Contract
EXHIBIT
10.1
[*]
Designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the
Commission
THIS
AGREEMENT made and entered into this 6th of
April 2009, by and between
XXXXXX
EXPLORATION, INC.
0000
Xxxxxxxx Xx. Xxxxx #000
Xxxxxxxxxxx,
XX 00000
A Nevada
corporation, hereinafter called "Operator," and
AMERICAN
XXXXX-XXXXXX, INC.
0000
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
A
Massachusetts corporation, hereinafter called "Participant"
WITNESSETH:
WHEREAS
Xxxxxx has acquired all right, title and interest to the [*] (the Prospect") and
the land, geological and geophysical information and data used to develop the
concept of the Prospect. In addition, Xxxxxx is the owner of oil and gas leases
(hereinafter referred to as "said leases") totaling [*], as more fully described
in Exhibit "A-4" to Exhibit "C" of this Agreement covering and embracing the
lands (hereinafter referred to as "said lands") in the Area of Mutual Interest
(hereinafter referred to as the "AMI"), shown on the attached Exhibit "A" and
described as follows:
[*]
Pursuant
to this Participation Agreement, Xxxxxx will make a portion of its working
interest in the [*] available to the Participants. Each Participant shall be
obligated to pay its proportional share of the acquisition costs, including the
anticipated oil and gas lease acquisition costs, which costs are deemed paid in
full with the consideration tendered with this Agreement, together with the
drilling and completing costs of the Test Well provided for in the attached
Operating Agreement; estimates of these costs are set out in the "Authorization
For Expenditure" attached hereto as Exhibit "B" in this Participation
Agreement.
WHEREAS
Participant desires to earn an assignment of Twenty-Five Percent of One Hundred
Percent (25% of 100%) Xxxxxx'x leasehold working interest in said lands and the
AMI for the consideration of $200,000.00, on conditions hereinafter set
forth:
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
NOW
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
1. For the
purposes of this Agreement, the following definitions and/or interpretations
shall apply:
(a) Initial
Test Well is a well drilled to sufficient depth to test for the presence of oil
or gas on a given property within the AMI.
(b) A
Completed Well is a well which has been fully equipped for the taking of
production, through and including the tanks for an oil well and through and
including the Christmas tree for gas.
(c) Paying
quantities means a quantity (in the judgment of a reasonable and prudent
operator) of oil, gas (including any gaseous hydrocarbons produced with oil)
and/or gas (including any liquid hydrocarbons produced with gas) sufficient to
repay, with a reasonable profit, the cost and expense of operating the
well.
(d) Contract
depth is a depth sufficient to fully test the [*], whichever is first
encountered. This depth is an estimated distance, which will be actually
determined based on results of the seismic study to be conducted per Section 2
below.
(e) A Dry
Hole is a well drilled to contract depth that is plugged and abandoned as being
incapable of commercial production.
(f) Term of
Agreement is as long as operations are being conducted on the leased lands or
until terminated under a provision of this Agreement.
(g) Net
Revenue is that revenue derived from the sale of hydrocarbons from the oil/gas
well after costs associated with the production of the same as described in the
XXXXX Agreement, which is attached to the Operating Agreement, have been
deducted.
(h) Seismic
Survey shall mean the acquisition of additional Seismic Data over the Prospect
area, either 2D or 3D as determined by Operator, and the processing of the data
acquired.
(i) Prospect
is the land, geological and geophysical information and data used to develop the
concept to locate and extract hydrocarbons from the lands within an A M
I.
(j) Earning
shall mean that the Participant has paid its entry fee and pro rata share of all
costs of the operations in connection with the Prospect up to and including the
completion of the initial Test Well. (k) Participant assignment of Interest
shall mean any action or attempted action by Participant that would or could
result in a change in the name of the entity holding title to or exercising
control over Participant's right, title or interest in and to the Prospect.
Further, any action resulting in a change of ownership, or control of ownership
of Participant, including but not limited to a change from private to public
ownership, shall be deemed an assignment or attempt to assign, as contemplated
under this Agreement.
2
[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
2. Participant
hereby agrees to (i) pay for, acquire, assume and be responsible for its
undivided share of Xxxxxx'x rights, interests and obligations under and pursuant
to the acquisition and operation of the Prospect and (ii) abide and be bound by
each and all of the terms and provisions of any oil and gas leases, acquired by
Xxxxxx, the costs thereof and (iii) the exploration and development costs of the
[*], including seismic study and the drilling and testing of the initial Test
Well on said prospect. In general, each Participant will be responsible for
their pro rata share of the cost of the Prospect, which shall include the
completion of the initial Test Well, and will thereby earn and own an undivided
working interest in the applicable leases proportionate to their participation
interest hereunder, that being Twenty-Five Percent of One Hundred Percent (25%
of 100%) of the working interest.
By the
consideration tendered with this Agreement, Participant shall be deemed to have
paid its pro rata share of all fees and costs of the Prospect, including land
acquisition and seismic, up to the drilling of the Initial Test Well. Not
included in this amount are delay rental payments for leases previously acquired
or the cost of drilling and completing the Initial Test Well. Cash calls may be
made by Operator from time to time for delay rental payments.
Operator
will issue a cash call for Participant's pro rata share of the cost of drilling
the Initial Test Well sufficiently in advance of the drilling of the Initial
Test Well to insure that all funds are collected by Operator prior to the
signing of a drilling contract for drilling rig. Additional cash calls in
connection with the drilling and completion of the Initial Test Well shall be
made as set forth in this Agreement and in
the Operating Agreement, as appropriate.
3. Pursuant
to this Participation Agreement and the Operating Agreement attached hereto as
Exhibit "C", Xxxxxx, or its assigns, shall serve as Operator for the Prospect.
All operations will be conducted under the terms and conditions of the said
Participation Agreement, or the Operating Agreement which names Xxxxxx, or its
assigns, as Operator, as appropriate. Except as provided for in Paragraph 4
below, each Participant(s) hereunder agrees to abide by the decision of the
majority in interest of Participants as to all elections under the Operating
Agreement.
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
4. Commencing
with the signing of this Participation Agreement, Operator shall perform such
tasks necessary to develop the Prospect with the goal of drilling and completing
the Initial Test Well for the production of Hydrocarbons from the lands in the
AML Participant and Operator agree to the terms and conditions of Section 5
below, which specifies how the duties are to be performed by Operator prior to
the commencement of actual drilling operations. Nothing in this Agreement
precludes the cessation of all activities in connection with this Prospect in
the event that the Operator's recommendation drawn from the Seismic Study
results in the agreement of Participant and Operator that the Initial Test Well
will not produce hydrocarbons in paying quantities_ In which case, the
Participant will be deemed not to have earned and the Parties to this Agreement
shall have no further obligations to each other. Participant understands that
Operator's recommendation is only its best assessment of the Seismic Data and is
no guarantee of the presence or absence of hydrocarbons under the leased
lands.
All AFEs
and elections attached thereto are due and payable at the Office of Operator, no
later than close of business on the fifteenth (15th)
calendar day following the Participant(s) receipt of the AFE. If that date falls
on a Saturday, Sunday, or recognized holiday, the next calendar day will be
used, unless there is a rig on site, in which case Participant has twenty-four
(24) hours to notify Operator of its election. Participant(s) agrees to pay its
pro rata share of costs on a given AFE, even if the total cost exceeds that
shown on the AFE. Failure to timely pay ANY AFE shall be deemed to be an
election not to participate in the [*].
Subsequent
to earning, Participant(s) shall have the right to independently exercise its
"non-consent" rights, under the terms and conditions set forth in the Operating
Agreement with respect to any operation for which Particpant(s) has the right to
exercise non-consent rights under the Operating Agreement. Upon proposing or
receipt of a proposal under the provisions of Articles VI, Paragraph B., 1., of
the Operating Agreement, Operator shall immediately give the written notice set
forth in said Article VI, Paragraph B., 1., of the Operating Agreement to the
Participant hereunder. The Participant shall have fifteen (15) days within which
to notify Operator whether or not they wish to participate in the cost of the
proposed operation, unless there is a rig on site, in which case Participant
shall have twenty-four (24) hours to notify Operator of its election. Failure to
timely notify Operator of its election shall constitute an election not to
proceed in accordance with the proposed operation but to go "Non-Consent" per
the terms of Article VI, Paragraph B., 2. of the Operating Agreement. Any
Participant electing not to participate pursuant to this non-consent provision
shall suffer forfeiture of any and all right, title and interest in the [*]. If
a Participant goes non-consent on any operation subsequent to hook-up of the
Initial Test Well, it shall retain the interest previously earned.
Notwithstanding
any other provision of this Agreement, in no event shall the Participant be
entitled to participate on a "non-consent" basis with respect to the Initial
Test Well as set forth in the AFE and in Article VI, of the Operating Agreement
or any subsequent operations.
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
Any
election, by Participant, not to participate prior to earning, whether by formal
notice or by failure to elect and/or to timely pay, shall result in the
forfeiture of any and all of Participant's right title and interest in the
[*].
5. Operator's
duties shall be:
(a) [*]
(b) to
conduct a study of the Seismic Data and issue a report of its findings to the
Participant.
(c) to report
to Participant a recommendation as to the suitability of the Prospect for the
drilling of a Test Well, the location and depth of same.
(d) [*]
(e) to
maintain leases held and acquired by paying rentals and extending terms, where
necessary. During the term of this Agreement the Operator shall keep the said
leases free and clear from all liens.
(f) to issue
AFEs and Cash Calls to fund operations.
(g) to drill,
with Participant’s participation, the Initial Test Well on lands within the
AMI.
(h) to
operate the production of any hydrocarbons found on the Leased Lands from the
Initial Test Well and/or any follow up xxxxx under the terms and provisions of
the Joint Operating Agreement.
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6.
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(a) If
it is determined by Operator, based upon its analysis of the Seismic Data,
that there is a probability of the Initial Test Well producing in paying
quantities, [*], or a date mutually acceptable to both parties, at a
location mutually acceptable between Operator and Participant, initially
presumed to be located in [*]. Should Operator and Participant disagree,
Participant shall not unreasonably withhold its consent to Operator's
proposal. Thereafter Operator shall diligently and continuously
prosecute the drilling of said test well in a proper and workmanlike
manner to contract depth. Operator shall furnish Participant with copies
of daily drilling reports as well as copies of all logs. Participant shall
have on-site access to all operations on the subject lands. Participant's
access shall be at its sole
risk.
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
(b) In the
event any well provided for herein is lost for any reason prior to being drilled
to contract depth, or Operator has encountered during the drilling of any well
mechanical difficulty or formation or condition which would render further
drilling impractical or impossible, Operator shall plug and abandon such well
and thereafter commence a substitute well at a mutually agreed location within
forty-five (45) days after cessation of Operators drilling operations in the
prior well, or at a time mutually agreed between Operator and Participant. In
the event of a disagreement, Participant shall not unreasonably withhold its
consent in these matters. Any substitute well drilled hereunder shall be drilled
subject to the same terms and conditions and to the same depth as provided for
the well so lost or abandoned. Any reference herein or hereafter made to the
test well shall be deemed to be a reference to any substitute well or xxxxx
which may be drilled there for.
(c) In the
event the test well, or substitute well there for is abandoned after reaching
contract depth due to the well being incapable of producing oil and/or gas in
paying quantities, Operator shall have the right to commence a second test well
within ninety (90) days after abandonment of the test well, or at a time
mutually agreed between the Operator and Participant, at a location mutually
acceptable between Operator and Participant. In the event of a disagreement,
Participant shall not unreasonably withhold its consent in these matters. Once
consent (election to participate) is given, Operator shall diligently and
continuously prosecute the drilling of the second test well in a proper and
workmanlike manner to contract depth and complete said test well within 45 days
from the date of commencement.
(d) By the
performance of the covenants and conditions hereof and upon completion of the
test well as a producer of oil and/or gas in paying quantities and in accordance
with the terms and conditions hereof, Participant shall earn and receive within
fifteen (15) days thereof an interest in said lands as follows:
(1) An
assignment of twenty-five percent of One Hundred Percent (25% of 100%) of
Xxxxxx'x working interest in the AMI. The assignment to Participant from
Operator shall be subject to an overriding royalty being the difference between
lessor royalty and twenty five percent (25.0%). Xxxxxx covenants and agrees to
deliver to Operator no less than a seventy-five percent (75.0%) net revenue
interest.
(2) In
addition, any new leasehold interest acquired within the AMI during the term
hereof by Operator shall be subject to said overriding royalty interest reserved
by Operator, being the difference between lessor royalty and twenty five percent
(25.0%). All information acquired in the drilling of any well by Operator in the
AMI shall be furnished to Participant(s) in a timely manner and at no cost to
Participant(s).
6
[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
(3) Within
three-hundred and sixty-five (365) days from and after the date of the
commencement of production of oil or gas in paying quantities in the test well,
or at a time mutually agreed between the Operator and Participant(s), Operator
shall have the right to commence drilling operations of the next well.
Operations for drilling of each successor well thereafter may commence within
three-hundred and sixty-five (365) days from and after the cessation of drilling
operations in the preceding well, or at a time mutually agreed between the
Operator and Participant(s), until the leased land has been fully developed. As
used in this paragraph, the term "cessation of drilling operations" shall not
include a temporary stoppage of drilling operations in the same well, nor to a
stoppage of longer duration for such purposes where such stoppage is approved in
writing by Operator. In the event of a disagreement, Participant(s) shall not
unreasonably withhold its consent in these matters. This Section of the
Participation Agreement is subject to the terms and conditions of the Leases
held in the AMI. In. the case of any conflict between the two, the requirements
of the Leases shall prevail.
7. Operator
shall have the right to contract out for services and assign duties to qualified
entities in the performance of its obligations under this
Agreement.
8. Participant
shall be responsible for the timely payment of its proportionate share of any
and all expenses in connection with the Prospect, including but not limited to
the drilling and completion of the Initial Test Well.
9. Each
party hereto shall be liable and responsible for and shall indemnify and hold
the other harmless (including costs and attorney's fees) from and against any
claim or actions following injury to, illness or death of any person and any
loss or damage to any property occurring in connection with the performance or
nonperformance of this agreement only to the extent of its own negligence
and that of its agents, servants, employees and contractors.
10. The
Initial Test Well shall be drilled subject to the terms and conditions of the
geological requirements set forth in Exhibit "A-2" to the Operating Agreement,
which is attached hereto and made a part hereof.
11. All
operations on the leased lands within the AMI shall be governed by a mutually
acceptable Operating Agreement with, among other attachments, a XXXXX Accounting
Procedure. The said Operating Agreement and Accounting Procedure is attached
hereto as Exhibit "C". For the purpose of determining Operator's reimbursable
costs and expenses for any well in which Operator retains a working interest,
the said XXXXX Accounting Procedure, as herein modified, shall control. In the
event of a conflict between the provisions of the Operating Agreement and/or the
Accounting Procedure and this Agreement, the terms of the latter shall
control.
12. If any
well is completed as a producer of oil and/or gas in paying quantities, Operator
shall furnish to Participant(s), within ninety (90) days after the date of
completion, an itemized statement of the cost of drilling, testing, completing
and equipping the well, together with an inventory of the material and equipment
therein, thereon and used in connection therewith and Operator shall thereafter
furnish Participants with a monthly itemized statement of the cost of operations
and the quantities and qualities of oil, gas or other minerals which are
produced from said well, together with the amount of proceeds from the sale of
such production in the preceding month; such reports, together with a complete
well record shall be furnished to Participants.
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of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
13. If a
lease described herein covers less that a full oil and gas leasehold estate in
any lands described herein under such lease, or if Operator's interest in such
lease covering any lands described herein under such lease is less than the full
oil and gas leasehold estate (excluding and disregarding any applicable royalty,
overriding royalty, production payment or other burden to which leasehold estate
is subject), then the overriding royalty reserved out of the production from the
lands in which Operator's interest in the oil and gas lease bears to the full
oil and gas leasehold estate in such land, and the interest in the well in which
Operator may acquire a working interest shall be in the proportion that the oil
and gas leasehold estate in such lease covering the lands described herein bears
to the full oil and gas leasehold estate in said lands.
14. Each
extension of any of the said leases, in whole or in part, shall maintain and
continue in effect the rights and interests reserved by Operator in said leases
so extended and in said lands covered thereby. Should a renewal or new lease or
leases covering the said lands, or a part of or interest in the said lands, or a
part of or interest in such a lease, be acquired by Operator, or by a third
party wholly or partly for Operator or Operator's benefit, within three (3)
years from the date of the expiration of the primary term of said lease, the
rights and interests herein reserved by Operator shall attach and apply to each
renewal or new lease, the lands described therein and estate created thereby
with the same result and effect as such reserved rights and interests attach and
apply to the said lease, the said lands or in the estates created by the said
lease. Should Participant, acting as Agent for the Operator, acquire any
additional acreage within the AMI in addition to the [*] described above,
Participant shall assign said leases to Operator. Operator shall reimburse
Participant(s) for all of its approved expenses related to the acquisition.
Operator shall maintain rights and interest in the additional acreage the same
as in all other acreage subject to this Agreement.
15. The
provisions of this paragraph 15 shall be applicable to all operations conducted
by Operator in which Participant, as to the interest in the said lease covered
by this Agreement, is participating in an operation with a working
interest.
(a) Operator
shall drill all xxxxx necessary to protect the said lands from drainage through
offset xxxxx to said lease(s).
(b) If
Operator should elect to abandon any well either drilled on the said lands or on
said unit of production, or if any well either on the said lands or on said unit
of production ceases to produce in paying quantities and if actual drilling
operations for a replacement well or reworking operations are not commenced
within thirty (30) days thereafter, Operator shall immediately inform
Participant in writing of such fact and Participant shall have the option, to be
exercised within fifteen (15) days, to reacquire free of cost the rights
assigned to Operator hereunder free and clear of liens and encumbrances insofar
as said rights cover and embrace the lands attributable to any such well, if
Participant elects to reacquire any of said lease(s) (or any part or interest as
herein provided), Participant shall also have the option to acquire any well,
together with the material in and around such well then on said lands and
necessary in the operation of such well at a price equal to the reasonable
salvage value of said materials. If Participant elects to take over a well, it
does so with the understanding that it accepts all obligations in connection
with said well, including but not limited to all abandonment costs. Further,
Participant(s) must present to Operator, at the time of notification of intent
to take over a well, proof of a "DOGGR Bond".
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
(c) In the
event Operator desires to surrender any of the said lease(s) as to all or any
part of said lands covered thereby or to allow any of said lease(s) to terminate
or expire, Operator shall notify Participant at least sixty (60) days in advance
of the anniversary date specified in such lease (or the date to be surrendered,
if other than the anniversary date) and Participant shall have fifteen (15) days
after receipt of such notice of its election to take a reassignment of said
lease as to the portion thereof to be relinquished or to be allowed either to
expire or terminate. Should Participant elect to receive a reassignment, it
shall be delivered by Operator not less than fifteen (15) days prior to the
anniversary date of any such lease (or proposed date of surrender). Any
reassignment under terms hereof shall be free of cost to
Participant.
(d) As to each
well that Operator drills on the leased lands, or lands within the AMI, Operator
shall notify Participant in writing of the following items:
(1) The exact
legal description of the location.
(2) The date
actual drilling is commenced.
(3) The total
depth drilled.
(4) The date
of completion.
(5) Whether
completed as a producer of oil and/or gas or as a dry hole.
(6) The date
any production commences.
(7) The date
any well is shut -in.
(8) The date
and amount of payment of any shut-in royalty.
Such
written notice shall be given to Participant within five (5) days after the
occurrence of each of said items.
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of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
(e) Should
Operator commence any well which will be drilling over the end of the primary
term of any of the said lease(s), Operator shall give Participant written notice
of such drilling at least ten (10) days prior to the end of such primary
term.
16. Any
notices given or required to be given hereunder shall be accomplished as set
forth below. Operator's address and telephone number are:
XXXXXX
EXPLORATION, INC.
0000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
(000)
000-0000
Participant's
address and telephone number are:
AMERICAN
XXXXX-XXXXXX, INC.
0000
Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
(000)
000-0000
Each
Participant shall promptly advise Operator, in writing, of its current address
and telephone number to be used in connection with the giving of any notices
hereunder.
The time
for such receiving party to give any notice in response thereto shall begin to
run on the day following the date the originating notice is received, and
responsive notice shall be deemed given when deposited in the United States mail
or private express courier, properly addressed and with postage or charges
prepaid. Any notice or response sent by Fax with hard copy via U. S. Mail shall
be deemed delivered on the date of fax transmission.
17. Operator,
prior to commencing operations for any well on the leased lands shall, conduct
title work and make reasonable effort to cure any title defects found. Operator
shall keep Participant advised of these efforts. Operator shall promptly furnish
Participant(s) with copies of all title reports, abstracts and attorney's title
opinions obtained by it relating to said lease(s). Operator and Participant
shall make available to each other, any title information it may have pertaining
to said lease(s). Neither party shall be liable for the accuracy of any title
information furnished pursuant to the foregoing. Participant does not warrant
title, either expressed or implied, to the said lease(s).
18. Participant
may not assign its interest or rights under this Agreement without the prior
written consent of Operator. Any change in the name of holder of the
Participant(s)' interest, change in ownership, including but not limited to a
change from private to public ownership of the Participant or any other change
in the status or nature of the ownership interest, shall be considered to be an
assignment, or attempt to assign, under this Section 18.
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
19. No party
hereto shall directly or indirectly make or authorize press or public
information releases announcing or concerning the Unit Area and operations
hereunder, the execution of or continuation or termination of this agreement or
the results of any operation conducted hereunder without approval of all parties
hereto
20. Time
shall be the essence of this Agreement in all of its parts. This Agreement may
be executed in any number of counterparts, each of which shall be considered as
an original for all purposes. The terms, covenants and conditions hereof shall
run in favor of and are binding upon the parties hereto, their successors and
assigns, and shall run in favor of and are binding upon the parties hereto,
their successors and assigns, and shall run with the said leases and
lands.
The
$200,000.00 consideration shall be paid to Operator upon Participant's execution
of this Agreement.
IN
WITNESS WHEREOF, Operator and Participant have hereunder caused their names to
be subscribed the day and year first above written.
| XXXXXX EXPLORATION, INC. | AMERICAN PETRO-IILTNTER, INC. | |||
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/s/
Xxxx X. Xxxx, President
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/s/
Xxxx Xxxxxx, President
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[*] Designates portions
of this document that have been omitted pursuant to a request for confidential
treatment filed separately with the
Commission
Exhibit
A
Property
Map
[*]
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