth to be drilled, the Managing General Partner 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 the well(s), the Partnership will not receive a refund for any unused portion of the Drilling Price allocable to the discontinued well(s).

 

 

  

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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 Well or other property of the Partnership or the land upon which said Partnership 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, drill collars and tool joints, and the Partnership shall be under no liability to reimburse Contractor for any such loss.

 

 

 

  

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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 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.

 

16.           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.

 

 

  

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BAYOY CITY EXPLORATION, INC.

 

By:  /s/ Charles T. Bukowski, Jr.

Charles T. Bukowski, Jr., President and CEO

 

2011 BAYOU CITY YEAR END DRILLING PROGRAM, L.P., A KENTUCKY LIMITED PARTNERSHIP

 

By:  Bayou City Exploration, Inc.

         Managing General Partner

 

     By:  /s/ Stephen C. Larkin

             Stephen C. Larkin, Chief Financial Officer

 

 

 

 

 

 

  

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EXHIBIT "1" TO EXHIBIT "C"

October 5, 2011

 

The primary investment objective of the Partnership is, assuming all Units are sold, the acquisition of up to 6.25% Working Interest, which is approximately 4.6875% of the Net Revenue Interest in one well to be drilled on the Loma Blanca Prospect (the "Loma Blanca Prospect Well"). The Loma Blanca Prospect will consist of oil and gas leases in Brooks County, Texas and will be drilled to a depth sufficient to test the Vicksburg Loma Blanca formation. In addition to the drilling program described above, the 2011 Bayou City Year End Drilling Program includes a $660,000 investment in the BYCX Opportunity Fund I, LLC. The "Opportunity Fund" will remain open through June 30, 2012 and will be offered through participation in each drilling program. As each drilling program is sold out and completed, our partners benefit from the growth of the Fund in asset numbers and total value. The net effect is that partners will progress from owning a large percentage of a small number of assets to owning a small percentage of a large number of assets. Each addition to the Fund spreads the risk over a larger asset base throughout the Fund subscription period. The primary objective of the Opportunity Fund is to mitigate the risk associated with oil and gas investment. The Fund is a joint venture with Home Servicing, LLC of Baton Rouge, Louisiana and seeks to provide our partners with aggressive returns via investment in mortgage notes and land contracts purchased at significant discounts to existing balances. Greater details regarding this concept and the parties involved can be found herein.

 

 

 

 

 

 

 

 

6lantronix_10q-ex1001.htm

EXHIBIT 10.1

 

Fiscal Year 2012

PERFORMANCE AWARD AGREEMENT

In consideration of your performance and service with Lantronix, Inc., a Delaware corporation (the “Company), this Agreement is entered into as of this ____ day of _____, 2011 (“Effective Date”) by and between the Company and [EMPLOYEENAME] (the “Grantee” or “Employee”) pursuant to the terms of this Performance Award Agreement and Exhibits A and B attached hereto (collectively the “Agreement”).

This Agreement is the entire agreement between the Company and Grantee regarding the subject matter of this Agreement and supersedes and replaces any prior or existing discussions, negotiations, or agreements between the Grantee and the Company regarding any incentive bonus, project bonus, or discretionary bonus; not to include any Long Term Incentive Plan Agreement(s).

	
1.  

	
Eligibility.  The Performance Award (as defined below) is designed to provide performance-based incentive compensation for all eligible employees during the two six-month grant periods commencing on July 1, 2011 and ending on December 31, 2011 (“Grant Period A”) and the period commencing on January 1, 2012 and ending on June 30, 2012 (“Grant Period B”).  The Compensation Committee of the Company’s Board of Directors (the “Committee”) has the sole authority to determine eligibility to receive Performance Awards.  Grantees are selected by the Committee to receive a Performance Award.  In order to be eligible to receive any  portion of the Performance Award, Grantee must satisfy all of the following:

	
  

	
(a)

	
Grantee must have been employed by the Company, or any subsidiary of the Company, by September 30, 2011 in respect of Grant Period A, and April 1, 2012 in respect of Grant Period B, respectively, to be eligible for pro-rated awards and by July 1, 2011 and January 1, 2012 for Grant Periods A and B respectively, to be eligible for full awards;

	
  

	
(b)

	
Grantee must have a satisfactory performance rating as of the last day of the applicable Grant Period; and

	
  

	
(c)

	
Grantee must have continued employment with the Company, or any subsidiary of the Company, as of the last day of the applicable Grant Period to receive any portion of the award.

	
  

	 

	
2.  

	
Performance Award.  Subject to, and contingent upon, those conditions set forth in Section 3 below, and compliance with the requirements of this Agreement, by this Agreement, you are hereby eligible to be granted a target performance award as set forth in the applicable Exhibit which may be paid in either a cash award, or Company Common Stock through the grant of Restricted Stock Units under the terms and conditions of the Plan, or a combination of the two, at the discretion of the Committee.  Total number of Restricted Stock Units will be determined based on the fair market value of Company Common Stock as of, and immediate vesting will occur as of, the date that the Committee certifies Company performance for the applicable Grant Period, or as otherwise determined by the Committee or the Board of Directors.

    

  

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3.  

	
Conditions to Receipt of Performance Award.

     

	
  

	
(a)

	

The granting of any award hereunder by the Company shall be contingent upon the prior occurrence of each of the following:

   

	
(i)   

	
The performance metrics contained in the applicable attached Exhibit must be attained for a Performance Award to be earned.

	
(ii)   

	
The availability of an adequate number of authorized shares available for grant under the Plan.

     

The Committee and Board of Directors shall have the exclusive and final discretionary authority to determine: whether or not to issue the award, satisfaction of the contingencies set forth above, the form of any award (i.e., Restricted Stock Units vs. cash awards), and the frequency of the award on either an annual or semi-annual basis.

	
  

	
(b)

	
Performance Awards granted under the Agreement will be made through the form of either cash payment or the issuance of Company Common Stock or a combination of the two (the “Performance Award”) through the grant of Restricted Stock Units, under the terms and conditions of the Plan.  The award will be based on Employee’s job grade level, EBITDA and Revenue according to the then current Fiscal Year 2012 Annual Operating Plan and stretch plan, and Management by Objectives (MBOs), as defined in the applicable Exhibit.  If you meet the eligibility criteria set forth in Section 1 above, you will receive the Performance Award as set forth on the schedule in the applicable Exhibit.  To the extent that any Performance Award is granted hereunder, such Performance Award shall be granted to you at a time (to be determined by the Committee and/or the Board of Directors in their sole discretion) following the end of the applicable Grant Period but in no event later than March 15 of the year following the end of the applicable Grant Period.

    

	
4.  

	
Tax Obligations.  As a condition of the granting of the Performance Award, the Grantee agrees that the Company may withhold cash and/or a number of the shares subject to the Performance Award to meet tax withholding obligations, as may be necessary to discharge the Company’s obligations with respect to any tax, assessment, or other governmental charge imposed on property or income received by the Grantee pursuant to this Agreement and the Performance Award.

	
5.  

	
No Assignment.  This Agreement, and the benefits provided hereunder, may not be assigned by the Grantee by operation of law or otherwise.

	
6.  

	
Governing Law.  This Agreement and the legal relations between the parties shall be governed and construed in accordance with the internal laws of the State of Delaware, without effect to the conflicts of laws principles thereof.

   

  

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7.  

	
Key Definitions

     

	
  

	
(a)

	

“Annual Operating Plan (AOP)” means the plan that serves to lay out planned activities and corresponding monetary resources for the fiscal year, measured on a quarterly basis, including, but not limited to, Revenue and EBITDA.   The AOP may be revised in the discretion of the Company’s Board of Directors.

	
  

	
(b)

	

“EBITDA” means earnings before interests, taxes, depreciation, amortization, stock based compensation, and other one-time events at the discretion of the Company’s Board of Directors.

	
  

	
(c)

	

“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.

	
  

	
(d)

	

“Plan” means the 2010 Stock Incentive Plan as may be amended pursuant to applicable laws, Company articles or Company bylaws.

	
  

	
(e)

	“Revenue” means the total amount of money received by the Company for goods sold or services provided during a certain time period.

     

	
8.  

	
Notices.  Any notice required or permitted under this Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Grantee at the last address specified in Grantee’s employment records, or such other address as the Grantee may designate in writing to the Company.

	
9.  

	
Amendments.  This Agreement may be terminated, amended or modified at any time by an instrument in writing from the Company, in its sole discretion.  The Company reserves the right to administer, modify, or terminate the Agreement with or without notice.

	
10.  

	
Authority.  Except as otherwise set forth in this Agreement, the Committee shall administer the Agreement and shall have the exclusive and final discretionary authority and power to determine employee eligibility to participate and receive payment under this Agreement, to determine the amount of payment under this Agreement, to construe terms and provisions of this Agreement, and to exercise all other powers specified in this Agreement or which may be implied from the provisions of this Agreement.  The Committee also reserves the right, it its sole discretion, to determine individual Grantee eligibility under this Agreement.

The Committee has the authority, in its discretion to amend and rescind any of this Agreement’s terms or provisions, terminate this Agreement, and to make all determinations necessary for the administration of this Agreement.

	
11.  

	
Employment At-Will.  The employment of all employees of the Company, or any subsidiary of the Company, is terminable at any time by either party, with or without cause being shown or advance notice by either party.  The Plans and this Agreement shall not be construed to create a contract of employment for a specified period of time between the Company and any Grantee.

	
12.  

	
Rights as a Stockholder.  The Grantee shall have no rights as a stockholder of the Company with respect to any share of Common Stock of the Company underlying or relating to any Performance Award until the issuance of a stock certificate to the Grantee in respect of such Performance Award.

	
13.  

	
Headings.  The headings in the Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

   

	
14.  

	
Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

   

  

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IN WITNESS WHEREOF, this Agreement is made as of the Effective Date.

Lantronix, Inc.

By: ____________________________

Printed Name:

Tile:

Date:

ACKNOWLEDGED AND AGREED:

By: ____________________________

Printed Name:

Date:

 

 

 

 

  

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EXHIBIT A

GRANT PERIOD A

 

 

 

 

 

 

 

 

 

 

  

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EXHIBIT B

GRANT PERIOD B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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