SERVICES AGREEMENT

 

This Services Agreement ("Agreement") is entered into effective as of March 01, 2011, by and between Source Capital Group, Inc. ("Source") and Bayou City Exploration, Inc. ("Bayou").

 

WHEREAS, Source operates a broker dealer business and in such capacity provides brokerage services to clients ("Broker Dealer Activities-);

 

WHEREAS, Source has served and expects to serve as a Dealer Manager for certain securities offerings of Bayou and its affiliates (the "Dealer Manager Services");

 

WHEREAS, Source desires to utilize the services of Bayou, as an independent contractor, to undertake the performance of certain administrative services for its branch office located in Allen, Texas (the "Source Branch"), including but not limited to office and secretarial services, accounting oversight, use of office facilities and equipment and other indirect expenses of operations; and

 

WHEREAS, in partial consideration of the Dealer Manager Services provided by the Source Branch to Bayou, Bayou agrees to perform such services and pay certain overhead expenses for the benefit of Source, and both Source and Bayou desire to have their rights, obligations and duties with respect to such services specified herein.

 

NOW, THEREFORE, in consideration of the mutual and independent covenants contained herein, the parties hereto agree as follows:

 

1.           Term of Agreement, Termination. This Agreement shall be effective Doran initial term of one year and shall thereafter be renewed automatically for successive one year terms unless terminated by Source or Bayou upon thirty (30) days written notice prior to the anniversary date of this Agreement or any renewal thereof. This Agreement shall otherwise remain in effect until terminated for any of the following reasons: (a) the dissolution and winding up of Source or Bayou; (b) the parties mutually consent to the termination; (c) either party is adjudicated banlu-upt, files a voluntary petition of bankruptcy, makes a general assignment for the benefit of creditors, or is unable to meet its obligations in the normal course of business as they fall due or if a receiver is appointed on account of insolvency, or (d) a material breach by Source or Bayou of any representation, warranty, covenant or obligations in this Agreement that is not cured within 30 days after written of the breach by the non-breaching party.

 

2.           Services and Facilities To Be Provided By Bayou to Source. Subject to the terms of this Agreement, Bayou agrees to provide the Source Branch any and all management and back office services required by Source other than Direct Services, as such term is defined herein, at no cost to Source. For purposes of the foregoing, the term "Direct Services" shall mean any and all services which directly relate to or are otherwise associated with the Broker Dealer Activities being undertaken by Source for its clients or the payment of any expenses related thereto that would have the effect of having Bayou, including but not limited to its officers, members, shareholders and/or employees, deemed to be a "person associated with" or an "associated person of' a Broker Dealer, as such terms are defined in Section 3(a)(18), (21) or (32) of the Securities Exchange Act of 1934, as amended. It is expressly understood that Bayou will not assist or otherwise have any involvement in the management or decision making process of Source incident to its Broker Dealer Activities but rather shall only be providing administrative and back office support services for such activities. The services to be provided by Bayou to Source shall include, but not be limited to:

 

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3.           Expenses to be Paid by Bayou. Bayou shall pay and agrees to assume all liabilities with respect to Overhead Expenses of the Source Branch. For purposes of this agreement, "Overhead Expenses" shall include rent, office equipment and supplies, secretarial and bookkeeping expenses, charges for furniture and fixtures, utilities, telephone, publications and subscriptions, service contracts for quotation equipment and news wires, data processing and other ordinary administrative and overhead expenses of Source. "Overhead Expenses" shall not include (a) license or other fees paid by Source to any government agency or industry regulatory group; (b) expenses such as salaries, draws, commissions, other compensation and remuneration, including sales incentives, payroll and other taxes, travel, entertainment and expenses of the directors, employees, sales representatives and agents of Source, fees of auditors, accountants, attorneys and other professionals or interest on indebtedness; or (c) any contractual obligations of Source. Notwithstanding the above, Source shall remain responsible for any decisions regarding the hiring and firing of its employees or the payments of salaries and or bonuses in connection with its business activities. Source shall have no obligation, directly or indirectly, to reimburse or otherwise compensate Bayou for paying Source Branch Overhead Expenses and /or assuming liabilities hereunder. Bayou shall provide Source with a schedule of Overhead Expenses of the Source Branch assumed hereunder which shall be reasonably calculated by Bayou on a monthly basis.

 

4.           Representations, Warranties and Covenants of Bayou. Bayou hereby represents and warrants that: (i) Bayou has and shall maintain adequate resources independent of Source to meet its obligations with respect to the services provided hereunder and Overhead Expenses it assumes and has an obligation to assume and pay under Sections 2 and 3 hereof; (ii) during the term of this Agreement, Bayou shall be solely liable for all expenses related to the services and Overhead Expenses it assumes and has an obligation to assume and pay under Sections 2 and 3 hereof, and Source shall have no direct or indirect liability for such expenses; (iii) Bayou shall provide Source with copies of its most current Federal income tax return as filed with the Internal Revenue Service within 30 days of the date each such return is filed during the term of this Agreement; and (iv) to the extent required by the Financial Industry Regulatory Authority ("MIRA"), Bayou shall provide access to relevant books and records of Bayou to enable Source to demonstrate compliance with applicable financial responsibility rules.

 

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A.   Assignment. This Agreement is not assignable, in whole or in part, by Source or Bayou, without the prior written consent of the other party hereto.

 

B.  Entire Agreement. This agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the subject matter hereof, and no other agreement, statement, or promise relating to the subject matter of this agreement that is not contained herein shall be valid or binding.

 

C.  Attorney's Fees. If any action at law or in equity is brought to enforce or interpret the provisions of this agreement, the prevailing party shall be entitled to reasonable attorney's fees in addition to any other relief to which he may be entitled.

 

D.  Governing Law. This Agreement shall be construed under and in accordance with the laws of the State of Kentucky without regard to any conflict of laws provisions.

 

E.  Amendment. This agreement may be amended by the mutual agreement of the parties hereto in writing.

 

 

 

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IN WITNESS WHEREOF, each of the undersigned has executed this Services Agreement effective as of the day and year first above written.

 

 

By: /s/ Kevin Lee Cline      

Name: Kevin Lee Cline

Title: Reg. Principal

 

 

By: /s/ Stephen C. Larkin      

Name: Stephen C. Larkin

Title: CFO

 

 

 

 

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