DEVELOPMENT AGREEMENT
EXHIBIT
10.1
THIS
DEVELOPMENT AGREEMENT (“Agreement”), made and entered into effective as of
January 1, 2007 (the “Effective Date”), by and between BP
AMERICA PRODUCTION COMPANY
(“BP”),
a Delaware corporation, with an office at 000 Xxxxxxxx Xxxx Xxxxxxxxx, Xxxxxxx,
Xxxxx 00000, and TRUE NORTH ENERGY CORP. (“Company”), a Nevada corporation, with
an office at 0000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxx 00000 (individually,
a “Party” and collectively, the “Parties”).
WITNESSETH:
WHEREAS,
BP owns those certain oil, gas and mineral leases set forth in Exhibit “A” (the
"Leases") covering the Contract Area; and
WHEREAS,
subject to the terms, provisions and conditions set forth below, Company will
pay a disproportionate 11.67% of the Drilling Costs for the BP America
Production Company - A. Major Heirs No. 1 well (the “Initial Well”) to be
drilled at the location shown on the plat attached as Exhibit “C”, and in return
BP will assign to Company an 8.75% interest in the Initial Well and the BP
Interests, all as further provided in this Agreement.
NOW,
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements hereinafter contained, to be kept and performed by the Parties,
it is
hereby agreed by and between the Parties as follows:
ARTICLE
I
DEFINITIONS
Each
capitalized term in this Agreement has the meaning given to it in this Article.
All defined terms include the singular and the plural. All references to:
Articles and Sections refer to Articles and Sections in this Agreement, and
Exhibits refer to Exhibits attached to this Agreement.
1.1 “Additional
Well”
means
a
well, other than the Initial Well or a Substitute Well, drilled on the Contract
Area after Company earns its proportionate share of the BP Interests in
accordance with Section 4.1.
1.2 “Affiliate”
of
a
Party means (i) the parent company thereof or (ii) any Person directly or
indirectly controlled by, controlling, or under common control with that party
(for the purposes of this definition, ownership of fifty percent (50%) or more
of the stock, equity or property of such Person, or having the right to appoint
fifty percent (50%) or more of the members or owner representatives of such
Person are examples of forms of control).
1.3 “AFE”
means
an Authority for Expenditure prepared by a Party for the purpose of estimating
the costs to be incurred in conducting an operation on a well subject to this
Agreement and for providing such other information as may be specifically set
forth elsewhere in this Agreement.
1.4 “Agreement”
has
the
meaning given to it in the preamble.
1.5 “BP”
has
the
meaning given to it in the preamble.
1.6 “BP
Interests”
means
the Leases to the extent they are contained within the Contract
Area.
1.7 “BP
GROUP”
means
the following Persons, individually and collectively: BP and its Affiliates
and
the officers, directors, employees, agents, and representatives of all of those
Persons.
1.8 “Carried
Interests”
has
the
meaning given to it in Section 5.7.
1.9 “Casing
Point”
means
the time when (a) a well has been drilled to the Objective Zone, (b) all logs,
tests, and evaluations have been completed and the results thereof have been
furnished to the Parties, and (c) a recommendation has been made whether to
run
and set production casing and attempt to Complete the well as a producer or
to
abandon the well as a dry hole.
1.10 “Company”
has
the
meaning given to it in the preamble.
1.11 “Complete”
or
“Completion”
or
“Completing”
means
a
single operation intended to complete a well as a producer of oil and/or gas
in
one or more Zone(s), including, but not limited to, the setting of
pipe/production lining and casing tie-back, installing tubing, wellhead and
tree, perforating, plugging back, well stimulation, and testing.
1.12 “Completion
Costs”
means
the actual costs and expenses incurred in Completing a well subject to this
Agreement.
1.13 “Contract
Area”
means
the geographic area (covering all depths) defined by the following Units, as
they may be amended from time to time: (a) the 640-acre Xxxxx Xxxx Field 18,100’
TUSC RA SUW, created by the State of Louisiana Office of Conservation Order
No.
1063-A-1, effective November 29, 1979; (b) the 640-acre Xxxxx Xxxx Field 18,100’
TUSC RA SUCC, created by the State of Louisiana Office of Conservation Order
No.
1063-A-2, effective February 20, 1980; and (c) the 640-acre Xxxxx Xxxx Field
18,100’ TUSC XX XXXX, created by the State of Louisiana Office of Conservation
Order No. 1063-A-2, effective February 20, 1980. The “Contract
Area”,
as it
exists now, is outlined in red on the plat attached as Exhibit “B”, but in the
event of any conflict between the definition set forth in the preceding sentence
and Exhibit “B”, the definition set forth in the preceding sentence shall govern
and control.
1.14 “Data”
means
3D seismic data, in whatever form (reels, paper, film, tape, magnetic or
electronic, covering the Contract Area.
1.15 “Data
Owner”
means
a
Third Party who owns the Data.
1.16 “Drilling
Costs”
means
the actual costs and expenses incurred in drilling a well subject to this
Agreement beginning with the initiation of preliminary site preparation
activities through and including logging, testing and evaluating the well prior
to recommending whether to attempt a Completion. Drilling Costs shall include,
but shall not be limited to, the costs and expenses associated with permitting,
preparing the site, drilling to the Objective Zone, and evaluating any Zone(s)
in such well to which a Completion may be attempted, as well as any unplanned
or
unforeseen events such as fire, explosion, or loss of well control. Drilling
Costs shall also include brokerage, abstracting, and reasonable attorney fees
related to the preparation of drilling title opinions for such well. Drilling
Costs shall not include the cost to plug and abandon any well, including a
dry
hole, and shall not include any Completion Costs.
1.17 “Estimated
Drilling Costs”
has
the
meaning given to it in Section 2.1.
1.18 “Effective
Date”
has
the
meaning given to it in the preamble.
1.19 “Exhibits”
has
the
meaning given to it in Section 16.6.
1.20 “Force
Majeure”
has
the
meaning given to it in Section 9.1.
1.21 “Initial
Well”
has
the
meaning given to it in the recitals.
1.22 “Insurance
Requirements”
has
the
meaning given to it in Exhibit “G”.
1.23 “Leases”
has
the
meaning given to it in the recitals.
1.24 “Objective
Zone”,
with
respect to the Initial Well, means the base of the Tuscaloosa C-1 sand, being
the stratigraphic equivalent of the base of the Tuscaloosa C-1 sand as seen
at
18,484 feet (electrical log measurement) for the Amarex - Major Heirs No. 1
well, located in Section 00, Xxxxxxxx 0 Xxxxx, Xxxxx 10 East, Pointe Coupee
Parish, Louisiana, or eighteen thousand, five hundred feet measured depth
(18,500’ MD), whichever occurs first in the Initial Well. The term “Objective
Zone”,
with
respect to any Substitute Well or Additional Well, means the deepest Zone to
which the Substitute Well or Additional Well is proposed to be drilled as
provided in the relevant AFE for such well.
1.25 “Operating
Agreement”
has
the
meaning given to it in Section 5.5.
1.26 “Partial
Assignment”
has
the
meaning given to it in Section 4.1.
1.27 “Partial
Interest”
has
the
meaning given to it in Section 4.2.
1.28 “Party”
and
“Parties”
have
the meaning given to them in the preamble.
1.29 “Person”
means
any individual or entity, in the broadest sense possible, including but not
limited to a corporation, partnership, limited partnership, limited liability
company, trust, trustee, association or unincorporated
organization.
1.30 “Plants”
has
the
meaning given to it in Section 5.6.
1.31 “Properties”
mean
all of BP’s right, title and interest (real or immovable, personal or movable,
mixed, contractual or otherwise), as of the Effective Date, in, to and under
or
derived from the following:
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(a)
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the
Leases, as well as the production of oil, gas or other hydrocarbon
substances attributable thereto;
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(b)
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all
unitization, communitization and pooling declarations, orders and
agreements (including all units formed by voluntary agreement and
those
formed under the rules, regulations, orders or other official acts
of any
governmental entity or tribal authority having jurisdiction) to the
extent
they relate to the Initial Well and any Additional Well, or the production
of oil, gas or other hydrocarbon substances attributable
thereto;
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(c)
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all
product sales contracts, processing contracts, gathering contracts,
transportation contracts, easements, rights-of-way, servitudes, surface
leases, subsurface leases, farm-in and farm-out contracts, areas
of mutual
interest, operating agreements, balancing contracts and other contracts,
agreements and instruments to the extent they relate to the Initial
Well
and any Additional Well, or the production of oil, gas or other
hydrocarbon and non-hydrocarbon substances attributable
thereto;
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(d)
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all
personal or movable property, improvements, fixtures and other
appurtenances, to the extent situated upon and exclusively used,
or
situated upon and held exclusively for use in connection with ownership,
operation, maintenance or repair of the interests described in the
Leases,
or production of oil, gas or other hydrocarbon and non-hydrocarbon
substances attributable thereto, including all xxxxx (whether producing,
shut-in, injection, disposal, water supply or plugged and abandoned),
gathering and processing systems, platforms, buildings, pipelines,
compressors, meters, tanks, equipment, machinery, tools, utility
lines,
permits, licenses, imbalances and suspense funds;
and
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(e)
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all
partnerships (tax, state law or otherwise) affecting any of the items
enumerated above.
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1.32 “Rig
Release Date”
has
the
meaning given to it in Section 3.2.
1.33 “Seismic
Use Agreements”
means
those agreements between BP and the Data Owner governing BP’s rights and
obligations concerning the Data.
1.34 “Substitute
Well”
means
a
well proposed within one (1) year of the Rig Release Date and drilled by BP
within the Contract Area, all in accordance with Section 3.2.
1.35 “Third
Party”
means
a
Person other than a Party or an Affiliate of a Party.
1.36 “Unit”
means
a
compulsory unit established by the Commissioner
of the Office of Conservation within the State of Louisiana Department of
Natural Resources
pursuant
to Chapter
39 of Part XIX of Title 43 of the Louisiana Administrative Code, as same may
be
amended from time to time.
1.37 “Well
Information”
has
the
meaning give to it in Section 2.2
1.38 “Zone”
or
“Zone(s)”
means
a
stratum of earth containing or thought to contain a common accumulation of
oil
and/or gas separately producible from any other common accumulation of oil
and/or gas.
ARTICLE
II
DRILLING
AND COMPLETING THE INITIAL WELL
2.1
BP
has
commenced drilling operations for the Initial Well, and, except as provided
elsewhere in this Agreement, BP shall continue drilling the Initial Well with
due diligence to the Objective Zone and perform all logging and testing
operations to which the Parties agree. Company shall pay 11.67% of the Drilling
Costs of the Initial Well, regardless of whether the Initial Well is
successfully drilled to the Objective Zone. BP has estimated that Drilling
Costs
will be approximately FOURTEEN MILLION, EIGHT HUNDRED SIXTY TWO THOUSAND DOLLARS
($14,862,000) (the “Estimated Drilling Costs”) for the Initial Well. Company
shall pay its share of Estimated Drilling Costs, being ONE MILLION, SEVEN
HUNDRED THIRTY FOUR THOUSAND, THREE HUNDRED NINETY FIVE DOLLARS ($1,734,395),
at
execution of this Agreement via wire transfer according to the wiring
instructions set forth in Exhibit “I”, but Company will pay its share of actual
Drilling Costs in accordance with this Article II and Section 5.4.
2.2 When
and
if Casing Point is reached in the Initial Well, BP shall give written notice
to
Company of such occurrence, and such notice shall state whether BP proposes
to
attempt to Complete the Initial Well as a producer, whether in the Objective
Zone or in a shallower Zone, or to abandon the Initial Well as a dry hole.
The
notice shall be accompanied by all well information and data set forth in
Exhibit “D” (the “Well Information”), unless such information has been
previously furnished to Company.
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(A)
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If
BP reaches Casing Point and proposes to Complete the Initial Well
as a
producer, whether in the Objective Zone or in a shallower Zone, such
notice shall also include a completion AFE. The completion AFE shall
include, at a minimum, an estimate of Completion Costs for the Initial
Well. Company shall have forty-eight (48) hours (exclusive of Saturday,
Sunday and holidays) from receipt of the notice to elect, by written
notice, whether it will participate in accordance with Section 2.3.
BP
shall not Complete the Initial Well until Company has notified BP
in
writing whether or not it will participate or until forty-eight (48)
hours
(exclusive of Saturday, Sunday and holidays) have elapsed since Company’s
receipt of BP’s notice. Failure to respond within the time period allowed
shall be deemed to be an election not to participate in the Completion
of
the Initial Well.
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(B)
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If
BP reaches Casing Point and proposes to abandon the Initial Well
as a dry
hole, (i) BP shall plug and abandon the Initial Well in accordance
with
Section 2.6, and (ii) Company shall have no right or option to takeover
the Initial Well.
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2.3 If
BP
proposes to Complete the Initial Well and Company timely elects to participate
in such Completion attempt in accordance with Section 2.2(A), Company shall
pay
8.75% of the Completion Costs associated with the Initial Well and 8.75% of
the
cost of any newly acquired surface equipment associated with the Initial Well
beyond the wellhead connections (including but not limited to stock tanks,
separators, treaters, pumping equipment, piping, and metering
devices).
2.4 If
BP
proposes to Complete the Initial Well and Company elects not to participate
in
such Completion attempt, or is deemed not to participate, BP may nonetheless
continue with such operation and carry Company’s proportionate part of
Completion Costs. If the Completion attempt is ultimately not successful, BP
shall abandon the Initial Well in accordance with Section 2.6 or propose to
Complete the Initial Well in another Zone under the provisions of Section 2.2
(and Company shall be given another election to participate in such newly
proposed Completion). If the Completion attempt results in the production of
oil
and/or gas in paying quantities, the Initial Well shall be operated by BP at
the
expense and for the account of BP and other parties who agreed to participate
in
the Completion attempt. By electing not to participate in any Completion
attempt, or being deemed not to participate in any Completion attempt, Company
shall be deemed to have relinquished to BP, and BP shall own and be entitled
to
receive, all of Company’s interest in the Initial Well and share of production
therefrom until the proceeds of the sale of such share, calculated at the well,
or market value thereof if such share is not sold (after deducting applicable
ad
valorem, production, severance, windfall profits, and excise taxes, royalty,
overriding royalty and other interests payable out of or measured by the
production from the Initial Well accruing with respect to such interest until
it
reverts), shall equal the total of the following:
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(A)
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twenty
six and one-quarter percent (26.25%) of the Completion Costs associated
with the Initial Well and twenty six and one-quarter percent (26.25%)
of
the cost of any newly acquired surface equipment beyond the wellhead
connections (including but not limited to stock tanks, separators,
treaters, pumping equipment, piping and metering devices) (i.e.,
300% non-consent penalty on a non-promoted basis);
and
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(B)
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eight
and three quarters percent (8.75%) of the cost of operation of the
Initial
Well commencing with first production and continuing until Company’s
interest shall revert to it in accordance with this Section 2.4
(i.e.,
100% non-consent penalty on a non-promoted
basis).
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2.5 Company
shall bear its proportionate part, being eight and three quarters percent
(8.75%), of any severance, production and gathering taxes and any other taxes
imposed or measured by the volume or value of production from the Initial Well,
including, but only by way of illustration, excise taxes and windfall profit
taxes, whether enacted by federal, state or local authority.
2.6 The
Initial Well shall be plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of the parties who participated
in
the cost of drilling the Initial Well. Company’s proportionate share of the
cost, risk and expense to plug and abandon the Initial Well shall be eight
and
three quarters percent (8.75%).
ARTICLE
III
SUBSTITUTE
XXXXX
3.1
If,
prior
to reaching Casing Point in the Initial Well, BP should encounter geological
or
mechanical conditions which render further operations impracticable or
economically infeasible, in the sole reasonable opinion of BP, BP shall (i)
give
written notice of such occurrence to Company, and (ii) such notice shall state
whether BP proposes to attempt to Complete the Initial Well in a shallower
Zone
or to abandon the Initial Well as a dry hole.
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(A)
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If
BP proposes to Complete the Initial Well without reaching the Objective
Zone, such notice shall also include a completion AFE. The completion
AFE
shall include, at a minimum, an estimate of Completion Costs for
the
Initial Well. Company shall have forty-eight (48) hours (exclusive
of
Saturday, Sunday and holidays) from receipt of the notice to elect,
by
written notice, whether it will participate in accordance with Section
2.3. BP shall not Complete the Initial Well until Company has notified
BP
in writing whether or not it will participate or until forty-eight
(48)
hours (exclusive of Saturday, Sunday and holidays) have elapsed since
Company’s receipt of BP’s notice. Failure to respond within the time
period allowed shall be deemed to be an election not to participate
in the
Completion of the Initial Well. If BP proposes to Complete the Initial
Well and Company elects not to participate in such Completion attempt,
or
is deemed not to participate, BP may nonetheless continue with such
operation and carry Company’s proportionate part of Completion Costs in
accordance with Section 2.4.
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(B)
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If
BP proposes to abandon the Initial Well as a dry hole, (i) BP shall
plug
and abandon the Initial Well in accordance with Section 2.6, and
(ii)
Company shall have no right or option to takeover the Initial Well.
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3.2 If
BP
does not drill the Initial Well to the Objective Zone, Company shall have the
right, but not the obligation, for a period of one (1) year from the date the
drilling rig used to drill the Initial Well is removed from the well site
location for the Initial Well (the “Rig Release Date”), to participate in the
drilling of a Substitute Well. BP shall have no obligation to drill a Substitute
Well, and Company shall have no right to propose a Substitute Well. If and
when
BP elects to drill a Substitute Well, BP shall provide Company with an AFE
for
the Substitute Well. The AFE for the Substitute Well shall include, at a
minimum, the surface and bottomhole location of the Substitute Well, the
Objective Zone, and the estimated costs for the Substitute Well as a dry hole
and as a producer. Company shall have thirty (30) days from receipt of such
written notice to elect whether it shall participate in such Substitute Well.
Failure to respond within the time period allowed shall be deemed to be an
election not to participate in the Substitute Well.
3.3 If
BP
proposes to drill a Substitute Well and Company timely elects to participate
in
such Substitute Well in accordance with Section 3.2, such Substitute Well shall
be treated for all purposes herein as the Initial Well (including, but not
limited to, Company’s obligation to pay 11.67% of the Drilling Costs for such
Substitute Well), except that the Objective Zone for such Substitute Well shall
be governed by the AFE for such Substitute Well.
3.4 If
Company elects not to participate in a Substitute Well, or is deemed not to
participate in a Substitute Well, this Agreement shall terminate except as
provided in Sections 6.2, 6.3, 6.4, and 6.5.
ARTICLE
IV
EARNING
RIGHTS
4.1 When
and
if the Initial Well is drilled to the Objective Zone and successfully Completed
as a well capable of producing oil and/or gas in paying quantities, BP shall
assign to Company, by partial assignment in the form attached hereto as Exhibit
“E”(the “Partial Assignment”), an eight and three quarters percent (8.75%)
working interest in the Initial Well and an eight and three quarters percent
(8.75%) interest in the BP Interests.
4.2 If
the
Initial Well is not drilled to the Objective Zone, for any reason, but the
Initial Well is successfully Completed as a well capable of producing oil and/or
gas in paying quantities, BP shall assign to Company, by partial assignment
in
the form of the Partial Assignment, an eight and three quarters percent (8.75%)
working interest in the Initial Well and an undivided eight and three quarters
percent (8.75%) interest in the BP Interests, but limited as to the geographic
boundaries of the Unit in which the Initial Well is located and further limited
as to those depths between the surface and the stratigraphic equivalent of
the
deepest Zone penetrated in the Initial Well (the “Partial Interest”). BP and
Company shall conduct operations with respect to such Initial Well as if they
have entered into the Operating Agreement until such well or a Substitute Well
is drilled to and successfully Completed in the Objective Zone or until this
Agreement is terminated; provided, however, if this Agreement is to be
terminated without Company earning its proportionate share of the BP Interests
in accordance with Section 4.1, then the Parties shall enter into an operating
agreement in the form of the Operating Agreement except that the contract area
of such operating agreement shall be limited to the Partial Interest.
ARTICLE
V
JOINT
OPERATIONS
5.1
BP
does
not own but has a limited non-exclusive right to use the Data in accordance
with
the Seismic Use Agreements. Under the Seismic Use Agreements, BP may not sell,
assign, copy, transfer, display, exhibit or in any way reveal the Data, except
as authorized by and in compliance with the provisions of the Seismic Use
Agreements. Therefore, Company’s access to the Data shall be limited, and may be
prohibited all together upon execution of this Agreement, unless Company obtains
the consent or otherwise enters into a seismic license or seismic use agreement
with the Data Owner. BP
does not represent or warrant in any way, and expressly disclaims any
representations or warranties, of any kind, express, implied or otherwise,
that
it owns the Data or otherwise has the right to provide all or any portion of
the
Data to Company.
5.2 BP
shall
deliver to Company the Well Information derived from or attributable to the
Initial Well and any Substitute Well and Additional Well, if such Well
Information is acquired, obtained, or performed by BP.
5.3
The
Initial Well and each Substitute Well and Additional Well shall be under the
exclusive control of BP and the operation thereof shall be conducted in a
prudent and workmanlike manner. BP shall conduct all its activities under this
Agreement as a reasonable prudent operator, in a good and workmanlike manner,
with due diligence and dispatch, in accordance with good oilfield practice,
and
in compliance with applicable law and regulation, but in no event shall BP
have
any liability to Company for losses sustained or liabilities or obligations
incurred except such as may result from BP’s gross negligence or willful
misconduct.
5.4 Except
as
otherwise specifically provided in this Agreement, BP shall promptly pay and
discharge expenses incurred in drilling the Initial Well and each Substitute
Well and Additional Well pursuant to this Agreement and shall charge Company
with its proportionate shares upon the expense basis provided in Exhibit “C” to
the Operating Agreement, whether or not such Operating Agreement has been
executed by the Parties. BP shall keep an accurate record, in accordance with
generally accepted accounting principles, showing expenses incurred and charges
and credits made and received.
5.5 When
and
if the Initial Well is drilled to the Objective Zone and successfully Completed
as a well capable of producing oil and/or gas in paying quantities, BP and
Company shall enter into an operating agreement attached hereto as Exhibit
“F”
(the “Operating Agreement”) covering the Contract Area. The Operating Agreement
shall be executed contemporaneously with the Partial Assignment but shall be
effective on October 1, 2006. The Operating Agreement shall apply to all
Additional Xxxxx. In
the event of any conflict between the Operating Agreement and this Agreement,
this Agreement shall govern.
5.6 Unless
Company elects by thirty (30) days’ prior written notice to BP either to take in
kind or to separately dispose of its share of oil, gas and other hydrocarbons,
BP shall in good faith, to the extent it can do so, cause Company’s share of
production from the Initial Well and each Substitute Well and Additional Xxxxx
to be marketed and sold to either a Third Party or to an Affiliate of BP in
a
commercially reasonable manner, which terms shall not be less than on the same
terms and conditions as BP’s share of production from such xxxxx are sold. It is
recognized by the Parties that BP, or its predecessor, has provided at its
cost
or made arrangements with Third Parties to provide certain facilities beyond
the
wellhead (the “Plants”) needed for producing, storing, separating, gathering,
treating, processing and delivering production from the Initial Well and each
Substitute Well and Additional Well. It is agreed that BP will continue to
make
the Plants (as they or any contractual arrangements related thereto may be
modified, changed or upgraded) proportionately available to handle BP, Company
and Third Party production from the Contract Area. It is understood that a
proportionate share of the cost of maintaining and operating the Plants,
including depreciation or rental in lieu of depreciation and actual Third Party
costs, whether on a cash fee basis or on a retained volume basis, will be
allocated to the Parties on a “throughput” basis (being that portion of such
costs relating to the production volumes from the Initial Well or, if drilled,
any Substitute Well or Additional Well, as each may bear to the total production
volumes handled by the Plants, including any Third Party or BP volumes not
produced from the Initial Well or, if drilled, any Substitute Well or Additional
Well). Nothing
herein shall be construed to impart, transfer or convey any ownership interest
in the Plants to Company.
5.7 If
any
lands within the Contract Area (other than those lands covered by the Leases)
contain an interest which is unleased or leased to a Third Party and such
interest must be carried in order to conduct operations consistent with this
Agreement (such Third Party interest being a “Carried Interest”), Company shall
bear eight and three quarters percent (8.75%) of the Carried Interests in order
to conduct such operations.
5.8 At
all
times while this Agreement is in effect, Company shall carry insurance of the
types and in the minimum amounts set forth in Exhibit “G”. All such insurance
set forth in Exhibit “G” shall specifically name BP as an additional insured or
provide that the insurer shall waive all rights of subrogation against BP.
ARTICLE
VI
TERM
AND TERMINATION
6.1 Except
as
provided in Sections 6.2, 6.3, 6.4, and 6.5, this Agreement shall terminate
one
(1) year from the Rig Release Date, if such has not been terminated sooner
pursuant to the provisions hereof.
6.2 Notwithstanding
Section 6.1, if the Initial Well is drilled to the Objective Zone and
successfully Completed as a well capable of producing oil and/or gas in paying
quantities, this Agreement shall continue for so long as the Operating Agreement
remains in full force and effect.
6.3
Notwithstanding Section 6.1, this Agreement shall remain in full force and
effect for so long as Company participates in the drilling of a Substitute
Well
in accordance with Section 3.2.
6.4 Notwithstanding
anything in this Agreement to the contrary, if Company earns a Partial Interest
in the Initial Well and the BP Interests pursuant to Section 4.2, the Parties
shall first enter into an operating agreement in the form of the Operating
Agreement, except that the contract area of such operating agreement shall
be
limited to the Partial Interest, prior to termination of this
Agreement.
6.5 Notwithstanding
anything in this Agreement to the contrary, the expiration or termination of
this Agreement shall not release any of the Parties from any obligation or
liability which accrued prior to such expiration or termination (including
the
costs to plug and abandon the Initial Well and any Substitute Xxxxx and
Additional Xxxxx) or which, by the terms hereof, is intended to survive such
expiration or termination, including but not limited to Articles I, X, XI,
XII,
XIII, XIV, XV, and XVI and Sections 5.1 and 5.6, which terms shall survive
indefinitely.
ARTICLE
VII
ASSIGNMENT;
PREFERENTIAL RIGHTS
7.1
The
rights and obligations created by this Agreement may not be assigned by Company,
in whole or in part, without first obtaining BP’s written consent under this
Agreement, such consent not to be unreasonably withheld. If BP consents to
an
assignment by Company of all or part of its rights and obligations under this
Agreement, it is nevertheless understood and agreed that any such consent shall
not relieve Company of its primary liability for the performance of and
compliance with the terms and provisions hereof, and shall not have the effect
nor be construed to have the effect of waiving this limitation as to future,
further, or additional assignments. Any assignment of the rights and obligations
under this Agreement by Company without the consent of BP shall be voidable
by
BP.
7.2 Notwithstanding
anything to the contrary in any other agreement, including the Operating
Agreement, should Company desire to sell all or any part of its interest in
the
Initial Well, the BP Interests, or any Substitute Well or Additional Well,
Company shall promptly give written notice to BP, with full information
concerning its proposed disposition, which shall include the name and address
of
the prospective transferee (who must be ready, willing and able to purchase),
the purchase price, a legal description sufficient to identify the property,
and
all other terms of the offer. BP shall then have an optional prior right, for
a
period of fifteen (15) days after receipt of such written notice, to purchase
for the stated consideration on the same terms and conditions the interest
which
Company proposes to sell.
ARTICLE
VIII
NOTICE
8.1 All
notices and other communications required or desired to be given hereunder
must
be in writing and sent (properly addressed as set forth below) by (a) certified
or registered U.S. mail, return receipt requested, with all postage and other
charges fully prepaid, (b) hand or courier delivery, or (c) facsimile
transmission. Date of service by mail and delivery is the date on which such
notice is received by the addressee and by facsimile is the date sent (as
evidenced by fax machine generated confirmation of transmission); provided,
however, if such date received is a Saturday, Sunday or legal holiday, then
date
of receipt will be on the next date that is not a Saturday, Sunday or legal
holiday, and if a facsimile is received after 5:00 pm local time, then date
of
receipt will be the next date that is not a Saturday, Sunday or legal holiday.
Each Party may change its address by notifying the other Party in writing of
such address change, and the change will be effective thirty (30) days after
such notification is received by the other Party.
FOR
COMPANY:
0000
Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx,
Xxxxx 00000
Fax
No.:
(000) 000-0000
FOR
BP:
|
|
BP
America Production Company
|
000
Xxxxxxxx Xxxx Xxxxxxxxx
Xxxxxxx,
Xxxxx 00000
Attention:
Tuscaloosa Area Land Negotiator
Fax
No.:
(000) 000-0000
ARTICLE
IX
FORCE
MAJEURE
9.1 If
either
Party is rendered unable, wholly or in part, by Force Majeure to carry out
its
obligations under this Agreement, upon such Party giving notice and reasonably
full particulars of such Force Majeure in writing to the other Party within
a
reasonable time after the occurrence of the cause relied upon, the obligations
of such Party, upon giving said notice, so far as such Party’s ability to
perform such obligations are materially affected by such Force Majeure, shall
be
suspended during the continuance of any inability so caused, and the cause
of
the Force Majeure as far as possible shall be remedied with all reasonable
dispatch. The term "Force Majeure" means one or a set of circumstances such
as
an act of God, strike, lockout or other industrial disturbances, act of the
public enemy, war, terrorism, blockade, riot, lightning, fire, storm, freezing,
flood, explosion, governmental action, delay, restraint or inaction (whether
said government's jurisdiction or authority be actual or assumed), including
without limitation, governmental action or inaction relating to the permitting
of xxxxx, and any other cause, circumstance or condition (except financial)
whether of the kind herein enumerated or otherwise, not reasonably within the
control of the Party claiming Force Majeure. The above requirement that any
Force Majeure shall be remedied with all reasonable dispatch shall not require
the settlement of strikes, lockouts or other labor difficulty by acceding to
the
demands of opponents therein when such course is inadvisable in the discretion
of the Party claiming Force Majeure.
ARTICLE
X
RELATIONSHIP
OF THE PARTIES; TAX PARTNERSHIP
10.1 This
Agreement does not create, and shall not be construed to create, a partnership,
association, joint venture or fiduciary relationship of any kind or character
between the Parties, and shall not be construed to impose any duty, obligation,
or liability arising from such a relationship by or with respect to any Party.
10.2 For
federal and state income tax purposes only, the Parties shall be governed by
the
terms and provisions of the Badger Prospect Tax Partnership provisions attached
as Exhibit “H”.
ARTICLE
XI
ENTIRE
AGREEMENT AND CORPORATE AUTHORITY
11.1 When
executed by the duly authorized representatives of Company and BP, this
Agreement shall constitute the entire agreement between the Parties regarding
the subject matter herein and shall supersede and replace any and all other
writings, understandings, letters of intent or memorandums of understanding
entered into or discussed prior to the execution date hereof.
11.2 The
Parties hereto represent that, as of the date of the execution hereof, they
are
corporations duly authorized, validly existing and in good standing under the
laws of the state of their incorporation and are qualified and authorized to
do
business in the State of Louisiana and that all requisite corporate power and
authority to duly execute, deliver and effectuate this Agreement have been
duly
obtained.
ARTICLE
XII
LAWS
AND REGULATIONS; GOVERNING LAW
12.1 Each
Party shall comply with and conduct its operations hereunder in accordance
with
the Leases, and if applicable, assignment(s) and other agreements relating
to
the Properties, and all applicable laws, ordinances, rules, regulations, and
orders of all federal, state and local governmental authorities having
jurisdiction over the operations.
12.2 This
Agreement and all matters pertaining hereto shall be governed by and construed
under the laws of the State of Louisiana, except to the extent that the conflict
of law rules of said state would require that the laws of another state would
govern its validity, construction, or interpretation.
ARTICLE
XIII
DISCLAIMERS
AND LIMITATION OF LIABILITY
13.1 BP
hereby expressly disclaims any and all representations and warranties associated
with the Properties, express, statutory, implied or otherwise, including without
limitation: (a) warranty of title, except as expressly provided in the Partial
Assignment, (b) existence of any and all prospects, (c) geographic, geologic
or
geophysical characteristics associated with any and all prospects, (d)
existence, quality, quantity or recoverability of hydrocarbon and
non-hydrocarbon substances associated with the Properties, (e) costs, expenses,
revenues, receipts, accounts receivable, accounts payable, suspense fund or
gas
imbalances associated with the Properties, (f) contractual, economic or
financial information and data associated with the Properties, (g) continued
financial viability or productivity of the Properties, (h) environmental or
physical condition of the Properties, (i) federal or state income or other
tax
consequences associated with the Properties, (j) absence of patent or latent
defects, (k) safety, (l) state of repair, (m) merchantability, and (n) fitness
for a particular purpose; and Company (on behalf of itself and its Affiliates
and each of their officers, directors, agents, employees, successors and
assigns) irrevocably waives any and all claims it may have against BP GROUP
with
respect to the matters set forth in this Section 13.1.
13.2 Each
of the Parties expressly waives and agrees not to seek indirect, consequential,
punitive or exemplary damages of any kind with respect to any dispute arising
out of or relating to this Agreement or breach hereof.
13.3 Company:
(a) waives all rights in redhibition pursuant to Louisiana Civil Code Articles
2520, et
seq.;
(b) acknowledges that this express waiver shall be considered a material and
integral part of this Agreement and the consideration thereof; and (c)
acknowledges that this waiver has been brought to the attention of Company,
has
been explained in detail and that Company has voluntarily and knowingly
consented to this waiver of warranty of fitness and warranty against redhibitory
vices and defects for the Properties.
13.4 To
the extent applicable to the Properties, Company hereby waives the provisions
of
the Louisiana Unfair Trade Practices and Consumer Protection Law (La. R.S.
51:1402, et
seq.).
Company warrants and represents that it: (a) is experienced and knowledgeable
with respect to the oil and gas industry generally and with transactions of
this
type specifically; (b) posses ample knowledge, experience and expertise to
evaluate independently the merits and risks of the transactions herein
contemplated; and (c) is not in a significantly disparate bargaining
position.
ARTICLE
XIV
NOT
CONSTRUED AGAINST DRAFTER
14.1 The
Parties acknowledge that they have had an adequate opportunity to review each
and every provision contained in this Agreement, including the opportunity
to
submit the same to legal counsel for review and comment. Based on said review
and consultation, the Parties agree with each and every term contained in this
Agreement. Based on the foregoing, the Parties agree that the rule of
construction that a contract be construed against the drafter, if any, shall
not
be applied in the interpretation and construction of this
Agreement.
ARTICLE
XV
CONSPICUOUSNESS
OF PROVISIONS
15.1 The
Parties acknowledge that the provisions contained in this Agreement that are
set
out in “bold” satisfy any requirement at law or in equity that provisions
contained in a contract be conspicuously marked or
highlighted.
ARTICLE
XVI
MISCELLANEOUS
PROVISIONS
16.1 The
terms
and conditions of this Agreement (including the Exhibits) shall be binding
upon
and inure to the benefit of the Parties and their successors and permitted
assigns, and the terms, covenants and conditions shall be covenants running
with
the Properties and with each transfer or assignment of the Properties, or
portion thereof.
16.2 If
any
provision of this Agreement is declared invalid or unenforceable, such
declaration shall not affect the validity of the other provisions of this
Agreement, which other provisions shall continue and remain in full force and
effect.
16.3 This
Agreement may be executed in any number of counterparts, each of which shall
be
considered an original for all purposes.
16.4 The
article headings in this Agreement are inserted for convenience and
identification only, and are in no way intended to describe, interpret, define,
extend or limit the scope or intent of this Agreement or any provisions
hereof.
16.5 This
Agreement may be amended, modified, changed, altered or supplemented only by
written instrument (not electronic) duly executed by the parties hereto which
specifically refers to this Agreement.
16.6 The
following constitute all of the exhibits to this Agreement (the “Exhibits”) and
are attached hereto and incorporated by reference herein:
Exhibit
“A” Lease
Schedule
Exhibit
“B” Map
of
the Contract Area
Exhibit
“C” Plat
of
the Initial Well
Exhibit
“D” Well
Information Requirements
Exhibit
“E” Form
of
Partial Assignment
Exhibit
“F” Form
of
Operating Agreement
Exhibit
“G” Insurance
Requirements
Exhibit
“H” Badger
Prospect Tax Partnership Provisions
Exhibit
“I” Wiring
Instructions
EXECUTED
by the Parties on the date(s) indicated in the acknowledgments below, but
effective as of the Effective Date.
|
BP
AMERICA PRODUCTION COMPANY
|
|||
| /s/ Xxxxx Xxxx Xxxxxx | |||
|
Witness
|
|||
|
Xxxxx
Xxxx Xxxxxx
|
|||
|
Full
Name (Typed or Printed)
|
|||
| By: /s/ Xxxxxx X. Xxxxxx | |||
|
/s/
Xxxxx Xxxx Xxxxxx
|
Xxxxxx
X. Xxxxxx
Attorney-in-Fact
|
||
|
Witness
|
|||
| Xxxxx Xxxx Xxxxxx | |||
|
Full
Name (Typed or Printed)
|
| /s/ Xxxxx Xxxx Xxxxxx | |||
|
Witness
|
|||
|
Xxxxx
Xxxx Xxxxxx
|
|||
|
Full
Name (Typed or Printed)
|
|||
| By: /s/ Xxxx X. Folnovic | |||
|
/s/
Xxxxx Xxxx Xxxxxx
|
Name:
Xxxx
X. Folnovic
Title:
President
and Chief Executive Officer
|
||
|
Witness
|
|||
| Xxxxx Xxxx Xxxxxx | |||
|
Full
Name (Typed or Printed)
|
ACKNOWLEDGMENTS
| STATE OF TEXAS | § |
| § | |
| COUNTY OF XXXXXX | § |
On
this
7th
day of
February, 2007, before me appeared XXXXXX X. XXXXXX, to me personally known,
who, being by me duly sworn, did say that he is Attorney-in-Fact for BP AMERICA
PRODUCTION COMPANY, and that said instrument was signed on behalf of said
corporation.
Given
under my hand and seal this 7th
day of
February, 2007
| My Commission Expires: | /s/ Xxxxxx X. Xxxxxxxx | |
|
Notary Public, State of Texas |
||
| Xxxxxx X. Xxxxxxxx | ||
|
(NOTARY
SEAL OF XXXXXX
X. XXXXXXXX)
|
Name (Typed or Printed) |
|
|
131239-6
|
||
|
Notary’s
Identification Number
|
||
| STATE OF TEXAS | § |
| § | |
| COUNTY/PARISH OF XXXXXX | § |
On
this
7th
day of
February, 2007, before me appeared Xxxx X. Folnovic, to me personally known,
who, being by me duly sworn, did say that he or she is President and Chief
Executive Officer of or for TRUE NORTH ENERGY CORP., and that said instrument
was signed on behalf of said corporation.
Given
under my hand and seal this 7th
day of
February, 2007
| My Commission Expires: | /s/ Xxxxxx X. Xxxxxxxx | |
|
Notary Public, State of Texas |
||
| Xxxxxx X. Xxxxxxxx | ||
|
(NOTARY
SEAL OF XXXXXX
X. XXXXXXXX)
|
Name (Typed or Printed) |
|
|
131239-6
|
||
|
Notary’s
Identification Number
|
||
