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interest in the lease, the test well and
four subsequent wells drilled in the prospect. The Company has
sought to enforce its approximate 23.68% interest in the prospect
and sought damages or rescission, as well as costs and attorneys'
fees. The case was originally filed in Duval County, Texas on
February 25, 2000.
In mid March, 2000, the
defendants filed an original answer and certain counterclaims
against plaintiffs, seeking unspecified damages for slander of
title, tortious interference with business relations, and exemplary
damages. The case proceeded to trial before the Court (without
a jury) on June 19, 2000 after the plaintiffs' were found by the
court to have failed to comply with procedural requirements regarding
the request for a jury. After several days of trial the case was
recessed and later resumed on September 5, 2000. The court at
that time denied the plaintiffs' motion for mistrial based on
the court's denial of a jury trial. The court also ordered that
the defendants' counterclaims would be the subject of a separate
trial that would commence on December 11, 2000. The parties proceeded
to try issues related to the plaintiffs' claims on September 5,
2000. All parties rested on the plaintiffs' claims on September
13, 2000. The court took the matter under advisement and has not
yet announced a ruling. Defendants filed a second amended answer
and counterclaim and certain supplemental responses to request
for disclosure in which they stated that they were seeking damages
in the amount of $33.5 million by virtue of an alleged lost sale
of the subject properties, $17 million in alleged lost profits
from other prospective contracts, and unspecified incidental and
consequential damages from the alleged wrongful suspension of
funds under their gas sales contract with the gas purchaser on
the properties, alleged damage to relationships with trade creditors
and financial institutions, including the inability to leverage
the Slick Prospect, and attorneys' fees at prevailing hourly rates
in Duval County, Texas incurred in defending against plaintiffs'
claims and for 40% of any aggregate recovery in prosecuting their
counterclaims. In subsequent testimony, the defendants verbally
alleged $26 million of damages by virtue of the alleged lost sale
of the properties (as opposed to the $33.5 million previously
sought), $7.5 million of damages by virtue of loss of a lease
development opportunity and $100 million of damages by virtue
of the loss of a business opportunity related to BNP's alleged
inability to participate in a 3-D seismic project.
The Company had also alleged
that BNP Petroleum Corporation, Seiskin Interests, LTD and Pagenergy
Company, LLC breached a contract with the plaintiffs by obtaining
oil and gas leases within an area restricted by that contract.
This breach of contract allegation is the subject of an additional
lawsuit by plaintiffs in the 165th District Court in Harris County,
Texas. The defendants took the position that the claim must be
tried in the Duval County case. The Duval County court, without
issuing a formal ruling, took the position that this claim should
be included in the Duval County case. The Company was seeking
damages as a result of defendants' actions as well as costs and
attorneys' fees.
On December 8, 2000 the
Company entered into a Compromise and Settlement Agreement ("Settlement
Agreement") with the defendants with regard to the above described
litigation. Under the terms of the Settlement Agreement, the Company
and the defendants agreed to enter into an Agreed Order of Dismissal
with Prejudice of the litigation and, among other things, agreed
as follows:
1. Should a co-plaintiff to the Duval County
litigation secure a final judgment (without regard to appeals,
new trials or other such actions) in the trial court in Duval
County that results in such plaintiff being entitled to recover
a five percent or greater undivided interest in the Slick Prospect,
BNP will pay to Carrizo, at BNP's option, either $500,000 or an
amount equal to the judgment rendered in favor of such plaintiff.
2. Should the defendants secure a final
judgment (without regard to appeals, new trials or other such
actions) in the trial court in Duval County against a co-plaintiff,
the Company will be obligated to pay BNP an amount equal to five
percent of any percentage of the total judgment apportioned to
the Company in the case, such payment being limited however to
no more than five percent of 47.2 percent of the total judgment
entered in the case.
3. In the event the defendants and such
co-plaintiff reach a full and final settlement prior to the entry
of a written final judgment in the trial court in Duval County
(including but not limited to any type of agreed judgment or any
agreement that such co-plaintiff will not be ultimately liable
to BNP for the full amount of any judgment rendered in favor of
the defendants), the obligations described in (1) and (2) above
will be null and void. Also, in the event BNP and such co-plaintiff
both only obtain take nothing judgments in the case, such obligations
will be null and void.
4. Both the Company and the defendants released
each other from any and all claims, demands, actions or causes
of action relating to or arising out of the litigation.
The case proceeded to
trial on the counterclaims on December 11, 2000. BNP presented
evidence that its damages were in the amounts of $19.6 million
for the alleged lost sale of the properties, $35 million for loss
of the lease development opportunity, and $308 million for loss
of the opportunity related to participation in the 3-D seismic
project. During the course of the trial, the co-plaintiff presented
its motion for summary judgment on the counterclaims based on
the doctrine of absolute judicial proceeding privilege. The court
partially granted the co-plaintiff's motion for summary judgment
as it related to the filing of a lis pendens, but denied it with
regard to the other allegations of BNP. The court also granted
to co-plaintiff's plea in abatement relating to the breach
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