FARMOUT AND PARTICIPATION AGREEMENT
EXHIBIT
10.8
FARMOR:
INNEX
California, Inc., 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxx, Xxxxx
00000.
FARMEE:
Brasada
Resources LLC, X.X. Xxx 0000, Xxxxxxxxxxx, Xxxxxxxxxx 00000.
NAME
OF AREA/PROSPECT:
Eel
River Project incorporating the Grizzly Bluff Field and Grizzly Bear Area,
Eel
River Basin, Humboldt County, California.
This
Farmout and Participation Agreement (“Agreement”)
is
between Xxxxxx and Farmee, and shall be effective as of the date it is executed
by Farmee as provided in Section 10.
1. EXHIBITS.
The
following exhibits are attached hereto and shall be considered part of this
Agreement:
Exhibit
A: General
Terms and Conditions which shall apply to this Agreement unless they are in
conflict with the terms and conditions provided in the body of this
Agreement.
Exhibit
B-1: Descriptions
of lands covered by this Agreement (“Farmout
Lands”).
Exhibit
B-2: Lease
Schedule describing the oil and gas leases subject to this
Agreement.
Exhibit
B-3: Outstanding
Requests-Lease Due Diligence.
Exhibit
C: Operating
Agreement.
Exhibit
D: Existing
Defined Prospects.
Exhibit
E: Letter
of
Intent.
Exhibit
F: Declaration
of Farmout and Participation Agreement and Operating Agreement.
2. PHASE
I.
2.1
PHASE
I EARNING XXXXX.
(a) Well
Specifications.
Subject
to rig availability, Farmee shall pay 100% of the costs to drill and complete
to
the pipeline connection, if a well is completed as a producer of oil and/or
gas
in paying quantities, or to drill and abandon, if a well is not completed as
a
producer of oil and/or gas in paying quantities, two xxxxx (“Phase
I Earning Xxxxx”),
strictly in compliance with the following well specifications:
(i) Location:
Within
the Grizzly Bear Area of Mutual Interest (“Grizzly Bear AMP), as shown on
Attachment 2 to Exhibit A to the Operating Agreement, with both xxxxx to be
at
locations mutually agreed to between Farmor and Farmee. Notwithstanding
paragraph 3.2 of Exhibit A (General Terms and Conditions), or otherwise, the
“drilling unit” for any Xxxxxxxx zone xxxxx referenced in section 4 of the
Settlement Agreement, General Release and Amendment to Joint Operating Agreement
among Forexco, Inc., Xxxx X. Xxxxxxxx, INNEX Energy, LLC, Ammonite Corporation
and Independence Energy, LLC dated July 1, 2004 (“Settlement
Agreement”)
shall
be limited to said zone insofar as it is within an 800 foot radius from such
well bore completion. For any other well, the “drilling unit” shall be 160 acres
(as nearly as practical in the shape of a square) and centered on the deepest
producing zone in the well, with the well located as nearly as practicable
in
the center thereof, or in the event the well is not completed as a producer
of
oil and/or gas in paying quantities, 40 acres around bottom hole.
(ii) Spudding
Deadline:
Not
applicable.
(iii) Required
Depths:
A well
to 4,500 feet (Xxxxxxxx zone), and a well to 5,700 feet or deep enough to test
the Lower Rio Dell 15 sand.
(iv) Setting
Casing/Plugging Deadline:
June
30, 2006.
2.2
OTHER
PHASE I OBLIGATIONS.
(a) Environmental
and Permitting Costs.
Farmee
shall pay 100% of the cost of obtaining an environmental impact report and
a
project development permit and any other related costs and fees (“EIR
and Permit Costs”).
(b) 2D
Seismic Costs.
In the
event of any purchase of 2D seismic data, Farmee will pay 100% of the costs
of
acquisition and reprocessing of existing 2D seismic data (the “2D
Seismic Costs”).
2
(c) Lease
Costs.
Farmee
shall pay 100% of the costs to maintain Farmor’s existing leases, as shown on
Exhibit B-2 to this Agreement, from the effective date of this agreement, and
to
acquire an additional 1,000 leasehold acres in the Eel River Basin Area of
Mutual Interest (“Eel
River Basin AMI”),
as
defined in Article XVI.E. of the Operating Agreement, within the Grizzly Bear
AMI or other defined prospects, as shown on Exhibit D to this Agreement
(collectively, “Lease
Maintenance and Acquisition Costs”).
Farmee shall be entitled to recover, from 75% of oil and gas revenues resulting
from the working interest production allocable to Farmor from the Phase I
Earning Xxxxx and any xxxxx drilled subsequent to the Phase I Earning Xxxxx,
125% of the portion attributable to Farmor’s working interest of the Lease
Maintenance and Acquisition Costs, the 2D Seismic Costs and the EIR and Permit
Costs, provided that any such recoveries that would otherwise be allocated
to
the recovery of the 3D Seismic Costs, pursuant to Section 3.2(a), shall not
be
allocated to the recovery of the Lease Maintenance and Acquisition Costs and
the
EIR and Permit Costs, but shall instead be allocated entirely to the recovery
of
the 3D Seismic Costs. After Farmee bas recovered 125% of the portion
attributable to Farmor’s working interest of the Lease Maintenance and
Acquisition Costs, the 2D Seismic Costs and the EIR and Permit Costs, Farmee
shall assign to Xxxxxx (i) an undivided 25% of its working interest in all
leases acquired by Fannies within the Grizzly Bear AMI or (ii) an undivided
30%
of its working interest in all leases acquired by Farmee outside the Grizzly
Bear AMI, pursuant to this Section 2.2(c). The burdens on the leases included
in
such assignment shall be no greater than the lessor royalties specified in
such
leases plus an overriding royalty interest to Xxxxxx on such leases equal to
the
Retained ORRI as defined in Section 5.3. If the leasehold acreage is not
acquired, the rights to the defined prospects outside the Grizzly Bear AMI
shall
revert to Xxxxxx, unless the failure to acquire such acreage is the result
of an
event of force majeure, defined as a condition beyond a party’s control such as,
but not limited to, war, strikes, fires, floods, acts of God, governmental
restrictions, and/or any other cause beyond the reasonable control of a party.
In the event that Farmee either (i) fails to fulfill its obligations under
Section 2.1 and 2.2 or (ii) elects not to drill or fails to drill the Phase
II
Earning Well as provided in Section 3.1, Fanner shall have the right to acquire
all of Farmee’s rights, title and interests in the Farmout Lands and in all
additional leasehold acres acquired by Farmee in the Eel River Basin AMI,
excluding leasehold acres, if any, assigned to Farmee pursuant to the drillsite
acreage assignment described in Section 2.3(b) (collectively, the “Farmee
Acreage”), in exchange for a cash payment equal to Farmee’s actual costs
(including lease rentals and brokerage costs) of acquiring the Farmee Acreage.
If Xxxxxx elects to acquire the Farmee Acreage on these terms, Xxxxxx’x
obligation pertaining to any unrecovered Lease Maintenance and Acquisition
Costs, 2D Seismic Costs and EIR and Permit Costs shall be canceled, and Farmee
shall make an assignment to Farmor of the Farmee Acreage, subject to reserving
an overriding royalty interest to Farmee equal to 1% of 8/8ths in all oil,
gas,
casinghead gas, condensate and other hydrocarbons that are or may be produced
from any xxxxx drilled on such acreage.
2.3
PHASE
I ASSIGNMENTS.
(a) Earned
Assignment.
As soon
as practicable after Xxxxxx is satisfied that Farmee has complied with all
of
its obligations under this Agreement with regard to the Phase I Earning Xxxxx,
including the well specifications provided in Section 2.1(a), and has reached
total depth in the second Phase I Earning Well, but regardless of whether a
Phase I Earning Well is completed as a producer of oil and/or gas in paying
quantities or is plugged and abandoned as a dry hole, Xxxxxx shall deliver
to
Farmee a drill site acreage assignment as described in Section
2.3(b).
(b) Drill
Site Acreage Assignment.
If a
drill site acreage assignment is earned, such assignment shall cover an
undivided 75% of Xxxxxx’x rights, title and interests (excluding any overriding
royalty interests held by Xxxxxx) in the Farmout Lands, subject to the reserved
overriding royalty interest described in Section 5, and subject to the following
area and/or depth limitations:
(i) Area:
Limited
to the “drilling units” for each Phase I Earning Well as defined in paragraph
3.2 of Exhibit A.
3
(ii) Depth:
Limited
to the interval between the surface of the ground and the stratigraphic
equivalent of the total depth drilled in the deepest Phase I Earning
Well.
3.
PHASE
II.
3.1
PHASE
II EARNING WELL.
(a) Farmee’s
Option.
If the
Farmee fulfills its Phase I obligations under Section 2, Farmee shall have
the
option, but not the obligation, to drill a “Phase
II Earning Well.”
(b) Well
Specifications.
Subject
to rig availability, Farmee shall pay 100% of the costs to drill and complete
to
the pipeline connection, if a well is completed as a producer of oil and/or
gas
in paying quantities, or to drill and abandon, if a well is not completed as
a
producer of oil and/or gas in paying quantities, the Phase II Earning Well
strictly in compliance with the following well specifications:
(i) Location:
Within
the Grizzly Bear AMI as shown on Attachment 2 to Exhibit A to the Operating
Agreement, at a location mutually agreed to between Farmor and Farmee.
Notwithstanding paragraph 3.2 of Exhibit A (General Terms and Conditions),
or otherwise, the “drilling unit” for any Xxxxxxxx zone xxxxx referenced in
section 4 of the Settlement Agreement shall be limited to said zone insofar
as
it is within an 800 foot radius from the well bore completion. For any other
well, the “drilling unit” shall be 160 acres (as nearly as practical in the
shape of a square) and centered on the deepest producing zone in the well,
with
the well located as nearly as practicable in the center thereof, or in the
event
the well is not completed as a producer of oil and/or gas in paying quantities,
40 acres around bottom hole.
(ii) Spudding
Deadline:
December 31, 2006.
(iii) Required
Depth:
At
Farmee’s sole option, either (1) 4,500 feet (Xxxxxxxx zone) or (2) 5,700 feet or
deep enough to test the Lower Rio Dell 15 sand.
(iv) Completion/Plugging
Deadline:
Not
applicable.
3.2
OTHER
PHASE II OBLIGATIONS.
(a) 3D
Seismic Survey.
Farmee
shall pay 100% of the costs of permitting, acquiring and processing one version
of a 3D seismic survey covering, subject to permit approvals, not less than
15
square miles in the Eel River Basin AMI during 2006 (“3D
Seismic Costs”).
Farmee shall be responsible for 75% of all seismic interpretation costs and
any
seismic reprocessing costs (“Post
Seismic Costs”),
and
partner shall be responsible for 25% of Post Seismic Costs. Farmee shall be
entitled to recover, from 75% of oil and gas revenues resulting from production
allocable to Xxxxxx from the Phase II Earning Well and my xxxxx drilled
subsequent to the Phase II Earning Well, 31.25% (125% of 25%) of the 3D Seismic
Costs. Farmee shall upon acquisition grant to Xxxxxx a license to the 3D seismic
data set acquired by Farmee pursuant to this Section 3.2(a), and after the
point
in time when Farmee has recovered 31.25% of the 3D Seismic Costs (“3D
Payout”),
Xxxxxx shall thereafter own a 25% interest in said seismic data set. During
the
period prior to the 3D Payout, Xxxxxx shall have a license to use the 3D seismic
data set for the mutual benefit of the joint venture contemplated by this
Agreement, but Xxxxxx shall have no other rights regarding such data, including,
without limitation, no right to license or sell such data to a third party.
Any
sale or transfer of any of the 3D seismic data set to a third party must be
approved by both Farmor and Farmee, which approval shall not be unreasonably
withheld, and the third party shall be required to execute a customary
confidentiality, agreement. Should Farmee sell any of the 3D seismic data prior
to the 3D Payout, 25% of the proceeds from all such sales shall be credited
toward Famine’s recovery of 31.25% of the 3D Seismic Costs.
4
3.3
PHASE
II ASSIGNMENTS.
(a) Earned
Assignments.
As soon
as practicable after (i) Xxxxxx is satisfied that Farmee has complied with
all
of its obligations under this Agreement with regard to the Phase II Earning
Well, including the well specifications provided in Section 3.1(b), and has
reached total depth on the Phase II Earning Well, but regardless of whether
the
Phase II Earning Well is completed as a producer of oil and/or gas in paying
quantities or is plugged and abandoned as a dry hole, and (ii) Farmor and Farmee
have received a fully processed version of the 3D seismic survey described
in
Section 3.2, partner shall deliver to Farmee a drill site acreage assignment
as
described in Section 3.3(b) and an additional acreage assignment as described
in
Section 3.3(c).
(b) Drill
Site Acreage Assignment.
If a
drill site acreage assignment is earned under Section 3.3(a), such assignment
shall cover an undivided 75% of Farmor’s rights, title and interests (excluding
any overriding royalty interests held by Xxxxxx) in the Farmout Lands, subject
to the reserved overriding royalty interest described in Section 5, and subject
to the following area and/or depth limitations:
(i) Area:
Limited
to the “drilling unit” for the Phase II Earning Well as defined in paragraph 3.2
of Exhibit A.
(ii) Depth:
Limited
to the interval between the surface of the ground down to the base of the Lower
Rio Dell (“LRD”)
formation, defined as the equivalent of the shale at a measured depth of 5,700
feet in the Standard Vicenus #1 well.
(c) Additional
Acreage Assignment.
If an
additional acreage assignment is earned under Section 3.3(a), the assignment
shall cover an undivided 75% of Farmor’s rights, title and interests (excluding
any overriding royalty interests held by Partner) in the Farmout Lands not
covered by the drill site acreage assignments described in Sections 2.3(b)
and
3.3(b), subject to the following area and/or depth limitations:
(i) Area:
No area
limitation.
5
(ii) Depth:
Limited
to the interval between the surface of the ground down to the base of the LRD
formation. If the Lower LRD formation, defined as the section below 5,800 feet
down to 6,500 feet in the Standard Vicenus #1 well, is penetrated by the deepest
of the Phase I Earning Xxxxx and the Phase II Earning Well, then the assignment
will be for depths from the surface of the ground down to the stratigraphic
equivalent of 6,500 feet in the Standard Vicenus #1 well.
Said
assignment shall include language to change the depth limitation of the leases
previously assigned in Sections 2.3 and 3.3(b), if applicable.
4.
PHASE
III.
4.1
PHASE
III EARNING WELL.
(a) Farmee’s
Option.
If the
Farmee fulfills its Phase II obligations under Section 3, Farmee shall have
the
option, but not the obligation, to drill a “Phase
III Earning Well.”
(b) Well
Specifications.
Farmee
shall pay 100% of the costs to drill and complete to the pipeline connection,
if
a well is completed as a producer of oil and/or gas in paying quantities, or
to
drill and abandon, if a well is not completed as a producer of oil and/or gas
in
paying quantities, the Phase III Earning Well strictly in compliance with the
following well specifications:
(i) Location:
Within
the Grizzly Bear AMI as shown on Attachment 2 to Exhibit A to the Operating
Agreement, at a location proposed by Farmee.
(ii) Spudding
Deadline:
One
year following the date that Farmee is presented with a final processed version
of the 3D seismic survey described in Section 3.2(a).
(iii) Required
Depth:
Deep
enough to test the Eel River, Xxxxxx and Bear River formations.
(iv) Completion/Plugging
Deadline:
Not
applicable.
(c) Completion
Attempts in Shallower Zones.
Should
tests of the Eel River, Xxxxxx or Bear River formations prove to be unsuccessful
and the Farmor and Farmee elect to attempt to complete the well in any shallower
zones, Farmor shall make an election to participate or not participate under
Article VI of the Operating Agreement. In the event that Farmor elects to
participate, it shall pay its 25% share of the costs of drilling the well to
a
depth of 100 feet below the lowest completion zone (or zone where a liner is
placed for the purposes of production). Farmor agrees to pay such costs in
the
form of a cash call prior to the completion attempt(s). Farmor shall also be
responsible for its 25% share of the completion costs of the well in such
shallower zones.
6
4.2
PHASE
III ASSIGNMENTS.
(a) Earned
Assignments.
As soon
as practicable after Xxxxxx is satisfied that Farmee has complied with all
of
its obligations under this Agreement with regard to the Phase III Earning Well,
including the well specifications provided in Section 4.1(b), and has reached
total depth on the Phase III Earning Well, but regardless of whether the Phase
III Earning Well is completed as a producer of oil and/or gas in paying
quantities or is plugged and abandoned as a dry hole, Xxxxxx shall deliver
to
Farmee an additional acreage assignment as described in Section
4.2(b).
(b) Additional
Acreage Assignment.
If an
additional acreage assignment is earned under Section 4.2(a), such assignment
shall cover an undivided 75% of Farmor’s rights, title and interests (excluding
any overriding royalty interests held by Xxxxxx) in the Farmout Lands not
covered by the acreage assignments described in Sections 2.3(b), 3.3(b) and
3.3(c), subject to the following area and/or depth limitations:
(i) Area:
No area
limitation.
(ii) Depth:
No
depth limitation.
Said
assignment shall include language to change the depth limitation of the leases
previously assigned in Sections 2.3 and 3.3, if applicable.
5. RESERVED
OVERRIDING ROYALTY INTERESTS.
5.1 Drill
Site Acreage Assignments.
In each
Drill Site Acreage Assignment by Farmor, Xxxxxx shall reserve an overriding
royalty interest equal to the following percentage of 8/8ths in all oil, gas,
casinghead gas, condensate and other hydrocarbons that are or may be produced
from the appropriate Earning Well. Such percentage shall be equal to the amount
by which 25%, reduced in proportion to the assigned interest, exceeds the sum
of
all royalties, overriding royalties and other payments which burden the assigned
interest at the time the Drill Site Acreage Assignment is made.
5.2 Additional
Acreage Assignments.
In each
Additional Acreage Assignment by Xxxxxx, Farmor shall reserve an overriding
royalty interest equal to the following percentage of 8/8ths in all oil, gas,
casinghead gas, condensate and other hydrocarbons that are or may be produced
from any xxxxx drilled on such acreage. Such percentage shall be equal to the
amount by which 21%, reduced in proportion to the assigned interest, exceeds
the
sum of all royalties, overriding royalties and other payments which burden
the
assigned interest at the time the Additional Acreage Assignment is
made.
5.3 Retained
Overriding Royalty Interest.
As to
the leases acquired by Farmee and the assignment of interest therein to Xxxxxx
pursuant to Section 2.2(b), Xxxxxx shall receive an overriding royalty interest
(“Retained
ORRI”)
which
is equal to the following percentage of 8/8ths in all oil, gas, casinghead
gas,
condensate and other hydrocarbons that are or may be produced from any xxxxx
drilled on such acreage. Such percentage shall be equal to (a) 1% plus (b)
the
product of 50% multiplied by (c) 100% less the lessor royalties specified in
the
leases less 80%; provided that the Retained ORRI shall never be less than 1%.
By
way of example only, the following is a calculation of the Retained ORRI,
assuming the lessor royalties specified in the leases are equal to 16.667%.
The
Retained ORRI would be equal to 1% + 50% x (100%-16.667%-80%) = 2.667%. In
this
example, the net revenue interest to the Farmee in the leases is
80.666%.
7
6.
OPERATING
AGREEMENT.
The
Operating Agreement attached as Exhibit C to this Agreement shall be executed
and become effective at the time this Agreement is executed. The Operating
Agreement shall govern all operations on jointly owned Farmout Lands, but shall
be subject to this Agreement. If there is any conflict between the Operating
Agreement and this Agreement this Agreement shall govern and
control.
7.
OTHER
PROVISIONS.
7.1 Delay
Rentals.
As
provided in Section 2.2(b), Farmee shall be responsible (either by paying
directly to the lessor or reimbursing Xxxxxx) for any and all delay rentals
required to maintain in effect the lease(s) included in the Farmout Lands until
Femme; has met its obligations under Phases I, II and III. From that point
forward, Farmor shall be responsible for its working interest share of such
costs. Farmee shall not be liable to Farmor for any loss resulting from a good
faith effort to make such payments.
7.2 Other
Operations in the Eel River Basin AMI.
Except
as otherwise provided herein, Farmee and Xxxxxx shall share the costs of all
other operations in the Eel River Basin AMI in proportion to their respective
working interest shares. Such operations include, but are not limited to, the
maintenance of the non-producing leases held by Farmor (except as provided
in
Section 2.2(c)), the acquisition of any new leases or the renewal or extension
of any existing leases (except as provided in Section 2.2(c)), the drilling
of
any xxxxx not otherwise provided for herein, and the acquisition, processing,
reprocessing and interpretation of any seismic data not otherwise provided
for
herein.
7.3 Acquisitions.
(a) Farmee
shall use commercially reasonable efforts to effect the acquisition of all
or
part of the interests held by Forexco, Inc. in the Grimly Bluff Field, and
by
Vintage Petroleum in the Xxxxxxxx Hill Field.
(b) Should
Fannies acquire all or part of the interests held by Vintage Petroleum in the
Xxxxxxxx Xxxx Field or by Forexco, Inc. in the Grizzly Bluff Field, Xxxxxx
shall
have the right, but not the obligation, to participate proportionately by paying
for (i) 25% of the interest acquired by Farmee, or (ii) 25% of Farmee’s working
interest in any well drilled to exclusively test reservoirs to which hydrocarbon
reserves have not been attributed, provided that the well is not a Fannies
obligation under the terms of the acquisition agreement(s).
7.4 New
Leases.
For all
existing defined prospects generated outside the Grimly Bear AMI, as shown
on
Exhibit D to this Agreement, Farmor shall be entitled to an overriding royalty
interest on new leases acquired for such prospects calculated in accordance
with
the formula for the Retained ORRI described in Section 5.3. Subsequent prospects
defined or developed after the Parties execute this Agreement shall be jointly
owned as provided in this Agreement, and no party shall be entitled to an
overriding royalty interest. The working interest for all new leases outside
the
Grizzly Bear AMI shall be 70% for Farmee and 30% for Xxxxxx.
8
7.5 Meetings.
Partner
and Farmee agree to hold quarterly meetings, in person or by conference phone
or
video, as appropriate, within five business days of the first day of each
calendar quarter m share data, discuss plans and issues regarding current and
the next succeeding quarter’s activities, and to propose operations and budget
requirements for the next succeeding quarter’s activities (for example a meeting
on April 1 to plan and discuss requirements for the second and third quarter’s
activities). Both parties shall provide each other with an agenda to be
addressed in the quarterly meetings a minimum of five business days prior to
the
meeting. This provision does not preclude additional meetings as necessary
which
may be called by providing an agenda of proposed topics and upon five days’
notice to the other party or parties.
7.6 Time
of the Essence.
Time is
of the essence in the performance of this agreement.
7.7 Lease
Exceptions.
Farmor
acknowledges that it has not been able to provide to Farmee certain outstanding
requests specified in the email memo from Xxxx Xxxxxx to Xxxxxx dated December
20, 2005, as shown on Exhibit B-3, requested by Farmee to enable Farmee to
satisfy itself as to the title, ownership and validity of certain leases listed
on Exhibit B-2. Xxxxxx and Farmee agree, if the title, ownership or validity
of
any such lease is subsequently determined to be materially different than as
shown on Exhibit B-2, to the detriment of Farmee, that (i) they shall use their
commercially reasonable efforts to agree upon a mutually acceptable modification
to the terms of this Agreement to reflect the impact of any such material
differences, and (ii) if Xxxxxx and Farmee are unable to agree upon such
modification of terms, such disagreement shall be subject to the provisions
of
Section 9.14 of Exhibit A to this Agreement.
8.
NOTICES
AND WELL INFORMATION.
8.1 General.
All
well data, information, notices and other communications to be given hereunder
shall be made in writing and shall be deemed duly given if sent by facsimile,
delivered personally with receipt acknowledged; mailed by registered mail return
receipt requested postage prepaid; or delivered by a recognized commercial
courier to the party at the address set forth below or such other address as
any
party shall have designated for itself by ten (10) days’ prior notice to the
other party.
| Farmor: |
0000
Xxxxxxxx Xxxxxxx
Xxxxx
000
Xxxxx,
Xxxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
|
| Farmee: |
X.X.
Xxx 0000
Xxxxxxxxxxx,
Xxxxxxxxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
|
9
Notice
is
deemed to have been duly received on the day personally delivered, on the day
after it is sent by facsimile, four (4) days after mailing by certified or
registered mail and the day after it is received from a recognized commercial
courier.
9.
AGREEMENTS
AFFECTING FARMOUT LANDS.
9.1 Farmee
Bound.
Except
as may be otherwise provided, Farmee shall be bound by any agreement which
affects the Farmout Lands, as of the effective date of assignment to Farmee.
Farmor shall not be liable for its good faith failure to disclose the existence
or effect of any such agreement to Farmee, either in this Agreement or
otherwise.
9.2 Other
Agreements.
Subject
to the disclaimer of liability contained in Section 9.1, Farmor believes (or
the
parties believe), in good faith, that the only other agreements affecting any
interest to be assigned to Farmee are the oil and gas leases described in
Exhibit B-2 and the following agreements:
(a) Settlement
Agreement, General Release and Amendment to Joint Operating Agreement among
Forexco, Inc., Xxxx X. Xxxxxxxx, INNEX Energy, LLC, Ammonite Corporation and
Independence Energy, LLC dated July 1, 2004 (defined in Section
2.1(a)(i));
(b) Gas
Purchase Agreement among CitiGas, LLC and INNEX Energy, LLC dated July 1,
2004;
(c) Assignment
effective as of July 2, 2004 from INNEX Energy, LLC in favor of Farmor;
and
(d) Letter
of
Intent dated August 23, 2005, as amended on October 20, 2005 and November 21,
2005, between affiliates of Farmee and Farmor (“LOI”),
the
terms of which are incorporated herein by this reference. A copy of the LOI
is
in the possession of Farmor and Farmee. If there is any conflict between this
Agreement and the LOI, this Agreement shall govern and control.
9.3 Assignment
of Other Agreements.
At any
time after Farmee is entitled to an earned assignment as provided in this
Agreement and upon request by Farmee, Farmor shall assign to Farmee the
applicable undivided interest in Farmor’s rights, title and interests in the
agreements described in Section 9.2(b) and 9.2(c) herein.
10.
EXECUTION.
Duplicate
originals of this Agreement are being executed. This Agreement shall be null
and
void, at Farmor’s option, if either (a) one of the duplicate originals of this
Agreement is not executed by Farmee and returned to Farmor by January 3, 2006
or
(b) Farmee fails to remit $50,000 to Farmor by January 3, 2006, representing
the
balance of the Project Fee owed to Farmor, as provided in Section 1a of the
LOI.
10
Farmor,
as provided in Section 1a of the LOI.
|
FARMOR
|
FARMEE | |||
|
By:
|
By:
|
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Title: President |
Title: Chief Financial Officer |
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| Date: January 3, 2006 | Date: January 3, 2006 | |||
11
