Acreage Participation Agreement
THIS AGREEMENT is entered into effective as of January 23, 2006, by and
betwoen REO Energy, Ltd., (hereinafter referred to as the "Holder"), and
Ingenium Capital Corp, (hereinafter referred to as the "Paticipant").
RECITALS
WHEREAS, the Holder has purchased approximately 1,000 acres of
mineral leasehold interests in and around Montague County Texas and has
obtained the rights to purchase an additional 1,000 acres (for a total
of 2,000 acres) of mineral leases in the same area, and
WHEREAS, the Participant is a Nevada Corporation engaged in the
oil and gas business and specifically has assets in the Xxxxxxx Shale
play, and;
WHEREAS, the Participant desires to purchase part of the Holder's
acreage in exchange for cash, overriding royalties and drilling rights;
WHtfEAS, the Holder will assign its interests in the acreage to
the Participant in Montague County as security for performance of this
Agreement;
Now, THEREPORE the parties hereto agree as follows:
1. Purchase Price. In consideration for the foregoing, the Participant will
pay $300,000, as payment for 50% of seller's leasehold interest in the
acquired acreage as defined in Exhibit "A", attached hereto and made a part
hereof, and approximates 1,000 net mineral leasehold acres. Exhibit B,
attached hereto and made a part hereof, contains a list of the entire
acreage in consideration under this Agreement, approximately 2,000 gross
acres, to which the Participant has certain rights.
2. Participant's Rights and Interests. The Participant will be entitled to
receive a 1% overriding royalty on the entire 2,000 gross acres purchased
by the Holder (as described in Exhibit "B" herein); however the assignment
of interest to the Participant will be for the 1,000 net acres purchased
with its cash proceeds. The Participant will be entitled to receive an
acreage fee from all of the xxxxx drilled on its assigned acreage in the
amount of $500 per acre, which will be due and payable upon the initiation
of drilling for each well.
3. Participation Guarantee. The Holder hereby grants to the Participant, the
right to participate in the working interest of all of the xxxxx drilled on
the subject 2,000 gross acres, as described in Exhibit "B" for up to 25% of
the total working interest ownership percentage (up to 25%), pursuant to
the budgeted AFE issued by the Holder. The Holder, at its sole discretion,
may elect to allow the Participant to increase its working interest
ownership percentage beyond the 25% noted herein.
4. Notice of Transfer. Upon payment as described above, the Holder will begin
to acquire the additional acreage. Upon transfer of title to the Holder, it
will execute the appropriate assignments of interests to the Participant as
its security interests. The Holder, at its sole discretion, may elect to
sell, transfer or hypothecate the acreage described in Exhibit "B" to a
third party prior to the completion of drilling. If the Holder does
transfer the any part or the leases described in Exhibit A, the Participant
would be entitled to keep its overriding royalty, as described in paragraph
2 above, plus receive $500 per acre for any unused or unallocated acreage
transferred or sold to a third party.
5. Participant's Rights in Acreage. The Participant agrees not to sell,
transfer or hypothecate the working interests assigned under this agreement
while drilling operations are in affect on the acreage noted in exhibit B.
The Holder retains the right of first refusal if the Participant elects to
sell the acreage described in Exhibit A if drilling operations are not in
effect. Drilling operations are considered not in effect if no drilling has
occurred one year prior to the expiration of the leases described In
Exhibit A, which is consistent with the terms of the leases extended to the
Holder.
6. Assignability. The Participant designated below may not assign all or any
portion of their rights under this Agreement to other persons without the
consent of the Holder or Holder's representative. If such consent is
granted, then a written notice of such assignment and the name and address
of such assignee shall be provided to the Holder prior to Notice of
Transfer. Notwithstanding the foregoing, no portion of this Agreement may
be assigned to any person or entity unless the person or entity signs a
written acknowledgment of all terms and conditions hereof, including those
contained in Paragraphs 1, 2 and 3.
7. Non-public Nature of Transaction. The terms of this sale do not Involve any
public solicitation or advertisement and were privately negotiated on a
arms-length basis. The Participant is a sophisticated investor with
substantial experience in the oil and gas industry.
8. Confidentiality. The Parties hereby agree to keep confidential all
proprietary information. The parties furthermore agree to keep confidential
any and all names, telephone or telex numbers, and any other matters
considered confidential arising from this Agreement.
9. Notices. Any notices required or permitted hereunder shall be sufficient if
mailed, postage prepaid, to the representative parties at the addresses set
forth below.
10. Construction. This agreement shall be construed and interpreted in
accordance with the laws of the State of Texas.
11. Default. In event of any default hereunder, the non-defaulting party shall
be entitled to reimbursement of all costs, including reasonable attorneys
fees, incurred in enforcing this agreement, whether with or without suit.
12. Further Assurances. At any time, and from time to time after the execution
hereof, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry
out the intent and purposes of this Agreement.
13. Counterparts. This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the respective parties and their heirs, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this agreement to be
effective as of the day and year first written above. written above.
PARTICIPANT HOLDER
/s/ Xxx Xxxxx /s/ Xxx Xxxx Xxxxxxx
--------------------- -------------------------
Ingenium Capital Corp. REO Energy, Ltd.
By: Xxx Xxxxx By: Xxx Xxxx Xxxxxxx
Its: President Its: Managing Partner
Dyemound Leases
Gross Net Acres Net Acres Negotiating or
Lease Name Acres Leased Mailed Uncontacted
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V.W. Xxxxxx leases:
King Lease 84.790 34.910 -0- *balance is leased to third party
Xxxxxxxx Lease 144.000 144.000
Xxxxxxxxx Lease 145.300 90.813 54.487
Xxxx Lease 135.000 135.000
Xxxxxxx Lease 275.000 275.000
Xxxxxxxxxx Lease 240.000 240.000
Xxxxxx Lease 160,000 106.668 53.322
Xxxxx Lease 110.000 110.000
Shahinian Lease 108.520 54.261 54.261
Xxxxxxxx Lease 80.000 35.000 45.000
Xxxxxxxx Lease 80.000 35.000 45.000
--------- ---------- --------
1,562.610 1,260.652 252.070
Total Leased (in hand): 1,260.652
(mailed): 252.070
---------
Total: 1,512.722
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Xxx Xxx Xxxxx leases:
Xxxxxx Lease 116.000 83.377 18.123 14.500
Xxx Lease 139.500 24.542 28.418 86.540
--------- ---------- -------- -------
255.500 107.919 46.541 101.400
Total Leased (in hand): 107.919
(mailed): 46.541
Total: -----------
154.460
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Combined ( all of the above):
Total Acres In Hand: 1,368.571
Total Acres In Mail: 298.611
-----------
1,667.182
Note:
We are negotiating and/or curing title to acquire leases on an additional 101,40
acres, which, assuming all mailed leases come in and the negotiated acres are
acquired; we are looking at a gross acreage of 1,818.11 with a corresponding
1,768.582 net mineral acres.
You might notice since our last exchange, the Xxxxxxx lease has fallen out of
play. We have other leases that we are working on in this area to fill in around
what we already have but to date have not gotten commitments from the lessors.
Xxx Xxx Xxxxx 940/476-2428 or 733-4831
