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Exhibit 10.5
July 12, 2000
Mr. C. E. "Gene" Miller
Eagle Investments Inc.
P.O. Box 348
Traverse City, MI 49685-0348
Dear Gene,
After numerous discussions and detailed review, Miller Exploration
(hereinafter "MEXP") will agree to purchase the following interest from Eagle
Investments (hereinafter "Eagle"), subject to Board approval and (to the extent
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necessary) shareholder approval. As you are aware, we both need to present a
purchase and sale agreement that would withstand the highest scrutiny, due to
the roles you play both in MEXP and Eagle.
Pursuant to the letter dated April 1, 1999 (attached as Exhibit "A"), MEXP
had specific restrictions regarding the right to repurchase and certain rights
which have now expired. Subject to the terms and conditions described below,
Eagle will contribute capital, extend said agreement, and modify certain rights
as detailed below. It is therefore agreed:
1) Eagle will infuse five hundred thousand ($500,000) dollars into MEXP in
exchange for common stock at $1.35/share. Eagle will wire said funds
to MEXP within five (5) business days of Board approval or shareholder
approval if required.
2) MEXP will purchase an undivided 50% of Eagle's non-producing leasehold
in the Mississippi Salt Basin pursuant to the interest represented in
Exhibit "B" for a purchase price of two million ($2,000,000) dollars.
Consideration will be paid in the form of MEXP common stock @
$1.35/share.
3) MEXP's purchase of the above will be subject to shareholder approval of
the Guardian Energy Management Corporation equity infusion of five
million ($5,000,000) dollars.
4) Eagle will be granted warrants as follows:
<TABLE>
<CAPTION>
Warrants Exercise Term
-------- -------- ----
<S> <C> <C>
781,250 $1.35/share 1 year from the date of shareholder approval
1,250,000 $2.50/share 2 years from the date of shareholder approval
</TABLE>
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Mr. C. E. "Gene" Miller
Page 2
July 12, 2000
5) Eagle will be responsible for its proportionate share of the working
interest to drill the proposed wells on the salt domes pursuant to
Exhibit "B". Upon shareholder approval, MEXP will reimburse Eagle for
50% of its cost to drill and/or complete the respective wells.\
6) MEXP's purchase will exclude any rights with respect to Eagle's
interest in the existing wellbores, specifically the Allar 32-6 and
Frost 5-11 #1 (Moselle Dome), Allar #6 (Midway Dome), Campbell #1
(Centerville Dome), and Fairchild #1 (Richmond Dome). In the event of
a side track, mechanical difficulties or development location, Eagle
will retain its rights in said proposed well(s).
7) MEXP will acquire all rights in the Langston #1 drilling unit (Kola
Dome), excepting the Sligo Formation, which is the current producing
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zone in the Langston #1.
A) Eagle will reserve the Sligo formation rights in the 640-acre
drilling units immediately adjoining and abutting the Langston #1
drilling unit. In the event a subsequent well is proposed to the
Hosston formation, or a depth greater than the Sligo, Eagle will only
have the rights of participation to the extent of its retained
working interest in the deeper horizons. However, in the event that
the subsequent well(s) is completed in the Hosston or deeper
formation(s), and it is then determined within 120 days of reaching
total depth, that the zones tested are considered to be unproductive
or do not produce in paying quantities, and the well is subsequently
completed in the Sligo formation, Eagle will participate, at its
option, for its proportionate interest as if no sale had taken place
to MEXP. Upon an election by Eagle to participate, Eagle will
reimburse MEXP for its proportionate cost of the additional interest
acquired as if the well had been drilled to the Sligo formation. If
the above 120-day term expires and the well is subsequently completed
in the Sligo formation, Eagle will participate as if no sale had
taken place to MEXP for its rights in the Sligo formation completion
without reimbursement for the drilling.
8) MEXP will have an exclusive right of first offer on any sales of
Eagle's assets, including the remaining non-producing leasehold as
well as the producing leasehold, in the counties which contain the
existing MEXP leasehold base. MEXP will have a period of 15 days from
receipt of such offer to reject or
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Mr. C. E. "Gene" Miller
Page 3
July 12, 2000
accept the offer ("response period"). In the event of rejection (or
no response by MEXP before the end of the response period), Eagle
will be free and clear to sell or assign such interest to any third
party at the terms and conditions equal to or greater than the terms
offered to MEXP. The right of first offer will include a notice from
Eagle to MEXP its desire to sell the producing and/or non-producing
leasehold. At such time MEXP will have the right to present an offer
within the response period described. Additionally, in the event
Eagle receives an unsolicited offer from a third party, which is
acceptable to Eagle, Eagle will also give MEXP the right of first
refusal to accept the terms and conditions provided therein within
the response period. The right of first offer will expire on
December 31, 2000, unless extended by the mutual consent of both
parties.
9) The purchase contemplated will be subject to the approval of the
outside directors of MEXP. A copy of the Resolution approving said
sale will be provided to Eagle.
10) This letter agreement contains the entire agreement between the
parties with respect to the subject matter hereof, and there are no
promises, terms, conditions, or obligations other than those
contained herein.
11) This letter agreement and the rights and obligations of the party
will be governed and interpreted in accordance with the laws of the
State of Michigan without giving effect to principals of conflicts or
laws.
If the above meets with your approval, we would appreciate you signing in
the space provided below. This offer must be accepted on or before July 15,
2000, or the proposal contained herein will be null and void.
Sincerely,
MILLER EXPLORATION COMPANY
Kelly E. Miller
President and CEO
KEM/sc
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Mr. C. E. "Gene" Miller
Page 4
July 12, 2000
Agreed to and accepted this ______ day of ______________, 2000.
EAGLE INVESTMENTS INC.
By: _________________________________
C. E. "Gene" Miller, President
