Exhibit 10.2
Consulting and Overriding Royalty Agreement with Xxxxx & Xxxxxx
17
D:\WINWORD\XXXXXX\BUSINESS\CONSULTING AND OVERRIDING ROYALTY AGREEMENT.doc
CONSULTING AND OVERRIDING ROYALTY AGREEMENT
DATED SEPTEMBER 20, 1999
BETWEEN:
SAN XXXXXXX OIL & GAS LTD., a corporation incorporated under the laws
of the State of Nevada and having an office in the City of Calgary,
in the Province of Alberta ("San Xxxxxxx")
- and -
XXXXX & XXXXXX CONSULTING GEOLOGISTS, a California Partnership,
having an office in the City of San Xxxxxxxx, in the State of
California (the "Consultant")
WHEREAS:
A. San Xxxxxxx wishes to retain the Consultant to provide geological
consulting services in locating, evaluating, investigating, appraising
and acquiring hydrocarbon prospects in the San Xxxxxxx and Sacramento
basin of California in accordance with the directions of San Xxxxxxx;
and
B. The Consultant has agreed to provide such services to San Xxxxxxx on
the terms and subject to the conditions set out herein.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires, the following terms
shall have the following meanings:
"ACQUIRED PROSPECTS" means all Prospects set forth in Prospect Letters
in which an interest is acquired by San Xxxxxxx within a period of two
years from the date of acceptance of each applicable Prospect Letter,
including interests obtained by way of lease, purchase, farmin or other
types of agreements and also including any 50% Interests San Xxxxxxx
has elected to acquire;
"CONFIDENTIAL INFORMATION" includes: a) all Prospects, data,
evaluations, information and reports prepared as part of the Services;
b) all confidential and proprietary information and trade secrets
relating to the Services; and c) techniques, inventions, ideas,
processes and procedures, know-how, computer software and related
intellectual property and similar information concerning the business
of San Xxxxxxx;
"CONSULTANT'S REPRESENTATIVES" means the Partners, employees, agents,
officers, directors, representatives, consultants, or advisors of the
Consultant;
"EFFECTIVE DATE" means September 20, 1999;
"50% INTEREST" is defined in Subsection 3.3 b);
"INITIAL TERM" means the period from the Effective Date until January
20, 2000, inclusive;
"NON-ACQUIRED PROSPECTS" means all Prospects other than Acquired
Prospects;
"NOTICES" is defined in Section 10.1;
"OVERRIDING ROYALTY" is defined in Schedule "B";
"PARTIES" means San Xxxxxxx and the Consultant, and "PARTY" means
either of them;
"PARTNERS" means Xxx Xxxxxx and Xxxx Xxxxx or either of them, as the
context requires;
"PERSON" includes a corporation, an individual, a partnership, a firm,
an association and a syndicate;
"PRODUCTS" is defined in Section 5.1;
"PROHIBITED AREA" shall mean all lands within the Study Areas for which
Prospects have been generated by Consultant;
"PROHIBITED BUSINESS" means any business which may be directly or
indirectly in competition with the business of San Xxxxxxx in the
Prohibited Area;
"PROSPECT MAP" is defined in Section 3.1;
"PROSPECTS" means all prospects relating to interests in lands or the
hydrocarbon rights thereto generated by the Consultant as part of the
Services pursuant to the terms of this Agreement, and "PROSPECT" means
a particular one of the Prospects;
"PROSPECT LETTER" means a letter in the form of Schedule "C" generated
by the Consultant with respect to a Prospect;
"RENEWAL PERIODS" is defined in Section 4.1;
"ROYALTY LANDS" is defined in the Royalty Procedure;
"ROYALTY PROCEDURE" means the document attached as Schedule "B";
"SERVICES" means the geological consulting services to be provided by
the Consultant hereunder as set forth in Schedule "A" and such other
consulting services as the Parties may agree from time to time;
"STUDY AREAS" means lands and geological formations within the San
Xxxxxxx and Sacramento Basin area of California;
"TERM" is defined in Section 4.2;
"TERMINATION DATE" is defined in Section 4.1;
1.2 INTERPRETATION
a) The headings of the articles and sections of this Agreement are
inserted for convenience of reference only and shall not be used in
construing or interpreting any provisions hereof.
b) Whenever the singular or masculine or neuter is used in this Agreement,
the same shall be construed as meaning the plural or feminine or body
politic or corporate and vice versa as the context or reference to the
Parties may require.
1.3 SCHEDULES
All Schedules attached hereto are incorporated herein by reference as fully as
though contained in the body hereof. The Schedules are as follows:
a) Schedule "A" which sets forth and describes the Services to be
performed hereunder;
b) Schedule "B" which is the Royalty Procedure, including all
accepted Prospect Letters that are to be attached thereto
pursuant to the terms of this Agreement; and
c) Schedule "C" which is a form of Prospect Letter to be
presented by the Consultant. Should there be a conflict
between the provisions of the body of this Agreement and a
Schedule hereto, the provisions in the body of the Agreement
shall prevail to the extent necessary to resolve the conflict.
ARTICLE 2 - RETAINER
2.1 RETAINER
San Xxxxxxx agrees to retain the Consultant to provide San Xxxxxxx with the
Services and the Consultant agrees to provide the Services to San Xxxxxxx.
2.2 PROVISION OF SERVICES
a) The Services to be provided hereunder by the Consultant shall be
provided by the Partners. The Partners may from time to time utilize
the assistance of other Consultant's Representatives, including
geological technicians, as may be appropriate to provide them with
technical assistance in performing the Services. If an additional
independent geologist, or an engineer, xxxxxxx or geophysicist is
required by Consultant to assist in providing the Services, such
additional independent geologist or such engineer, xxxxxxx or
geophysicist may be hired only with the prior approval of San Xxxxxxx.
b) During the Initial Term, the Consultant shall provide Services of
Partners for 30 man days per month or 120 days during the Initial Term.
For each Renewal Period, San Xxxxxxx may elect, with the approval of
the Consultant, to increase or decrease the foregoing number of days in
increments of 10 days per month.
ARTICLE 3 - PROSPECTS
3.1 PROSPECT LETTERS
The Consultant shall generate and present to San Xxxxxxx a Prospect Letter in
the form of Schedule "C" for each and every Prospect developed as part of the
Services. Each Prospect Letter shall describe the lands and include a map
outlining the area (the "Prospect Map") covering such Prospect. San Xxxxxxx may
accept some, none or all of the Prospects described in such Prospect Letters, in
its sole discretion.
3.2 ACCEPTANCE OF PROSPECTS
Each Prospect Letter that is accepted by San Xxxxxxx shall be incorporated into
this Agreement as part of Schedule "B" as of the date of acceptance of the
applicable Prospect Letter by San Xxxxxxx. The lands described therein and the
Prospect Map attached thereto shall become part of the Royalty Lands for
purposes of Schedule "B".
3.3 REJECTION OF PROSPECTS BY SAN XXXXXXX
a) If San Xxxxxxx initially rejects a Prospect Letter, it may nevertheless
(subject to Subsection 3.3 b) hereof) within twelve (12) months of the
presentation of the applicable Prospect Letter by Consultant,
subsequently elect to accept such Prospect Letter by sending an
amending letter to the Consultant. The Consultant shall acknowledge
receipt of such amending letter and the applicable Prospect Letter
shall be incorporated into this Agreement as part of Schedule "B" as of
the date of such acceptance by San Xxxxxxx.
b) After four (4) months from the date that a Prospect Letter has been
presented by the Consultant to San Xxxxxxx, if San Xxxxxxx has not
accepted the Prospect Letter, the Consultant shall have the right to
have a third party acquire the applicable Prospect and any leases with
respect thereto. In such case, if, during the fifth through twelfth
months (inclusive) from the date of the presentation of the Prospect
Letter, a third party agrees to acquire such Prospect, the Consultant
shall provide San Xxxxxxx with the right to elect to acquire a fifty
percent (50%) interest in such Prospect (the "50% Interest"), along
with the right to act as operator of the Prospect. If San Xxxxxxx
elects to acquire such 50% Interest, San Xxxxxxx shall pay its 50%
share of any geological, geophysical or lease acquisition costs
relating thereto. If San Xxxxxxx elects to acquire such 50% Interest,
the applicable Prospect Letter shall be incorporated into this
Agreement as part of Schedule "B" for the 50% Interest as of the date
of such election by San Xxxxxxx, and the lands described therein and
the Prospect Map attached thereto shall become part of the Royalty
Lands for purposes of Schedule "B".
c) After one year from the date that a Prospect Letter has been presented
by the Consultant to San Xxxxxxx, if San Xxxxxxx has not accepted such
Prospect Letter, the Consultant shall be free to have a third party
acquire the applicable Prospect with no further obligation to provide
an interest to San Xxxxxxx.
3.4 DEVELOPMENT OF PROSPECTS
Nothing herein contained or implied shall obligate San Xxxxxxx to accept any
Prospect nor to acquire an interest in or perform any operations upon or with
respect to any of the lands contained in any of the Prospects.
ARTICLE 4 - COMPENSATION
4.1 REMUNERATION
In consideration for the provision by Consultant of the Services hereunder, San
Xxxxxxx shall pay to the Consultant the following fees:
Day Rate for Partners U.S. $750/day
Geological Technicians U.S. $275/day
Travel Day Rate for Partners U.S. $750/day
It is understood and agreed that:
a) the Consultant shall be solely responsible for any additional salaries
and wages, cost of holidays, vacation, sickness and disability
benefits, insurance coverage and other customary allowances which may
be payable to any of Consultant's Representatives; and that
b) the above-referenced fees cover all office overhead costs and include
all engineering, geological and geophysical data relating to the
Prospects currently in the possession of the Consultant.
Every four weeks during the Term, the Consultant shall provide invoices to San
Xxxxxxx setting forth the fees payable to Consultant for that four week period
and San Xxxxxxx shall pay such invoices by wire transfer to the Consultant's
bank account.
4.2 EXPENSES
Consultant shall be reimbursed for all reasonable out of pocket expenses,
including costs for travel, supplies, shipping, plotting and new data, actually
and properly incurred by the Consultant in connection with providing the
Services hereunder. On a monthly basis, any expenses in an aggregate amount
greater than $2000.00 shall require prior approval of San Xxxxxxx. The
Consultant shall furnish statements and backup materials to support all
expenses.
4.3 OVERRIDING ROYALTY
In addition to paying the remuneration and expenses set forth in Sections 4.1
and 4.2, San Xxxxxxx shall also award the Partners constituting the Consultant
an Overriding Royalty on all oil and gas leases obtained within areas indicated
on Prospect Maps for Acquired Prospects in accordance with Schedule "B".
Acquisition by San Xxxxxxx of any oil and gas leases on prospects not generated
by the Consultant will not be subject to the Overriding Royalty, nor will any
Non-Acquired Prospects be subject to the Overriding Royalty.
4.4 NO OTHER INTEREST
Except as provided in Sections 4.1, 4.2 and 4.3, the Consultant shall not be
entitled to any other fees nor any share of the interest of San Xxxxxxx in any
Acquired Prospect and that San Xxxxxxx alone shall be solely entitled to the
rights and benefits in respect to the Acquired Prospects.
ARTICLE 5 - REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 REPRESENTATION AND WARRANTY BY CONSULTANT
The Consultant represents and warrants to San Xxxxxxx that the Consultant and
all applicable Consultant's Representatives have the required skills and
experience to perform the duties and exercise the responsibilities required of
the Consultant in performing the Services hereunder. Without limiting the
generality of the foregoing, the Consultant agrees that Consultant's
Representatives shall remain members in good standing in their respective
professional associations and conduct themselves in accordance with the rules
governing the conduct of the members of the said associations.
5.2 NO DELEGATION OF SERVICES
The Consultant covenants and agrees with San Xxxxxxx that it shall not delegate
performance of the Services to any person without the prior written consent of
San Xxxxxxx.
ARTICLE 6 - TERM OF AGREEMENT
6.1 INITIAL TERM AND RENEWAL PERIODS
The Initial Term of this Agreement shall be the period of time commencing on the
Effective Date and ending on January 20, 2000. The Agreement shall continue for
successive four month periods (the "Renewal Periods") thereafter until
terminated by either Party by written notice given at least 45 calendar days
prior to the end of any such four month period. The Agreement shall thereupon
terminate on the last day of such four month period after such notice has been
given (the "Termination Date").
6.2 TERM
The Term of this Agreement shall be from the Effective Date until the
Termination Date.
ARTICLE 7 - CONFIDENTIALITY
7.1 OWNERSHIP OF PRODUCTS
The Consultant acknowledges and agrees that all Prospects, inventions,
improvements, discoveries, intellectual property or trade secrets (collectively
the "Products") made, conceived, developed or reduced to practice in the
performance of the Services hereunder shall belong exclusively to San Xxxxxxx.
The Consultant agrees to take all steps to vest in San Xxxxxxx all of the right,
title and interest in and to any of the Products and will, at the request and
expense of San Xxxxxxx, procure appropriate intellectual property protection
covering the Products. This Section will cease to apply to any Products relating
to Non-Acquired Prospects one year from the date that each the applicable
Prospect Letter was presented to San Xxxxxxx by the Consultant, or in the case
of a 50% Interest acquired by San Xxxxxxx pursuant to Subsection 3.3 b), this
Section will not apply to any Products relating to the other 50% interest
acquired by the applicable third party.
7.2 CONFIDENTIAL INFORMATION
a) Except with the express written consent of San Xxxxxxx or as otherwise
herein expressly provided, the Consultant shall not, either during the
Term of this Agreement or at any time thereafter, disclose or cause to
be disclosed, either directly or indirectly, any of the Confidential
Information in any manner, to anyone other than to the officers,
directors and management of San Xxxxxxx.
b) The Confidential Information shall only be disclosed to Consultants
Representatives on a "need to know" basis. Consultant shall ensure that
all such Persons having access to the Confidential Information comply
with the provisions of this Agreement.
c) The confidentiality obligations hereunder shall not apply to any of the
Confidential Information that the Consultant can demonstrate is
available to the public other than as a result of disclosure by the
Consultant or Consultant's Representatives.
d) The confidentiality obligations hereunder shall cease to apply to any
Non-Acquired Prospects one year from the date that the applicable
Prospect Letter was presented to San Xxxxxxx by the Consultant. Between
the fifth and twelfth months (inclusive) from the date that a Prospect
Letter for a Non-Aquired Prospect was presented to San Xxxxxxx, the
Consultant shall be entitled to disclose Confidential Information to a
third party in exercising its rights under Subsection 3.3 b).
e) The Consultant shall be entitled to disclose Confidential Information
to a court of competent jurisdiction or to any regulatory body having
jurisdiction, provided that:
(i) The Consultant shall take reasonable steps to
maintain the confidentiality of the Confidential
Information by the court or regulatory body; and
(ii) The Consultant shall provide San Xxxxxxx with
immediate written notice of any request for
disclosure.
7.3 LIABILITY AND INDEMNITY
The Consultant shall:
a) be liable to San Xxxxxxx for all loss and damages whatsoever
which San Xxxxxxx may sustain or incur; and, in addition
b) indemnify and hold harmless San Xxxxxxx from and against all
loss and damages whatsoever which may be suffered by San
Xxxxxxx or which it may sustain or incur by reason of the
failure of the Consultant or Consultant's Representatives to
comply with the obligations contained in Sections 7.1 and 7.2
of this Agreement.
7.4 OTHER REMEDIES
The Consultant acknowledges the competitive value of the Confidential
Information. Accordingly, the Consultant agrees, that in addition to the
remedies provided in Section 7.3, that injunctive relief, specific performance
or other equitable relief are appropriate remedies for any breach of this
Agreement by the Consultant or Consultant's Representatives.
ARTICLE 8 - NON-COMPETITION
8.1 NON-COMPETITION
The Consultant agrees that it will not at any time during the Term or for a
period of four (4) months following the Termination Date of this Agreement:
a) individually or jointly with or in association with or
conjunction with or in partnership with any Person carry on or
be engaged in or be concerned with the Prohibited Business
within the Prohibited Area;
b) as agent for any person or as an officer, director or
shareholder of any corporation be engaged in or concerned with
the Prohibited Business within the Prohibited Area; or
c) in any manner whatsoever, carry on or be engaged in or
concerned with or be interested in the Prohibited Business
within the Prohibited Area.
Subject to Section 7.2 and the foregoing provisions of this Section 8.1,
Consultant shall, however, be allowed to present and submit research papers and
lead geological field trips in the Prohibited Area.
8.2 RESTRICTIONS VALID
The Consultant acknowledges and agrees that all restrictions contained in this
Agreement are reasonable and valid and all defenses to the strict enforcement
thereof by the Consultant are hereby waived.
ARTICLE 9 - CAPACITY
9.1 INDEPENDENT CONTRACTOR
It is acknowledged that the Consultant is being retained by San Xxxxxxx in the
capacity of an independent contractor and not as an employee of San Xxxxxxx. The
Parties agree that this Agreement does not create a partnership or joint venture
between them.
ARTICLE 10 - GENERAL CONTRACT PROVISIONS
10.1 NOTICES
All notices, requests, demands or other communications (collectively, "Notices")
by the terms hereof required or permitted to be given by one Party to the other,
or to any other person, shall be given in writing by personal delivery or by
registered mail, postage prepaid, or by facsimile transmission to such other
party at the following address:
a) To San Xxxxxxx at: 00 XXXXXXXXX XXXXX X.X.
XXXXXXX, XXXXXXX X0X 0X0
FAX: (000) 000-0000
b) To the Consultant at: 000 X. XXXXXX XXXXXX
XXXXX 000
XXX XXXXXXXX, XXXXXXXXXX 00000
FAX: (000) 000-0000
or such other address as may be given by a Party to the other Party hereto in
writing from time to time.
All such Notices shall be deemed to have been received when delivered or
transmitted or, if mailed, 72 hours after 12:01 a.m. on the day following the
day of the mailing thereof. If any Notice shall have been mailed and if regular
mail service shall be interrupted by strikes or other irregularities, such
Notice shall be deemed to have been received 72 hours after 12:01 a.m. on the
day following the resumption of normal mail service, provided that during the
period that regular mail service is interrupted, all Notices shall be given only
by personal delivery or by facsimile transmission.
10.2 FURTHER ASSURANCES
The Parties shall sign such further and other documents, cause such meetings to
be held, resolutions passed and by-laws enacted, exercise their vote and
influence, do and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part hereof.
10.3 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original and such counterparts together shall
be one and the same instrument.
10.4 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement and of every part hereof and no
extension or variation of this Agreement shall operate as a waiver of this
provision.
10.5 ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the Parties with respect
to all the matters herein and its execution has not been induced by, nor do
either of the Parties rely upon or regard as material, any representations or
writings whatever not incorporated herein and made a part hereof. This Agreement
may not be amended or modified in any respect except by written instrument
signed by the Parties. Any schedules referred to herein are incorporated herein
by reference and form part of this Agreement.
10.6 ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective legal personal representatives, heirs, executors,
administrators or successors.
10.7 ASSIGNMENT
San Xxxxxxx may assign its rights and obligations under this Agreement. This
Agreement may not be assigned by the Consultant, except that the Overriding
Royalty may be assigned as provided in Schedule "B".
10.8 CURRENCY
Unless otherwise specifically provided for herein, all monetary amounts
specified herein shall refer to the lawful money of the United States of
America.
10.9 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of California and each Party irrevocably attorns to the non-exclusive
jurisdiction of the Courts of such State.
10.10 CALCULATION OF TIME
When calculating a period of time within which or following which any act is to
be done or step taken pursuant to this Agreement, the date which is the
reference date shall, unless otherwise specifically included, be excluded. If
the last day of a period is not a business day, then the time period in question
shall end on the first business day following such non-business day.
10.11 SEVERABILITY
If any portion of this Agreement is determined to be invalid or unenforceable
for any reason whatsoever, that invalidity or unenforceablity shall not affect
the validity or enforceability of remaining portions of this Agreement and such
invalid or unenforceable portion shall be severed from the remainder of this
Agreement.
IN WITNESS WHEREOF the Parties have executed this Agreement this 3 day of
October, 1999.
SAN XXXXXXX OIL & GAS LTD. XXXXX & NAMSON
CONSULTING GEOLOGISTS
PER: /s/ J. Xxxxxxx Xxxxx PER: /s/ Xxx X. Xxxxxx
--------------------------- ----------------------------
J. XXXXXXX XXXXX, XXX X. XXXXXX, PH.D.
PRESIDENT
PER: /s/ Xxxxxx X. Xxxxx
---------------------------
XXXXXX X. XXXXX. PH.D.
SCHEDULE "A" - SERVICES
Attached to and made part of an Agreement dated the 20th day of September, 1999,
between San Xxxxxxx Oil & Gas Ltd. and Xxxxx & Namson Consulting Geologists
"SERVICES" SHALL INCLUDE THE FOLLOWING ACTIVITIES TO BE PERFORMED BY THE
CONSULTANT UNDER THE AGREEMENT:
A. GEOLOGICAL EVALUATION OF STUDY AREAS
The Consultant shall cause to be conducted a detailed, thorough and
complete geological study and evaluation of such lands and geological
formations within the Study Areas as directed by San Xxxxxxx during the
Term for the purpose of locating, evaluating, investigating and
appraising hydrocarbon prospects in the Study Areas. The Consultant
shall have a good faith obligation to present all Prospects developed
during the Term to San Xxxxxxx by presenting Prospect Letters to San
Xxxxxxx as contemplated in the Agreement. The Consultant shall
recommend which of the Prospects should become Acquired Prospects. The
Consultant shall assist San Xxxxxxx from a technical standpoint in
developing sufficient technical and strategic expertise regarding the
Prospects with which to acquire lands that may become available through
lease, purchase, farmin or otherwise. During the Initial Term, the
Services shall specifically include the following work programs:
I. During the period from the Effective Date until November 20,
1999 ("Phase I"), the Services shall include the following
work program:
A. Review leads in Xxxxx and Xxxxxx inventory.
B. Select leads for further work and land evaluation.
C. Begin developing leads into Prospects.
D. Acquire additional geologic and geophysical data and
review non-proprietary seismic data over leads and
Prospects.
E. Initiate land review.
F. Review outside company proposals and data rooms
(including Enron, Aera, Chevron, Texaco).
G. Recommend lands for leasing.
II. During the period from November 21, 1999, until January 20,
2000 ("Phase II"), the Services shall include the following
work program:
A. Develop new Xxxxx and Namson regional leads and
trends.
B. Generate new Xxxxx and Xxxxxx prospects.
C. Review outside proposals in light of new prospects.
D. Initiate land review.
E. Recommend lands for leasing.
F. Farm out Xxxxx and Namson generated prospects and
seek partners.
B. BUDGETS AND WORK PROGRAMS
At least thirty (30) days before the end of the Initial Term and before each
Renewal Period, the Consultant shall provide San Xxxxxxx with the following:
1. a proposed work program setting our a proposed work program
for the next succeeding four (4) month period; and
2. a proposed budget for the next succeeding four (4) month
period, including the following:
A. Number of days for which Services will be provided by
Consultant (to be divided into number of days and the
day rates for each category of Consultant's
Representatives, including Partners, landmen,
geophysicists, geologists, geological technicians and
other technical aides)
B. Travel Expenses
C. Geological and Geophysical Data Acquisition
D. Miscellaneous
The Parties will discuss and reach mutual agreement upon any budgets and work
programs to be carried out as part of the Services for each Renewal Period.
SCHEDULE "B"
ROYALTY PROCEDURE
ATTACHED TO AND MADE PART OF AN AGREEMENT DATED THE 20TH DAY OF
SEPTEMBER, 1999, BETWEEN SAN XXXXXXX OIL & GAS
LTD. AND XXXXX & XXXXXX CONSULTING GEOLOGISTS.
WHEREAS Xxxxx & Namson Consulting Geologists and San Xxxxxxx Oil
& Gas Ltd. are parties to that Agreement dated the 20th day of September, 1999
(hereinafter called the "Agreement") to which this Royalty Procedure is attached
as Schedule "B"; and
WHEREAS pursuant to the terms and conditions of the Agreement,
San Xxxxxxx Oil & Gas Ltd. agrees to grant to Xxxxx & Xxxxxx Consulting
Geologists a gross overriding royalty as more particularly set forth herein;
NOW THEREFORE in consideration of the mutual covenants and
agreements herein contained and subject to the terms and conditions hereinafter
set forth, the parties agree as follows:
1.00 DEFINITIONS
In this Royalty Procedure including the recitals and this Clause,
unless the context otherwise requires, the following terms shall
have the meanings hereinafter assigned thereto, namely:
(a) AFFILIATE means, with respect to the relationship between
partnerships or corporations, that one of them is controlled
by the other or both of them are controlled by the same
person, corporation or partnership; and for this purpose a
corporation shall be deemed controlled by those persons,
corporations or partnerships who own or effectively control,
other than by way of security only, sufficient voting shares
of the corporation (whether directly through the ownership of
shares of the corporation or indirectly through the ownership
of shares of another corporation which owns shares of the
corporation) to elect the majority of its board of directors,
and a partnership shall be deemed controlled by any person,
corporation or partnership with a beneficial ownership of more
than 50% in such partnership.
(b) CONDENSATE means a mixture mainly of pentanes and heavier
hydrocarbons (whether or not contaminated with sulphur
compounds) that is recovered or recoverable at a well from an
underground reservoir and that may be gaseous in its virgin
reservoir state but is liquid at the conditions under which
its volume is measured or estimated.
(c) CRUDE OIL means a mixture mainly of pentanes and heavier
hydrocarbons (whether or not contaminated with sulphur
compounds) that is recovered or recoverable at a well from an
underground reservoir and that is liquid at the conditions
under which its volume is measured or estimated and includes
all other hydrocarbon mixtures so recovered except Natural Gas
and Condensate.
(d) CURRENT MARKET VALUE means the price received by the Grantor
at the Point of Measurement for its share of Petroleum
Substances produced and marketed from, or pursuant to a scheme
of pooling or unitization allocated to, the Royalty Lands,
which price shall not be less than that which the Grantor
would have received at the wellhead in an arm's length
transaction if acting as a reasonably prudent operator having
regard to the current market prices, availability to market,
type of transportation service available and economic
conditions of the petroleum industry generally.
(e) GRANTOR means San Xxxxxxx Oil & Gas Ltd.
(f) NATURAL GAS means Raw Gas or marketable gas as the context so
requires, and as those terms are defined in the Regulations;
(g) NET REVENUE INTEREST means the percentage interest remaining
in any particular Royalty Lands after all applicable lessor
royalties and other similar existing burdens or encumbrances
relating thereto are subtracted from 100%.
(h) OVERRIDING ROYALTY means the applicable percentage gross
overriding royalty as reserved in this Royalty Procedure in
favour of the Royalty Owner, more particularly described in
the Clause entitled "Overriding Royalty" in this Royalty
Procedure.
(i) PETROLEUM SUBSTANCES means all Crude Oil, Natural Gas,
Condensate, related hydrocarbons, sulphur and every other
substance an interest in which is granted under the Said
Leases.
(j) POINT OF MEASUREMENT means the production tankage in the case
of Crude Oil and Condensate and shall mean the point of
delivery in the case of Natural Gas and all other Petroleum
Substances.
(k) PROSPECT LETTERS means any letters in the form of Schedule "C"
to the Agreement which are attached hereto pursuant to the
provisions of the Agreement.
(l) RAW GAS has the meaning prescribed by the Regulations.
(m) REGULATIONS means all statutes, laws, rules, orders and
regulations in effect from time to time and made by
governments or governmental boards or agencies having
jurisdiction over the Royalty Lands and over the operations to
be conducted thereon.
(n) ROYALTY LANDS means the areal, stratigraphic and substance
rights for lands within areas indicated in Prospect Maps for
which leases or other interests are obtained by Grantor within
two years of Grantor's acceptance of each applicable Prospect
Letter attached hereto pursuant to the provisions of the
Agreement.
(o) ROYALTY OWNER means Xxxxxx X. Xxxxx & Xxx X. Xxxxxx, each as
to a 50% interest.
(p) SAID LEASES means the title documents relating to the Royalty
Lands, and any extensions, renewals, variations or
replacements of the title documents insofar as they relate to
the Royalty Lands.
2.00 OVERRIDING ROYALTY
2.01 QUANTIFICATION OF OVERRIDING ROYALTY
(a) The Grantor hereby grants to the Royalty Owner an Overriding
Royalty, which shall comprise an interest in the Petroleum
Substances within, upon and under the Royalty Lands. The
gross volume of Petroleum Substances comprising the
Overriding Royalty shall be quantified as the following
applicable percentage of the Current Market Value of the
gross monthly production of Petroleum Substances from each
well on the Royalty Lands in accordance with the following
applicable Net Revenue Interest for such Royalty Lands:
OVERRIDING ROYALTY PERCENTAGE IF THE NET REVENUE INTEREST IS:
----------------------------- -------------------------------
3% Greater than 87.5%
2.5% 84% to 87.49%, inclusive
2.0% 81% to 83.99%, inclusive
1.5% Less than 81%
(b) For the purpose of determining the Overriding Royalty
payable to the Royalty Owner for each well on the Royalty
Lands, the applicable Overriding Royalty percentage set
forth in Subsection (a) shall be multiplied by the
percentage working (participating) interest in the Petroleum
Substances held by the Grantor in that well. Grantor may
agree to grant interests in the Royalty Lands to other
parties in exchange for such other parties agreeing to share
in the costs of acquiring the Royalty Lands and drilling
xxxxx thereon. In such case, Grantor shall ensure that each
such party shall be responsible for its respective share of
the Overriding Royalty payable with respect to such Royalty
Lands.
(c) If any portion of the Royalty Lands is pooled or unitized in
accordance with the provisions of Articles 8 and 9
respectively, the Overriding Royalty will be calculated
based on the quantity of Petroleum Substances thereby
allocated to the affected Royalty Lands.
(d) If Grantor's interest in all or a portion of the Royalty
Lands has been acquired by virtue of an option or farmout
agreement, and the Grantor's interest is subject to an
overriding royalty, carried or net profit or other interest
which may be converted by the optionor or farmor to a
working (participating) interest, any assignment of an
interest to such optionor or farmor upon such conversion
shall not be subject to the Overriding Royalty. After such
conversion, the Overriding Royalty shall be calculated on
the basis of the Grantor's reduced interest.
2.02 SEPARATE QUANTIFICATION FOR CRUDE OIL
If the Grantor completes any well on the Royalty Lands in more than
one zone producing Crude Oil and production therefrom is segregated
and accounted for separately in accordance with the appropriate
regulations, the Overriding Royalty shall be quantified separately
for each producing zone rather than for the total production from
such well, less only those charges permitted herein.
3.00 OVERRIDING ROYALTY NOT TAKEN IN KIND
3.01 PAYMENTS MADE TO ROYALTY OWNER MONTHLY
When and to the extent that the Royalty Owner is not taking its
share of Petroleum Substances in kind, every sale of Petroleum
Substances produced from the Royalty Lands by the Grantor shall
include the Royalty Owner's Overriding Royalty share thereof. The
Grantor shall remit to the Royalty Owner all monies accruing to the
Royalty Owner on account of the Overriding Royalty on or before the
twenty-fifth (25th) working day following the calendar month in
which such Petroleum Substances were sold. The Overriding Royalty
shall be paid to the partners comprising Royalty Owner in the
following proportions:
Xxx X. Xxxxxx 50%
Xxxxxx X. Xxxxx 50%
3.02 MONTHLY STATEMENTS PROVIDED TO ROYALTY OWNER
The Grantor shall enclose with each monthly payment to the Royalty
Owner the following information:
(a) a statement showing the quantity and kind of the Petroleum
Substances produced, saved and sold from the Royalty Lands
in the immediately preceding calendar month and the Current
Market Value thereof, together with a calculation of the
Overriding Royalty for such immediately preceding calendar
month; and
(b) if requested, a copy of the Grantor's governmental
production statement for the month for which the Overriding
Royalty is calculated.
3.03 PERMITTED DEDUCTIONS
Royalty Owner shall be responsible for any taxes payable with
respect to its share of Petroleum Substances. To the extent that the
Royalty Owner does not take its Overriding Royalty share of
Petroleum Substances in kind, as hereinafter provided, the
Overriding Royalty shall be paid on the Current Market Value of the
Petroleum Substances without any deductions except the following:
(a) with respect to Crude Oil and Condensate, the Overriding
Royalty will bear a proportionate share of the actual costs
of transportation to market connection, where sales are not
made f.o.b. the tanks serving the Royalty Lands; and
(b) with respect to Natural Gas, the cost of gathering,
compressing, treating, processing and transporting the
Overriding Royalty share of the Natural Gas may be deducted
from the Current Market Value of the Natural Gas;
provided that such costs may only be deducted to the extent that
they are actually incurred and are reasonable.
3.04 PETROLEUM SUBSTANCES SOLD AT LESS THAN CURRENT MARKET VALUE
If any Petroleum Substances are sold at less than Current Market
Value in any transactions (including those transactions which are
not at arm's length or any transactions involving any arrangement
from which the Grantor obtains a collateral advantage in
consideration of the reduced price), the gross proceeds of the sale
of such Petroleum Substances shall, for the purposes of calculating
the Overriding Royalty, not be less than the Current Market Value of
those Petroleum Substances when produced from the Royalty Lands.
4.00 OVERRIDING ROYALTY TAKEN IN KIND
4.01 NOTICE TO GRANTOR
The Royalty Owner shall have the right to take in kind the Royalty
Owner's share of Petroleum Substances. Such right may be exercised
separately with respect to Crude Oil, Raw Gas, individual Natural
Gas liquids, Condensate, marketable gas or any other individual
Petroleum Substance. In the case of Crude Oil and Condensate, such
right shall only be exercised on a minimum of forty-five (45) days
notice to the Grantor. In the case of all other Petroleum Substances
such right shall only be exercised on six (6) months notice to the
Grantor. If the Royalty Owner, however, signifies in writing its
consent to the sale of any of the Royalty Owner's share of Petroleum
Substances under a contract made by the Grantor providing for a
minimum term in excess of the said respective notice periods, the
Royalty Owner's right to take in kind any Petroleum Substances
subject to such contract shall be suspended during the term of such
contract. The Royalty Owner may cease to take in kind any Petroleum
Substances upon giving the Grantor the same minimum notice as
required in order to permit the Royalty Owner to take such Petroleum
Substances in kind as aforesaid. The right to take in kind or to
cease to take in kind may be exercised from time to time subject
only to the foregoing provisions of this Subclause.
4.02 GRANTOR'S RESPONSIBILITIES
When the Royalty Owner is taking in kind any of the Royalty Owner's
share of Petroleum Substances other than Raw Gas, the Grantor shall
in respect to Crude Oil and at no cost to the Royalty Owner, remove
basic sediment and water therefrom in accordance with good oilfield
practice so that pipeline specifications in that regard will be met,
and the Royalty Owner shall also have the right to use free of
charge a proportionate share of the Grantor's lease tankage and
storage facilities to store a maximum of ten (10) days accumulation
of the Royalty Owner's share of such Petroleum Substances. In
respect to Crude Oil and Condensate the Grantor shall deliver the
same to the Royalty Owner, or its nominee, at the tank outlets in
accordance with usual and customary pipeline and shipping practice,
free and clear of all charges whatsoever. Grantor shall deliver
Royalty Owner's share of Raw Gas to the Royalty Owner or its nominee
at the wellhead of the relevant well, provided that to the extent
the Royalty Owner so requests on reasonable notice to the Grantor
and the Grantor can reasonably comply with such request, the Grantor
shall gather, compress, transport, treat and process such share of
Raw Gas with the Grantor's share of Raw Gas from the applicable
xxxxx and deliver to the Royalty Owner at the relevant plant outlet,
the Royalty Owner's Overriding Royalty share of marketable gas and
other Petroleum Substances obtained from such share of Raw Gas. In
such event, the Royalty Owner shall be responsible for:
(i) its proportionate share of the costs of gathering,
compressing, transporting, treating and processing such Raw
Gas where the Grantor or an Affiliate thereof does not own
such facilities; or
(ii) where the Grantor or an Affiliate thereof owns such
facilities, such fee as may be agreed upon by the Grantor
and the Royalty Owner for the use of such facilities and the
making of the Royalty Owner's Overriding Royalty share of
Raw Gas marketable.
5.00 RIGHT TO AUDIT
5.01 EXAMINATION OF RECORDS
The Royalty Owner shall have the right to audit the records of the
Grantor insofar as they relate to any matter or items required to
determine the accuracy of any statements or payments with respect to
the Overriding Royalty. The books, records, vouchers and accounts
maintained by the Grantor shall be open to inspection at all
reasonable times during business hours by an officer, agent,
employee or other person appointed or authorized by the Royalty
Owner, in writing, to examine the same.
5.02 DISCREPANCIES
Any payment made or statement rendered by the Grantor hereunder
which is not disputed by the Royalty Owner on or before the last day
of the twenty-fourth (24th) month following the end of the calendar
year of the month for which such statement or payment was rendered
shall be deemed to have been correct.
5.03 RIGHT TO VIEW OPERATIONS
The Royalty Owner shall also have the right (which may be exercised
through servants or agents) to enter at its sole cost, risk and
expense upon the Royalty Lands at all reasonable times to gauge
tanks, check the quantities of Petroleum Substances in storage,
witness tests and otherwise view operations on the Royalty Lands.
5.04 RIGHTS SUSPENDED
The provisions of Subclauses 5.01 and 5.03 shall be suspended where
the Grantor is drilling a well to obtain information to assist it in
bidding for lands posted for sale by any governmental authority,
until such sale is completed.
6.00 RATEABLE PRODUCTION
6.01 GRANTOR TO MARKET RATEABLY
The Grantor shall, subject to the Clause entitled "Overriding
Royalty Taken In Kind", make every reasonable endeavour within its
legal authority to market any of the Petroleum Substances produced
or capable of being produced from the Royalty Lands rateably with
any other similar substances produced from any lands within the same
pool in which the Grantor or any Affiliate has an interest and
further the Grantor covenants that it will not discriminate against
the Petroleum Substances produced or capable of being produced from
the Royalty Lands in the production and marketing of the same.
7.00 RIGHT TO COMMINGLE
7.01 GRANTOR MAY COMMINGLE PETROLEUM SUBSTANCES
The Grantor shall have the right to commingle Petroleum Substances
produced from the Royalty Lands with Petroleum Substances produced
from other lands, provided methods acceptable to the Royalty Owner
are used to determine the proper measurement of individual well
production. Where governmental regulations or orders require
segregated production tests of individual xxxxx at intervals not
greater than two months, such tests will be deemed acceptable to the
Royalty Owner under this Clause and no further tests will be
required.
8.00 POOLING
8.01 POOLINGS AUTHORIZED BY ROYALTY OWNER
The Grantor shall have the right to pool any portion of the Royalty
Lands forming less than a spacing unit for the production of
Petroleum Substances with lands other than the Royalty Lands in
order to form a complete spacing unit for the production of
Petroleum Substances. Unless otherwise agreed to in writing by the
Royalty Owner or ordered by governmental authority, such pooling
will be on a surface acreage basis; that is, the production of
Petroleum Substances from the well on the pooled lands comprising
the spacing unit shall be divided between the Royalty Lands and the
other lands in such spacing unit in the proportion that the number
of acres of the Royalty Lands in such spacing unit is to the number
of acres of the other lands in such spacing unit. Where, however,
the Overriding Royalty is a sliding scale royalty based upon the
amount of production from the spacing unit, the rate of such sliding
scale royalty shall be calculated upon the total production from the
spacing unit, but such rate shall be applied only upon the
production deemed produced from the Royalty Lands in the spacing
unit in order to determine the Overriding Royalty. If such pooling
is effected, the Overriding Royalty shall thereafter be calculated
and paid in accordance with the foregoing provisions of this Clause.
9.00 UNITIZATION
9.01 ROYALTY OWNER TO CONSENT TO UNITIZATION
The Grantor shall not include the Royalty Lands or any part thereof
in any voluntary plan of unitization comprising more than one
spacing unit without the written consent of the Royalty Owner. The
execution by the Royalty Owner of the applicable unit agreement
shall be deemed to be consent to such unitization under this Clause.
10.00 SURRENDER
10.01 GRANTOR TO KEEP LEASES IN GOOD STANDING
The Grantor shall pay all rentals, royalties, taxes and charges
payable under the provisions of the Said Leases or with respect to
the Royalty Lands and the production therefrom, either directly or
by reimbursing the Royalty Owner, and shall keep the Said Leases in
good standing until surrender thereof as herein provided for and
shall not allow the Said Leases to terminate or become subject to
forfeiture.
10.02 NOTICE OBLIGATIONS ON SURRENDER
The Grantor shall not surrender any portion of the Royalty Lands
without giving notice of such proposed surrender in writing
(hereinafter called "the Surrender Notice") to the Royalty Owner at
least sixty (60) days before the next ensuing anniversary date of
the lease covering the lands or interest therein which it proposes
to surrender. Within thirty (30) days after receipt of the Surrender
Notice, the Royalty Owner may elect in writing to acquire such
interest and if it does so the Grantor shall, without warranty,
forthwith transfer or assign such interest to the Royalty Owner. The
Overriding Royalty shall thereafter cease to be payable with respect
to the interest so assigned to the Royalty Owner. If the Royalty
Owner fails to make the election as provided for herein, the Grantor
may surrender the lands specified in the Surrender Notice.
10.03 SURRENDER SUBJECT TO FORFEITURE
If the Grantor proposes to surrender any portion of the Royalty
Lands to avoid an obligation to drill a well, the provision for
notice and assignment in the preceding Subclause shall apply,
mutatis mutandis, provided that the assignment, if requested by the
Royalty Owner, shall be of the entire interest which is subject to
forfeiture by reason of the failure to drill such well and the
surrender notice shall be given not less than sixty (60) days before
the well must be commenced to meet the obligation.
10.04 ROYALTY OWNER TO ASSUME RIGHTS AND OBLIGATIONS
Upon the Royalty Owner electing to acquire the interest to be
surrendered as set forth herein, the Royalty Owner shall assume all
rights and obligations of the Grantor with respect to the interest
assigned, including indemnification of the Grantor, which rights,
obligations and indemnification accrue from and after the effective
date of such assignment. The effective date of such assignment shall
be the date upon which Royalty Owner elected to acquire the subject
interest as provided herein.
11.00 ASSIGNMENT
11.01 NOMINATION OF ASSIGNEE
If the Royalty Owner transfers, assigns or otherwise disposes of any
part of its interest hereunder to more than one party, it shall
ensure that one of the parties to whom such disposition is made
shall be nominated to receive the payment of the Overriding Royalty
on behalf of all such parties and until written notice of such
nomination is received by the Grantor, the Grantor shall be entitled
to continue to make payments of the Overriding Royalty to the
Royalty Owner.
11.02 ASSIGNMENT BY GRANTOR
If the Grantor disposes, in any manner whatsoever, of its interest
in this Royalty Procedure, the Royalty Lands, the Said Leases or any
portion or portions thereof, it shall at all times continue to be
bound by the provisions of this Royalty Procedure as if there had
been no assignment, until such time as the Royalty Owner shall have
been served with a document reflecting the assignment. Such
assignment document shall be accompanied by a written undertaking by
the Assignee, directly enforceable by the Royalty Owner, to perform
and be bound thereafter by all of the provisions of this Royalty
Procedure to the same extent and degree, with respect to the
interest which has been assigned to it, as it would have been had it
been a party to this Royalty Procedure in the place of the Grantor.
12.00 LIABILITY AND INDEMNITY
12.01 GRANTOR'S RESPONSIBILITY
The Grantor shall:
(a) be liable to the Royalty Owner for all losses, costs,
damages and expenses whatsoever (whether contractual or
tortious) which the Royalty Owner may suffer, sustain, pay
or incur; and
(b) in addition, indemnify and hold harmless the Royalty Owner
and its directors, officers, agents and employees against
all actions, causes of action, proceedings, claims, demands,
losses, costs, damages and expenses whatsoever which may be
brought against or suffered by the Royalty Owner, its
directors, officers, agents and employees or which they may
sustain, pay or incur;
insofar as they are either a direct result of or directly
attributable to any act or omission (whether negligent or otherwise)
of the Grantor with respect to operations or activities conducted by
it or on behalf of it.
12.02 ROYALTY OWNER'S RESPONSIBILITY
Where the Royalty Owner conducts operations or activities with
respect to the Royalty Lands, the provisions of the preceding
Subclause shall apply, mutatis mutandis, to determine the Royalty
Owner's responsibility to the Grantor with respect to losses
attributable to such operations or activities.
13.00 CONFIDENTIAL INFORMATION
13.01 CONFIDENTIALITY REQUIREMENT
Except as provided herein, all data and information of any nature
acquired by the parties from any operations pursuant to this Royalty
Procedure, or supplied by one party to the other pursuant hereto,
shall be for the sole and exclusive use and benefit of the parties
hereto unless the parties agree to the dissemination of such
information or unless a party hereto is required to give such
information to any governmental department, body or agency, or any
recognized association within the petroleum industry, of which it is
a member, that engages in the exchange of factual information
relating to the type of operations contemplated by this Royalty
Procedure. In no event shall information of any type or character
relating to xxxxx drilled on a confidential basis to the parties be
disclosed by a party without prior written agreement of the other
party.
13.02 DISCLOSURE TO AFFILIATES
The provisions of this Clause shall not apply to disclosures to
Affiliates provided that such Affiliates agree to be bound by the
terms of this Clause.
14.00 ABANDONMENT
14.01 NOTICE OF INTENTION TO ABANDON
If the Grantor intends to abandon any well drilled on the Royalty
Lands, it shall give notice to the Royalty Owner of such intention
and provide the Royalty Owner with all available well information
which may be reasonably required by the Royalty Owner to determine
whether it wishes to exercise its rights pursuant to this Clause.
Following receipt of such notice and of all other required
information, the Royalty Owner may, within forty-eight (48) hours
when a drilling rig is on location and within thirty (30) days in
all other cases, elect to take over the well at its own cost, risk
and expense.
14.02 GRANTOR ABANDONS WELL
If the Royalty Owner fails to reply to the Grantor within the
applicable aforementioned time period or if the Royalty Owner
advises the Grantor by notice in writing within said period that the
Royalty Owner consents to the proposed abandonment of a well, the
Grantor shall, at its sole cost, risk and expense, abandon the well
in accordance with good oilfield practice and the Regulations.
14.03 ROYALTY OWNER ELECTS TO TAKE OVER WELL
If the Royalty Owner elects to take over a well within the time
period aforesaid, then:
(a) the entire interest granted under this Royalty Procedure by
the Royalty Owner to the Grantor in the spacing unit on
which the well is situated shall be assigned by the Grantor
to the Royalty Owner;
(b) the Royalty Lands comprising the production spacing unit for
such well shall no longer be subject to this Royalty
Procedure;
(c) the Royalty Owner shall thereafter own such spacing unit and
well and all material, equipment and production therein and
thereon or relating thereto; and
(d) the Royalty Owner shall reimburse the Grantor for the
salvage value of any material and equipment on the spacing
unit or relating thereto which the Royalty Owner wishes to
retain, less the estimated cost of salvaging such material
and equipment.
14.04 OBLIGATIONS AND LIABILITIES UPON ABANDONMENT
If the Royalty Owner takes over a well pursuant to this Clause, the
Royalty Owner shall, effective as of the date of the Royalty Owner's
election to take over that well, assume all rights and obligations
of the Grantor with respect to the interest assigned, including
indemnification of the Grantor, and the Grantor shall be released
and discharged from all obligations thereafter accruing with respect
to the well. The Grantor shall not be released from any obligation
which ought to have been performed by it or any liability which may
have accrued prior to takeover of such well by the Royalty Owner.
14.05 PRODUCTION EXCLUDED
A spacing unit surrendered by the Grantor to the Royalty Owner
pursuant to an abandonment notice as aforesaid, shall exclude
Petroleum Substances being produced or that are capable of being
produced from any other well or xxxxx, the production from which is
attributable to any other horizons or formations underlying that
portion of the Royalty Lands on which the well subject to the
abandonment notice is located.
15.00 DEFAULT
15.01 RIGHTS OF ROYALTY OWNER
If the Grantor defaults in respect of any obligations or covenants
on its part to be satisfied and performed, the satisfaction or
performance of which has not been waived in writing by the Royalty
Owner, the Royalty Owner may give to the Grantor written notice
requiring it to remedy the default.
15.02 DEFAULT NOT TO APPLY TO PRODUCTION
Any default pursuant to the preceding Subclause shall not apply to
any spacing unit on which there is located a well capable of
producing Petroleum Substances in paying quantities or on which a
well is being drilled at the time of cancellation and termination,
unless the default aforesaid is in respect of the spacing unit or
some portion thereof, either alone or together with any other
portion or portions of the Royalty Lands.
15.03 RIGHTS ARE IN ADDITION TO OTHER RIGHTS
The rights herein granted to the Royalty Owner shall be in addition
to and not be in substitution for any other right or remedy which
the Royalty Owner may have.
16.00 LIEN
16.01 ROYALTY OWNER'S LIEN
The Royalty Owner shall be entitled to and shall have a first and
paramount lien upon the Grantor's share of all Petroleum Substances
from time to time produced from the Royalty Lands to secure the
payment of the Overriding Royalty. Such lien shall not operate to
release the Grantor from personal liability for monies due to the
Royalty Owner. Such lien shall not attach to the Grantor's share of
Petroleum Substances sold or otherwise disposed of from the Royalty
Lands, but immediately upon default occurring in payment by the
Grantor of monies payable to the Royalty Owner such lien shall
operate as an assignment to the Royalty Owner of the consideration
thereafter payable to the Royalty Owner for the Petroleum Substances
sold, up to the amount owed to the Royalty Owner and not so paid by
the Grantor.
16.02 SERVICE OF AGREEMENT TO CONSTITUTE AUTHORITY
Service of a copy of this agreement upon any purchaser of Petroleum
Substances together with written notice from the Royalty Owner shall
constitute written authorization on the part of the Grantor for such
purchaser to pay the Royalty Owner the proceeds from any sale or
sales of the Grantor's share of Petroleum Substances, up to the
amount owed to the Royalty Owner by the Grantor, and such purchaser
is authorized to rely solely upon the statement of the Royalty Owner
as to the amount owed to the Royalty Owner by the Grantor.
16.03 PROOF OF DEFAULT
The books and records kept by the Royalty Owner shall constitute
written proof of the existence of such default, although no
purchaser shall be obliged to examine the same before acting upon
such notice of default.
17.0 WELL INFORMATION
17.01 INFORMATION TO ROYALTY OWNER
The Grantor shall, with respect to each well drilled or being
drilled (or reworked, deepened or plugged back) on the Royalty
Lands:
(a) give the Royalty Owner notice, not later than forty-eight
(48) hours before the date of spudding the well, that the
Grantor proposes to drill the well, and promptly give the
Royalty Owner notice when actual drilling operations have
commenced on the well;
(b) during the drilling of the well, furnish the Royalty Owner
with daily drilling and geological reports; and
(c) provide the Royalty Owner promptly with all information
relative to mud samples and drill stem test fluid samples,
copies of all drill stem tests and service reports thereon,
copies of pressure charts and copies of all logs run in the
well, together with a copy of the completion report
including the details and results of all production tests
carried out with respect to the well.
17.02 LIMITS ON USE OF INFORMATION
Royalty Owner may not use any information provided pursuant to
Subclause 17.01 to acquire lands or leases or otherwise compete with
Grantor within the area of the applicable Prospect.
18.00 NOTICES
18.01 SERVICE OF NOTICES
Whether or not so stipulated herein all notices, communications and
statements (herein called "notices") required or permitted hereunder
shall be in writing. Any notice to be given hereunder shall be
deemed to be served properly if served in any of the following
modes:
(a) personally, by delivering the notice to the party on whom it
is to be served at that party's address for service, which
notice shall be deemed received by the addressee when
actually delivered as aforesaid, if such delivery is during
normal business hours; provided that if a notice is not
delivered during the addressee's normal business hours, such
notice shall be deemed to have been received by such party
at the commencement of the next ensuing business day
following the date of delivery;
(b) by telefacsimile (or by any other like method by which a
written and recorded message may be sent) directed to the
party on whom it is to be served at that party's address for
service, which notice shall be deemed received by the
respective addressees thereof: (i) when actually received by
them, if received within normal business hours; or (ii) at
the commencement of the next ensuing business day following
transmission thereof, if such notice is not received during
such normal business hours; or
(c) by mailing it first class (air mail if to or from a location
outside Canada) double registered post, postage prepaid,
directed to the party on whom it is to be served at that
party's address for service, which notice shall be deemed to
be received by the addressee at noon, local time, on the
earlier of the actual date of receipt or the fourth (4th)
day (excluding Saturdays, Sundays and statutory holidays)
following the mailing thereof; provided that, if postal
service is interrupted or operating with unusual or imminent
delay, notice shall not be served by such means during such
interruption or period of delay.
For notice periods of forty-eight (48) hours or less, the applicable
notice shall be given in accordance with paragraph (a) or (b) of
this Subclause.
18.02 ADDRESSES FOR NOTICES
The address for service of notices hereunder of each of the parties
shall be as follows:
The Grantor: SAN XXXXXXX OIL & GAS LTD.
00 Xxxxxxxxx Xxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 0X0
Fax: (000) 000-0000
The Royalty Owner: XXXXX & XXXXXX CONSULTING GEOLOGISTS
000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
18.03 RIGHT TO CHANGE ADDRESS
Any party may change its address for service by notice to the other
parties.
19.00 MISCELLANEOUS
19.01 DEVELOPMENT OF LANDS
Nothing in this Royalty Procedure is to be construed as an express
or implied covenant by the Grantor to develop the Royalty Lands.
19.02 PERPETUITIES
Notwithstanding anything contained in this Royalty Procedure, any
right under this Royalty Procedure of a party to acquire any
interest from another party shall terminate not later than the
expiration of twenty-one (21) years after the death of the last
surviving descendant now living of the Governor of the State of
California.
19.03 PARTIES TO DO ALL FURTHER ACTS
The parties hereto shall from time to time and at all times do all
such further acts and execute and deliver all such further deeds and
documents as shall be reasonably required in order fully to perform
and carry out the terms of this Royalty Procedure.
19.04 NO WAIVER EXCEPT IN WRITING
No waiver by any party hereto of any breach of any of the covenants,
conditions or provisos herein contained shall be effective or be
binding upon another party unless the same be expressed in writing,
and any waiver so expressed shall not limit or affect its right with
respect to any other or future breach.
19.05 TIME OF ESSENCE
Time is of the essence of this Royalty Procedure.
19.06 ROYALTY RUNS WITH LANDS
The obligation of the Grantor to pay the Overriding Royalty shall be
a covenant running with the Royalty Lands during the term of this
Royalty Procedure.
19.07 HEADINGS
The headings of the Clauses of this Royalty Procedure are inserted
for convenience of reference only and shall not affect the
construction or interpretation of this Royalty Procedure.
19.08 CONFLICTS
Wherever any term or condition of this Royalty Procedure conflicts
or is at variance with any term or condition of the Agreement, the
provisions of the Agreement shall prevail.
