OVERRIDING ROYALTY AGREEMENT
Exhibit
10.01
THIS AGREEMENT dated as of the
10th
day of June, 2009
BETWEEN:
CONTACT EXPLORATION INC., a
body corporate, having an office in the City of Calgary, in the Province of
Alberta (“Contact”)
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and
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ELMWORTH ENERGY CORPORATION, a
body corporate, having an office in the City of Calgary, in the Province of
Alberta (“Elmworth”)
WHEREAS the Royalty Owner has
agreed to convey to the Royalty Payor the
Royalty Owner’s entire interest in the Royalty Lands subject to the reservation
of the Overriding Royalty.
NOW THEREFORE the parties
hereto enter into this Agreement in consideration of mutual covenants and other
good and valuable consideration, which the parties hereby
acknowledge.
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1.0
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DEFINITIONS
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The
definitions contained in the Overriding Royalty Procedure shall apply to this
Agreement and in addition:
a) “Overriding
Royalty Procedure” means the 1997 CAPL Overriding Royalty Procedure attached as
Schedule “B”.
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b)
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“Royalty
Lands” means those lands described in Schedule
“A”.
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c)
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“Royalty
Owner” means Contact.
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d)
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“Royalty
Payor” means Elmworth.
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e)
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“Effective
Date” means the 1st
day of May, 2009.
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2.0
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SCHEDULES
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The
following Schedules are attached hereto and made part of this
Agreement:
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a)
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Schedule
“A” which describes the Title Documents, the Royalty Lands and the
Encumbrances.
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b)
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Schedule
“B” which is the Overriding Royalty
Procedure
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3.0
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CONVEYANCE
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Royalty
Owner hereby conveys to Royalty Payor all of Royalty Owner’s undivided 30%
interest (the “Working Interest”) in the Royalty Lands and the Title Documents
subject to the reservation to Royalty Owner of an Overriding Royalty. Royalty
Payor shall assume all costs, expenses, risk and liability associated with the
Working Interest from and after the Effective Date. The parties hereto agree to
enter into a General Conveyance Agreement to evidence the agreement to sell,
assign, transfer and convey the Working Interest from Royalty Owner to Royalty
Payor as of the Effective Date
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4.0
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FURTHER
CONSIDERATION
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In
further consideration of Royalty Owner conveying the Working Interest in the
Royalty Lands to Royalty Payor, Royalty Payor hereby agrees to pay to Royalty
Owner the amount of $270,000.00. In consideration of this payment by Royalty
Payor, Royalty Owner hereby agrees to reimburse Royalty Payor for all
outstanding amounts payable by Royalty Owner to Royalty Payor up to the
Effective Date. The total amounts payable under this provision shall not exceed
$270,000.00 regardless whether such costs occurred before or after the Effective
Date. Upon settlement of these outstanding amounts, Royalty Payor shall relieve
Royalty Owner of any future obligations to reimburse Royalty Payor for any
outstanding costs and expenses associated with the Royalty Lands from and after
the Effective Date.
In
addition, Royalty Payor shall assume all of Royalty Owner’s liabilities and
future costs related to the reclamation of the well site and any access roads
associated with the well Oiltec et al Cogmagun #1 located at or near coordinates
45.082285 degrees North and 64.043977 degrees West. It is further understood and
agreed to by the parties that Royalty Payor will take over the surface lease for
the above referenced well and shall assume responsibility for the annual surface
rental payments from and after the Effective Date.
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5.0
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AREA OF MUTUAL
INTEREST
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The
provisions of Clause 6, Area of Mutual Interest (“AMI”), of the Farmout
Agreement dated May 10, 2007 between Royalty Owner and Royalty Payor, shall
remain in effect until September 15, 2009, whereby any new working interests
acquired by Royalty Payor within the AMI shall be subject to the Overriding
Royalty payable to Royalty Owner.
6.0 TITLE
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a)
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Each
of the parties hereto represents and warrants that it has the requisite
capacity and authority to enter into this Agreement and to perform the
obligations to which it thereby becomes
subject.
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b)
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The
Royalty Owner does not warrant title to its interest in the Royalty Lands,
but confirms that:
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i)
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it
has complied with the terms of the Title Documents to the extent necessary
to keep them in full force and effect;
and
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ii)
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as
of the Effective Date, it has not received any notice of default related
to the Title Documents which makes them subject to forfeiture;
and
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iii)
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its
interest in the Title Documents is only encumbered with the applicable
lessor’s royalty and such other encumbrances or royalties as are set out
in Schedule “A”.
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c)
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No
party to this Agreement shall do, or cause to be done, anything to
encumber the Royalty Lands which:
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i)
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adversely
and materially affects the interest of any other party;
or
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ii)
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results
in the Title Documents becoming subject to termination or
forfeiture.
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7.0 OVERRIDING
ROYALTY
The
Royalty Owner reserves to itself a 5.75% overriding royalty interest in 87% of
the Petroleum Substances produced, or deemed to be produced from the Royalty
Lands (resulting in a 5.0025% overriding royalty based on 100% of production)
(the “Overriding Royalty”) as described in Article 2.00 of the Overriding
Royalty Procedure.
8.0
RIGHT TO
COMMINGLE
The
Royalty Payor shall have the right to commingle production from the Royalty
Lands with production from other lands, provided methods acceptable to the
Royalty Owner are used to determine the proper measurement of individual well
production. Where governmental regulations or orders require segregated
production tests of individual xxxxx at intervals not greater than two months,
such tests will be deemed acceptable to the Royalty Owner under this Clause and
no further tests will be required.
9.0 ASSIGNMENT
PROCEDURE
As
provided in Clause 5.01 of the Overriding Royalty Procedure, assignments of
interest under this Agreement shall be carried out according to the 1993 CAPL
Assignment Procedure (“Assignment Procedure”).
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10.0
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NOTICES
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The
address for service of notices hereunder of each of the parties shall be as
follows:
Royalty
Payor: Elmworth Energy Corporation
Xxxxx 0000, 000 – 0xx Xxxxxx
X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: President &
Chief Operating Officer
Royalty
Owner: Contact Exploration Inc.
Xxxxx 000, 000 – 0xx Xxxxxx
X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention:
President
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11.0
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LIMITATIONS
ACT
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The two
year period for seeking a remedial order under Section 3 of the Limitations Act,
R.S.A. 2000 c.L 12, as amended, for any claim (as defined in that Act) arising
in connection with this Agreement is extended to:
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a)
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for
claims disclosed by an audit, two (2) years after the time this Agreement
permitted that audit to be performed;
or
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b)
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for
all other claims, four (4) years.
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12.0
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MISCELLANEOUS
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a)
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Nothing
in this Agreement is to be construed as an express or implied covenant by
the Royalty Payor to develop the Royalty
Lands.
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b)
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This
Agreement shall be construed and enforced in accordance with the laws in
effect in the province in which the Royalty Lands are located. Each of the
parties hereto attorns to the jurisdiction of the Courts of the Province
of Alberta and all Courts of appeal
therefrom.
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c)
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This
Agreement and the schedules attached hereto shall terminate when all Title
Documents have terminated and all Royalty Xxxxx have been
abandoned.
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d)
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This
Agreement shall supersede all previous agreements by the parties relating
to the Royalty Lands.
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e)
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This
Agreement may be executed in counterpart and, when each party has executed
a counterpart, all counterparts taken together shall constitute this
Agreement.
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IN WITNESS WHEREOF the parties
hereto have executed this Agreement as of the date first above
written.
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CONTACT
EXPORATION INC.
Per:
/s/ XXXXX XXXXX
ELMWORTH
ENERGY CORPORATION
Per:
/s/ XXXXXX XXXXXXXX
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This is
execution page attached to and forming part of the Overriding Royalty Agreement
dated June 10, 2009 between Contact Exploration Inc. and Elmworth Energy
Corporation.
SCHEDULE
“A”
This is
Schedule “A” attached to and forming part of the Overriding Royalty Agreement
dated June 10, 2009 between Contact Exploration Inc. and Elmworth Energy
Corporation.
For a
description of the Title Documents and the Royalty Lands – see attached Schedule
I to Production Lease No. PL #00-00-00-00.
Encumbrances:
Lessor
Royalty of 10% payable to the Province of Nova Scotia
Overriding
Royalty of 3% payable to Devon ARL Corporation on a 90% interest in the Royalty
Lands
SCHEDULE
“B”
This is
Schedule “B” attached to and forming part of the Overriding Royalty Agreement
dated June 10, 2009 between Contact Exploration Inc. and Elmworth Energy
Corporation.
1997 CAPL OVERRIDING ROYALTY
PROCEDURE
Clause
1.01(b) – Effective Date – May 1, 2009
Clause
1.02 – Definitions
Subclause 101 (s) (market price) –
delete everything after “Subclause 2.03”.
Clause
2.01 – quantification of Overriding Royalty
Crude
oil 5.75%
Other petroleum
substances:
Alternate
1 5.75%
Clause
2.08 – Surrender
Will apply
