MODIFICATION AND SETTLEMENT AGREEMENT
This
Modification and Settlement Agreement (the "Agreement")
is made
and entered
into as of this 11th day of November 2007 by and among Indigo-Energy, Inc.,
a
Nevada corporation (the "Company"),
HUB
Energy, LLC, Mid-East Oil Company and Xxxx Xxxxxxxx, an individual residing
at
000 Xxxxxxx Xxxx, Xxxxxxx, XX 00000 (HUB, Mid-East and Xxxxxxxx are collectively
referred to as the “Advisors”
and
together with the Company, the “Parties”.)
WHEREAS,
the
Company previously entered into various agreements with the Advisors, including
but not limited to Drilling and Operating Agreement dated July 24, 2006 (the
“Original Agreements”) pursuant
to which the Company engaged the Advisors 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 Agreements, including those terms relating to the payment of certain
obligations of the Company owed to the Advisors; and
WHEREAS,
the
Company has offered and the Advisors have agreed to accept modifications
to the terms and condition provided in the Original Agreements, subject to
the
provisions set forth herein.
NOW
THERFORE,
the
Parties hereto agree as follows:
Section
1. Release.
Effective upon the execution of this Agreement set forth herein (the “Contract
Obligations”), the Advisors hereby release the Company from any liability,
except the obligation to make payments as set forth below. It is agreed that
upon execution of this Agreement, the Advisors will have no right to any
overriding royalty on any new xxxxx subject to §2(c ). Further, the Company, for
itself and for its officers, directors, employees, agents and consultants,
hereby agrees to release the Advisors, their employees, agents, attorneys,
consultants and affiliates, from any liability to the Company or any of its
affiliates.
Section
2. Consideration.
As
consideration for this release and settlement by the Parties the Parties agrees
as follows:
a. Amounts
Owed - The Company acknowledges that they are indebted to the Advisors in the
amount of $65,000 to Hub Energy, Inc. and $1,037,644.74 to Mid East Oil for
Drilling Obligations and $33,039 to Mid-East Oil in Expense Reimbursements
(cumulatively the “Old Obligations”); but have the right to certain write-offs
with respect to the Old Obligations for work not completed or not satisfactorily
performed. The Parties agree that all of the Old Obligations will be satisfied
by paying $250,000 to Mid-East plus an additional $33,039 for expenses and
$65,000 to HUB (the “Negotiated Payments”). These payments shall be made on the
following terms:
All
due
and payable upon the first occurrence of funds received from the Company by
either a Yorkville Advisors SEPA in the amount of two million dollars
($2,000,000) or greater, or general disbursement funds made available from
any
source in the amount of two million dollars ($2,000,000) or greater but in
no
case less than ten percent (10%) of the total general disbursement funding
received from the Company. Notwithstanding the above, the Negotiated Payments
must be made no later than January 5, 2008. In the event that Advisors have
not
obtained a full settlement with LK Drilling (as set forth in section 2(e) below)
and the current litigation has not been withdrawn, the Company shall have the
right to make payment directly to LK Drilling in order to procure the release
of
any liens then outstanding which payment amounts will be deducted from the
Negotiated Payments.
b. Additional
Payments -
The
Company acknowledges that it will be obligated to pay the Advisors an additional
$18,000 toward the costs of the pipeline and related completion of the Serian
SMMP well.
x.
Xxxxx
Covered
-
1.
The
Company agrees that upon execution of this Agreement, all of the Company’s
right, title and interest in the xxxxx identified on Schedule A hereto will
be
transferred to the Advisors so that the Company will have no right to any
portion of the production related to such xxxxx.
2.
The
Advisors will give up all right, title and interest, excluding the right to
the
overriding royalty, on the xxxxx identified on Schedule B. The Advisors will
provide positive affirmation that the Company has all right and title to the
xxxxx identified on Schedule B as Mid East Oil Xxxxx and will indemnify the
Company for any claims of any third party challenging the Company’s title to
such xxxxx.
d. Future
Obligations - The Advisors hereby waive any right to continue to receive the
monthly Operating Fee for the xxxxx identified on Schedule A . With respect
to
the xxxxx identified on Schedule B which are tended by the Advisors, the
Advisors shall be entitled to a tending fee equal to the lesser of $300 or
the
Company’s monthly net revenue interest in such xxxxx. Any costs other than the
tending fee must be pre-approved in writing by Indigo. The Parties further
agree
that the Advisors shall have no right to any future overriding royalty on any
xxxxx owned by the Company, except that in the event that the Company enters
into an agreement to develop xxxxx in Pennsylvania, Kentucky or West Virginia
and to utilize TAPO Energy, LLC, Dannic Energy Corp, P&J Resources Inc. or
Mid-East Oil Company as drillers (“Protected Xxxxx”) the Advisors shall be
entitled to a continuing overriding royalty equal to one-sixteenth (1/16) of
all
gross revenues from all gas produced, saved and marketed from any Protected
Xxxxx for the life of such xxxxx. The Advisors acknowledge that they shall
have
no right to any additional equity securities of the Company. For clarification
purposes, the Advisors shall be entitled to retain the ten million shares of
common stock previously issued which but shall have no right to any additional
shares of common stock, preferred stock or options to purchase common
stock.
e. Satisfaction
of Drilling Obligations and Clear Title and Interst.
- The
Advisors agree to make any payments necessary to obtain a full settlement from
LK Drilling by January 12, 2008. The Advisors hereby agree to indemnify the
Company from any liability arising from any failure to satisfy the obligations
to LK or any of the drillers or subcontractors that Advisors contracted with
during the term of the Original Agreement and recognize that such failure could
result in significant economic damage to the Company.
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 Pennsylvania law and shall be
interpreted, enforced
and governed under the laws of the laws of the Commonwealth of Pennsylvania
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 part, 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 Agreements. Nothwithstanding the foregoing, if the Company defaults
in
any payments due under this Agreement, or defaults in any other term or
provision of this Agreement, the Advisors will be entitled to enforce this
Agreement and the Original Agreements, at the sole option of the
Advisors.
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.
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THE
COMPANY:
|
|
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___________________
By:
Title:
Date:
HUB-ENERGY,
LLC
_____________________
By:
Title:
Date:
MID-EAST
OIL COMPANY
_______________________
By:
Title:
Date:
________________________
Xxxx
Xxxxxxxx, Individually
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Schedule
A
To
Mid
East
Mid
East
Oil Xxxxx:
1.
Xxxx
#2
2.
Coastal Timberlands #1
3.
Xxxxxx
#3
4.
Crown
Crest #1
5
Schedule
B
To
Mid
East
Tapo
Energy Company Xxxxx:
1.
Suan
#1
2.
Suan
#2
3.
Suan
#3
4.
Xxxxxxx #2
5.
Xxxxxxx #3
Xxxxxx
Energy Xxxxx:
1.
Grape
#1
2.
Grape
#3
3.
Grape
#4
4.
Xxxxxxxxxx #1
5.
Xxxxxxxxxx #2
P&J
Resources Xxxxx
1.
Xxxxxxx Xxxxx #1
2.
Xxxxxx
Xxxxx #1
3.
Xxx
Xxxxx #1
4.
Xxxx
Xxxxxxxxxx #1
5.
Xxxx
Xxxxxxxxxx #2
Mid
East
Oil Xxxxx:
1.
XX
Xxxxxxx #3
2.
DL
Xxxxxxx #4
3.
Serian
SMMB #1
4.
XxXxxx
#2
5.
Xxxxxx
#2
6
