NET PROFITS AGREEMENT
This
Agreement made effective as of the 19 day of January, 2010
BETWEEN:
IMPERIAL OIL &
GAS INC. a body corporate, having an office at the City of Calgary, in
the Province of Alberta (hereinafter called "Grantor")
-and-
MARA ENERGY, LLC,
a body corporate, having an office at the City of Vancouver, in the
Province of British Columbia (hereinafter called "Grantee")
WHEREAS
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1.
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Grantee
has contacts with, knowledge of and/or existing and future access to high
growth potential oil and gas exploration and development opportunities in
Canada and the continental United States ("Prospects");
and
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2.
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The
Grantee will at its own cost and risk examine, assess, negotiate,
re-engineer existing and future Prospects and report upon them to a
bankable standard as far as it is possible, in order to present
pre-qualified Prospects to the Grantor so that the Grantor may consider
and elect at its sole discretion to reject or to participate or otherwise
take an involvement in those Prospects;
and.
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3.
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The
Grantee has the capability and contacts, worldwide, to assist the Grantor
in obtaining financing by way of its capability of securing corporate
finance from financial institutions banks, and finance houses so that the
Grantor may have the opportunity to fund the development of the Prospects;
Grantee will assist where necessary in the preparation of any/all
marketing materials to help facilitate any fundraising;
and
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4.
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The
Grantor has agreed to reserve an interest to the Grantee in the Prospects
by way of a net profits interest as more particularly described
herein.
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NOW THEREFORE, THIS
AGREEMENT WITNESSETH that in consideration of the mutual premises and
covenants contained herein, the parties agree each with the other as
follows:
1. DEFINITIONS
Except as
otherwise defined in this Agreement, each term used in this Agreement including
the recitals, will have the meaning given to it subject to the
following;
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a.
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"Capital
Costs" means all capital costs incurred in the Prospects including, but
not limited to, the costs of drilling xxxxx, completion of xxxxx,
equipping of xxxxx for the taking of production, rework or recompletion of
xxxxx and construction of pipelines and
facilities;
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b.
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"Grantor"
means Imperial and Gas, Inc. together with any person, corporation or
entity to which it has assigned an interest in all or any portion of the
Prospects;
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c.
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"Grantee"
means Grantee or any other entity or individual Grantee nominates to
assign over to the terms of this
Agreement;
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d.
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"Net
Proceeds of Production" means the gross proceeds of sale from or allocated
to the Grantee's share of production of petroleum substances from the
Prospects less the Grantee's share
of:
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i.
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all
payments for the lessor royalty under the title documents;
and
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ii.
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all
taxes (other than income taxes) paid by the Grantee pursuant to the
Regulations on the equipment for the production of petroleum substances
from the Prospects; and
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iii.
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all
encumbrances applicable to petroleum substances produced from the
Prospects; and
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iv.
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all
reasonable operating costs applicable to production of petroleum
substances from the Prospects; and
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v.
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all
reasonable facility fees and enrichment fees applicable to production of
petroleum substances from the Prospects;
and
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vi.
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all
land and mineral lease acquisition costs related to the
Prospects.
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e.
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"Net
Profits Interest" means an interest in the Prospects which entitles the
Grantor to receive monthly an amount equal to 50 percent of the Net
Proceeds of Production;
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f.
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"Payout"
means the first day of the month following the date when the Grantor
recovers out of the Net Proceeds of Production an amount equal to the
Initial Funded Amount;
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2.
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NET
PROFITS
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After Payout, the Grantor agrees that the Grantee
will be entitled to the Net Profits Interest subject to the following
conditions:
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i.
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the
Net Profits Interest will be reduced in proportion to the interest in the
Prospects retained by the Grantor.
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ii.
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the
Grantee will in no event be liable to pay for or advance any portion of
any costs and expenses including Capital Costs associated with the
Prospects, the same being solely a deduction from the Net Profits
Interest.
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iii.
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that
costs and expenses including Capital Costs in excess of the Net Proceeds
of Production shall be carried forward without limitation and deducted
from future Net Profits Interest payments, but shall not be carried back
so as to require any refund from the
Grantee.
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iv.
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The
Grantee may reduce, defer or waive, at its sole discretion, in part or
whole, its Net Profits Interest in the event that, in the sole opinion of
the Grantee, the Grantor experiences a necessity for
funds.
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3.
MISCELLANEOUS
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a.
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If
any term or condition of this Agreement conflicts with a term or condition
of the title documents, then such term or condition in the title documents
shall prevail and this Agreement shall be deemed to be modified
accordingly.
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b.
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The
headings of the clauses of this Agreement are inserted for convenience of
reference only and shall not affect the meaning or construction
thereof.
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c.
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Whenever
the plural or masculine or neuter is used in this Agreement the same shall
be construed as meaning singular or feminine or body politic or corporate
and vice versa where the context so
requires.
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d.
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This
Agreement shall enure to the benefit of and be binding on the Parties and
their respective successors and permitted assigns and upon the heirs,
executors, administrators and assigns of natural persons who are or become
Parties hereto.
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e.
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The
management of the Net Proceeds of Production under this Agreement from
assets located in the continental US shall be governed by the definitions
contained in Article I of the A.A.P.L. Form 610 – MODEL FORM OPERATING
AGREEMENT - 1989 (a copy of which is attached as Schedule "A" to this
Agreement). The Net Profits Interest will be calculated and paid in the
lawful currency of the United States of America for Prospects located in
the United States.
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f.
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The
management of the Net Proceeds of Production from assets under this
Agreement located in Canada shall be governed by the definitions contained
in clause 101 of the 1990 CAPL Operating Procedure (a copy of which is
attached as Schedule "B" to this Agreement). The Net Profits Interest will
be calculated and paid in the lawful currency of Canada for Prospects
located in Canada.
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g.
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The
Parties agree that this Agreement shall for all purposes be construed and
interpreted according to the laws of the Province of Alberta and that the
courts having jurisdiction with respect to any matter or thing arising
directly or indirectly relating to this Agreement, or the relationship
between the Parties, shall be the courts of said Province, to the
jurisdiction of which courts the Parties by their execution of this
Agreement do hereby submit.
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h.
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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 one
agreement.
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i.
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The
terms of this Agreement express and constitute the entire agreement
between the Parties insofar as the specific subject matter contained in
this Agreement. No implied covenant or liability of any kind on the part
of the Parties is created or shall arise by reason of these presents or
anything contained in this
Agreement.
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j.
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This
Agreement supersedes and replaces all previous agreements, memoranda or
correspondence, whether written or oral among the parties with respect to
the subject matter of this
Agreement.
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k.
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Each
of the parties shall from time to time and at all times do such further
acts and execute and deliver such further deeds and documents as shall be
reasonably required in order to fully perform and carry out the terms of
this Agreement.
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1.
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If
any portion of this Agreement shall be or deemed to be unenforceable,
illegal or invalid, the remaining portions of the Agreement shall not be
affected thereby.
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m.
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Time
is of the essence of this
Agreement.
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1.
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The
two-year period for seeking a remedial order under section 3(1)(a) of the
Limitations Act, R.S.A. 2000 c.L-I2, as amended, for any claim (as defined
in that Act) arising in connection with this agreement is extended
to:
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i.
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for
claims disclosed by an audit, two years after the time this agreement
permitted that audit to be performed;
or
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ii.
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for
all other claims, four years.
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n.
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Each
of the Parties represents and warrants that it now has or is entitled to
have full right, full power and absolute authority to enter into this
Agreement.
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o.
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The
addresses for notice for the parties
are:
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Mara
Energy, LLC.
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Imperial
Oil and Gas Inc.
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Xxxxx
000, #000
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Xxxxx
0000, 144 -4fil
Ave SW
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Calgary,
AB T3G 3Y6
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Xxxxxxx,
XX X0X 0X0
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Email:
xxx@xxxxxxxxxxxxx.xxx
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Email:
xxx@xxxxxxxxxxxx.xxx
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IN WITNESS WHEREOF
the parties hereto have executed and delivered this Agreement as of the
day and year first above written.
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MARA
Energy, LLC
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Imperial
Oil and Gas, Inc.
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Name:
Xxxxx Xxxxxx
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Name:
Xxxxx Xxxxxx
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Title:
Director
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Title:
Director
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