ACREAGE CONTRIBUTION CONTRACT Kupcake Area North Slope, Alaska
EXHIBIT
10.37
Kupcake
Area
North
Slope, Alaska
THIS
CONTRACT, entered into effective on January 23, 2008 ("Effective Date"), between
TRUE. NORTH ENERGY CORP. ("True North"), with an office in Houston, Texas,
hereinafter referred to as "Farmor" and SAVANT ALASKA, LLC ("Savant") with
an
office in Denver, Colorado, hereinafter sometimes referred to as
"Operator."
WITNESSETH,
THAT:
WHEREAS,
Farmor is the owner of one hundred percent (100%) working interest in that
certain State of Alaska Oil and Gas Lease ADL-390839 dated March 1, 2007
("Lease"); and,
WHEREAS,
said Lease is made subject to this Contract insofar and only insofar as said
Lease covers the following described lands situated in:
Township
11 North, Range 17 East. Umiat Meridian, Alaska
Section
25: N2NE, SENE
Sometimes
referred to herein as "Farmout Lands"; and,
WHEREAS,
said Farmout Lands are hereinafter sometimes referred to as the "Lease Acreage";
and,
WHEREAS,
Farmor has agreed to assign to Operator and Operator has agreed to accept from
Farmor an assignment covering certain interests in the Farmout Lands, on the
terms, covenants and conditions hereinafter set forth;
NOW,
THEREFORE, in consideration of the premises and agreements hereinafter
contained, to be performed by the parties hereto, it is agreed between the
parties as follows:
1. TEST
WELL
1.1 Test
Well:
On or
before March 15, 2008, Operator shall commence the actual drilling of a test
well (hereinafter the "Test Well") at a lawful location of its choice in the
NE
of Section 29, Township 11 North, Range 18 East, Umiat Meridian, Alaska. Said
Test Well shall be drilled diligently, without unnecessary delay, and in a
workmanlike manner to a depth of 11,000 feet or to a depth sufficient to test
the Cretaceous Kemik formation,. whichever depth is the lesser, and shall be
production tested, and plugged and abandoned in accordance with all applicable
laws, rules and regulations, and this Contract.
1.2 References
to "Test Well".
For all
purposes of this Contract, the term "Test Well" shall also apply to the drilling
of a Substitute Well ("Substitute Well") as provided in 1.3 below.
1.3 Substitute
Well.
If
Operator discontinues drilling the Test Well before the depth requirement is
satisfied because of encountering impenetrable substances, heaving shale,
excessive salt, mechanical conditions, or because of other conditions which
make
further drilling impracticable and which Operator, after a diligent effort,
is
unable to overcome, Operator shall have the right, but not the obligation,
to
drill a Substitute Well in the same quarter section in which the discontinued
well was located, provided the actual drilling of said Substitute Well is
commenced not later than three hundred sixty-five (365) days after the
abandonment of the discontinued well.
The
Substitute Well shall be drilled in the manner and to the depth specified for
the Test Well. If the Substitute Well is commenced, drilled, production tested,
and plugged and abandoned as herein provided, Operator shall be deemed to have
complied with this Contract to the same extent as if the Test Well had been
commenced, drilled, production tested, and plugged and abandoned in accordance
herewith.
2. TITLES
The
rights granted Operator under this Contract are granted without warranty of
title. Upon request, Farmor shall furnish to Operator such abstracts or other
evidence of title as it has in its files, together with photostats of the basic
Lease and any intermediate assignment(s) thereof, but there shall be no
obligation on the part of Farmor to purchase new or supplemental abstracts.
Operator shall furnish to Farmor, without cost, copies of all title opinions
acquired by Operator covering the Lease Acreage.
2.1 Deed
of Trust.
Reference is made to that certain deed of trust dated September 17, 2007 ("DOT")
granted by True North to First American Title Insurance Company (Trustee) for
the benefit of Valens U.S. SPV I, LLC (Beneficiary). Prior to the delivery
of
any well information by Operator to True North as provided in Paragraph 6
herein, True North shall secure a Subordination Agreement, which will document
that the DOT is subordinate to this Contract so that the interest earned by
Operator in the Lease Acreage is free and clear of lien imposed by said DOT.
True North shall provide Operator with a copy of said Subordination
Agreement.
2.2 Consents.
Except
for governmental consents and approvals of assignment that are customarily
obtained after assignment, True North represents and warrants that there are
no
pre-emptive rights or consents to assignment burdening the Lease
Acreage.
3. EARNING;
ASSIGNMENT
If
Operator fails to drill the Test Well to the required depth, in the manner
and
time herein provided, then Operator shall be deemed to have forever relinquished
its right to acquire any interest in Farmor's Lease Acreage under this
Contract.
If
Operator drills the Test Well to the required depth, in the manner and time
herein provided, submits evidence thereof, and otherwise complies with and
performs all other terms, covenants, and conditions hereof, then Operator shall
earn and be entitled to receive from Farmor an assignment, effective from the
date of the release of the rotary rig from the Test Well, covering an undivided
seventy-five percent (75%) of 8/8ths working interest and a proportionate (in
accordance with Farmor's assigned working interest) seventy-eight and one-third
percent (78.33%) net revenue interest in the Farmout Lands, limited to those
depths and formations lying between the surface and the stratigraphic equivalent
of 100 feet below the total depth drilled in the Test Well. Any assignment
earned by Operator shall be without warranty of title; shall be subject to
all
of the expressed and implied terms of the Lease and any prior assignment(s)
thereof, which will be assumed by Operator to the extent of the assigned
interests; and shall be in the form of a State of Alaska Assignment Of Interest
In Oil And Gas Lease. True North shall provide to Operator such assignment
within thirty (30) days from the date that the rotary rig is released from
the
Test Well.
4. COST
OF TEST WELL
The
entire cost, expense, and risk of drilling, production testing, and plugging
and
abandoning the Test Well shall be borne by Operator, it being understood that
the risk to be borne by , Operator shall include, but shall not be limited
to,
any claim. demand, action, cause of action, judgment, attorney's fee or expense
of investigation or litigation, for injury to or loss or destruction of
property, or for injury to or death of any person arising out of or in
connection with the drilling of the Test Well, whether through an act or
omission of a party to this Contract, or otherwise.
5. OPERATING
AGREEMENT
The
Operating Agreement ("Operating 'Agreement") attached hereto as Exhibit "1"
shall govern the rights and obligations of the parties to this Contract as
to
all Lease Acreage in which Operator earns an interest from Farmor hereunder,
The
Operating Agreement shall become effective, irrespective of its execution by
the
parties, as and from the date on which the rotary rig is released from the
Test
Well.
If
Farmor
and Operator enter into an operating agreement between themselves and/or with
any third party covering drilling and operations on the Lease Acreage or on
other lands and leases which are pooled, unitized, or spaced with the Lease
Acreage, then such other operating agreement shall supersede the Operating
Agreement issued hereunder as to the rights and obligations of the parties
with
respect to such drilling and operations. During the term of such other operating
agreement, the Operating Agreement hereunder shall continue to govern the rights
and obligations of the parties as to the balance of the lands and depths covered
by the Operating Agreement. At such time, if ever, that such other operating
agreement shall terminate, or any portion of the Lease Acreage is released
therefrom, then the Operating Agreement issued hereunder shall again become
effective as to such lands and depths; it being the intent of the parties that
there shall never be a time when any portion of the Lease Acreage earned by
Operator hereunder is not subject to an Operating Agreement between Farmor
and
Operator.
6. TEST
WELL INFORMATION
Subject
to Paragraph 2.1 herein, Farmor shall receive from Operator, well information
from the Test Well as stated in ,Article 5.9 of the Operating Agreement. The
information and data obtained under this Contract shall remain strictly
confidential by Farmor and shall not be provided to any third party, including,
but not limited to, geological and reservoir information; originals and copies
of logs; core and core analysis; and' all other well information including,
but
not limited to, drilling information, production tests, results of the Test
Well, and any operation conducted under this Contract, except data or
information that becomes public other than by breach of this Contract or as
agreed to in writing by the Operator.
7. INSURANCE
As
to all
operations on the Lease Acreage, Operator shall secure and maintain insurance
in
full force and effect as provided in Exhibit "B" of the Operating
Agreement.
8. LAWS
AND REGULATIONS
Operator
shall comply with and conduct its operations on the Lease Acreage in accordance
with the Lease and any intervening assignment(s) and all applicable laws,
ordinances, rules, regulations, and orders of all governmental authorities
having jurisdiction thereof, including the provisions of the Equal Opportunity
Supplement attached as Exhibit "D" to the Operating Agreement.
9. DELAY
RENTALS; SHUT-IN WELL PAYMENTS
Farmor
shall pay all delay rentals and shut-in well payments which become due and
payable on the Lease Acreage. Operator shall reimburse Farmor for its
proportionate share of such payments attributable to the Farmout Lands without
regard to different ownership in various depths.
Either
party may give the other party notice in writing at least sixty (60) days prior
to the rental or shut-in payment due date that such party does not desire to
have such payment made for its account. In such event, the party who elects
not
to continue the Lease in full force and effect by the payment of such rental
or
shut-in payment, shall assign to the other party any interest which it may
have
in the Lease or part thereof which is affected.
10. ADDITIONAL
PROVISIONS
10.1 Rights
Reserved By Farmor.
With
respect to the Lease assigned or to be assigned hereunder, Farmor reserves
all
rights; horizons, strata and formations which are not affected by this Contract,
including, but not limited to, the right to the concurrent use of the surface
and the right to drill through the covered intervals.
10.2 Surrender
of Lease.
Operator shall not release, surrender, abandon, or allow to expire any of its
interest in and to the Lease Acreage without giving Farmor at least sixty (60)
days written notice prior to any such contemplated action, and if Farmor so
desires, Operator shall reassign the affected interest within fifteen (15)
days
from the date it receives request from Farmor to do so.
11. SUBSEQUENTLY-CREATED
INTERESTS
Operator's
rights of assignment under this Contract shall be free and clear of all liens,
claims, add encumbrances, and all overriding royalties, production payments,
net
profit obligations, carried working interests, and other payments out of or
with
respect to production, or . any other obligations created, assigned, or incurred
by Farmor, excluding only the Lessor's royalty upon the Lease to be assigned
hereunder and overriding royalties in existence and of record on the Effective
Date of this Contract.
12. NOTICES
Except
as
herein otherwise expressly provided, any notices or other communications
required or permitted hereunder shall be in writing and shall be deemed given
only when received by the party to whom the same is directed as
follows:
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Savant
Alaska, LLC
000
00xx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxx 00000
Attn:
Xxxxx Xxxxx
Phone:
(000) 000-0000 (ext. 124)
Fax:
(000) 000-0000
xxxxxx@xxxxxxxxxxxxxxx.xxx
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0000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxxxxxx,
Xxxxx 00000
Attn:
Xxxx Folnovic
Phone:
(000) 000-0000
Fax:
(000) 000-0000
xxxx@xxxxxxx.xxx
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Each
party may change its address, telephone number, fax number or email address
for
any or all purposes by notifying the other party of such change in writing.
The
return receipt of the United States Post Office or fax confirmation shall be
proof of the date and time of receipt of notice.
13. EFFECT
OF AGREEMENT
The
terms, covenants, and conditions of this Contract shall be binding upon and
shall inure to the benefit of Farmor and Operator as well as their respective
successors and assigns; and said terms, covenants, and conditions shall be
covenants running with the Lease Acreage and with each transfer of said Lease
Acreage.
14. CONFLICTS
If
any
conflict or inconsistency arises between the terms and conditions of this
Contract and the Operating Agreement, then the terms and conditions of this
Contract shall prevail.
15. MERGER
INTEGRATION
This
writing is intended by the parties as a complete and final statement of the
agreement, and supersedes any prior oral or written statements or
agreements.
At
Operator's option, this Contract shall be void unless it is fully executed
by
Farmor and returned to Operator on or before February 8, 2008.
IN
WITNESS WHEREOF, the parties hereto have executed this Contract effective as
of
the date first above written.
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SAVANT
ALASKA, LLC
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By:
Savant Resources LLC, Its Manager
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By:
Savant Operating Company, Its Manager
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| By: | /s/ Xxxxxxxxx Xxxx | |
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Xxxxxxxxx
Xxxx
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| President | ||
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| By: | /s/ Xxxx Folnovic | |
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Xxxx Folnovic |
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President
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Date: January
29, 2008
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