MODIFICATION AND SETTLEMENT AGREEMENT
This
Modification and Settlement Agreement (the “Agreement”)
is
made and entered into as of this __ day of March 2008 by and among
Indigo-Energy, Inc., a corporation organized under the laws of the State of
Nevada (the “Company”) and TAPO Energy, LLC, a limited liability company
organized under the laws of the State of [______] (“TAPO” and together with the
Company, the “Parties”).
WHEREAS,
the
Company previously entered into a Drilling and Operating Agreement with TAPO
dated [___________] (the “Original Agreement”), pursuant to which the Company
engaged TAPO to perform certain services on the Company’s behalf with respect to
the development of certain oil and gas interests;
WHEREAS,
the
Parties have agreed that it is in all of their interests to modify the terms
provided under the Original Agreement, including those terms relating to the
payment of certain obligations of the Company owed to TAPO; and
WHEREAS,
the
Company has offered and TAPO has agreed to accept modifications to the terms
and
condition provided in the Original Agreement, subject to the provisions set
forth herein.
NOW
THEREFORE,
the
Parties hereto agree as follows:
Section
1. Release.
Effective upon the execution of this Agreement set forth herein, TAPO hereby
releases the Company from any liability arising out of or by virtue of the
Original Agreement, except the obligation to make payments as set forth below.
Further, the Company, for itself and for its officers, directors, employees,
agents and consultants, hereby agrees to release TAPO, its employees, agents,
attorneys, consultants and affiliates, from any liability to the Company or
any
of its affiliates, arising out of or by virtue of the Original
Agreement.
Section
2. Consideration.
As
consideration for this release and settlement by the Parties the Parties hereby
agree as follows:
a. Payment
of Amounts Owed —
The
Company acknowledges, and TAPO agrees, that the Company is indebted to TAPO
in
the amount of $671,598 under the Original Agreement (the “Old Obligation”). The
Parties agree that the Old Obligation will be satisfied by the assignment hereby
of all of the Company’s rights and interests in the revenue earned from the
xxxxx specified in Schedule A hereof (the “Xxxxx”). The assignment specified in
the immediately preceding paragraph shall be subject to the following
terms:
i. Period.
The
Company hereby assigns to TAPO all of its right to receive the revenue earned
from the Xxxxx for a period of 48 months (retroactively commencing in January
2008), or until the Old Obligation is hilly satisfied, whichever is later (the
“Assignment Period”). After the expiration of the Assignment Period, all rights
assigned to TAPO under this Agreement shall automatically revert back to the
Company with a new Carried Interest
of 65% (i.e. after the Assignment Period, the Company shall be entitled to
a 65%
carried
interest in the Xxxxx), without need of a further agreement between the
Parties.
ii. Right
to Audit.
The
Company shall have the right to audit TAPO’s financial books and records upon
fifteen (15) days prior written notice given to TAN). The right to audit given
to the Company shall be exercised by the Company in good faith and only for
the
purposes of determining the amount of revenue received by TAPO from the
Xxxxx.
1
iii. Right
to Statements.
TAPO
undertakes to provide the Company with a monthly written statement indicating
the amounts received by TAPO as revenue from the Xxxxx, irrespective of whether
the Company exercises its audit right under the immediately preceding paragraph,
As a condition to the effectiveness of this Agreement, TAPO shall have provided
a reconciliation of all amounts received from any gas vendor in 2007 with
respect to the xxxxx.
b. Additional
Payments
- In
addition to the assignment provided under Section 2 hereof, and as additional
consideration for the mutual release contemplated in this Agreement, the Company
assigns and transfers to TAPO, its heirs, successors and assigns, and TAPO
hereby accepts 84.375% of the Company’s right, title, mineral rights and
interests (the “Interests”) in three (3) drill sites identified in Schedule B
hereof (the “Drill Sites”) situated on a 420-acre parcel of land owned by the
Company (the “Leased Property”), on the following terms:
| i. |
Each
Drill Site shall hold a certain portion of the Leased Property and
shall
include all land within 500 foot radius around such Drill
Site.
|
| ii. |
The
assignment of the Company’s rights, title, mineral rights and interest in
the Drill Sites is intended as a 100% assignment of the Company’s 84.375%
interest in such Drill Site to TAPO, its heirs, successors and
assigns.
|
| iii. |
In
consideration for the rights granted to TAPO, TAPO undertakes to
remit to
the Company an “override royalty” equal to 3.125% of all net revenues
generated by TAPO on the Leased
Property.
|
| iv. |
The
Company shall also be entitled to, and TAPO hereby agrees to pay
to the
Company, a Land Ownership Interest Royalty in an amount equal to
12.5% of
all revenue earned by TAPO from the Leased
Property.
|
| v. |
TAPO
shall remit to the Company all amounts due to the Company under this
Agreement, whether as “override royalty”, as Land Ownership Interest
Royalty or otherwise, within 10 days of receipt of funds from the
purchasing vendor, without need of demand on the part of the
Company.
|
| vi. |
TAPO
shall observe, and shall be solely responsible for complying with
all
relevant regulatory standards and regulations imposed upon, and relative
to, the drilling operations to be conducted by TAPO on the Leased
Property, including, but not limited to, the observance of all legal
offset requirements relative to the existing xxxxx of the
Company.
|
x. Xxxxx
Covered
- The
Company agrees that upon execution of this Agreement, and for the duration
of
the Assignment Period, all .01 its right and interest in the revenue of the
Xxxxx, as identified in Schedule A hereto, will be transferred to TAPO so that
the Company will have no right to any portion of the revenue related to or
generated by such Xxxxx.
d. Entry
into Transportation Agreement.
As soon
as practicable after the execution of this Agreement, the Parties agree and
undertake to enter into a Standard Transportation Agreement which shall xxxxx
XXXX, under certain conditions to be stipulated therein, the right to transport
all gas produced and recovered from the Xxxxx and the Leased Property through
the Company’s existing pipelines. Said rate to be the greater of 5% of the gas
price paid or $0.50 per MCF but in no case less than $0.15 per MCF in order
to
ensure the proper allocation of suck gas recovered from the Xxxxx and from
the
Leased Property, TAPO undertakes, immediately upon the execution of this
Agreement, to install a meter on all existing pipes of the Company, and intended
to be used by TAPE), for the purpose of verifying the amount of gas generated
by
the xxxxx operated by TAPO.
2
Section
3. Successors.
This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective administrators, representatives, executors, successors and
assigns, either by reason of death, incapacity, merger, consolidation, and/or
purchase or acquisition of substantially all of the Company’s assets or
otherwise.
Section
4. Governing
Law.
Each
Party acknowledges that it has been represented by counsel in connection with
this Agreement, and has executed the same with knowledge of its consequences.
This Agreement is made and entered into under New York law and shall be
interpreted, enforced and governed under the laws of the laws of New York
without regard to its conflicts of laws principles.
Section
5. Paragraph
Headings.
The
paragraph headings used in this Agreement are intended solely for convenience
of
reference and shall not in any manner amplify, limit, modify or otherwise be
used in the interpretation of any of the provisions hereof.
Section
6. Severability.
Should
any of the provisions of this Agreement be declared or be determined to be
illegal or invalid, the validity of the remaining parts, terms or provisions
shall not be affected thereby and said illegal or invalid pan, term or provision
shall be deemed not to be a part of this Agreement.
Section
7. Entire
Agreement.
Except
as provided in the next sentence, this Agreement sets forth the entire agreement
between the Parties, and fully supersedes any and all prior agreements or
understandings between the Parties pertaining to the subject matter hereof,
including, but not limited to, the Original Agreement. Notwithstanding the
foregoing, if either party defaults in any payments due under this Agreement,
or
defaults in any other term or provision of this Agreement, the other party
shall
be entitled to enforce this Agreement and the Original Agreements, at its sole
option.
Section
8. Counterparts.
This
Agreement may be executed in counterparts. Each counterpart shall be deemed
an
original, and when taken together with the other signed counterpart, shall
constitute one fully executed Agreement.
Section
9. Further
Assurances.
From
and after the date hereof, the parties hereto shall take all actions, including
the execution and delivery of all documents, necessary to effectuate the terms
hereof.
Section
10. Survival.
All
obligations of the Parties as set forth herein shall survive the execution
and
delivery hereof.
3
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be entered into
as of
the date first written above.
| |
|
|
|
/s/ Xxxxxx X. Xxxxxx
By: Xxxxxx
X. Xxxxxx, President
Date:
|
||
|
TAPO
ENERGY, LLC
|
||
| |
|
|
| /s/ | ||
|
By:
Title: Manager
Date: 04/02/08
|
||
4
Schedule
A
| 1. |
Suan
Well #1
|
| 2. |
Suan
Well #2
|
| 3. |
Suan
#3
|
| 4. |
Hudkind
Well #2
|
| 5. |
Xxxxxxx
Well #3
|
5
