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ASSET PURCHASE AGREEMENT
Between:
BOOMERS' CULTURAL DEVELOPMENT INC.
And:
KOKO PETROLEUM INC.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated and made for reference
as fully executed on this 19th day of May, 2006 (the "Effective Date").
BETWEEN:
BOOMERS' CULTURAL DEVELOPMENT INC., a company duly incorporated under
the laws of Nevada and having its mailing address at 0000 Xxxxxxxx
Xxxx, #00000, Xxxxx Xxxx, XX, X0X 0X0
(the "Transferee");
OF THE FIRST PART
AND:
KOKO PETROLEUM INC., a company duly incorporated under the laws of
Nevada and having an address for notice and delivery located at 000
Xxxxxxxx Xxxxxxxx Xxxx, Xxxxxxxx Xxxxx, XX, VOH IRO
(the "Transferor");
OF THE SECOND PART
(the Transferor and the Transferee being hereinafter singularly also
referred to as a "Party" and collectively referred to as the "Parties"
as the context so requires).
WHEREAS:
A. The Transferor is the owner of certain interests in the Corsicana Fields
Project, Barnet Shale Formation, McKinney, Blackburn, in Texas (collectively,
the "Assets"), a complete listing of such Assets of the Transferor being set
forth in Schedule "A" which is attached to this Agreement and which forms a
material part hereof;
B. The Transferee is desirous of acquiring the Assets of the Transferor, as
displayed in that certain Letter of Intent dated for reference May 4, 2006, a
copy of which is attached as Schedule "B" which is attached to this Agreement
and which forms a material part hereof.
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration
of the mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE
AS FOLLOWS:
Article I
DEFINITIONS, SCHEDULES AND INTERPRETATION
1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(c) Up to $80,000 as required within seven (7) days of written request by
the Transferor to be used for legal, accounting, and administrative
fees for the purpose of the Transferor obtaining a listing on the
NASDAQ OTC Bulletin Board;
(d) Assumption of $150,000 in debt owed by the Transferor with respect to
the Corsicana Field Project; and
(e) Assumption of up to $1,600,000 in debt owed by the Transferor.
Article 3
BOARD REPRESENTATION
3.1 Entitlement to Board Representation. The Transferee shall cause the
Transferor to nominate a candidate of its choosing to sit on the board of
directors of the Transferee.
3.2 Accounting. It is hereby also acknowledged and agreed by the Parties hereto
that the Transferee, or its subsidiary as the case may be, will maintain, at its
principal place of business, separate accounts, and records thereto, of business
and activities conducted pursuant to this Agreement and that such accounts and
records are to be in sufficient detail. In this regard the Transferee shall
retain the accounts, and records in relation thereto, for at least one year
after the date upon which they were made and presented to the Transferor. The
Transferee shall furnish such reasonable evidence as the Transferor deems
necessary to verify the accounting and will permit the Transferor's respective
representatives to make copies of or extracts from such accounts and records.
3.3 Inspection. The Transferor shall have, on at least five business days'
notice, unimpeded right and authority to enter on the premises of the
Transferee, its representatives, its agents, its counsel or any other party
having control or possession of records or premises of the Transferee or in
relation to its production or sales or distribution of the Products, for the
purpose of all such investigations as the Transferor may require to assure
themselves as to the compliance by the Transferee with appropriate accounting
provisions of this Agreement. In this regard the Transferee covenants to allow
and assist the Transferor, and the Transferor's duly authorized representatives,
access to all the aforesaid premises and locations and access to all such
personnel and other persons as the Transferor may require, and the Transferee
shall make such premises, records and persons available within five business
days of notice by the Transferor. In the event that any aforesaid party refuses
or delays or omits to give the Transferor entry and access to premises or
records, the Transferee warrants to give the Transferor all reasonable
assistance to effect such end.
Article 4
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE TRANSFEROR
4.1 Representations, Warranties and Covenants by the Transferor. In order to
induce the Transferee to enter into and consummate this Agreement, the
Transferor represents to and warrants to the Transferee that, to the best of the
informed knowledge, information and belief of the Transferor:
(a) the Transferor is duly incorporated under the laws of its
jurisdiction of incorporation and is validly existing and in
good standing with respect to all statutory filings required by
the applicable corporate laws;
(b) the Transferor is qualified to do business in those
jurisdictions where it is necessary to fulfill its obligations
under this Agreement and the Transferor has the full power and
authority to enter into this Agreement and any agreement or
instrument referred to or contemplated by this Agreement;
(c) the Transferor is the registered and beneficial owner of its interests
in the Assets as set out in the Agreements referred to in Schedule "A"
and has the requisite power, authority and capacity to own and use the
Assets and the Transferor owns the right to develop and maintain the
Assets subject the terms of the Agreements as referred to in Schedule
"A";
(d) no person, firm or corporation has any written or oral agreement,
option, understanding or commitment, or any right or privilege capable
of becoming an agreement, for the purchase from the Transferor any of
the Assets except as set out in the Agreements referred to in Schedule
"A";
(e) the Transferor has not experienced, nor is the Transferor aware of,
any occurrence or event which has had, or might reasonably be expected
to have, a materially adverse affect on the Assets;
(f) the Transferor is not in breach of any provision or condition of, nor
has the Transferor done or omitted to do anything that, with or
without the giving of notice or lapse or both, would constitute a
breach of any provision or condition of, or give rise to any right to
terminate or cancel or accelerate the maturity of any payment under,
any deed of trust, contract, certificate, consent, permit, license or
other instrument to which the Transferor is a party, by which the
Transferor is bound or from which the Transferor derives benefit, or
any judgment, decree, order, rule or regulation of any Court or
governmental authority to which the Transferor is subject, or any
statute or regulation applicable to the Transferor, to an extent that,
in the aggregate, has a material adverse affect on the Transferor or
the Assets;
(g) the Transferor has not committed to sell, license, distribute, option,
or otherwise dispose of or grant any interest in all or any part of
the Assets or agree to do or perform any act or enter into any
transaction or negotiation which could reasonably be expected to
interfere with this Agreement or which would render inaccurate any of
the representations, warranties or covenants set forth in this
Agreement;
(h) the execution and delivery of this Agreement and the agreements
contemplated hereby have been duly authorized by all necessary action,
corporate or otherwise, or will have been so authorized at the
relevant time;
(i) this Agreement constitutes a legal, valid and binding obligation of
the Transferor enforceable against it in accordance with its terms,
except as enforcement may be limited by laws of general application
affecting the rights of creditors and the discretionary authority of
courts of law;
(j) no proceedings are pending for, and the Transferor is unaware of, any
basis for the institution of any proceedings leading to its respective
dissolution or winding up, or the placing of it in bankruptcy or
subject to any other laws governing the affairs of insolvent
companies;
(k) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the
terms hereof does not and will not:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of the Transferor's constating
documents;
(ii) give to any party the right of termination, cancellation or
acceleration in or with respect to any agreement, contract or
commitment to which the Transferor is a party;
(iii) give to any government or governmental authority, or any
municipality or any subdivision thereof, including any
governmental department, commission, bureau, board or
administration agency, any right of termination, cancellation or
suspension of, or constitute a breach of or result in a default
under, any permit, license, control or authority issued to the
Transferor which is necessary or desirable in connection with the
conduct and operations of its respective Business and the
ownership or leasing of its respective Assets or other assets; or
(1) the Transferor will employ good faith, due diligence, and best efforts
to perform its obligations of this Agreement and will enter into such
additional or collateral agreements as may be reasonably required by
the Transferee to effect and complete the objects and intent of this
Agreement.
4.2 Continuity of the Representations, Warranties and Covenants by the
Transferor. The representations, warranties and covenants by the Transferor
contained in this Article, or in any certificates or documents delivered
pursuant to the provisions of this Agreement or in connection with the
transactions contemplated hereby, will be true at and as of the Effective Date.
Subject to any investigations or inquiries made by the Transferee or by the
Transferee's professional advisors, or the waiver of any condition by the
Transferee, the representations, warranties and covenants of the Transferor
contained in this Article shall continue in full force and effect for a period
of twelve (12) months from the Effective Date; provided, however, that the
Transferor shall not be responsible for the breach of any representation,
warranty or covenant of the Transferor contained herein caused by any act or
omission of the Transferee. In the event that any of the representations,
warranties or covenants of the Transferor are found by a Court of competent
jurisdiction to be incorrect and such incorrectness results in any loss or
damage sustained, directly or indirectly, by the Transferee, then the Transferor
will pay the amount of such loss or damage to the Transferee within 30 calendar
days of receiving notice of judgment therefor; provided that the damages will be
limited to the consideration paid upon closing.
Article 5
WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE TRANSFEREE
5.1 Warranties, Representations and Covenants by the Transferee. In order to
induce the Transferor to enter into and consummate this Agreement, the
Transferee hereby warrants to and represents to the Transferor that, to the best
of the informed knowledge, information and belief of the Transferee, after
having made due inquiry:
(a) the Transferee is duly incorporated under the laws of its jurisdiction
of incorporation and is validly existing and in good standing with
respect to all statutory filings required by the applicable corporate
laws;
(b) the execution and delivery of this Agreement and the agreements
contemplated hereby has been duly authorized by all necessary
corporate action on its part;
(c) there are no consents, approvals or conditions precedent to the
performance of this Agreement;
(d) this Agreement constitutes a legal, valid and binding obligation of
the Transferee enforceable against the Transferee in accordance with
its terms, except as enforcement may be limited by laws of general
application affecting the rights of creditors;
(e) no proceedings are pending for, and the Transferee is unaware of, any
basis for the institution of any proceedings leading to the
dissolution or winding up of the Transferee
or the placing of the Transferee in bankruptcy or subject to any other
laws governing the affairs of insolvent companies;
(f) the Transferee is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which it is subject or
which apply to it;
(g) there has been and there will be prepared and filed on a timely basis
all federal and state income tax returns, elections and designations,
and all other governmental returns, notices and reports of which the
Transferee had, or ought reasonably to have had, knowledge required to
be or reasonably capable of being filed with respect to the operations
of the Transferee, and no such returns, elections, designations,
notices or reports contain or will contain any material misstatement
or omit any material statement that should have been included, and
each such return, election, designation, notice or report, including
accompanying schedules and statements, is and will be true, correct
and complete in all material respects;
(h) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the
terms hereof does not and will not:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of the constating documents of
the Transferee;
(ii) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of any law, judgment, order,
injunction, decree, regulation or ruling of any Court or
governmental authority, domestic or foreign, to which the
Transferee is subject, or constitute or result in a default under
any agreement, contract or commitment to which the Transferee is
a party;
(iii) give to any party the right of termination, cancellation or
acceleration in or with respect to any agreement, contract or
commitment to which the Transferee is a party;
(iv) give to any government or governmental authority, or any
municipality or any subdivision thereof, including any
governmental department, commission, bureau, board or
administration agency, any right of termination, cancellation or
suspension of, or constitute a breach of or result in a default
under, any permit, license, control or authority issued to the
Transferee which is necessary or desirable in connection with the
conduct and operations of its business and the ownership or
leasing of its business assets; or
(v) constitute a default by the Transferee, or any event which, with
the giving of notice or lapse of time or both, might constitute
an event of default, under any agreement, contract, indenture or
other instrument relating to any indebtedness of the Transferee
which would give any party to that agreement, contract, indenture
or other instrument the right to accelerate the maturity for the
payment of any amount payable under that agreement, contract,
indenture or other instrument;
(i) neither this Agreement nor any other document, certificate or
statement furnished to the Transferor by or on behalf of the
Transferee in connection with the transactions contemplated hereby
knowingly or negligently contains any untrue or incomplete statement
of material fact or omits to state a material fact necessary in order
to make the statements therein not misleading;
(j) the Transferee is not aware of any fact or circumstance which has not
been disclosed to the Transferor which should be disclosed in order to
prevent the representations, warranties and covenants contained in
this section from being misleading or which would likely affect the
decision of the Transferor to enter into this Agreement; and
(k) the Transferee will employ good faith, due diligence, and best efforts
to perform its obligations of this Agreement and will enter into such
additional or collateral agreements as may be reasonably required to
effect and complete the objects and intent of this Agreement.
(l) the Shares represented in this transaction are duly issued and fully
paid, valid, and nonassessable.
5.2 Continuity of the Representations, Warranties and Covenants by the
Transferee. The representations, warranties and covenants of the Transferee
contained in this Article, or in any certificates or documents delivered
pursuant to the provisions of this Agreement or in connection with the
transactions contemplated hereby, will be true at and as of the Effective Date.
Notwithstanding any investigations or inquiries made by the Transferor or by the
Transferor's respective professional advisors prior to the Effective Date, or
the waiver of any condition by the Transferor, the representations, warranties
and covenants of the Transferee contained in this Article shall survive the
Effective Date and shall continue in full force and effect for a period of
twelve (12) months from the Effective Date; provided, however, that the
Transferee shall not be responsible for the breach of any representation,
warranty or covenant of the Transferee contained herein caused by any act or
omission of the Transferor. In the event that any of the said representations,
warranties or covenants are found by a Court of competent jurisdiction to be
incorrect and such incorrectness results in any loss or damage sustained,
directly or indirectly, by the Transferor, then the Transferee will pay the
amount of such loss or damage to the Transferor within 30 calendar days of
receiving notice of judgment therefor; provided that the Transferor will not be
entitled to make any claim unless the loss or damage suffered may exceed the
amount of $10,000.
Article 6
OBTAINING APPROVAL
6.1 Approval The Transferor shall, prior to closing, obtain the requisite
approval to effect the terms contemplated within this agreement, and to obtain
waivers, consents, and rights of first refusal as required under the agreement
as set out in Schedule "A".
Article 7
ADDITIONAL TERMS
7.1 Due Diligence. Each of the Parties hereto may conduct such further due
diligence examination of the other Parties hereto as it deems appropriate. In
that regard the Parties agree that each shall have full and complete access to
the other Parties' books, records, financial statements and other documents,
articles of incorporation, by-laws, minutes of Board of Directors' meetings and
its committees, investment agreements, material contracts and as well such other
documents and materials as the Parties hereto, or their respective counsel, may
deem reasonable and necessary to conduct an adequate due diligence investigation
of each Party, its respective operations and financial condition prior to the
Closing.
7.2 Opinions, Reports and Advice of the Transferor. The Transferor hereby
acknowledges and agrees that all written and oral opinions, reports, advice and
materials provided by the Transferor to the Transferee in connection with the
Assets hereunder are intended solely for the Transferee's benefit and for the
Transferee's use only, and that any such written and oral opinions,
reports, advice and information are the exclusive property of the Transferee.
In this regard the Transferor hereby covenants and agrees that the Transferee
may utilize any such opinion, report, advice and materials for any other
purpose whatsoever and, furthermore, may reproduce, disseminate, quote from and
refer to, in whole or in part, at any time and in any manner, any such opinion,
report, advice and materials in its sole and absolute discretion.
7.3 Additional Documents and Acts by Transferor. The Transferor will also cause
or deliver, or cause to be delivered, to the Transferee, at the times
stipulated, the following:
(a) upon the request of the Transferee, all documentation as may
be necessary and as may be required by counsel for the
Transferee, acting reasonably, to ensure that all of the
Assets have been duly transferred, assigned and are
registerable in the name of and for the benefit of the
Transferee under applicable corporate laws and including,
without limitation, all necessary deeds, conveyances, bills of
sale, assurances, transfers, contract assignments, sales
agreement assignments, development agreement assignments,
royalty assignments, license assignments, manufacturing
agreement assignments, supply agreement assignments, consents
and any other documents necessary or reasonably required
effectively to transfer all of the Assets and the business of
the Assets to the Transferee with a good and marketable title,
free and clear of all mortgages, liens, charges, pledges,
claims, security interests or encumbrances whatsoever;
(b) within 10 days of the Closing Date, a certified copy of the
resolutions of the directors and shareholders of the
Transferor authorizing the transfer by the Transferor to the
Transferee of all of the Assets in accordance with the terms
of this Agreement;
(c) within 30 days of the Closing Date, all necessary consents and
approvals in writing to the completion of the transactions
contemplated herein and including, without limitation,
approval from all Regulatory Authorities having jurisdiction
over the Transferor and the Assets or a certificate of counsel
of the Transferor that no such consents are required; and
(d) within 30 days of the Closing Date all records, engineering
specifications and reports, patents, books, and other
documentation pertinent to the Assets and all molds,
inventory, customer lists, supply contracts, manufacturing
contracts, and all and every part of such matters pertaining
to the Assets.
Article 8
NON-DISCLOSURE
8.1 Non-disclosure. The Parties hereto, for themselves, their officers,
directors, shareholders, consultants, employees and agents, agree that they each
will not disseminate or disclose, or knowingly allow, permit or cause others to
disseminate or disclose to third parties who are not subject to express or
implied covenants of confidentiality, without the other Parties' express written
consent, either: (i) the fact or existence of this Agreement or discussions
and/or negotiations between them involving, inter alia, possible business
transactions; (ii) the possible substance or content of those discussions; (iii)
the possible terms and conditions of any proposed transaction; (iv) any
statements or representations (whether verbal or written) made by either Party
in the course of or in connection with those discussions; or (v) any written
material generated by or on behalf of any Party and such contacts, other than
such disclosure as may be required under applicable securities legislation or
regulations, pursuant to any order of a Court or on a "need to know" basis to
each of the Parties' respective professional advisors. Disclosure will be
required to the other parties as set out in the agreements as set out in
Schedule "A".
Article 9
PROPRIETARY INFORMATION
9.1 Confidential Information. Each Party hereto acknowledges that any and all
information which a Party may obtain from, or have disclosed to it, about the
other Parties constitutes valuable trade secrets and proprietary confidential
information of the other Parties (collectively, the "Confidential Information").
No such Confidential Information shall be published by any Party without the
prior written consent of the other Parties hereto, however, such consent in
respect of the reporting of factual data shall not be unreasonably withheld, and
shall not be withheld in respect of information required to be publicly
disclosed pursuant to applicable securities or corporation laws. Furthermore,
each Party hereto undertakes not to disclose the Confidential Information to any
third party without the prior written approval of the other Parties and to
ensure that any third party to which the Confidential Information is disclosed
shall execute an agreement and undertaking on the same terms as contained
herein.
9.2 Impact of Breach of Confidentiality. The Parties hereto acknowledge that the
Confidential Information is important to the respective businesses of each of
the Parties and that, in the event of disclosure of the Confidential
Information, except as authorized hereunder, the damage to each of the Parties
hereto, or to either of them, may be irreparable. For the purposes of the
foregoing sections the Parties recognize and hereby agree that a breach by any
of the Parties of any of the covenants therein contained would result in
irreparable harm and significant damage to each of the other Parties that would
not be adequately compensated for by monetary award. Accordingly, the Parties
agree that in the event of any such breach, in addition to being entitled as a
matter of right to apply to a Court of competent equitable jurisdiction for
relief by way of restraining order, injunction, decree or otherwise as may be
appropriate to ensure compliance with the provisions hereof, any such Party will
also be liable to the other Parties, as liquidated damages, for an amount equal
to the amount received and earned by such Party as a result of and with respect
to any such breach. The Parties also acknowledge and agree that if any of the
aforesaid restrictions, activities, obligations or periods are considered by a
Court of competent jurisdiction as being unreasonable, the Parties agree that
said Court shall have authority to limit such restrictions, activities or
periods as the court deems proper in the circumstances. In addition, the Parties
further acknowledge and agree that all restrictions or obligations in this
Agreement are necessary and fundamental to the protection of the respective
businesses of each of the Parties and are reasonable and valid, and all defenses
to the strict enforcement thereof by either of the Parties are hereby waived by
the other Parties.
Article 10
CLOSING AND TRANSFER OF INTEREST
10.1 Closing. Closing shall be on or before Wednesday, May 31, 2006. Closing
documentation shall be the documentation as required to carry out the intent of
this Agreement, including:
(a) Document set out in Article 7;
(b) All indemnities in regard to debts being assumed in regard to
Agreements as referred to in Schedule "A";
(c) Evidence of appointment of nominee of the Transferor; and
(d) 1,500,000 shares duly issued non-assessable in the Transferee.
10.2 Assumption of Obligations. Any transfer of all or any part of the
Transferor's licence shall be accompanied by the written agreement of any such
transferee to assume the obligations of the Transferor under the licence and to
be bound by the terms and conditions thereof.
Article 11
FORCE MAJEURE
11.1 Events. If any Party hereto is at any time prevented or delayed in
complying with any provisions of this Agreement by reason of strikes, walk-outs,
labour shortages, power shortages, fires, wars, acts of God, earthquakes,
storms, floods, explosions, accidents, protests or demonstrations by
environmental lobbyists or native rights groups, delays in transportation,
breakdown of machinery, inability to obtain necessary materials in the open
market, unavailability of equipment, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons beyond the control of
that Party, then the time limited for the performance by that Party of its
respective obligations hereunder shall be extended by a period of time equal in
length to the period of each such prevention or delay.
11.2 Notice. A Party shall, within seven calendar days, give notice to the other
Party of each event of force majeure under section "14.1" hereinabove, and upon
cessation of such event shall furnish the other Party with notice of that event
together with particulars of the number of days by which the obligations of that
Party hereunder have been extended by virtue of such event of force majeure and
all preceding events of force majeure.
Article 12
DEFAULT AND TERMINATION
12.1 Default. The Parties hereto agree that if any Party hereto is in default
with respect to any of the provisions of this Agreement (herein called the
"Defaulting Party"), the non-defaulting Party (herein called the "Non-Defaulting
Party") shall give notice to the Defaulting Party designating such default, and
within 10 calendar days after its receipt of such notice, the Defaulting Party
shall cure such default, or commence proceedings to cure such default and
prosecute the same to completion without undue delay.
Article 13
INDEMNIFICATION AND LEGAL PROCEEDINGS
13.1 Indemnification. The Parties hereto agree to indemnify and save harmless
the other Party hereto, including its respective affiliates and their respective
directors, officers, employees and agents (each such party being an "Indemnified
Party") from and against any and all losses, claims, actions, suits,
proceedings, damages, liabilities or expenses of whatever nature or kind,
including any investigation expenses incurred by any Indemnified Party, to which
an Indemnified Party may become subject by reason of an act or inaction of the
other Party.
13.2 Claim of Indemnification. The Parties hereto agree to waive any right they
might have of first requiring the Indemnified Party to proceed against or
enforce any other right, power, remedy, security or claim payment from any other
person before claiming this indemnity.
13.3 Notice of Claim. In case any action is brought against an Indemnified Party
in respect of which indemnity may be sought against any of the Parties hereto,
the Indemnified Party will give the relevant Party hereto prompt written notice
of any such action of which the Indemnified Party has knowledge and such Party
will undertake the investigation and defense thereof on behalf of the
Indemnified Party, including the prompt retaining of counsel acceptable to the
Indemnified Party affected and the payment of all expenses. Failure by the
Indemnified Party to so notify shall not relieve any Party hereto of such
Party's obligation of indemnification hereunder unless (and only to the extent
that) such failure results in a forfeiture by any Party hereto of substantive
rights or defenses.
13.4 Settlement. No admission of liability and no settlement of any action shall
be made without the consent of the Indemnified Party affected, such consent not
to be unreasonably withheld.
13.5 Legal Proceedings. Notwithstanding that the relevant Party hereto will
undertake the investigation and defense of any action, an Indemnified Party will
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel will be at the
expense of the Indemnified Party unless:
(a) such counsel has been authorized by the relevant Party hereto;
(b) the relevant Party hereto has not assumed the defense of the action
within a reasonable period of time after receiving notice of the
action;
(c) the named parties to any such action include that any Party hereto and
the Indemnified Party shall have been advised by counsel that there
may be a conflict of interest between any Party hereto and the
Indemnified Party; or
(d) there are one or more legal defenses available to the Indemnified
Party which are different from or in addition to those available to
any Party hereto.
Article 14
NOTICE
14.1 Notice. Each notice, demand or other communication required or permitted to
be given under this Agreement shall be in writing and shall be sent by prepaid
registered mail addressed to the Party entitled to receive the same, or
delivered to such Party, at the address for such Party specified above. The date
of receipt of such notice, demand or other communication shall be the date of
delivery thereof if delivered, or, if given by registered mail as aforesaid,
shall be deemed conclusively to be the third calendar day after the same shall
have been so mailed, except in the case of interruption of postal services for
any reason whatsoever, in which case the date of receipt shall be the date on
which the notice, demand or other communication is actually received by the
addressee.
14.2 Change of Address. Either Party may at any time and from time to time
notify the other Party in writing of a change of address and the new address to
which notice shall be given to it thereafter until further change.
Article 15
GENERAL PROVISIONS
15.1 Entire Agreement. This Agreement constitutes the entire agreement to date
between the Parties hereto and supersedes every previous agreement,
communication, expectation, negotiation, representation or understanding,
whether oral or written, express or implied, statutory or otherwise, between the
Parties hereto with respect to the subject matter of this Agreement.
15.2 Enurement. This Agreement will enure to the benefit of and
will be binding upon the Parties hereto, their respective heirs, executors,
administrators and assigns.
15.3 Schedules. The Schedules to this Agreement are hereby incorporated by
reference into this Agreement in its entirety.
15.4 Time of the Essence. Time will be of the essence of this Agreement.
15.6 Applicable Law. The situs of this Agreement is Vancouver, British Columbia,
and for all purposes this Agreement will be governed exclusively by and
construed and enforced in accordance with the laws and Courts prevailing in the
Province of British Columbia.
15.7 Further Assurances. The Parties hereto hereby, jointly and severally,
covenant and agree to forthwith, upon request, execute and deliver, or cause to
be executed and delivered, such further and other deeds, documents, assurances
and instructions as may be required by the Parties hereto or their respective
counsel in order to carry out the true nature and intent of this Agreement.
15.8 Currency. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of the U.S.A.
15.9 Severability and Construction. Each Article, section, paragraph, term and
provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to any of the Parties
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and agreement as of the date upon which the ruling becomes
final).
15.10 Captions. The captions, section numbers and Article numbers appearing in
this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.
15.11 Counterparts. This Agreement may be signed by the Parties hereto in as
many counterparts as may be necessary and, if required, by facsimile, each of
which so signed being deemed to be an original, and such counterparts together
shall constitute one and the same instrument and notwithstanding the date of
execution will be deemed to bear the Execution Date as set forth on the front
page of this Agreement.
15.12 Consents and Waivers. No consent or waiver expressed or implied by either
Party hereto in respect of any breach or default by any other Party in the
performance by such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
IN WITNESS WHEREOF each of the Parties hereto has set their respective hands and
seals in the presence of their duly authorized signatories as of the Execution
Date determined hereinabove.
The COMMON SEAL of
BOOMERS'CULTURAL DEVELOPMENT INC. )
--------------------------------- )
the Transferor herein, )
was hereunto affixed in the presence of: )
/s/
----------------------------------------- )
Authorized Signatory
The COMMON SEAL of
KOKO PETROLEUM INC. )
--------------------------------- )
the Transferor herein, )
was hereunto affixed in the presence of: )
/s/
----------------------------------------- )
Authorized Signatory
15.11 Counterparts. This Agreement may be signed by the Parties hereto in as
many counterparts as may be necessary and, if required, by facsimile, each of
which so signed being deemed to be an original, and such counterparts together
shall constitute one and the same instrument and notwithstanding the date of
execution will be deemed to bear the Execution Date as set forth on the front
page of this Agreement.
15.12 Consents and Waivers. No consent or waiver expressed or implied by either
Party hereto in respect of any breach or default by any other Party in the
performance by such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
IN WITNESS WHEREOF each of the Parties hereto has set their
respective hands and seals in the presence of their duly authorized signatories
as of the Execution Date determined hereinabove.
The COMMON SEAL of
BOOMERS'CULTURAL DEVELOPMENT INC. )
--------------------------------- )
the Transferor herein, )
was hereunto affixed in the presence of: )
/s/
----------------------------------------- )
Authorized Signatory
The COMMON SEAL of
KOKO PETROLEUM INC. )
--------------------------------- )
the Transferor herein, )
was hereunto affixed in the presence of: )
/s/
----------------------------------------- )
Authorized Signatory
SCHEDULE "A"
THIS IS SCHEDULE "A" to the Asset Purchase Agreement dated the day of ,
2006.
The Assets
1. Plan of Redevelopment Agreement between Texas M.O.R., Inc., JMT
Resources, Ltd. and KOKO Petroleum, Inc. dated October 20, 2005;
2. Letter of Intent Agreement between Texas M.O.R., Inc., JMT Resources,
Ltd., KOKO Petroleum, Inc. and Nitro Petroleum, Inc. dated March 01,
2006;
3. Letter Agreement between First Canadian American Financial Services,
Inc. and Xxxxx Energy, LLC dated February 02, 2004; and
4. Letter Agreement between KOKO Petroleum, Inc. and REO Energy, Ltd.
dated September 20, 2005.
SCHEDULE "B"
------------
LETTER OF INTENT
================================================================================
LETTER OF INTENT AGREEMENT
--------------------------
CORSICANA FIELD PROSPECT
This Letter of Intent Agreement ("Agreement") is executed as of March 1, 2006,
("Execution Date") between TEXAS M.O.R., INC. ("MOR"), JMT RESOURCES, LTD.
("JMT)", NITRO PETROLEUM, INC. ("NITRO") and KOKO PETROLEUM, LTD. ("KOKO").
RECITALS:
A. JMT owns approximately 7,838 [+/-] gross acres in mineral interest
leaseholds located in Xxxxxxx County, Texas ("Prospect Leases"). The geologic
trend is identified as the Xxxxxxx Pool and is covered by oil and gas leases
more particularly described in Exhibit "A" attached hereto (the "Prospect").
JMT has a ninety-five percent working interest in the Prospect.
B. MOR and its affiliate, JMT, the owner of the Prospect Leases, have
offered KOKO and NITRO the right to participate in the cost of developing the
Prospect Leases to be funded by KOKO and NITRO, subject to the terms of this
Agreement.
C. The development of the Prospect Leases shall include, but not be
limited to the following activities: the implementation of the polymer flood in
the Nacatoch Formation, the drilling new vertical and horizontal xxxxx within
zones covered by the Prospect Leases, plugging old well bores, development off
injection disposal xxxxx, re-work of existing xxxxx on the Prospect Leases,
acquisition of new mineral leases not covered under the Prospect Leases and the
acquisition of related oil field equipment
D. The parties hereto have previously executed agreements for the
development of a pilot project and farm-out participation on a portion of the
Prospect Leases. By mutual execution, this Agreement will supersede those
agreements and render them null and void. KOKO and NITRO will each earn an
undivided working interest equal to twenty-three and three-quarters percent
(23.75%) each in the entire Prospect once funding has been completed.
E. KOKO, NITRO and JMT request the right of first refusal to purchase
the other's interest in the prospect. Furthermore, KOKO and NITRO requests the
right of first refusal to fund any future drilling operations outside the
Prospect area not limited to geographical location.
F. Unless specifically referred to individually, KOKO and NITRO shall
be referred to as "Investing Parties" and JMT and MOR will be referred to as
"Operating Parties".
TERMS OF AGREEMENT:
NOW, THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is hereby
acknowledged, MOR, JMT, NITRO and KOKO agree as follows:
ARTICLE I
SUMMARY OF PROSPECT-RELATIONSHIP OF THE PARTIES
2.01. Relationship of Parties. The parties hereto are participants in the
Prospect Leases in which the costs charged by the Operating Parties to the
Investing Parties will be on an actual basis. The investing Parties will be
entitled to seventy percent (70%) off the net income derived from the prospect
until it has returned its contributed capital ("Payback"). After payback of the
1
Investing Parties investment, the Operating Parties and the Investing Parties
will equally share in the net income derived from the Prospect.
2.02. Formation of a Joint Venture for Accounting and Records. The parties
hereto agree to form a joint venture for the purpose of maintaining an accurate
set of books and records that will properly reflect all costs and charges
applied to the Prospect Leases. The ownership of the Joint Venture will be as
follows: JMT will own 50%, NITRO will own 25% and KOKO will own the remaining
25%. The Investing Parties will have the right to inspect and/or audit the books
and records of the joint venture at any time with reasonable notice to the
Operating Parties.
2.03. Prospect Leases Funding Summary. The Investing Parties agree to invest
$4,500,000 over the next twenty-four months from the date of this Agreement, of
which $1,200,000 has already been invested. Once funding has been completed, JMT
will legally assign 50% of its interest in the Prospect Leases. The Investing
Parties will be able to secure its interest prior to the completion of funding
by recording this document and any subsequent definitive document with Xxxxxxx
County
2.04. Relationship to Operating Agreement. The Operating Agreement executed
under the previous Pilot Project will remain in effect with MOR continuing to
operate the Prospect Leases The Operating Agreement contains several provisions
relating to the joint development of the Prospect Leases and is intended to be
consistent with the provisions of this Agreement In the event of a conflict
between the Operating Agreement and this Agreement, the provisions of this
Agreement shall be considered to be controlling. The Investing Parties agree
that certain overhead and salary charges will be charged against the Joint
Venture, which will be mutually agreed upon by the Parties hereto.
ARTICLE III
FUNDING REQUIREMENTS AND PROCEDURES
3.01 Acquisition of Prospect Leases. The Operating Parties and their affiliates
have acquired and purchased the Prospect Leases for the purpose of their
redevelopment. The cost of acquiring and the subsequent development the Prospect
Leases to date was borne solely by the Investing Parties and their affiliates
and will not be passed to the Investing Parties for purposes of this Agreement.
The Operating Parties have to date invested $4,500,000 in the acquisition and
development of the Prospect Leases.
3.02 Funding of Prospect Leases. The remaining funding due the joint venture,
$3,300,000 will be due and payable as requested by the Operating Parties and
agreed to by the Investing Parties, however, the remaining funding will be due
and payable within twenty-four months of the date of this Agreement. After the
Investing have funded the $3,300,000, the Investing Parties and the Operating
Parties will each be required to fund additional projects for the Prospect
Leases on a "heads-up" or 50%-50% basis.
3.03. Projects to be Funded for the Prospect Leases. The following projects will
be funded by the Investing Parties for the benefit off the Joint Venture and
shall include;
Remaining Funding of the Polymer Pilot - $490,000
Seismic Project - $500,000
Polymer Expansion - $1,500,000 Horizontal
Pecan Gap Drilling - $810,000
2
3.04. Partial Funding of Prospect Stages and KOKO's Subsequent Interest. In the
event the Investing Parties fail to fund the agreed amounts or elect not to
continue funding the projects defined above, the Investing Parties interest will
be equal to the working interest the Operating Parties have in the existing
xxxxx drilled and completed under this Agreement.
ARTICLE IV
TITLE
4.01. Representations as to Ownership, Burdens and Available Acreage. The
Operating Parties warrant and represent that they are the owners of the Prospect
Leases, that the Prospect Leases are free of liens and encumbrances (other than
the Operating Agreement and various easements), and that the Leases shall have a
minimum Net Revenue Interest of seventy five percent (75%). In the event that a
Prospect Lease covers a Net Revenue Interest off greater than seventy five
percent (75%), then the Investing Parties shall be entitled to their share of
the excess Net Revenue Interest for that Lease, to the extent of the acreage
under that Prospect Lease which is assigned to a Prospect Well.
4.02. Indemnification Against Liens. The Operating Parties hereby agrees to"
defend, indemnify and hold the Investing Parties harmless against any and all
liens and encumbrances which may arise .in connection with a Prospect Lease as a
result of MOR's operations or JMT's ownership, but does not include liens and
encumbrances created by the Investing Parties, nor any costs, liabilities,
losses or attorneys' fees incurred by the Investing Parties as a result of such
liens and encumbrances.
4.03 Examination of Title/Loss of Title. MOR and JMT shall warrant and represent
the validity of leasehold title prior to expending funds to drill a Prospect
Well thereon. Other than the indemnification by MOR for liens described in
section 4.02 above, the parties shall bear proportionately, after the drilling
of a Prospect Well, the possible loss of title as to the spacing unit
surrounding the particular well for any reason, as more particularly set forth
in Article IV of the Operating Agreement.
4.04. Interest Earned by the Investing Parties. The funding by the Investing
Parties under this Agreement shall entitle the Investing Parties to own a
fort-seven and one-half percent (47.5%) Working Interest and not less than a
thirty-five percent (35%) Net Revenue Interest in the Prospect Well, together
with a like interest in the Railroad Commission of Texas spacing unit assigned
to the well (currently set at 2 acres under applicable field rules set by the
Commission) and the equipment associated with the well. Within thirty (30) days
after the final investment by the Investing Parties, the Operating Parties shall
record and deliver an assignment of the Investing Parties Working Interest in
the Prospect Leases and applicable Railroad Commission of Texas spacing unit
assigned to the well.
4.05. Right to Assign/Mortgage. The Investing Parties shall not have the right
to assign or to mortgage the interests earned under this Agreement, subject to
the provisions of the Operating Agreement, unless it has received express,
written consent from the Operating Parties, in which case shall bind the
assignee or mortgagee.
3
ARTICLE V
DRILLING OPERATIONS AND INFORMATION REPORTING
5.01. Operator Elections and Decisions. MOP, as Operator, shall have the
exclusive right, in its sole discretion, to: 1) select all drill-site
locations, title attorneys, insurance carriers, drilling contractors, field and
office personnel, service companies and equipment related to a Prospect Well;
and 2) to make all elections regarding scheduling, completion or plugging of a
Prospect Well. All other decisions shall be governed by the terms of the
Operating Agreement.
5.02. Insurance Requirements. For all operations pertaining to a Prospect
Leases, MOR shall cause the drilling contractor to carry, as well as MOR,
general liability insurance in which the Investing Parties shall be listed as
an additional insured under each policy.
5.03. Information Reporting. MOR shall provide to JMT, NITRO and KOKO on a
monthly basis (without the need for a specific request) detailed information
regarding the production attributable to a Prospect Leases and any costs which
are assessed to the Investing Parties as to a Prospect Leases. At the Investing
Parties request, MOR shall likewise provide copies of any logs or technical
data pertaining to a Prospect Well.
5.04. Responsibilities of Operator. Consistent with the provisions of the
Operating Agreement, MOR shall conduct its operations as a reasonable prudent
operator, in a good and workmanlike manner, with due diligence and dispatch, in
accordance with good oilfield practice, and in compliance with applicable law
and regulation, but in no event shall it have any liability as Operator to the
Investing Parties for losses sustained or liabilities incurred except such as
may result from gross negligence or willful misconduct.
5.05. LIMITED ARBITRATION FOR RESET OF WELL BORE COSTS AND ACCOUNTING DISPUTES.
ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THE RESETTING OF WELL
BORE COSTS FOR THE STAGE 3 XXXXX OR RELATING TO AN ACCOUNTING DISPUTE UNDER THIS
AGREEMENT SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN FORT WORTH, TEXAS
IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES ("RULES") OF THE AMERICAN
ARBITRATION ASSOCIATION IN EFFECT AT THE TIME THE CONTROVERSY OR CLAIM IS
SUBMITTED TO ARBITRATION; PROVIDED, HOWEVER, THAT THE AMERICAN ARBITRATION
ASSOCIATION NEED NOT BE USED AS THE SOURCE OF THE ARBITRATORS SELECTED. ONE
ARBITRATOR SHALL BE SELECTED BY EACH PARTY AND IF THEY CANNOT AGREE AS TO THEIR
DECISION, THEN THE TWO ARBITRATORS SHALL SELECT A THIRD ARBITRATOR AND THE THREE
ARBITRATORS SHALL RESOLVE THE CLAIM. THE ARBITRATOR SHALL HAVE JURISDICTION TO
DETERMINE ANY SUCH CLAIM AND MAY GRANT ANY RELIEF OTHER THAN PUNITIVE OR
EXEMPLARY DAMAGES AUTHORIZED BY LAW FOR SUCH CLAIM, INCLUDING SPECIFIC
PERFORMANCE. ANY SUCH ARBITRATION SHALL BE CONCLUDED WITHIN 30 DAYS OF
INITIATION OF THE ARBITRATION. ANY CONTROVERSY OR CLAIM WHICH IS THE SUBJECT OF
ARBITRATION SHALL BE DEEMED WAIVED AND SHALL BE FOREVER BARRED IF ARBITRATION IS
NOT INITIATED BY THE AGGRIEVED PARTY BY MAKING DEMAND FOR ARBITRATION WITHIN 3
MONTHS OF THE DATE THE CONTROVERSY OR CLAIM FIRST ARISES. IN ANY ARBITRATION
UNDER THIS PARAGRAPH, ANY AND ALL RULES OF DISCOVERY SET FORTH IN THE TEXAS
RULES OF CIVIL PROCEDURE SHALL BE APPLICABLE. EACH PARTY TO THE ARBITRATION
SHALL BEAR THE INITIAL FILING FEES AND CHARGES
4
REQUIRED BY THE ARBITRATION BODY; PROVIDED, HOWEVER, THAT THE ARBITRATOR MAY
AWARD REIMBURSEMENT OF ALL SUCH COSTS AND FEES TO THE PREVAILING PARTY AS A PART
OF ITS AWARD. THIS PARAGRAPH SHALL LIKEWISE BE SPECIFICALLY ENFORCEABLE IN A
COURT OF COMPETENT JURISDICTION SHOULD THE PARTY NOT DEMANDING ARBITRATION
REFUSE TO PARTICIPATE IN OR FULLY COOPERATE WITH THE ARBITRATION PROCESS.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
6.01. Time is of Essence/Attorneys Fees. Time is of the essence with respect to
this Agreement and each party hereto shall have the right to specific
performance as to the obligations set forth herein. In the event that either
party seeks enforcement of this Agreement in any legal or equitable proceeding,
the prevailing party in such proceeding shall be entitled to recover from the
other party all expenses attributable to such proceeding, including interest,
court costs and attorneys fees.
6.02. Entire Agreement. This Agreement, the documents to be executed hereunder,
and each Exhibit attached hereto constitute the entire agreement between the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties pertaining to the subject matter hereof.
6.03. Warranties. There are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein or in documents delivered pursuant hereto.
6.04. Amendments. No supplement, amendment, alteration, modification, waiver or
termination off this Agreement shall be binding unless executed in writing by
the parties hereto.
6.05. Waiver., No waiver of any of the provisions of this Agreement will be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
6.06. Captions. The captions in this Agreement are for convenience only and
may not be considered a part of or as affecting the construction or
interpretation of any provision of this Agreement.
6.07. APPLICABLE LAW. THIS AGREEMENT, OTHER DOCUMENTS DELIVERED PURSUANT HERETO
AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THE VALIDITY OF THE VARIOUS
CONVEYANCES AFFECTING THE TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE PROPERTY IS
LOCATED. THIS AGREEMENT IS PERFORMABLE IN AND VENUE SHALL LIE IN TARRANT COUNTY,
TEXAS.
6.08. Notices. Any notice, communication, request, instruction or other document
required or permitted hereunder shall be given in writing by certified mail,
return receipt requested, postage prepaid, or by overnight courier, prepaid
telegram, or personal delivery to the address below or to such other address or
to the attention of such other person as shall be designated in writing by
5
any party to the other party hereafter. All notices will be deemed to have been
given as of the date of receipt. The initial contact information is as follows:
If to MOR or JMT: 0000 Xxxxxxxx Xxx.
Xxxx Xxxxx, XX 00000
(000) 000-0000
FAX: (000) 000-0000
If to KOKO or NITRO 902 Xxxxxxxx Dr.
Xxxxxxxxx, XX
X0X 0X0
Fax: 000-000-0000
6.09. Brokerage Fees and Transaction Expenses., Except as otherwise provided
herein, each party shall be solely responsible for all expenses incurred by it
in connection with this transaction, including, without limitation, fees and
expenses of its own counsel and accountants, and shall not be entitled to any
reimbursement therefore from any other party hereto. The Parties warrant and
represent to each other that no brokerage commission shall become due or owing
to any party as a result of this transaction.
6.10. Counterparts/Facsimile Signatures. This Agreement may be executed in
counterpart originals, each of which shall be treated as a fully executed
original hereof when all parties hereto have executed such a counterpart. A
facsimile signature shall be treated as an original signature unless an original
signature is required by law.
SIGNATURES APPEAR ON FOLLOWING PAGE.
6
EXECUTED effective as of the date set forth above.
"MOR"
TEXAS M.O.R., INC.
By:________________________________________
Name: Xxxx X. Xxxxxx Title: President
"JMT"
JMT RESOURCES, LTD.
By:________________________________________
Name: Xxxx Xxxxxx Title: Managing Partner
"KOKO"
KOKO PETROLEUM, INC.
By:_______________________________________
Name: Xxx Xxxxx
Title: Chief Executive Officer
"VITRO"
By:________________________________________
Name: Xxx Xxxx
Title: Chief Exec the Officer
7
Exhibit A
Texas M.O.R., Inc. d/b/a Xxxx Oil Properties
Operating Leases
Corsicana Shallow Field
Xxxxxxx County, Texas
Net Formation
Revenue Lease Prod INJ Wolf City (W)
No. Lease Name RRC# Interest Acreage Xxxxx Xxxxx Nacatoch (N) Depth Rights
--- ---------- ---- -------- ------- ----- ----- ------------ ------------
1 Xxxxxxxxxx 00000 0.7825000 139.34 00 0 X Xxx xxxxxx
0 Xxxxxx, XX 00000 0.7825000 57.00 18 0 N All rights to 2,000 ft.
3 Xxxxx 00260 0.8150000 104.00 10 1 N Base of the Woodbine- 3,200 ft.
4 Xxxxxx 00000 0.8150000 144.54 6 0 N Base of the Woodbine- 3,200 ft.
5 Xxxxxxxxx 00000 0.8150000 125.78 15 3 N Base of the Pecan Gap
6 Bounds 01430 0.8450000 50.00 2 0 N All rights to 2,000 ft.
7 Central 00265 0.8150000 322.70 45 19 N Base of the Woodbine- 3,200 ft.
8 Dreeben 00269 0.7837500 87.50 5 1 N Base of the Pecan Gap
9 Xxxxxxx A 01414 0.8150000 116.40 2 0 N Base of the Woodbine- 3,200 ft.
10 Xxxxxx 00274 0.8150000 337.00 49 14 N Base of the Woodbine- 3,200 ft.
11 Xxxxxxxx-Xxxx 00776 0.8033333 100.00 18 1 N Base of the Woodbine- 3,200 ft.
12 Xxxx I & II 00284 0.8150000 213.00 24 22 N Base of the Pecan Gap
13 King A 00285 0.7603125 177.60 10 4 N All rights to 2,000 ft.
14 King B 00286 0.7603125 10.00 4 4 N Base of the Woodbine- 3,200 ft.
15 McKinney 00289 0.7525000 350.40 11 8 N Base of the Woodbine- 3,200 ft.
16 Xxxxx 00300 0.8150000 100.00 9 1 N Base of the Woodbine- 3,200 ft.
17 Worthy 00295 0.8150000 67.66 9 5 N Base of the Woodbine- 3,200 ft.
18 J.J.W&H. Xxxxxx 00309 0.8150000 109.42 5 3 N Base of the Woodbine- 3,200 ft.
19 Xxxxxx A 00310 0.8150000 39.00 4 0 N Base of the Woodbine- 3,200 ft.
21 Xxxxx :A" 00606 0.7200000 40.00 1 0 W All rights
21 Xxxx Xxxxxxx 00089 0.8450000 488.40(2) 1 0 N Base of the Pecan Gap
22 X. Xxxxxx 01390 0.8450000 145.00 13 1 N All rights to 2,000 ft.
23 Xxxxxxx C 01407 0.7700000 546.00 13 1 N Base of the Pecan Gap
24 Xxxxxxxx B 01690 0.8150000 25.00 7 4 N Base of the Woodbine- 3,200 ft.
25 Xxxxxx 01720 0.8150000 114.00 12 3 N Base of the Woodbine- 3,200 ft.
Totals 4009.74 311.00 96.00
======= ====== =====
8
================================================================================
XXXXX ENERGY, LLC
Xx. Xxx Xxxxx
First Canadian American Financial Services, Inc.
2nd Floor; 000 Xxxxx Xxxxxx Re: Participation Agreement
Penticton, K C. V2A 4M2 Corsicana Field
Canada Xxxxxxx County, Texas
Gentlemen:
This letter when executed by all parties shall produce an "Option" to
enter into a formal agreement evidenced under the terms and conditions outlined
below, by which First Canadian American Financial Services ("FCAFS") shall
participate with Amen Energy, LLC ("Xxxxx") in the exploration and production
of Corsicana Field. This option shall begin when this agreement has been
executed by all parties and expire 30 days from the date of execution.
Xxxxx Energy has heretofore obtained from Spartan General Partners a
farmout of 1,000 acres of held-by-production leases (the "Farmout") with the
right to drill and earn an undivided ninety percent (9O%) interest in the
Farmout lands, carrying Spartan for a 10% interest in each well, Upon
performance of the terms set forth below, FCAFS shall earn an interest in the
Farmout leases.
1. FCAFS shall tender to Xxxxx immediately available funds,
representing land and geological/geophysical expenses in the
following manner.
A) $25.000.00 (Twenty-five thousand) upon execution of
this agreement.
B) $25,000,00 (Twenty-five thousand) before
participating in any well beyond the initial
test well.
2. At such time when 100% of the participating interest in the
drilling of the initial test well is placed, Xxxxx or its
designated operator shall invoice FCAFS for 50% of the
$150,000.00 estimated total cost to drill and complete the
initial test well on the Farmout. FCAFS agrees to tender such
payment within thirty (30) days from receipt of the invoice.
Failure to timely remit such payment shall result in the
forfeiture of all of FCAFS's rights under this Agreement and the
forfeiture of the $25,000 previously paid for land and
geological/geophysical expenses.
3. Upon Armen's receipt of the assignment of the oil and gas leases
to be earned as provided for in the Farmout, Armen shall assign
to FCAFS an undivided 45%
1
working interest in and to said leases, delivering a 37%
net revenue interest in each lease, thereby reserving
unto Xxxxx an overriding royalty interest in each lease
equal to the difference 'between current lease burdens
and the total 74%, proportionately reduced.
4. FCAFS shall own an undivided 45% interest in each well
drilled until Payout. Payout is defined as that point in
time when the Value (as hereinafter defined) of the oil,
gas and other hydrocarbons produced, saved and marketed
or taken from each well, equals the total cost of,
(a) drilling, testing, completing and equipping the well
into the tanks or gas gathering lines;
(b) the cost of operating the well up to the date of
Payout;
(c) severance, production and/or mineral ad valorem
taxes measured by production and assessed on
production from the well;
(d) royalty to the lessors in the well; and
(e) the overriding royalty reserved to Xxxxx and all
other overriding royalty or other burdens created
by Xxxxx or its predecessors in title.
Value shall be determined by the net proceeds realized
from the sale of such production, or the fair market value
thereof at the wellhead if not sold but taken for use in
field operation. At Payout of each well, Xxxxx shall
back-in for and own a five percent (5%) working Interest
in such paid-out well, proportionately reduced to FCAFS's
initial interest in such well. At each well Payout, FCAFS
shall execute and deliver assignments to Xxxxx sufficient
to xxxx Xxxxx with its back-in working
interest.
5. Prior to spudding the first well on the Farmout, Xxxxx and
1;CAFS shall enter into a mutually acceptable -Operating
Agreement based on the AAPL 610-1989 form, naming Xxxxx,
or its designee, as Operator.
6. Should Xxxxx propose the drilling of a well on the Farmout
lands and FCAFS elects to not drill the well, then upon
spudding of the well, FCAFS shall assign to Xxxxx all of
FCAFS's interest in the leases covering and affecting
eighty (80) acres around the proposed well location. Said
80 acres shall be formed as near as practical in the shape
of a square with the proposed well location at the center
of the square, At such time when the well achieves 400%
Payout, FCAFS shall back-in for a 40.5% working interest
in the wellbore. Such back-in at 400% Payout shall apply
to any and all xxxxx drilled within said 80 acres,
7. FCAFS shall not assign its rights to this Agreement without
the prior written consent of Xxxxx.
8. Should FCAFS desire to sell all or any part of its
interests earned under or xxxxx drilled pursuant to axis
Agreement, it snail promptly give written notice to the
Xxxxx, with full information concerning its proposed
disposition, which shall include the name and address of
the prospective transferee (who' must be ready,
2
willing and able to purchase), the purchase price, a legal
description sufficient to identify the property, and all
other terms of the offer. Xxxxx shall then have an optional
prior right, for a period of fifteen (15) days after the
notice is delivered, to purchase for the stated consideration
on the same terms and conditions the interest which FCAFS
proposes to sell. However, there shall be no preferential
right to purchase in those cases where FCAFS wishes to
mortgage its interests, or to transfer title to its interests
to its mortgagee in lieu of or pursuant to foreclosure of a
mortgage of its interests, or to dispose of its interests by
merger, reorganization, consolidation, or by transfer of its
interests to a subsidiary or parent company or to a
subsidiary of a parent company, or to any company ins which
such party owns a majority of the stock.
9. Should there be any conflict between the terms of this
Agreement and the terms of ' the Operating Agreement to be
entered into as set forth in paragraph 5. above, the terms and
conditions of this Agreement shall prevail,
If the foregoing adequately sets out your understanding of our agreement,
please indicate so by signing in the space provided for below and returning one
copy of this letter so executed to the f undersigned.
Sincerely,
Xxxxx X. Xxxxx
President
Agreed to and Accepted this 2nd day of February, 2004.
First Canadian American Financial Services, Inc. Xxxxx Energy, LLC
By: By:
Name: Name:
Title: Title:
3
EXHIBIT "A"
Attached to and made a part of that
Oil and Gas Division Order
by and between Xxxx Oil Properties
and American Stellar Energy, Inc.
Well Name:
----------
McKinney X-X
XxXxxxxx 0-00
Xxxxxxxxx 0-X
XXXXXXX XXXXXX, XXXXX
Lease McKinney Xxxxxxxxx
----------------------------
Lease # 00289 00263
N et Revenue 0.752500 0.815000
Xxxx Xx before completion 0.000000 0.000000
Xxxx WI after completion 0.100000 0.100000
Xxxx NRI 0.075250 0.081500
Amer. Stellar WI before completion 0.500000 0.500000
Amer. Stellar WI after completion 0.450000 0.450000
Amer. Stellar NRI 0.333000 0.333000
KoKo WI before completion 0.500000 0.500000
KoKo Wl after completion 0.450000 0.450000
KoKo NRI 0.333000 0.333000
----------------------------
Xxxxx Xxxxx XXX 0.000000 0.000000
Xxxxxx XXX 0.005625 0.033750
total revenue 0.752500 0.815000
================================================================================
REO Energy, Ltd.
0000 XXXXXXXX XXXXXX -XXXX XXXXX, XXXXX 00000 XXX
Tel(817)000-0000 Fax (000)000.0000
September 20, 2005
Koko Petroleum, Inc.
X.X. Xxx 000
Xxxxxxxxx, XX X0X 0X0
Xxxxxx.
Re: Xxxx #1
Xxxxxxx Shale Prospect Cooks County, Texas
Dear Xxx:
This letter will serve as a submittal to you of a working interest in the above
captioned prospect subject to drilling of the above described well. REF Energy,
Ltd. proposes a test well on the above-described lease to a maximum depth of
8800 feet or of sufficient depth to test the Xxxxxxx Shale Formation. This
lease contains approximately 40 acres and is burdened by a total of 25% royalty
and overriding royalty interest.
You agree to pay $140,000 (One Hundred Forty Thousand Dollars) for an undivided
10.0% working interest in the prospect, equal to a 7.5 % net revenue interest.
You understand that this is a limited turnkey prospect through the tanks.
"Limited Turnkey Prospect" shall mean that your payment shall cover all costs
associated with the lease through completion of the well and delivery through
the tanks; provided, however, if REO ENERGY, LTD., and/or Operator encounter any
circumstance(s) on the lease, prior to delivery through the tanks, which would
cause a reasonable and prudent operator to cease operations and abandon the
well, then and in that event REO ENERGY, LTD., and/or Operator shall have the
absolute right, without Non-Operator's consent, to cease operations and abandon
the well, return to Non-Operator the Portion of Non-Operator's payment which was
not, as of the date of abandonment, expended plus Non-Operator's share of the
reasonable value of all salvageable equipment on the lease, if any. Upon the
receipt of such payment, Non-Operator shall be deemed to have released REO
ENERGY, LTD. and Operator from any and all further obligations and
responsibilities arising out of or associated with this Agreement and the other
agreements referred to herein.
Upon completion of this well as a commercial producer, we agree to assign to you
an undivided 10.0 % working interest in and to the lease subject to your
pro-rata share of the royalty and overriding royalty interest equal to a 7.5%
net revenue interest.
By execution of this participation letter, you understand and agree that Xxxx
Energy Operating, Inc. will be the operator of record, and its standard
operating agreement will then become effective and govern the day-to-day
operations.
After completion of this well as a commercial producer, REO Energy, Ltd. will
begin to evaluate the drilling of additional xxxxx on adjoining acreage held by
REO Energy, Ltd. Should REO Energy, Ltd. determine that additional xxxxx should
be drilled, you will have the right to participate for up to a 10.0% working
interest on a turnkey basis with the cost to be determined by current market
conditions at the time the well is to be spurred.
TITLE
REO Energy, Ltd. has employed attorneys to review the title to the concerned
lease. (It being understood, however, that all the burdens on the lease set
forth and described in Exhibit "A" may not be of record or have been disclosed
to such attorneys employed by REO Energy, Ltd. The fact that such are not set
forth in said title opinions shall not prevent or be any basis for claiming that
the assignment of an interest to you shall not be subject to such burdens if
such burdens are not disclosed in Exhibit "A". REO Energy, Ltd. presently
believes such title is sufficiently clear for drilling operations to begin. REO
Energy, Ltd. does not, however, make any warranty either expressed or implied,
of such title (nor will any warranty be made in any assignment to you) other
than that (A) REO Energy, Ltd. has not executed and will not execute without
your consent, any documents for the purpose of creating burdens on the working
interest to be assigned to you pursuant to this letter agreement in excess of
those indicated or contemplated herein or in the attached Exhibits including the
operating agreement, (B) any burdens on the working interest or faults in title
existing at the time of the assignment to you of your interest in the lease will
be borne by REO Energy, Ltd. in a proportion at least equal to the proportion
which the share. of the working interest retained by REO Energy, Ltd. bears to
the entire (8/8) working interest, and (C) REO ENERGY, LTD. has neither
encumbered nor assigned to any other party the undivided interest it is agreeing
to assign to you thereunder.
YOUR REPRESENTATIONS TO RTE ENERGY, LTD.
REO ENERGY, LTD. understands from you or your representative, the following:
(A) You are financially sophisticated in business and oil and gas drilling
ventures;
(B) You understand that although we all hope to make money from this
matter, this, as with any oil and gas drilling venture, is a very
high risk undertaking and all of your investment (including your
contribution for completion expenses) may very likely be lost or else
never recovered in its entirety and no representations to the contrary
have been made to you or your representatives by REO Energy, Ltd. or
its representatives;
(C) You have your own tax counsel and recognize that REO Energy, Ltd.
makes no representation of warranty of any kind of the proper tax
treatment of your expenditures for. this matter;
(D) You and REO Energy, Ltd. ate not herein agreeing and have nor, in any
way, agreed to be partners or trustees for the other in regard to the
venture and matters herein set forth;
(E) You understand that this matter is not being registered with either
the SEC or under the Blue Sky Laws of any state;
(F) You have performed your own investigation, to the extent you believe
necessary, of this matter; and
(G) This agreement represents the entire agreement between you and REO
Energy, Ltd. and sets out all inducements or representations made by
either xxxxx hereto to the other party hereto in regard and to this
agreement.
Your execution of this letter agreement shall be deemed to indicate the warranty
that all of the foregoing statements (A) through (G) are true, correct and you
agree to them and the entire letter agreement.
Yours truly,
REO Energy, Ltd.
Xxx Xxxx Xxxxxxx Manager
Agreed to and accepted this 22nd day of September, 2005, for a 10.0 % working
interest equal to a 7.5 % net revenue interest at a total cost of $140,000
through the tanks in the Xxxx #1 well.
Koko Petroleum, Inc.
-------------------- ----------------------------------------
Company Name Social Security No. or Fed. Tax I.D. No.
X.X. Xxx 000
------------ ----------------------------------------
Address Signature
Xxxxxxxxx, XX X0X 0X0
--------------------- ----------------------------------------
City, State, Zip Printed Name and Title
Canada
---------------------
Country
AUTHORITY FOR EXPENDITURE
---------------------------------------------------------------------------------------------------------
XX Exploration Development AFE NO: 152
---- --- W.O. NO.: XXXX #1
DATE: 8/25/2005
Projected Depth: 8800' Well No.: 1
Prospect: Xxxxxxx Shale County: Xxxxx
Date Work Must Commence: 9/25/05 Date Completed:
Lease: Xxxx
Location: State: Texas
Description of work: Now Drilling Project
TURNKEY AFE
---------------------------------------------------------------------------------------------------------
SUMMARY OF AFE COSTS
TANGIBLE LEASEHOLD COST
Land and Legal 8/8 Cost YOUR SHARE
---------------------------------------------------------------------------------------------------------
101 Leases: 40 acres @ $750 /acre 30,000 3,000
102 Titles: 1,500 150
103 Permits: 1,100 110
104 Surveys: 1,800 180
105 Damages: 5,000 500
106 Insurance: 2,500 250
107 Geological Prospect Fee: 50,000 5,000
---------------------------------------------------------------------------------------------------------
Total Leasehold Cost: 91,900 9,190
INTANGIBLE DRILLING COST
Drilling 0perations
---------------------------------------------------------------------------------------------------------
201 Site Construction & Roadway: 30,000 3,000
202 Contract Drilling Footage: 8800 feet @ /ft. - -
205 Contract Drilling Daywork: 27 days @ $ 15,000 /day 405,000 40,500
206 Mob-Demob: 30,000 3,000
207 Geologist: 3,000 300
208 Cementing services, surface casing: 8,600 860
209 Mud and chemicals: 18,000 1,800
211 Drilling rental tools: - -
212 Drill stem testing: test @ - -
213 Coring/core analysis and engineering - -
214 Electric logging and surveys: 18,500 1,850
215 Mud logging: 15 days@ $ 880/day 13,200 1,320
216 Drilling water: 2,000 200
217 Hauling: 2,500 250
218 Direction drilling: - -
219 Welding: 3,000 300
220 Gyro Survey: - -
221 Supervision: 7,500 750
222 Communications: Cell Phones - -
223 Misc. third party services: 1,500 150
224 Rentals surface: 2,500 250
225 General Adminsitrative: 7,500 750
226 Casing crews surface: 3,000 300
230 Cellar/Rat Hole 1,500 150
231 Contingencies 16,000 1,600
---------------------------------------------------------------------------------------------------------
Total Intangible Drilling Cost: $ 573,300 57,330
Page 1 of 3
SUMMARY OF AFE COSTS (continued)
TANGIBLE DRILLING COST
Casing 8/8 Cost YOUR SHARE
---------------------------------------------------------------------------------------------------------
401 Conductor: feet @ -
402 Surface Casing: 800 feet @ $ 19.25 /ft. 15,400 1,540
403 Intermediate Caslng: feet @ -
404 Prod. Casing: 8800 feet @ $15.80/ft. 139,040 13,904
405 Drilling Liner: feet @ - -
406 Float EQPT & Centralizes: 3,000 300
407 Wellhead assembly: 4,000 400
408 Contingencies 4,800 480
---------------------------------------------------------------------------------------------------------
TOTAL TANGIBLE DRILLING COST: $ 166,420 16,624
INTANGIBLE COMPLETION
Completion Operations
---------------------------------------------------------------------------------------------------------
301 Completion unit: 6 days @ $ 3,000 /day 18,000 1,800
302 Completion rental tools: 15,000 1,500
303 Cementlng production casing: sacks 16,000 1,600
304 Casing crews production casing: 9,700 970
305 Supervision: 7,500 750
306 Trucking: - -
307 Perforation Services: 38,000 3,800
308 Fracturing: (3) stage 260,000 26,000
309 Acidizing: 20,000 2,000
310 Fray Water and Transfer Svc 25,000 2,500
312 Misc. Third Party Services: 2,000 200
315 General Administrative 7,500 750
316 Prod. Instal. labor 10,000 1,000
317 Completion Rental Equipment 4,000 400
318 Flowback Labor 4,800 480
319 Frac Tank Rental 10,800 1,080
320 Water Hauling 5,000 500
321 Contingencies 13,350 1,335
--------------------------------------------------------------------------------------------------------
TOTAL INTANGIBLE COMPLETION COST: $ 466,650 46,665
TANGIBLE COMPLETION COST:
--------------------------------------------------------------------------------------------------------
501 Completion liner feet @ /ft. - -
502 Tubing: 8800 feet @ $ 4.20 /ft. 36,960 3,696
503 Rods: feet @ /ft. - -
504 Well Head (X-Tree): 11,100 1,110
505 Surface Pumping Equipment: - -
506 Pumping downhole: - -
507 Packers: - -
508 Production Equipment: 5,000 500
509 Separator and Line Healer: 8,000 800
000 Xxxxx Xxx: - -
511 Storage Tanks: (2) 330 bbl tanks 14,750 1,475
512 Prod. Install, Valves and piping: 11,500 1,150
513 Safety Equipment 2,500 250
514 Misc. Materials 1,000 100
515 Water Disposal Equipment: (1) 300 bbl FG Tank w/walkway 8,150 815
516 Contingencies 2,950 295
--------------------------------------------------------------------------------------------------------
TOTAL TANGIBLE COMPLETION COST: $ 101,910 10,191
Page 2 of 3
SUMMARY OF AFE COSTS (continued)
--------------------------------
8/8 COST Your Share
---------------------------------------------------------------------------------------------------
TOTAL LEASEHOLD COST: $ 91,900 9,190
---------------------------------------------------------------------------------------------------
TOTAL DRILLING INTANGIBLE COST: $ 573,300 57,330
---------------------------------------------------------------------------------------------------
TOTAL DRILLING TANGIBLE COST: $ 168,240 16,624
---------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
TOTAL DRILLING COST: $ 831.4401 83,144
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
TOTAL DRYHOLE COST: $ 857,1401 85,7141
----------------------------------------------------------------------------------------------------
TOTAL INTANGIBLE COMPLETION COST: $ 466,650 46,665
----------------------------------------------------------------------------------------------------
TOTAL TANGIBLE COMPLETION COST: $ 101,910 10,191
----------------------------------------------------------------------------------------------------
TOTAL COMPLETION COST: $ 568,560 56,8561
----------------------------------------------------------------------------------------------------
TOTAL INTANGIBLE COST: $ 1,039,950 103,995
----------------------------------------------------------------------------------------------------
.TOTAL TANGIBLE COST: $ 360,050 36,005
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
TOTAL PROJECT COST: $ 1,400,000 140,000
----------------------------------------------------------------------------------------------------
NON OPERATOR APPROVAL: OPERATOR APPROVAL:
---------------------------------------------------------------------------------------
Date: 9/20/2005 Date: 9120/2005
---------------------------------------------------------------------------------------
AFE #: 152
AFE #: 152
---------------------------------------------------------------------------------------
Non-Oper: KOKO PETROLEUM Oper: Xxxx Energy Operating, Inc.
---------------------------------------------------------------------------------------
Xxx Xxxx Xxxxxxx, President
By: By:
---------------------------------------------------------------------------------------
Signature, Title
Non-operator's interest: 10.0%
---------------------------------------------------------------------------------------
