Nevada
|
13-3087510
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
510
Royal Bank Building, 10117 Jasper Avenue, Edmonton, Alberta,
Canada
|
T5J
1W8
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of each class
|
Name
of each exchange on which registered
|
|
None
|
None
|
Common
Stock, $0.001 par value per share
|
(Title
of class)
|
TABLE
OF CONTENTS
|
|||
|
|||
Page
Number
|
|||
|
|||
GLOSSARY
AND ABBREVIATIONS
|
5
|
||
|
|||
CURRENCY
EXCHANGE RATES
|
7
|
||
|
|||
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
|
7
|
||
|
|||
PART
I
|
|
||
|
|||
ITEM
1.
|
DESCRIPTION
OF BUSINESS
|
7
|
|
General
Overview
|
7
|
||
Business
Development
|
7
|
||
Business
of Issuer
|
8
|
||
Overview
|
8
|
||
Operations
|
9
|
||
Recent
Developments
|
10
|
||
Sales
and Marketing
|
10
|
||
Research
and Development
|
11
|
||
Competition
|
11
|
||
Canadian
Government and Environmental Regulations
|
11
|
||
Employees
|
12
|
||
Royalty
Agreements
|
12
|
||
Risk
Factors
|
13
|
||
Reports
to Security Holders
|
16
|
||
|
|||
ITEM
2.
|
DESCRIPTION
OF PROPERTY
|
16
|
|
Office
Leases
|
16
|
||
Oil
& Gas Properties
|
16
|
||
Acreage
|
16
|
||
Reserves,
Production and Delivery Commitments
|
17
|
||
Drilling
Activity
|
17
|
||
Present
Activities
|
18
|
||
ITEM
3.
|
LEGAL
PROCEEDINGS
|
18
|
|
|
|||
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
20
|
|
|
|||
PART
II
|
|
||
|
|||
ITEM
5.
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
21
|
|
Market
Price Information for Common Stock
|
21
|
||
Holders
of Record
|
22
|
||
Dividends
|
22
|
||
Equity
Compensation Plan Information
|
22
|
||
Stock
Option Plan
|
23
|
||
Sales
of Unregistered Securities
|
23
|
||
ITEM
6.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
25
|
|
|
|||
REPORT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
|
28
|
ITEM
7.
|
FINANCIAL
STATEMENTS
|
29
|
|
Balance
Sheet
|
29
|
||
Statement
of Operations
|
30
|
||
Statement
of Changes in Stockholders’ Equity
|
31
|
||
Statement
of Cash Flows
|
32
|
||
Notes
to Financial Statements
|
33
|
||
ITEM
8.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
42
|
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES
|
42
|
|
|
|||
ITEM
8B.
|
OTHER
INFORMATION
|
43
|
|
PART
III
|
|
||
ITEM
9.
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION
16(a) OF THE EXCHANGE ACT
|
43
|
|
ITEM
10.
|
EXECUTIVE
COMPENSATION
|
47
|
|
ITEM
11.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
49
|
|
ITEM
12.
|
CERTAIN
RELATIONSHIP AND RELATED TRANSACTIONS
|
50
|
|
ITEM
13.
|
EXHIBITS
|
51
|
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
53
|
|
SIGNATURES
|
54
|
Year
|
|
2006
|
|
2005
|
|
2004
|
|
2003*
|
|||||
Rate
at end of year
|
$
|
1.1153
|
$
|
1.1611
|
$
|
1.2699
|
$
|
1.3536
|
|||||
Average
rate for the year
|
$
|
1.1425
|
$
|
1.2231
|
$
|
1.3256
|
$
|
1.3589
|
*
For the period September 10 to September 30, 2003
|
· |
The
operator might initiate exploration or development on a faster or
slower
pace than we prefer;
|
· |
The
operator might propose to drill more wells or build more facilities
on a
project than we have funds for or that we deem appropriate, which
could
mean that we are unable to participate in the project or share in
the
revenues generated by the project;
|
· |
If
an operator refuses to initiate a project, we might be unable to
pursue
the project.
|
OIL
AND NATURAL GAS RIGHTS
as of September 30, 2004
|
|||||||||||||
Gross
Hectares
|
Net
Hectares
|
Gross
Acres
|
Net
Acres
|
||||||||||
Developed
Acreage
|
|||||||||||||
Sawn
Lake – Peace River OS Area, Alberta, Canada
|
None
|
None
|
None
|
|
|
None
|
|||||||
Total
|
None
|
None
|
None
|
|
|
None
|
|||||||
Undeveloped
Acreage
|
|||||||||||||
Sawn
Lake – Peace River OS Area, Alberta, Canada
|
7,936
|
6,349
*
|
19,610
|
|
|
15,688
*
|
|||||||
Total
|
7,936
|
6,349
|
19,610
|
|
|
15,688
|
*80%
working interest (pre-farmout)
|
Exploratory
Wells year ended September 30
|
2006
|
2005
|
2004
|
||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||||
Gas
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Oil
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Oil/Gas
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Evaluating
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Drilling
at end of year
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Suspended
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Abandoned
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Total
Exploratory Wells
|
-
|
-
|
-
|
-
|
-
|
-
|
Development
Wells year ended September 30
|
2006
|
2005
|
2004
|
||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||||
Gas
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Oil
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Oil/Gas
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Evaluating
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Drilling
at end of year
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Suspended
|
2
|
0.8
|
** |
1
|
0.4
|
** |
-
|
-
|
|||||||||||
Abandoned
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Total
Development Wells
|
2
|
0.8
|
1
|
0.4
|
-
|
-
|
ITEM 5. |
MARKET
FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
High
(US$)
|
|
Low
(US$)
|
|||||
Fiscal
2003
|
|||||||
First
Quarter
|
$
|
0.24
|
$
|
0.12
|
|||
Second
Quarter
|
$
|
0.13
|
$
|
0.01
|
|||
Third
Quarter
|
$
|
0.03
|
$
|
0.002
|
|||
Fourth
Quarter
|
$
|
0.002
|
$
|
0.0003
|
|||
Fiscal
2004
|
|||||||
First
Quarter
|
$
|
0.55
|
$
|
0.05
|
|||
Second
Quarter
|
$
|
1.30
|
$
|
1.05
|
|||
Third
Quarter
|
$
|
1.55
|
$
|
0.48
|
|||
Fourth
Quarter
|
$
|
1.42
|
$
|
0.80
|
|||
Fiscal
2005
|
|||||||
First
Quarter
|
$
|
1.03
|
$
|
0.53
|
|||
Second
Quarter
|
$
|
0.90
|
$
|
0.35
|
|||
Third
Quarter
|
$
|
0.58
|
$
|
0.30
|
|||
Fourth
Quarter
|
$
|
0.68
|
$
|
0.31
|
|||
Fiscal
2006
|
|||||||
First
Quarter
|
$
|
1.31
|
$
|
0.37
|
|||
Second
Quarter
|
$
|
2.98
|
$
|
1.15
|
|||
Third
Quarter
|
$
|
2.85
|
$
|
1.45
|
|||
Fourth
Quarter
|
$
|
1.76
|
$
|
0.58
|
|||
Fiscal
2007
|
|||||||
First
Quarter
|
$
|
0.66
|
$
|
0.33
|
Equity
Compensation Plan Category
|
(a)
Number
of Securities to be issued upon exercise of outstanding options,
warrants
and rights
|
(b)
Weighted-average
exercise price of outstanding options, warrants and
rights
|
(c)
Number
of Securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||
Equity
compensation plans approved by security holders
|
None
|
None
|
None
|
|||||||
Equity
compensation plans not approved by security holders
|
None
|
None
|
None
|
|||||||
Total
|
None
|
None
|
None
|
·
|
the
amendment of the SPA to delete certain restrictions on the Company’s
ability to enter into any future
financings;
|
·
|
the
termination of the RRA;
|
|
·
|
the
issuance to the Investors of an aggregate of 1,600,000 (one million
six
hundred thousand) shares of common stock of the Company (the “Shares”),
including the granting of certain piggyback registration rights related
thereto; and
|
|
·
|
the
full and final settlement of all existing or potential claims between
the
Company and the Investors arising under the SPA and the
RRA.
|
· |
In
August 2004 Deep Well acquired 3 Peace River Oil Sands Development
leases
for a total of 31 sections covering 19,609 gross acres (7,936 gross
hectares) with a net working interest of 80%.
|
· |
In
September 2004 a $1,000,000 unsecured convertible debenture was issued
for
net cash of $879,000, after commissions of
$121,000.
|
· |
In
December 2004 Deep Well signed a Joint Operating Agreement with 1132559
Alberta Ltd.
|
· |
In
February 2005 the Company signed a Farmout Agreement with Signet,
whereby
Signet must drill 10 wells, at no cost to the Company, to earn up
to a 40%
interest in the joint lands and pay a prospect fee of $2,000,000
($1,000,000 being deferred).
|
· |
In
March 2005 Deep Well raised $750,000 through a security purchase
and
registration rights agreement.
|
· |
In
June 2005 through an acquisition of Northern, Deep Well more than
doubled
its oil sands lease holdings, in which Deep Well acquired a net 80%
working interest in an additional 3 Peace River Oil Sands Development
leases, 1 Oil Sands permit and 1 Petroleum and Natural Gas License
for a
total of 38.5 sections covering 24,354 gross acres (9,856 gross
hectares).
|
· |
In
June 2005 a new Board of Directors was elected by written resolution
of a
majority of shareholders.
|
· |
In
July 2005 the directors re-appointed Mr. Curtis Sparrow to the
Board.
|
· |
In
July 2005 the company moved its corporate head office to Edmonton,
Alberta. The Company retained an office in Calgary, Alberta for
Operations.
|
· |
In
August 2005 the Company raised $200,000 through a private placement
and
issued shares pursuant to a debt settlement arrangement of $84,378
of our
indebtedness.
|
· |
In
September 2005 the Company began drilling their first well at Sawn
Lake,
Alberta Canada.
|
· |
In
October 2005 the Company raised $1,260,000 through a private
placement.
|
· |
In
November 2005 the Company amended the Farmout Agreement with Signet,
in
which the $1,000,000 deferred portion of the $2,000,000 prospect
fee must be paid immediately, along with 7.55 million common shares
of Signet. At September 30, 2006, the Company owned 17.84% of
the common shares of Signet.
|
· |
In
January 2006 the Company raised $76,800 through a private placement
and
issued shares pursuant to a debt settlement arrangement of $38,293
of our
indebtedness.
|
· |
In
April 2006 the directors re-appointed Mr. David Roff to the
Board.
|
· |
In
August and September of 2005 the Company drilled 2 more wells at
Sawn
lake, Alberta.
|
· |
In
October 2006 the first 3 wells drilled by the Company were suspended
for
further evaluation.
|
· |
In
January 2007 the Company entered into a settlement agreement and
release
of all claims with certain
investors.
|
MADSEN & ASSOCIATES, CPA’S INC. |
684
East Vine St. #3
|
|
Certified Public Accountants and Business Consultants |
Murray,
Utah 84107
|
|
Telephone
801-268-2632
|
||
Fax
801-262-3978
|
Salt
Lake City, Utah
|
|
November
29, 2006
|
/s/
Madsen & Associates, CPA’s Inc.
|
|
Sept.
30, 2004
|
Sept.
30, 2003
|
Sept.
10, 2003 to Sept. 30, 2004
|
||||||||
REVENUES
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
EXPENSES
|
||||||||||
Administrative
|
544,199
|
50,000
|
594,199
|
|||||||
NET
LOSS FROM OPERATIONS
|
(544,199
|
)
|
(50,000
|
)
|
(594,199
|
)
|
||||
OTHER
INCOME AND EXPENSE
|
||||||||||
Interest
|
(6,421
|
)
|
-
|
(6,421
|
)
|
|||||
Settlement
of debt
|
24,866
|
-
|
24,866
|
|||||||
NET
LOSS
|
$
|
(525,754
|
)
|
$
|
(50,000
|
)
|
$
|
(575,754
|
)
|
|
NET
LOSS PER COMMON SHARE
|
||||||||||
Basic
and diluted
|
$
|
(0.02
|
)
|
$
|
-
|
|||||
WEIGHTED
AVERAGE
|
||||||||||
OUTSTANDING
SHARES - stated in 1,000’s
|
||||||||||
Basic
|
31,236
|
36,020
|
Common
Stock
|
Capital
Excess of
|
Accumulated
|
|||||||||||
Shares
|
Amount
|
Par
Value
|
Deficit
|
||||||||||
Balance
September 10, 2003 - note 1
|
991,912
|
$
|
992
|
$
|
(992
|
)
|
$
|
-
|
|||||
Issuance
of common stock pursuant
|
|||||||||||||
to
bankruptcy agreement
|
|||||||||||||
September
10, 2003
|
36,019,556
|
36,019
|
13,981
|
-
|
|||||||||
Net
operating loss for the period
|
|||||||||||||
September
10 to September 30, 2003
|
-
|
-
|
-
|
(50,000
|
)
|
||||||||
Return
and cancellation of common shares
|
(5,775,000
|
)
|
(5,775
|
)
|
5,775
|
-
|
|||||||
Net
operating loss for the year ended
|
|||||||||||||
September
30, 2004
|
-
|
-
|
-
|
(525,754
|
)
|
||||||||
Balance
September 30, 2004
|
31,236,468
|
$
|
31,236
|
$
|
18,764
|
$
|
(575,754
|
)
|
Sept.
30, 2004
|
Sept.
30, 2003
|
Sept.
10, 2003 to Sept. 30, 2004
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||
Net
loss
|
$
|
(525,754
|
)
|
$
|
(50,000
|
)
|
$
|
(575,754
|
)
|
|
Adjustments
to reconcile net loss to net
|
||||||||||
cash
provided by operating activities
|
||||||||||
Commissions
withheld from loan proceeds
|
121,000
|
-
|
121,000
|
|||||||
Changes
in accounts receivable
|
(17,879
|
)
|
-
|
(17,879
|
)
|
|||||
Changes
in prepaid expenses
|
(34,641
|
)
|
-
|
(34,641
|
)
|
|||||
Changes
in accounts payable
|
204,336
|
-
|
204,336
|
|||||||
Net
Change in Cash From Operations
|
(252,938
|
)
|
-
|
(302,938
|
)
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||
Loans
- related parties
|
(119,790
|
)
|
-
|
(119,790
|
)
|
|||||
Purchase
of oil and gas properties
|
(111,392
|
)
|
-
|
(111,392
|
)
|
|||||
(231,182
|
)
|
-
|
(231,182
|
)
|
||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||
Loans
- related parties
|
104,885
|
-
|
104,885
|
|||||||
Proceeds
from issuance of common stock
|
-
|
50,000
|
50,000
|
|||||||
Proceeds
from debentures net of commissions
|
879,000
|
-
|
879,000
|
|||||||
983,885
|
50,000
|
1,033,885
|
||||||||
Net
change in Cash
|
499,765
|
-
|
499,765
|
|||||||
Cash
at Beginning of Period
|
-
|
-
|
-
|
|||||||
Cash
at End of Period
|
$
|
499,765
|
$
|
-
|
$
|
499,765
|
||||
SUPPLEMENTAL
DISCLOSURES
|
||||||||||
Interest
expense
|
$
|
6,421
|
2005
|
$
|
8,469
|
||
2006
|
8,469
|
|||
2007
|
8,469
|
|||
2008
|
8,469
|
|||
2009
|
8,469
|
|||
Subsequent
|
84,690
|
Book
Value
|
Fair
Value
|
||||||
Current
assets
|
$
|
42,565
|
$
|
42,565
|
|||
Oil
and Gas properties
|
965,808
|
2,530,304
|
|||||
Less
liabilities
|
-
|
-
|
|||||
Total
|
$
|
1,008,373
|
$
|
2,572,869
|
1) |
Portwest
Investments Ltd., a company owned 100% by Dr. Horst A. Schmid for
providing services to the Company as Chief Executive Officer and
President
for $12,500 Cdn per month.
|
2) |
Concorde
Consulting, a company owned 100% by Mr. Curtis J. Sparrow for providing
services as Chief Financial Officer to the Company for $15,000 Cdn
per
month.
|
3) |
Trebax
Projects Ltd., a company 100% owned by Mr. Cyrus Spaulding for providing
services as Chief Operating Officer for the Company for $130 Cdn
per
hour.
|
4) |
Brave
Consulting, a company 50% owned by Mr. David Roff for providing consulting
services to the Company for $8,000 Cdn per
month.
|
ITEM 8. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
· |
October
6, 2004 to September 6, 2005 at $1.00 per
share
|
· |
September
7, 2005 to September 6, 2006 at $1.50 per
share
|
· |
September
7, 2006 to September 6, 2007 at $2.00 per
share
|
Name
|
Age
|
Position/Office
|
||
Mr.
Steven P. Gawne
|
55
|
Director
President
and Chief Executive Officer
|
||
Mr.
Curtis Sparrow
|
47
|
Director
Chief
Financial Officer, Secretary and Treasurer
|
||
Dr.
Horst A. Schmid
|
71
|
Director
and Chairman of the Board
|
||
Mr.
Leonard F. Bolger
|
73
|
Director
|
||
Mr.
Menno Wiebe
|
56
|
Director
Chief
Operating Officer (July 6, 2004 until June 29, 2005
|
||
Mr.
John F. Brown
|
50
|
Chief
Operating Officer (February 9, 2004 until June 7,
2004
|
Name
|
Age
|
Position/Office
|
|||
Dr.
Horst A. Schmid
|
72
|
Director
and Chairman of the Board
President
and Chief Executive Officer
|
|||
Mr.
Curtis Sparrow
|
48
|
Director
Chief
Financial Officer, Secretary and Treasurer
|
|||
Mr.
Cyrus Spaulding
|
49
|
Director
Chief
Operating Officer
|
|||
Mr. Donald E.H. Jones |
52
|
Director |
Name
|
Age
|
Position/Office
|
|||
Dr.
Horst A. Schmid
|
73
|
Director
and Chairman of the Board
President
and Chief Executive Officer
|
|||
Mr.
Curtis Sparrow
|
49
|
Director
Chief
Financial Officer, Secretary and Treasurer
|
|||
Mr.
Cyrus Spaulding
|
50
|
Director
Chief
Operating Officer
|
|||
Mr. Donald E.H. Jones |
53
|
Director | |||
Mr. David Roff |
35
|
Director |
Long
Term Compensation
|
|||||||||||||||||||||||||
Annual
Compensation
|
Awards
|
Payouts
|
|||||||||||||||||||||||
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Other
|
Restricted
Stock Award (s)
|
Securities
Underlying Options/ SARs
|
LTIP
Payouts
|
All
Other Compensation
|
|||||||||||||||||
Mr.
Steven P. Gawne (1)
|
2004
|
$
|
99,704.96
US
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$ | - | |||||||||||
President
and
|
2003
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
Chief
Executive Officer
|
2002
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
Mr.
Curtis Sparrow (2)
|
2004
|
$
|
68,471.64
US
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$ | - | |||||||||||
Chief
Financial Officer
|
2003
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
2002
|
-
|
-
|
-
|
-
|
-
|
-
|
- | ||||||||||||||||||
Mr.
John F. Brown (3)
|
2004
|
$
|
15,379.82
US
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$ | - | |||||||||||
Chief
Operating Officer
|
2003
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
From
February 9, 2004 to
|
2002
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
June
7, 2004
|
|||||||||||||||||||||||||
Mr.
Menno Wiebe (4)
|
2004
|
$
|
37,985.76
Cdn
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$ | - | |||||||||||
Chief
Operating Officer
|
2003
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
From
July 6, 2004 to
|
2002
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
June
29, 2005
|
|||||||||||||||||||||||||
Mr.
David Roff
|
2004
|
$
|
Nil
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$ | - | |||||||||||
President
and Chief
|
2003
|
Nil
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
Executive
Officer From
|
2002
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||||
September
10, 2003 to February 6, 2004
|
1. |
Portwest
Investments Ltd., a company owned 100% by Dr. Horst A. Schmid for
providing services as Chief Executive Officer and President for $12,500
Cdn per month.
|
2. |
Concorde
Consulting, a company owned 100% by Mr. Curtis Sparrow for providing
services as Chief Financial Officer for $15,000 Cdn per
month.
|
3. |
Trebax
Projects Ltd., a company 100% owned by Mr. Cyrus Spaulding for providing
services as Chief Operating Officer for $130 Cdn per
hour.
|
4. |
Brave
Consulting, a company 50% owned by Mr. David Roff, a former President
of
the Company, has been a consultant to Deep Well since July 15, 2005.
Brave
consulting, a private corporation 50% owned by Mr. Roff and the other
50%
is owned by a non-related third party, was paid a fee of $4,000 Cdn
per
month from July 2005 until October 2005. From November 2005 until
present,
Brave consulting is being paid a consulting fee of $8,000 Cdn per
month
|
ITEM 11. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED
STOCKHOLDER MATTERS
|
Name
and Address of Beneficial Owner
|
Title
of Class
|
Number
of Shares Beneficially Owned
|
Percentage
of Class Beneficially Owned (1)
|
Nature
of Ownership
|
|||||||||
Nearshore
Petroleum Corporation (2)
Suite
3175, 246 Stewart Green SW
Calgary,
Alberta T3H 3C8 Canada
|
Common
|
4,875,000
|
15.6
%
|
|
Indirect
|
||||||||
C.
Ruiz Tighe (3)
89
Arbour Ridge Heights NW
Calgary,
Alberta T3G 3Z2 Canada
|
Common
|
1,947,000
|
6.2
%
|
|
Direct/Indirect
|
||||||||
Portwest
Investment Ltd. (4)
Suite
510, 10117 Jasper Avenue
Edmonton,
Alberta T5J 1W8 Canada
|
Common
|
1,950,000
|
6.2
%
|
|
Direct
|
||||||||
697580
Alberta Ltd.
1425
Ranchlands Road NW
Calgary,
Alberta T3G 1N2
|
Common
|
1,800,000
|
5.8
%
|
|
Direct
|
||||||||
Rainbow
Enterprises Ltd.
First
Bourbon House/Bourbon St.
P.O.
Box 1695
Castries
St. Lucia, British Virgin Islands
|
Common
|
1,800,000
|
5.8
%
|
|
Direct
|
Name
and Address of Beneficial Owner
|
Title
of Class
|
Number
of Shares Beneficially Owned
|
Percentage
of Class Beneficially Owned (1)
|
Nature
of Ownership
|
|||||||||
Mr.
Steven P. Gawne (2)
Director,
President and Chief Executive Officer
Suite
3175, 246 Stewart Green SW
Calgary,
Alberta T3H 3C8 Canada
|
Common
|
4,875,000
|
15.6
%
|
|
Indirect
|
||||||||
Mr.
Curtis Sparrow
Director,
Chief Financial Officer, Corporate Secretary and Treasurer
Suite
510, 10117 Jasper Avenue
Edmonton,
Alberta T5J 1W8 Canada
|
None
|
||||||||||||
|
|||||||||||||
Dr.
Horst A. Schmid (3)
Director
and Chairman of the Board
Suite
510, 10117 Jasper Avenue
Edmonton,
Alberta T5J 1W8 Canada
|
Common
|
1,950,000
|
6.2
%
|
|
Indirect
|
||||||||
Mr.
Leonard F. Bolger
Director
Suite
3175, 246 Stewart Green SW
Calgary,
Alberta T3H 3C8 Canada
|
None
|
||||||||||||
Mr.
John F. Brown
Chief
Operating Officer
Suite
3175, 246 Stewart Green SW
Calgary,
Alberta T3H 3C8 Canada
|
Common
|
(4
|
)
|
||||||||||
Mr.
Menno Wiebe (5)
Director
and Chief Operating Officer
Bankers
Hall W Tower 10
th
,
888 3rd St SW
Calgary
Alberta T2P5C5 Canada
|
Common
|
900,000
|
2.9
%
|
|
Direct
|
||||||||
All
Officers and Directors as a Group
|
7,725,000
|
24.7
%
|
|
Exhibit
No.
|
Description | |
2.1
|
Liquidating
Plan of Reorganization of Allied Devices Corporation, now known as
Deep
Well Oil & Gas, Inc. filed with Form 10-K/A on January 28, 2004, and
incorporated herein by reference
|
|
2.2
|
Order
and Plan of Reorganization of the U.S. Bankruptcy Court in and for
the
Eastern District of New York, In re: Allied Devices Corporation,
Chapter
11, Case No. 03-80962-511, dated September 10, 2003 filed with Form
10K/A
on January 28, 2004, and incorporated herein by
reference
|
|
3.1
|
Restated
and Amended Articles of Incorporation filed with and accepted by
the
Secretary of State of Nevada on October 22, 2003 filed with Form
10-K/A on
January 28, 2004, and incorporated herein by reference
|
|
3.2
|
Amended
Articles of Incorporation filed with the State of Nevada on February
27,
2004 filed with Form 8-K on March 5, 2004, and incorporated herein
by
reference
|
|
3.3
|
Amended
Articles of Incorporation filed with the State of Nevada on May 5,
2004
filed with Form 8-K on March 7, 2004, and incorporated herein by
reference
|
|
3.4
|
Registrant’s
By-laws, filed herewith
|
|
4.1
|
Form
of Warrant issued pursuant to the Securities Purchase Agreement and
Registration Rights Agreement dated March 10, 2005, filed with Form
8-K on
March 14, 2005, and incorporated herein by reference
|
|
4.2
|
Form
of Warrant issued pursuant to the Subscription Agreement dated August
12,
2005 by and among the Company with three investors related to the
Private
Placement offering, and Debt Settlement Agreement, filed with Form
8-K on
August 17, 2005, and incorporated herein by reference
|
|
4.3
|
Form
of Warrant issued pursuant to the Subscription Agreement dated October
11,
2005 by and among the Company with three investors related to the
Private
Placement offering, filed with Form 8-K on October 19, 2005, and
incorporated herein by reference
|
|
4.4
|
Form
of Warrant issued pursuant to the Subscription Agreement dated January
13,
2006 by and among the Company with three investors related to the
Private
Placement offering, and Debt Settlement Agreement, filed with Form
8-K on
March 6, 2006, and incorporated herein by reference
|
|
10.1
|
Gross
Overriding Royalty Agreement dated December 19, 2002 between Baytex
Energy
Ltd. and 979708 Alberta Ltd., and filed herewith
|
|
10.2
|
Gross
Overriding Royalty Agreement dated December 12, 2003 between Mikwec
Energy
Canada Limited (now known as Northern Alberta Oil Ltd.), and Nearshore
Petroleum Corporation, and filed herewith
|
|
10.3
|
Joint
Operating Agreement dated April 26, 2004 between Mikwec Energy Canada
Limited (now known as Northern Alberta Oil Ltd.), and Maxen Petroleum Inc.
(now known as Pan Orient Energy Corp.), and filed
herewith
|
|
10.4
|
Consulting
Agreement by and between Deep Well and Menno Wiebe dated June 8,
2004, and
filed herewith
|
|
10.5
|
Exchange
Agreement between Deep Well and Northern (formerly Mikwec) dated
July 8,
2004, filed with Form 8-K on November 5, 2004, and incorporated herein
by
reference
|
|
10.6
|
Employment
Letter Agreement by and between Deep Well and John Brown dated November
15, 2004, and filed herewith
|
|
10.7
|
Joint
Operating Agreement dated December 9, 2004 between Deep Well and
1132559
Alberta Ltd., and filed herewith
|
|
10.8
|
Farmout
Agreement dated February 25, 2005 by and between the Company, Deep
Well
Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global Energy,
Inc., Signet Energy, Inc. (formerly known as Surge Global Energy
(Canada)
Ltd.), filed herewith
|
|
10.9
|
Assumption
of Liabilities and Indemnity Agreement dated February 28, 2005 by
and
between Deep Well Oil & Gas, Inc. and Signet Energy, Inc. (formerly
known as Surge Global Energy (Canada) Ltd.), filed
herewith
|
|
10.10
|
Termination
Agreement dated February 28, 2005 by and between Nearshore Petroleum
Corporation, Northern Alberta Oil Ltd. and Signet Energy, Inc. (formerly
known as Surge Global Energy (Canada) Ltd.), filed
herewith
|
|
10.11
|
Farmout
Amending Agreement dated March 3, 2005 by and between the Company,
Deep
Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global
Energy
(Canada) Ltd.), filed herewith
|
10.12
|
Two
Farmout Amending Agreements dated March 10, 2005 by and between the
Company, Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and
Surge Global Energy, Inc., Signet Energy, Inc. (formerly known as
Surge
Global Energy (Canada) Ltd.), filed herewith
|
|
10.13
|
Form
of Securities Purchase Agreement and Registration Rights Agreement
dated
March 10, 2005, by and among the Company and each of Provident Premier
Master Fund, Ltd. and Grey K Fund LP, filed with Form 8-K on March
14,
2005, and incorporated herein by reference
|
|
10.14
|
Form
of Amending Agreement dated as of April 25, 2005, filed with Form
8-K on
June 10, 2005, and incorporated herein by reference
|
|
10.15
|
Form
of Termination, Option and Put Agreement, filed with Form 8-K on
June 10,
2005, and incorporated herein by reference
|
|
10.16
|
Consulting
agreement by and between Northern and Portwest Investments Ltd.,
dated
July 1, 2005, and filed herewith
|
|
10.17
|
Consulting
agreement by and between Northern and Concorde Consulting, dated
July 1,
2005, and filed herewith
|
|
10.18
|
Farmout
Amending Agreement dated July 14, 2005 by and between the Company,
Deep
Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global
Energy
(Canada) Ltd.), filed herewith
|
|
10.19
|
Form
of Subscription Agreement dated August 12, 2005 by and among the
Company
with three investors related to the Private Placement offering, and
Debt
Settlement Agreement, filed with Form 8-K on August 17, 2005, and
incorporated herein by reference
|
|
10.20
|
Consulting
agreement by and between the Northern and Trebax Projects Ltd., effective
September 1, 2005, and filed herewith
|
|
10.21
|
Form
of Subscription Agreement dated October 11, 2005, by and among the
Company
with three investors related to the Private Placement offering, filed
with
Form 8-K on October 19, 2005, and incorporated herein by
reference
|
|
10.22
|
Farmout
Amending Agreement dated November 15, 2005 by and between the Company,
Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global
Energy
(Canada) Ltd.), filed herewith
|
|
10.23
|
Farmout
Acknowledgement Agreement dated November 15, 2005 by and between
the
Company, Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and
Surge Global Energy, Inc., Signet Energy, Inc. (formerly known as
Surge
Global Energy (Canada) Ltd.), filed herewith
|
|
10.24
|
Deep
Well Oil & Gas, Inc. Stock Option Plan (“The Plan”), effective
November 28, 2005, filed with Form 8-K on March 3, 2006, and incorporated
herein by reference
|
|
10.25
|
Sample
Stock Option Agreements with all Directors, filed
herewith
|
|
10.26
|
Sample
Stock Option Agreements with all Contractors, filed
herewith
|
|
10.27
|
Sample
Indemnity Agreement with all Directors, filed herewith
|
|
10.28
|
Form
of Subscription Agreement dated January 13, 2006 by and among the
Company
with three investors related to the Private Placement offering, and
Debt
Settlement Agreement, filed with Form 8-K on March 6, 2006, and
incorporated herein by reference
|
|
10.29
|
Settlement
Agreement & Release of All Claims, dated as of January 29, 2007, by
and among the Company and Grey K Fund LP, Grey K Offshore Fund Ltd.,
Provident Premier Master Fund Ltd., Atlas Master Fund Ltd. and Gemini
Master Fund, Ltd., filed with From 8-K on January 31, 2007, and
incorporated herein by reference.
|
|
16.1
|
Changes
in registrant’s certifying accountant, Letter of Madsen & Associates,
CPA’s Inc. filed with Form 8-K on August 16, 2004, and incorporated herein
by reference
|
|
16.2
|
Changes
in registrant’s certifying accountant, Letter of Deloitte & Touche LLP
filed with Form 8-K on August 10, 2005, and incorporated herein by
reference
|
|
21.1
|
Subsidiaries
of Registrant, filed herewith
|
|
31.1
|
Certification
of President and Chief Executive Officer Pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002, filed herewith
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith
|
|
32.1
|
Certification
of President and Chief Executive Officer Pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002, filed herewith
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, filed herewith
|
Fee
Category
|
Fiscal
2004 Fees
|
Fiscal
2003 Fees
|
|||||
Audit
Fees
|
$
|
29,328.94
|
$
|
5,950.00
|
|||
Audit
Related Fees
|
8,646.42
|
-
|
|||||
Tax
Fees
|
1,016.63
|
-
|
|||||
All
Other Fees
|
-
|
-
|
|||||
Total
Fees
|
$
|
38,991.99
|
$
|
5,950.00
|
· |
approved
by our audit committee; or
|
· |
entered
into pursuant to pre-approval policies and procedures established
by the
audit committee, provided the policies and procedures are detailed
as to
the particular service, the audit committee is informed of each service,
and such policies and procedures do not include delegation of the
audit
committee’s responsibilities to
management.
|
DEEP
WELL OIL & GAS, INC.
|
||
|
|
|
By | /s/ Horst A. Schmid | |
Dr.
Horst A. Schmid
Chairman
of the Board
|
Date |
February
21, 2007
|
By | /s/ Horst A. Schmid | |
Dr.
Horst A. Schmid
Chief
Executive Officer and President
(Principal
Executive
Officer)
|
Date |
February
21, 2007
|
By | /s/ Curtis Sparrow | |
Mr.
Curtis Sparrow
Chief
Financial
Officer
(Principal
Financial and Accounting
Officer)
|
Date |
February
21, 2007
|
By | /s/ David Roff | |
Mr.
David Roff
Director
|
Date |
February
21, 2007
|
Re: |
Overriding Royalty
Agreement
Townships
91 & 92 Ranges 12 & 13 W5M (the “Lands”)
Sawn
Lake Area, Alberta
|
a)
|
“Royalty
Owner” means Baytex Energy
Partnership;
|
b)
|
“Royalty
Payor” means 979708 Alberta Ltd.;
|
c)
|
“Royalty
Lands” means the lands set forth and described in Schedule
“A”.
|
a)
|
Schedule
“A” which describes the Royalty Lands, Title Documents, and Encumbrances;
and
|
b)
|
Schedule
“B” which is the Overriding Royalty
Procedure.
|
a)
|
a
5% non-convertible overriding royalty on 100% production as provided
for
in Article 2.00 of the Overriding Royalty
Procedure.
|
a)
|
The
Addresses for Service hereunder of each of the respective Parties
shall be
as follows:
|
b)
|
Any
Party may change its respective Address for Service by serving written
notice to the other Party.
|
a)
|
for
claims disclosed by an audit, two years after the time this Agreement
permitted that audit to be performed;
or
|
b)
|
for
all other claims, four years.
|
BAYTEX
ENERGY LTD.
|
979708
ALBERTA LTD.
|
|
(the
“Royalty Owner”)
|
(the
“Royalty Payor”)
|
|
/s/
Dan Horner
|
/s/
Michael B. Holley
|
|
Dan
Horner, LL.B.
|
Michael
B. Holley
|
|
Vice
President, Land
|
Director
|
Title
Documents
|
Lands
|
Interest
|
Encumbrances
|
Crown
PNG Licence 5495030101
|
91-13
W5M: Sections N28; 32; 33; 34
92-13
W5M: Sections 3; 4; 5
All
PNG
Expiry:
March 2, 2003
|
100%
|
Crown
LOR
5%
Non-convertible ORR
payable
to Baytex Energy
Partnership
by 979708
Alberta
Ltd.
|
Crown
PNG Licence 5495040066
|
91-12
W5M: Sections 9; 10; 15; 16;
17;
SE 20; 21; 22
All
PNG
Expiry:
April 13, 2004
|
100%
|
Crown
LOR
5%
Non-convertible ORR
payable
to Baytex Energy
Partnership
by 979708
Alberta
Ltd.
|
1.00
|
DEFINITIONS AND INTERPRETATION |
1.01
|
Definitions |
(a)
|
“
Agreement
”
means the Head Agreement and the Schedules attached to
it.
|
(b)
|
“
Effective
Date
”
means
December
1, 2002
|
(c)
|
“
Facility
Fees
”
means,
as applicable:
|
(i)
|
for
Facility Usage of facility capacity owned by third parties (other
than
Affiliates of the Royalty Payor), all costs and expenses paid by
the
Royalty Payor for that Facility Usage;
and
|
(ii) | for Facility Usage of facility capacity owned by the Royalty Payor (or an Affiliate of the Royalty Payor), an expense equal to a fee (comprised of both operating and return on capital components) in accordance with (1) or (2) below: |
(1) | the fee ordinarily chargeable for the same use as the Facility Usage, if that facility is made available for use by third parties; or |
(2) |
in
all other circumstances, a fee sufficient to cover that use of facilities,
where the capital recovery component of that fee uses as a guideline
the
PJVA Jumping Pound-95 methodology and where the operating cost component
is calculated and assessed on the basis of facility throughput
costs;
|
(d)
|
“
Facility
Usage
”
means the Royalty Payor’s use of facilities beyond those included in
Equipping Costs to make merchantable and to deliver to market Petroleum
Substances produced from a Royalty Well, including, as applicable,
the
gathering, compression, treatment, processing and transportation
of those
Petroleum Substances, but excluding any basis adjustments made in
the
determination of the Market Price of natural
gas.
|
(e)
|
“
Head
Agreement
”
means the Agreement, other than the
Schedules.
|
(f)
|
“
Overriding
Royalty
”
means that interest in a portion of the Petroleum Substances within,
upon,
under or attributed to the Royalty Lands that is reserved by or granted
to
the Royalty Owner pursuant to the Head Agreement, as more particularly
outlined in Article 2.00.
|
(g)
|
“
Overriding
Royalty
Procedure
”
means this Schedule.
|
(h)
|
“
Royalty
Determination Point
”
means the first point at which Petroleum Substances are or can be
metered,
measured or allocated downstream of the wellhead after, as applicable:
(i)
any treatment of crude oil for the separation, removal and disposal
of
basic sediment and water; (ii) any extraction of liquid hydrocarbons
from
natural gas at the wellhead and any wellsite separation, removal
and
disposal of basic sediment and water from those liquid hydrocarbons;
and
(iii) any wellsite dehydration of natural
gas.
|
(i)
|
“
Royalty
Lands
”
means the areal, stratigraphic and substance rights described as
“Royalty
Lands” in Schedule “A” of the Agreement or made subject to the Overriding
Royalty in the manner outlined in the Head Agreement, as the case
may be,
and so much of those rights as remain subject to the Agreement and
the
Title Documents, excluding any Reserved
Formations.
|
(j)
|
“
Royalty
Owner
”
has the meaning set forth in the Head
Agreement.
|
(k)
|
“
Royalty
Payor
”
has the meaning set forth in the Head
Agreement.
|
(l)
|
“
Reserved
Formations
”
means any rights not included in the Royalty Lands that are held
under the
Title Documents.
|
(m)
|
“
Royalty
Well
”
means any well from which production is obtained from the Royalty
Lands or
may be allocated to the Royalty Lands pursuant to a pooling, unit
or other
arrangement.
|
(n)
|
“
Title
Documents
” means the documents of title described as “Title
Documents” in Schedule “A” to the Agreement, insofar as they relate to the
Royalty Lands, and all renewals, extensions, continuations or documents
of
title issued in substitution or by
selection.
|
1.02
|
Incorporation Of Provisions From 1990 CAPL Operating Procedure |
308
|
SURFACE RIGHTS | ||
309
|
MAINTENANCE
OF TITLE DOCUMENTS, with the addition at the end of the first sentence
of
Subclause 309(b) of: “, provided that the Royalty Payor is not obligated
to consult in this manner with a Royalty Owner”.
|
||
2001
|
WAIVER MUST BE IN WRITING | ||
2101
|
PARTIES TO SUPPLY | ||
2201
|
SERVICE OF NOTICE | ||
2202
|
ADDRESSES FOR NOTICES - The Parties’ Addresses for Service will be as set forth in the Head Agreement. | ||
2203
|
RIGHT TO CHANGE ADDRESS | ||
2403
|
MULTIPLE ASSIGNMENT NOT TO INCREASE COSTS, with “Overriding Royalty” replacing “working interest” in the first and third lines. | ||
2601
|
LIMITATION ON RIGHT OF ACQUISITION | ||
2801
|
SUPERSEDES PREVIOUS AGREEMENTS | ||
2802
|
TIME OF ESSENCE | ||
2803
|
NO AMENDMENT EXCEPT IN WRITING | ||
2804
|
BINDS SUCCESSORS AND ASSIGNS, with “5.00” replacing “XXIV” in the first line. | ||
2805
|
LAWS OF JURISDICTION TO APPLY | ||
2806
|
USE OF NAME | ||
2807
|
WAIVER OF RELIEF |
1.03
|
Multiple Royalty Owner Parties |
1.04
|
Multiple
Royalty Payor Parties
|
(a) |
the
Royalty Payor’ s obligations and liabilities to the Royalty Owner will be
joint and several;
|
(b)
|
the
Royalty Owner may deal solely with the Royalty Payor Party designated
as
the Royalty Payor’s representative in the Head Agreement respecting the
Head Agreement or this Royalty Procedure, provided that: (i) the
Royalty
Owner will provide each Royalty Payor Party with notices the Royalty
Owner
serves to the Royalty Payor; (ii) the Royalty Payor is bound by
the acts
and elections of that representative acting in that capacity; and
(iii)
the Royalty Payor may designate another representative by notice
to the
Royalty Owner; and
|
(c) | the Royalty Payor’s rights and obligations will accrue proportionately to the Royalty Payor Parties in the percentages set forth in the Head Agreement. |
1.05
|
Modifications
To CAPL Document Form
|
2.00
|
OVERRIDING
ROYALTY
|
2.01
|
Quantification
Of Overriding Royalty
|
A. |
The
Overriding Royalty is created effective as of the date and in the
manner
provided in the Head Agreement and this Overriding Royalty Procedure.
Subject to the other provisions of this Article, including the modified
calculation under Subclause 2.02C for production of Petroleum Substances
allocated to the Royalty Lands, the Overriding Royalty (based on
a 100%
Working Interest) will be determined on a well by well basis at the
Royalty Determination Point, and will be as
follows:
|
(a) |
for
crude oil,
5.00%
of
the gross monthly production thereof produced from each Royalty Well;
and
|
(b)
|
for
all other Petroleum Substances,
Alternate
1
will apply (Specify 1 or 2).
|
(i)
|
if
not taken in kind by the Royalty Owner pursuant to Clause 2.03, the
gross
proceeds from the Royalty Payor‘s sale of % of the gross monthly
production thereof produced from each Royalty Well, free and clear,
subject to Subclause 2.04C, of all Facility Fees otherwise chargeable
pursuant to Clause 2.04; and
|
(ii)
|
if
taken in kind by the Royalty Owner, % of the gross monthly production
thereof produced from each Royalty
Well.
|
B.
|
Notwithstanding
the calculation at the Royalty Determination Point under Subclause
2.01A,
the Overriding Royalty will not include Petroleum Substances that
the
Royalty Payor reasonably uses or unavoidably loses in the Royalty
Payor’s
drilling and production operations for the Royalty Lands. Those drilling
and production operations include the proportionate use of those
Petroleum
Substances in batteries, treaters, compressors, separators, satellites
and
similar equipment serving Royalty Wells, but do not include the use
of
Petroleum Substances for any enhanced recovery
operations.
|
2.02
|
Effect
Of Pooling Or Unitization On
Calculation
|
A.
|
The
Royalty Payor may pool the Petroleum Substances in a zone underlying
all
or a portion of the Royalty Lands to the extent required to form
a Spacing
Unit in that zone, provided that the pooling allocates production
therefrom to the applicable Royalty Lands in the proportion that
the
surface area of the Royalty Lands placed in the Spacing Unit bears
to the
total surface area of the Spacing Unit. The Royalty Payor will
promptly
give notice to the Royalty Owner describing the extent to which
the
Royalty Lands have been pooled and describing the pooled Spacing
Unit.
|
B.
|
If
the Royalty Payor proposes to pool, unitize or otherwise combine
any
portion of the Royalty Lands with any other lands, other than as
provided
in the previous Subclause, the Royalty Payor must promptly send notice
of
that intention to the Royalty Owner. That notice must include the
technical justification for that pooling, unitization or combination
and
the proposed terms thereof, provided that the Royalty Payor will
not be
required to provide interpretative data to the Royalty Owner. Unless
otherwise required by the Regulations to form a Spacing Unit, the
Royalty
Payor will not enter into that pooling, unitization or combination
without
the prior written consent of the Royalty Owner, which consent will
not be
unreasonably delayed or withheld.
|
C.
|
If
any portion of the Royalty Lands is pooled, unitized or combined
with any
other lands pursuant to this Clause, Clause 2.01 will be deemed to
be
amended to calculate the volume of the Overriding Royalty by applying
the
percentages set forth in that Clause to the quantity of Petroleum
Substances thereby allocated to the affected Royalty
Lands.
|
2.03
|
Royalty
Owner’s Rights To Take Overriding Royalty In
Kind
|
A.
|
Subject
to the provisions of this Clause, the Royalty Payor is appointed
as the
agent of the Royalty Owner for the handling and disposition of the
Overriding Royalty share of Petroleum Substances. All acts of the
Royalty
Payor under this Clause in the handling and disposition of those
Petroleum
Substances and the receipt of proceeds of sale therefrom will be
as
trustee for the Royalty Owner.
|
B.
|
The
Royalty Owner may, on a minimum of 60 days’ notice to the Royalty Payor,
revoke the agency established in Subclause 2.03A and elect to take
delivery and separately dispose of the Petroleum Substances comprising
the
Overriding Royalty at the Royalty Determination Point. This right
may be
exercised separately for each type of Petroleum Substance, effective
at
the 1st day of the calendar month next following that minimum 60
day
period. The Royalty Owner will supply the Royalty Payor with such
information regarding the Royalty Owners arrangements for disposition
of
those Petroleum Substances as the Royalty Payor may reasonably require
to
coordinate custody transfer and shipping arrangements for those Petroleum
Substances. Failure to provide the Royalty Payor with that information
will be deemed to be a failure by the Royalty Owner to take those
Petroleum Substances in kind.
|
C.
|
If
the Royalty Owner takes in kind its Overriding Royalty share of crude
oil
or liquid products extracted from natural gas at the wellhead, the
Royalty
Payor will, at the Royalty Payor’s cost, remove basic sediment and water
from those Petroleum Substances in accordance with good oilfield
practice,
so that relevant pipeline specifications can be met. The Royalty
Payor
will provide the Royalty Owner, at the Royalty Payor’s cost, production
tankage capacity for an accumulation of the Overriding Royalty share
of
those Petroleum Substances consistent with the Royalty Payor’s shipping
schedule for its own share of those Petroleum Substances. Subject
to
Subclause 2.04C, the Royalty Payor will deliver the Overriding Royalty
share of those Petroleum Substances to the Royalty Owner, or the
Royalty
Owner’s nominee, at the Royalty Determination Point, in accordance with
usual and customary pipeline and shipping practice, free and clear
of all
charges. If the Royalty Owner takes its Overriding Royalty share
of
natural gas in kind, the Royalty Payor will deliver that gas to the
Royalty Owner, or the Royalty Owner’s nominee, at the Royalty
Determination Point for the relevant well at the Royalty Payor s
cost.
|
D.
|
Except
to the extent otherwise agreed by the Royalty Payor and the Royalty
Owner,
insofar as the Royalty Payor takes possession of Petroleum Substances
comprising the Overriding Royalty as agent of the Royalty Owner,
the
Royalty Payor will dispose of those Petroleum Substances
by:
|
(b)
|
purchasing
those Petroleum Substances for the Royalty Payors own account (or
the
account of an Affiliate) at a Market Price and accounting to the
Royalty
Owner therefor.
|
(a) | selling those Petroleum Substances at a Market Price and accounting to the Royalty Owner for the proceeds of the sale; or |
E.
|
Insofar
as the Royalty Owner has elected to revoke the agency established
by
Subclause 2.03A, the Royalty Owner may re-establish that agency on
a
minimum of 60 days’ notice to the Royalty Payor, effective as of the 1st
day of the calendar month next following that minimum 60 day period.
This
right may be exercised separately for each type of Petroleum
Substance.
|
2.04
|
Royalty
Payor’s Allowed Deductions If Overriding Royalty Not Taken In
Kind
|
A.
|
To
the extent that the Royalty Payor disposes of Petroleum Substances
comprising the Overriding Royalty on behalf of the Royalty Owner,
the
Royalty Owner’s share of those Petroleum Substances will be free of any
deductions for costs and expenses incurred by the Royalty Payor to
and
including the Royalty Determination Point. Subject to Subclause 2.04C,
the
Royalty Owner will be responsible, on a well by well basis, for the
following costs and expenses incurred after the Royalty Determination
Point with respect to the Royalty Owner’s share of those Petroleum
Substances:
|
(a)
|
for
crude oil and liquid products extracted from natural gas at the wellhead,
any associated Facility Fees and any transportation costs to transport
those Petroleum Substances from the Royalty Determination Point to
the
point of sale; and
|
(b)
|
for
Petroleum Substances other than those described in the preceding
Paragraph, the associated Facility Fees if Alternate 2.01A(b)(1)
applies.
|
B.
|
The
deductions applicable pursuant to the preceding Subclause will be
subject
to
Alternate
2
|
C.
|
Notwithstanding
any other provision of this Article, if the Royalty Payor is required
to
incur costs to enrich the Overriding Royalty share of Petroleum Substances
to increase the heating value or to facilitate transportation or
marketing
of those Petroleum Substances, those costs will be deductible by
the
Royalty Payor against the gross proceeds of sale applicable to those
enriched Petroleum Substances, with the intention that neither the
Royalty
Payor nor the Royalty Owner suffer a loss as a result of that enrichment.
Enrichment operations, include, without limitation, condensate blending
in
the case of heavy oil and enrichment by propane or butane in the
case of
gas with a low heating value.
|
D.
|
The
Royalty Payor’s right to make the deductions set forth in this Clause
pertains to the costs and expenses that would otherwise be incurred
by the
Royalty Owner to bring those Petroleum Substances to the point of
sale if
the Royalty Owner were taking those Petroleum Substances in kind.
The
allowable deductions from the proceeds of sale of the Royalty Owner’s
Overriding Royalty share of Petroleum Substances are expressed as
cash
obligations for convenience of record keeping and audit, and are
not to be
construed as altering the nature of the Overriding Royalty as an
interest
in land.
|
2.05
|
Royalty
Payor To Account To Royalty Owner
Monthly
|
2.06
|
Royalty
Owner’s Lien
|
2.07
|
Royalty
Wells To Be Produced
Equitably
|
2.08
|
Royalty
Owner’s Rights Upon
Surrender
|
2.09
|
Audits
Of Overriding Royalty
|
A.
|
The
Royalty Owner may, upon reasonable notice to the Royalty Payor and
at the
Royalty Owner’s own expense, audit the books, records and accounts of the
Royalty Payor with respect to the production, disposition or sale
of the
Overriding Royalty within 24 months next following the end of the
applicable calendar year. The Royalty Owner will conduct any such
audit in
accordance with PASC Joint Venture Audit Protocol Bulletin No. 6
(or any
replacement therefor).
|
B.
|
Any
statement issued by the Royalty Payor to the Royalty Owner respecting
the
calculation of the Overriding Royalty will be presumed to be true
and
correct 26 months following the end of the calendar year in which
that
statement was issued, unless the Royalty Owner takes written exception
thereto and requests an adjustment pursuant to this Clause within
that 26
month period. If a Party discovers during that period that there
was an
error in the calculation of the Overriding Royalty and can demonstrate
that the error applied both to that period and a prior period, the
Royalty
Payor will make the required adjustment retroactively to either the
inception of that error or such other time as the Parties may agree,
provided that any dispute respecting the proposed retroactive adjustment
will be resolved pursuant to Clause 8.01. Except to the extent required
to
confirm the adjustment proposed by the Royalty Payor, the retroactive
adjustment contemplated by the previous sentence will not extend
the
Royalty Owners audit rights beyond the 24 month limitation provided
for in
Subclause 2.09A.
|
3.00
|
WELL
INFORMATION TO ROYALTY
OWNER
|
3.01
|
Royalty
Owner’s Notification
|
4.00
|
LIABILITY
AND INDEMNITY
|
4.01
|
Royalty
Payor’s Responsibility
|
(a)
|
be
liable to the Royalty Owner for all losses, costs, damages and expenses
whatsoever (whether contractual or otherwise) that the Royalty Owner
may
suffer, sustain, pay or incur; and, in
addition
|
(b)
|
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 that may
be
brought against or suffered by the Royalty Owner, its directors,
officers,
agents and employees or that they may sustain, pay or
incur;
|
4.02
|
Royalty
Owner’s Responsibility
|
5.00
|
ASSIGNMENT
|
5.01
|
Incorporation
Of Assignment Procedure
|
6.00
|
DEFAULT |
6.01
|
Royalty
Owner’s Default Remedies
|
7.00
|
RESERVED
FORMATIONS
|
7.01
|
Royalty
Owner’s Access To Reserved
Formations
|
8.00
|
DISPUTE
RESOLUTION
|
8.01
|
Disputes
Initially Referred To
Mediation
|
1.
|
DEFINITIONS
|
In
this Agreement, including the recitals and the Schedules, unless
the
context otherwise requires, the following words shall have the meanings
ascribed thereto, namely:
|
|
(a)
|
“
Assignment
Procedure”
shall
mean the 1993 CAPL Assignment Procedure attached hereto as Schedule
“B”;
|
(b)
|
“
Current
Market Value”
shall
mean 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 said Lands which
price
shall not be less than that which the Grantor would have received
at the
wellhead if acting as a reasonably prudent operator having regard
to the
current market prices, availability to market and economic conditions
of
the petroleum industry generally;
|
(c)
|
“
Effective
Date”
shall
mean December 12, 2003;
|
(d)
|
“
Grantor”
shall
mean Mikwec Energy Canada Ltd.;
|
(e)
|
“
Gross
Overriding Royalty and/or Royalties”
shall
mean a non-convertible gross overriding royalty of Six and One Half
Percent (6.5%) to Nearshore Petroleum Corporation of all Petroleum
Substances produced, saved and marketed from below the Surface from
the
said Lands;
|
(f)
|
“
Lands”
shall
mean any lands comprising the Petroleum and Natural Gas Licence(s),
Oil
Sands Leases, Petroleum and Natural Gas Lease(s)and any Oil Sands
Licence(s), which may be selected therefrom as described in the attached
Schedule “A”;
|
(g)
|
“Lease(s)”
shall mean any Petroleum and/or Natural Gas Lease(s), Oil Sands Leases,
or
other title document(s) in or acquired in the area set forth in Schedule
“A” and any renewal or extensions thereof or substitution
therefore;
|
(h)
|
“
Petroleum
Substances”
shall
mean all petroleum, natural gas, heavy oil, related hydrocarbons,
sulphur
and every other substance an interest in which is granted under the
said
Lease(s) below the Surface;
|
(i)
|
“
Point
of Measurement”
shall
mean the production tankage, in the case of crude oil, shall mean
the
point of delivery in the case of natural gas and shall mean the point
of
delivery for all other Petroleum Substances;
|
(j)
|
“
Royalty
Owner”
shall
mean Nearshore Petroleum Corporation;
|
2.
|
GROSS
OVERRIDING ROYALTY
|
(a)
|
Grantor
hereby grants and assigns Grantee a 6.5% gross overriding royalty
on the
leased substances on the interest which Grantor holds in the Lease(s).
It
is understood that the gross overriding royalty applies not only
against
the initial working interest of Grantor, but also to the interest
of any
third party which derives its interest from or through the
Grantor.
|
(b)
|
The
gross overriding royalty shall be paid to Grantee during the term
of the
Lease(s) and any renewal or extension thereof.
|
3.
|
DEDUCTIONS
|
The
said Royalty shall be paid on the current market value of the Petroleum
Substances without any deductions except the following,
namely:
|
|
(a)
|
With
respect to crude oil, the said Royalty will bear its proportionate
share
of the actual costs of transportation to market connection, where
sales
are not made f.o.b. the tanks serving the said Lease(s), provided
that the
costs shall not exceed those permitted by the Crown in right of the
Province of Alberta.
|
(b)
|
With
respect to natural gas, the cost of gathering, processing and transporting
the said Royalty share of the natural gas may be deducted from the
current
market value of the natural gas, provided:
|
(i)
|
the
deduction of gathering, processing, and transportation costs shall
not
exceed those permitted by the Crown in right of the Province of Alberta
in
the calculation of Crown Royalty; and
|
(ii)
|
such
costs may only be deducted to the extent that they are actually incurred
and are reasonable and shall never be reduced below fifty (50%) percent
of
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 said Royalty, not be less than the current
market value of those Petroleum Substances when produced from the
said
Lands as defined by clause 1(b)
hereof.
|
Notwithstanding
anything to the contrary herein contained, the Grantor shall be entitled
to use, and as a consequence thereof the Grantor shall be free from
the
obligation of payment or delivery of the Grantee’s Royalty, such part of
the Petroleum Substances as is reasonably required for and used by
the
Grantor in its operations upon the Lands, including treating and
preparing
Petroleum Substances therefrom for market, but not including injection
thereof in connection with any secondary recovery
operations.
|
|
4.
|
TAKING
IN KIND
|
(a)
|
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, condensate, liquefied petroleum gases and marketable
gas. In the case of crude oil condensate, such right shall only be
exercised on a minimum of sixty (60) days notice to the Grantor.
In the
case of liquefied petroleum gases such rights shall only be exercised
on
six (6) months notice to the Grantor. If the Royalty Owner, however,
signified 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 substance
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 provisions
of this
clause 4.
|
(b)
|
When
the Royalty Owner is taking in kind any of the Royalty Owner’s share of
the Petroleum Substances, the Royalty Owner shall 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 production
of the
Royalty Owner’s share of crude oil and condensate and five (5) days
production of the Royalty Owner’s share of marketable gas which will be
delivered by the Grantor at the point of delivery downstream from
the
plant and to the purchase designated by the Royalty Owner, for the
Royalty
Owner’s account.
|
5.
|
OPERATIONS
ON THE LANDS
|
No
royalty shall be payable on Petroleum Substances reasonably used
in
operations on the said Lands for the production, treating, processing
and
storing of Petroleum Substances on which the said Royalty is payable
to
the Royalty Owner hereunder.
|
|
Any
overriding royalty exemption shall be restricted only to that portion
of
the production from a test well used as fuel for heaters, treaters,
compressors, separators, instruments and similar equipment required
to
produce Petroleum Substances from the test well spacing unit. Grantor
shall not be granted any overriding royalty exemption from production
of
Petroleum Substances used for reservoir injection or pressure maintenance,
secondary and heavy oil recoveries or upgrading schemes, or fuel
and/or
feedstock for any gas plant, refinery, satellite or
battery.
|
|
6.
|
RIGHT
TO POOL OR UNITIZE
|
Grantor
is hereby given the right and authority, at any time and from time
to
time, to pool the said Lands, or any portion thereof to form a production
spacing unit or unitize the said Lands or any portion thereof, or
any zone
or formation underlying the same, on such terms and conditions as
the
Grantor may determine from time to time. In the event of such pooling
or
unitization, Grantee’s gross overriding royalty shall be determined on
that portion of the production of the leased substances from the
area so
pooled or unitized which is allocated to that portion of the said
Lands
which is contributed to the pooled or unitized area pursuant to the
pooling or unitization Agreement
concerned.
|
7.
|
RIGHT
TO COMMINGLE
|
The
Grantor shall have the right to commingle Petroleum Substances produced
from the said 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 wells 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.
|
DEVELOPMENT
OF LANDS
|
Notwithstanding
any provision herein contained, the Grantor shall be under no obligation
to Grantee to develop the said Lands or any part thereof to produce
the
leased substances which may be within, upon or under the said
Lands.
|
|
9.
|
RENTALS,
RENEWALS AND ROYALTIES
|
Grantor
shall during the term of this Agreement make timely payment of all
rentals, renewals or extension fees, payment in lieu of actual production
and royalties becoming due or due in respect of the Lease(s), the
Lands or
the Petroleum Substances.
|
|
10.
|
TAXES
|
Each
party hereto shall be liable for its proportionate share of taxes
and
other charges levied or assessed against the Petroleum Substances,
and in
lieu of payment by the Grantee of its share thereof, Grantor may
make such
payment and deduct the amount thereof from any money payable by it
to the
Grantee.
|
|
11.
|
RIGHT
TO AUDIT
|
Grantee,
upon notice in writing to Grantor, shall have the right to audit
the
Grantor’s accounts and records relating to the accounting hereunder for
any calendar year within the twelve (12) month period next following
the
end of such calendar year. 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 month following the month for which
such
statement or payment was rendered shall be deemed to have been correct.
Any cost to conduct such audit as granted herein shall be at the
sole
cost, risk and expense of the Royalty Owner.
|
|
12.
|
ASSIGNMENT
OF ROYALTY
|
Royalty
Owner may convey or assign any portion of its interest in the gross
overriding royalty payable under the Agreement but the Grantor shall
not
become liable to make payments in respect of the gross overriding
royalty
to more than one person. If the interest of Royalty Owner hereunder
is at
any time owned by more than one person, such persons shall nominate
one
person to act as a common trustee for receipt of monies payable hereunder
and to deal with the Grantor in respect of the said interests. In
such
event, Grantor shall thereafter make payments to and deal solely
with such
common trustee in respect of the said interest.
|
|
13.
|
ASSIGNMENT
OF WORKING INTEREST
|
Grantor
may at any time, sell or otherwise dispose of all or any of its interest
in the said Lands but Grantor covenants that it shall cause any Assignee
or successor of the Grantor to deliver to Grantee a written and
enforceable undertaking to assume the obligations of Grantor under
this
Agreement insofar as they relate to such interest and the obligations
which accrue pursuant to the terms of this Agreement, whereupon the
Grantor shall be relieved of the obligation so assumed.
|
|
14.
|
BOOKS
AND ACCOUNTS
|
Grantor
shall maintain complete and accurate records of the leased substances
produced, saved and marketed from the said Lands and of the monies
received from the sale thereof and shall furnish to Grantee with
each
payment of the gross overriding royalty hereunder a statement giving
sufficient detail for Grantee to ascertain the accuracy of the payment
of
the gross overriding royalty made
therewith.
|
15.
|
SALE
OF LEASED SUBSTANCES
|
Any
sale of leased substances by Grantor shall include the gross overriding
royalty, which shall be sold at a price not less than that for which
Grantor is selling its share of production. Not later than the last
day of
each calendar month, Grantor shall pay to Grantee the proceeds of
the sale
of the gross overriding royalty during the preceding calendar month.
Grantee’s gross overriding royalty share of production shall bear its
proportionate share of the costs of any transportation services that
are
provided with respect thereto prior to the sale
thereof.
|
|
16.
|
FORCE
MAJEURE
|
The
obligation of the parties, other than the obligations of the Grantor
to
the Lessor of the Lease(s), its successors and assigns, shall be
suspended
and there shall be no liability for damages during the time and to
the
extent that either party is prevented from complying with its obligations
under this Agreement in part or in whole by strikes, lockouts, acts
of God
or the Queen’s enemies, war, blockades, riots, laws, orders or regulations
of governmental bodies or agencies, unavoidable accidents, delays
in
transportation, inability to obtain necessary materials in the open
market, or any other cause, except financial, whether similar or
dissimilar to those specifically enumerated, beyond the reasonable
control
of the party affected. The party whose obligations under this Agreement
are suspended shall give notice, including reasonably full particulars,
of
the cause for such suspension, in writing or by telegraph to the
other
parties within a reasonable time after the occurrence thereof. The
performance of such obligations shall begin or be resumed within
a
reasonable time after such cause has been removed.
|
|
17.
|
CONFIDENTIAL
INFORMATION
|
(a)
|
Except
as provided herein, all data and information of whatsoever nature
acquired
by the parties from any operations pursuant to this Royalty Agreement
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
thereto
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 Agreement.
In no event shall information of any type of character relating to
wells
drilled on a confidential basis to the parties be
disclosed.
|
(b)
|
The
provisions of this clause shall not apply to disclosures to Affiliates
provided that such Affiliate agree to be bound by the terms of this
clause.
|
18.
|
DURATION
OF AGREEMENT
|
This
Agreement shall remain in full force and effect for so long as any
interest hereunder is retained by the parties or any assignees
thereof.
|
19.
|
NOTICES
|
Whether
or not so stipulated herein, all notices, communications and statements
(hereinafter called “notices”) required or permitted hereunder shall be in
writing. Notices may be served:
|
|
(a)
|
personally,
by leaving them with the party on whom they are to be served at the
party’s address hereinafter given. Personally served notices shall be
deemed received by the addressees when actually delivered provided
such
delivery shall be during normal business hours; or
|
(b)
|
by
telegraph (or any other like method by which a written and recorded
message may be sent) directed to the party on whom they are to be
served
at that party’s address hereinafter given. Notices so served shall be
deemed received by the addressees thereof eight hours after the time
of
transmission or at the commencement of the next ensuing normal business
day, whichever is the later; or
|
(c)
|
by
mailing them first class registered post, postage prepaid to the
party on
whom they are to be served. Notices so served shall be deemed to
be
received by the addressees on the second day (excluding as the second
day,
Saturdays, Sundays and statutory holidays) following the mailing
thereof
in Canada.
|
The
addresses of each of the respective parties hereto shall be as
follows:
|
|
Mikwec
Energy Canada Ltd.
|
|
Suite
100, 10187 - 104th Street
|
|
Edmonton,
Alberta
|
|
T5J
0Z9
|
|
Attn:
President
|
|
Nearshore
Petroleum Corporation
|
|
Suite
3175, 246 Stewart Green S. W.
|
|
Calgary,
Alberta
|
|
T3H
3C8
|
|
Attn:
President
|
|
Any
party hereto may change its said address by notice served as
aforesaid.
|
|
20.
|
FURTHER
ASSURANCES
|
Each
of the parties hereto shall, from time to time, and at all times,
do such
further acts and deliver all such further assurances, deeds and documents
as shall be reasonably required in order to fully perform and carry
out
the terms of this Agreement.
|
|
21.
|
ENTIRE
AGREEMENT
|
The
terms of this Agreement express and constitute the entire agreement
between the parties with respect to the matters herein addressed,
this
Agreement hereby wholly supersedes and replaces all prior agreements
and
representations, whether oral or in writing, between the Parties,
with
respect to the subject matter hereof.
|
|
22.
|
TIME
OF ESSENCE
|
Time
is of the essence of this
Agreement.
|
23.
|
WAIVER
|
No
waiver by any party of any breach of any of the covenants, conditions
and
provisions herein contained shall be effective or be binding upon
any of
the parties unless the same shall be expressed in writing. Any waiver
so
expressed shall not limit or affect its right with respect to any
other or
future breach.
|
|
24.
|
NO
AMENDMENT EXCEPT IN WRITING
|
No
amendment or variation of the provisions of this Agreement shall
be
binding upon any party unless it is evident in writing and executed
by all
parties.
|
|
25.
|
BINDS
SUCCESSORS AND ASSIGNS
|
This
Agreement shall enure to the benefit of and be binding upon the parties
hereto, their successors and permitted assigns.
|
|
26.
|
COUNTERPART
EXECUTION
|
This
Agreement may be executed in counterparts and when each such party
has
executed a counterpart, all counterparts taken together shall constitute
one agreement.
|
MIKWEC ENERGY CANADA LTD. | ||
|
|
|
By: | /s/ Victor Davis | |
|
||
Victor Davis, President |
NEARSHORE PETROLEUM CORPORATION | ||
|
|
|
By: | /s/ Steve Gawne | |
|
||
Steve Gawne, President |
1.01
|
In
this Assignment Procedure, the following terms, when capitalized,
shall
have the meaning assigned to each
below:
|
(a)
|
“Affiliate”
- for the purposes of this Assignment Procedure, means a corporation
or
partnership that is affiliated with the party in respect of which
the
expression is being applied, and, for the purpose of this definition
a
corporation or partnership is affiliated with another corporation
or
partnership if it directly or indirectly controls or is controlled
by that
other corporation or partnership, and for the purpose of determining
whether a corporation or partnership is so controlled, it shall be
deemed
that:
|
(i)
|
a
corporation is directly controlled by another corporation or partnership
if the shares of the corporation to which are attached more than
50% of
the votes that may be cast to elect directors of the corporation
are
beneficially owned by that other corporation or partnership and the
votes
attached to those shares are sufficient, if exercised, to elect a
majority
of the directors of the
corporation;
|
(ii)
|
a
partnership is directly controlled by a corporation or other partnership
it that corporation or partnership beneficially owns more than a
50%
interest in the partnership;
|
(iii)
|
a
corporation or partnership is indirectly controlled by another corporation
or partnership if control, as defined above, is exercised through
one or
more other corporations or
partnerships.
|
|
(b)
|
“Agreement”
- means the agreement to which this Assignment Procedure is attached
and
made a part.
|
(c)
|
“Assigned
Interest” - means the interest in the Agreement which is the subject of an
assignment and which is specified in a Notice of Assignment, but
shall not
include rights of the Assignor as
operator.
|
(d)
|
“Assignee”
- means the entity named in a Notice of Assignment as the
Assignee.
|
(e)
|
“Assignment
and Novation Agreement” - means an agreement by all parties to the
Agreement and a party to whom an interest in the Agreement has been
assigned where:
|
(i)
|
the
assignee assumes the duties and obligations of the assignor for the
Assigned Interest; and
|
(ii)
|
the
assignor is released from its duties for the Assigned Interest;
and
|
(iii)
|
the
assignee is substituted as a party to the Agreement in the place
of the
assignor to the extent of the Assigned
Interest.
|
(f)
|
“Assignor”
- means the party to the Agreement named in a Notice of Assignment
as the
Assignor.
|
(g)
|
“Binding
Date” - means the first day of the second calendar month following the
month in which the Notice of Assignment is served in accordance with
Article IV below.
|
(h)
|
“Notice
of Assignment” - means a notice in the form entitled Notice of Assignment
attached hereto as Appendix A.
|
(i)
|
“Third
Party” - means the parties to the Agreement who are not the
Assignor.
|
(j)
|
“Transfer
Date” - means the effective date of the transfer of the Assigned Interest,
as specified in the Notice of
Assignment.
|
1.02
|
In
this Assignment Procedure, when a numbered clause or Article is referred
to, that clause or Article is of this Assignment
Procedure.
|
2.01
|
(a)
|
A
Notice of Assignment issued in accordance with this Assignment Procedure
shall be used in place of an Assignment and Novation Agreement for
assignments where the Agreement:
|
(i)
|
requires
parties to use; or
|
(ii)
|
entitles
parties to request; or
|
(iii)
|
is
silent as to the right of any party to
request;
|
(b)
|
The
Notice of Assignment shall be in the form indicated in Appendix A
and
shall be executed by the Assignor and the
Assignee.
|
2.02
|
If
there is a conflict between the Assignment Procedure and the provisions
of
the Agreement, the Assignment Procedure shall
prevail.
|
2.03
|
If
the Agreement requires each Third Party’s consent to an assignment but
does not specify a time within which each Third Party shall respond
or
shall be deemed to have responded, then consent of each Third Party
to an
assignment shall be deemed if it fails to reply within 20 days of
receipt
of a written request for consent.
|
2.04
|
(a)
|
If
the Agreement is silent regarding rights of first refusal or consent
from
Third Party which relates to an Assigned Interest, then Assignor
shall, by
notice pursuant to Article IV:
|
(i)
|
advise
Third Party of:
|
(ii)
|
request
Third Party’s written consent to such disposition, which consent shall not
be unreasonably withheld.
|
(b)
|
Clause
2.04 (a) shall not apply in the following instances,
namely:
|
(i)
|
an
assignment made by way of security for present or future indebtedness,
or
liabilities (whether contingent, direct or indirect and whether financial
or otherwise), the issuance of the bonds or debentures of a corporation,
or the performance of the obligations of a guarantor under a guarantee,
provided that in the event the security is enforced by a sale or
foreclosure, Clause 2.04 (a) shall apply;
or
|
(ii)
|
an
assignment to an Affiliate, or in consequence of a merger or amalgamation
with another corporation or pursuant to an assignment made by a party
of
its entire interest in the Agreement to a corporation in return for
shares
in that corporation or to a registered partnership in return for
an
interest in that partnership; or
|
(iii)
|
an
assignment is required within the terms of the Agreement (such as,
but not
limited to, abandonment, forfeiture or
surrender).
|
2.05
|
An
assignment of an Assigned Interest shall (subject to Clause 2.06)
be
effective against Third Party on the Binding Date
if:
|
(a)
|
all
prohibitions, limitations or conditions (such as, but not limited
to, a
right of first refusal or a requirement for prior consent from Third
Party) applying to the Assigned Interest have been complied with
and
satisfied pursuant to the Agreement, or waived by Third Party, including,
if applicable, compliance with Clauses 2.03 and 2.04;
and
|
(b)
|
following
compliance with Clause 2.05(a), a Notice of Assignment is served
on Third
Party in accordance with Article
IV.
|
2.06
|
(a)
|
A
Third Party who objects to the Notice of Assignment on the basis
of a
failure to comply with Clause 2.05 may, prior to the Binding Date,
notify
(pursuant to Article IV) Assignor and Third Party of its
objections.
|
(b)
|
If
a notice of objection is served pursuant to Clause 2.06(a), the Notice
of
Assignment to which the notice of objection relates will be of no
effect.
|
(c)
|
If
a Third Party does not object pursuant to Clause 2.06(a), the Notice
of
Assignment will be effective for purposes of Article Ill, but each
Third
Party will retain all other rights or remedies arising as a consequence
of
the failure of Assignor to comply with Clause 2.05, including (without
limitation), rights to seek damages for breach of the Agreement and
rights
to seek specific performance of a right of first
refusal.
|
3.01
|
If
a Notice of Assignment has become effective in accordance with Clauses
2.05 or 2.06, then Assignor, Assignee and Third Party shall have
agreed
that:
|
(a)
|
Subject
to Clause 3.01(d), Assignor and Assignee shall have acknowledged
and
represented that the Assignor has transferred, assigned and conveyed
the
Assigned Interest to Assignee as of the Transfer
Date.
|
(b)
|
Subject
to Clause 3.01(d), Assignee shall replace Assignor as a party to
the
Agreement with respect to the Assigned Interest on and after the
Transfer
Date.
|
(c)
|
Only
insofar as Third Party is concerned, notwithstanding the terms and
provisions in the “Transfer Agreement” referenced in the Notice of
Assignment:
|
(i)
|
Subject
to Clause 3.01(d), Assignee shall assume and be bound by, observe
and
perform all terms, obligations and provisions in the Agreement with
regard
to the Assigned Interest at all times on or after the Transfer Date;
and
|
(ii)
|
Assignor
shall retain and be entitled to all rights, benefits and privileges
under
the Agreement with respect to the Assigned Interest at all times
prior to
the Transfer Date; and
|
(iii)
|
Subject
to Clause 3.01(d), Assignee shall assume and be entitled to all rights,
benefits and privileges under the Agreement with respect to the Assigned
Interest at all times on and after the Transfer
Date.
|
(d)
|
In
all matters relating to the Assigned Interest subsequent to the Transfer
Date and prior to the Binding Date, Assignor acts as trustee for
and duly
authorized agent of Assignee, and Assignee, for the benefit of Third
Party, ratifies, adopts and confirms all acts or omissions of the
Assignor
in such capacity as trustee and agent. Third Party agrees to recognize
and
accept Assignor as trustee and agent for
Assignee.
|
(e)
|
On
and after the Transfer Date, Third
Party:
|
(i)
|
releases
and discharges Assignor from the observance and performance of all
terms
and covenants of the Agreement and all obligations and liabilities
which
arise or occur on or after the Transfer Data under the Agreement
with
respect to the Assigned Interest;
and
|
(ii)
|
does
not release and discharge Assignor from any obligation or liability
which
had arisen or accrued prior to the Transfer Data or which does not
relate
to the Assigned Interest.
|
(f)
|
Subject
to the terms and provisions of the “Transfer Agreement” referenced in the
Notice of Assignment, Assignee on and after the Transfer
Date:
|
(i)
|
releases
and discharges Assignor from the observance and performance of all
terms
and covenants of the Agreement and all obligations and liabilities
which
arise or occur on or after the Transfer Date under the Agreement
with
respect to the Assigned Interest;
and
|
(ii)
|
does
not release and discharge Assignor from any obligation or liability
which
had arisen or accrued prior to the Transfer Date or which does not
relate
to the Assigned Interest.
|
(g)
|
The
address of Assignee for the purposes of the Agreement and the serving
of
notices under it shall be the address stated for Assignee in the
Notice of
Assignment.
|
(h)
|
The
Agreement shall continue in full force and effect from and after
the
Transfer Date with Assignee made a party thereto to the extent of
the
Assigned Interest, subject to Clause 3.01(d). The Agreement is amended
as
necessary to give effect to the Notice of Assignment and, as so amended,
is ratified and confirmed by each
party.
|
3.02
|
In
no event shall errors, inaccuracies or misdescriptions in a Notice
of
Assignment have any effect on the Third Party or the interests of
Third
Party in the Agreement, even if Third Party has knowledge of an error,
inaccuracy or misdescription.
|
3.03
|
Assignor
and Assignee shall be solely responsible for any adjustment between
themselves with respect to the Assigned Interest as to revenues,
benefits,
costs, obligations or indemnities which accrue prior to Binding
Date.
|
4.01
|
All
notices and Notices of Assignment (herein called “notices”) required or
permitted by the terms of this Assignment Procedure shall be in writing,
subject to the provisions of this Article. This Article applies only
to
notices served pursuant to this Assignment Procedure. Any notice
to be
given under this Assignment Procedure 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. Personally served notices shall be deemed
received by the addressee when actually delivered as aforesaid, if
such
delivery is during normal business hours, on any day other than a
Saturday, Sunday or statutory holiday. If a notice is not delivered
during
normal business hours, such notice shall be deemed to have been received
by such party at the commencement of the day next following the date
of
delivery, other than a Saturday, Sunday or statutory holiday;
or
|
(b)
|
by
telecopier or telex (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 (however, an original executed
copy of a Notice of Assignment shall subsequently be provided to
all
addressees without delay). A notice so served shall be deemed received
by
the respective addressees: (i) when actually received by them, if
received
within the normal business hours on any day other than a Saturday,
Sunday
or statutory holiday; 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
of
Canada) registered post, postage prepaid, directed to the party on
whom it
is to be served at that party’s address for service. Notices so served
shall be deemed to be received by the addressees 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 mailing.
However, 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.
|
4.02
|
The
addresses for service of a notice pursuant to this Assignment Procedure
shall be as set out (and amended from time to time) in the
Agreement.
|
1.
|
Assignor
(specify proportions if more than one
Assignor):
|
2.
|
Assignee
(specify proportions if more than one Assignee and include address
for
service of notice pursuant to Master
Agreement):
|
4.
|
Assigned
Interest: (Check A or B below):
|
5.
|
Subject to Clause 7 of this Notice of Assignment, Assignor and Assignee, in accordance with the terms of the Transfer Agreement, acknowledge that: |
(i)
|
Assignor
has transferred and conveyed the Assigned Interest to the Assignee
as of
the Transfer Date; and
|
(ii)
|
Assignee
agrees to replace Assignor, on and after the Transfer Date, as a
party to
the Master Agreement with respect to the Assigned Interest;
and
|
(iii)
|
Assignee
agrees to be bound by and observe all terms, obligations and provisions
in
the Master Agreement with respect to the Assigned Interest on and
after
the Transfer Date.
|
6.
|
Subject
to the terms and provisions of the Transfer Agreement, Assignee on
and
after the Transfer Date:
|
(i)
|
discharges
and releases the Assignor from the observance and performance of
all terms
and covenants in the Master Agreement and any obligations and liabilities
which arise or occur under the Master Agreement with respect to the
Assigned Interest, and
|
(ii)
|
does
not release and discharge the Assignor from any obligation or liability
which had arisen or accrued prior to the Transfer Date or which does
not
relate to the Assigned Interest.
|
7.
|
Assignee
and Assignor agree that in all matters relating to the Master Agreement
with respect to the Assigned Interest, subsequent to the Transfer
Date and
prior to the Binding Date, Assignor acts as trustee for and duly
authorized agent of the Assignee and Assignee, for the benefit of
the
Third Party, ratifies, adopts and confirms all acts or omissions
of the
Assignor in such capacity as trustee and
agent.
|
8.
|
This
Notice of Assignment shall become binding on all parties to the Master
Agreement on the first day of the second calendar month following
the
month this notice is served on Third Party in accordance with the
terms of
the Master Agreement (“Binding Date”). In addition, Assignor and Assignee
agree that they shall be solely responsible for any adjustment between
themselves with respect to the Assigned Interest as to revenues,
benefits,
costs, obligations or indemnities which accrue prior to the Binding
Date.
|
9.
|
Assignor
represents and certifies that this Notice of Assignment and its service
are in compliance with all the terms and provisions of the Master
Agreement.
|
1. | INTERPRETATION |
(a)
|
In
this Agreement, unless the context otherwise requires, the
definitions
contained in clause 101 of the Operating Procedure shall apply,
and:
|
(i) |
“Assignment
Procedure” means the 1993 CAPL Assignment Procedure as completed and
attached as Schedule “C”
|
(ii) | “Effective Date” means April 23, 2004; |
(iii) |
“Joint
Lands” means the lands described in Schedule “A” hereto, including where
the context requires the petroleum substances within, upon or
under such
lands, or any interest or interests in such lands from time to
time
remaining subject to this Agreement;
|
(iv) |
“Operating
Procedure” means the Operating Procedure as completed and attached as
Schedule “B”, together with the Accounting Procedure as completed and
annexed thereto as Exhibit “A”
|
(v) |
“Operator”
initially means MIKWEC, appointed as such in Clause 5
of
this Agreement;
|
|
(vi) | “Participating Interest” means the percentage interest of a party set forth in Clause 4 of this Agreement; |
(vii) | “Title Document” means the document of title set forth and described in Schedule “A” hereto and any renewal, extension or replacement thereof, including any leases selected from a license or reservation, insofar as they relate in each case to the Joint Lands; and |
(b)
|
The
headings of the clauses of this Agreement and the Schedules are
inserted
for convenience of reference only and shall not affect the meaning
or
construction thereof.
|
(c)
|
Whenever
the singular or masculine or neuter is used in this Agreement or
the
Schedules, the same shall be construed as meaning plural or feminine
or
body politic or corporate and vice versa as the context
requires.
|
(d)
|
In
the event of any conflict or inconsistency between the provisions
of this
Agreement and those of any Schedule, the provisions of this Agreement
shall prevail. If any term or condition of this Agreement conflicts
with a
term or condition of any Title Document, then such term or condition
of
such Title Document shall prevail and this Agreement shall be deemed
to be
amended accordingly with respect to such Title
Document.
|
2.
|
SCHEDULES
|
(a)
|
Schedule
“A” which sets forth and describes the Joint Lands and the Title
Document;
|
(b)
|
Schedule
“B” which is the Operating Procedure together with the Accounting
Procedure annexed thereto as Exhibit “A”;
and
|
(c)
|
Schedule
“C” which is the Assignment
Procedure.
|
3.
|
TITLE
|
4.
|
PARTICIPATING
INTERESTS
|
MIKWEC
|
80%
|
MAXEN
|
20%
|
5.
|
APPOINTMENT
OF OPERATOR
|
6.
|
OPERATING
PROCEDURE
|
7.
|
INFORMATION
TO JOINT-OPERATOR
|
(a)
|
final
summary of survey log formation
tops;
|
(b)
|
detailed
drillstem test data, if applicable;
|
(c)
|
lithologic
core and sample report, if applicable;
and
|
(d)
|
core,
water, gas or oil analyses, if
applicable.
|
8.
|
ENCUMBRANCES
ON INTEREST
|
9.
|
NEW
ROYALTY APPLICATIONS
|
10.
|
INCENTIVE
ASSISTANCE PROGRAM
|
11.
|
CONFIDENTIAL
INFORMATION
|
12.
|
TERM
OF AGREEMENT
|
13.
|
ENTIRE
AGREEMENT
|
14.
|
COVENANTS
RUN WITH THE LAND
|
15.
|
ENUREMENT
|
16.
|
LAWS
OF ALBERTA
|
17.
|
COUNTERPART
EXECUTION
|
MIKWEC
ENERGY CANADA LIMITED
|
||
|
|
|
By: | /s/ Vic Davies | |
|
||
President |
MAXEN
PETROLEUM INC.
|
||
|
|
|
By: | /s/ Sam Charanek | |
|
||
President |
CLAUSE
311 - Insurance Election:
|
A___
|
B
x
|
CLAUSE
604 -
Marketing
Fee:
|
A
x
|
B
___
|
CLAUSE
903 - Casing Point Election:
|
A
x
|
B
___
|
CLAUSE
903 - Casing Point Election:
|
180
days
|
CLAUSE
2401 - Disposition of Interests:
|
A
x
|
B
___
|
CLAUSE
2404 - Recognition upon Assignment
|
A
x
|
B
___
|
CLAUSE
202 - Labour
|
||
b)
|
(1)
shall not be be chargeable.
|
|
(2)
shall not be chargeable.
|
||
CLAUSE
203 - Employee Benefits: (b) Non-compulsory 25%
|
||
CLAUSE
217 - Warehouse Handling:
|
||
|
(1) 2.5%, $5,000 | |
|
(2) 5% | |
CLAUSE
302
|
||
a)
For each Exploration Project
|
||
1.
|
5%
of the first $ 50,000.00
|
|
2.
|
3%
of the next $ 100,000.00
|
|
3.
|
1%
of the cost exceeding the sum of (1) and (2).
|
|
b)
For each Drilling Well
|
||
1.
|
5%
of the first $ 50,000.00
|
|
2.
|
3%
of the next $ 100,000.00
|
|
3.
|
1%
of the cost exceeding the sum of (1) and (2).
|
|
c)
For each Construction Project:
|
||
1.
|
5%
of the first $ 50,000.00
|
|
2.
|
3%
of the next $ 100,000.00
|
|
3.
|
1%
of the cost exceeding the sum of (1) and (2).
|
|
d)
For Operating and Maintenance, per month:
|
||
1.
|
n/a
of the Cost of Operation and Maintenance of the Joint Property;
and
|
|
2.
|
$250
per producing well per month.
|
|
3.
|
n/a
flat rate...
|
1.01 | In this Assignment Procedure, the following terms, when capitalized, - shall have the meaning assigned to each below: |
a)
|
“Affiliate”
- for the purposes of this Assignment Procedure, means a corporation
or
partnership that is affiliated with the party in respect of which
the
expression is being applied, and, for the purpose of this definition
a
corporation or partnership is affiliated with another corporation
or
partnership if it directly or indirectly controls or is controlled
by that
other corporation or partnership, and for the purpose of determining
whether a corporation or partnership is so controlled, it shall
be deemed
that:
|
(i)
|
a
corporation is directly controlled by another corporation or partnership
if the shares of the corporation to
which
are attached more than 50% of the votes that may be cast to elect
directors of the corporation are beneficially owned by that other
corporation or partnership and the votes attached to those shares
are
sufficient, it exercised, to elect a majority of the directors
of the
corporation;
|
(ii) | a partnership is directly controlled by a corporation or other partnership if that corporation or partnership beneficially owns more than a 50% interest in the partnership; |
(iii) | a corporation or partnership is indirectly controlled by another corporation or partnership if control, as defined above, is exercised through one or more other corporations or partnerships. |
Where
two or more corporations or partnerships are affiliated at the
same time
with the same corporation or partnership, they shall be deemed
to be
Affiliates of each other.
|
(b)
|
“Agreement”
- means the agreement to which this Assignment Procedure is attached
and
made a part.
|
(c)
|
“Assigned
Interest” - means the interest in the Agreement which is the subject of an
assignment and which is specified in a Notice of Assignment, but
shall not
include rights of the Assignor as operator.
|
(d)
|
“Assignee”
- means the entity named in a Notice of Assignment as the
Assignee.
|
(e)
|
“Assignment
and Novation Agreement” - means an agreement by all parties to the
Agreement and a party to whom an interest in the Agreement has
been
assigned where:
|
(i)
|
the
assignee assumes the duties and obligations of the assignor for
the
Assigned Interest; and
|
(ii)
|
the
assignor is released from its duties for the Assigned Interest;
and
|
(iii)
|
the
assignee is substituted as a party to the Agreement in the place
of the
assignor to the extent of the Assigned
Interest.
|
(f)
|
“Assignor”
- means the party to the Agreement named in a Notice of Assignment
as the
Assignor.
|
(g)
|
“Binding
Date” - means the first day of the second calendar month following the
month in which the Notice of Assignment is served in accordance
with
Article IV below.
|
(h)
|
“Notice
of Assignment” - means a notice in the form entitled Notice of Assignment
attached hereto as Appendix A.
|
(i)
|
“Third
Party” - means the parties to the Agreement who are not the
Assignor.
|
(j)
|
“Transfer
Date” - means the effective date of the transfer of the Assigned Interest,
as specified in the Notice of Assignment.
|
1.02
|
In
this Assignment Procedure, when a numbered clause or Article is
referred
to, that clause or Article
is
of this Assignment Procedure.
|
|
(i) |
requires
parties to use; or
|
(ii) |
entitles
parties to request; or
|
(iii) |
is
silent as to the right of any party to
request;
|
(i)
|
advise
Third Party of:
|
a. | its intention to make the disposition; |
b. |
a
description of the Assigned Interest;
and
|
c. |
t
he identity of the proposed Assignee,
and
|
(ii)
|
request Third Party’s written consent to such disposition, which consent shall not be unreasonably withheld. |
(i)
|
an assignment made by way of security for present or future indebtedness, or liabilities (whether contingent, direct or indirect and whether financial or otherwise), the issuance of the bonds or debentures of a corporation. of the performance of the obligations of a guarantor under a guarantee, provided that in the event the security is enforced by a sale or foreclosure. Clause 2.04 (a) shall apply; or |
(ii)
|
an assignment to an Affiliate, or in consequence of a merger or amalgamation with another corporation or pursuant to an assignment made by a party of its entire interest in the Agreement to a corporation in return for shares in that corporation or to a registered partnership in return for an interest in that partnership; or |
(iii)
|
an assignment is required within the terms of the Agreement (such as, but not limited to, abandonment, forfeiture or surrender). |
2.05
|
An assignment of an Assigned Interest shall (subject to Clause 2.06)
be
effective against Third Party on the Binding Date
if:
|
(a)
|
all
prohibitions, limitations or conditions (such as, but not limited
to, a
right of first refusal or a requirement for prior consent from Third
Party) applying to the Assigned Interest have been complied with
and
satisfied pursuant to the Agreement, or waived by Third Party, including,
if applicable, compliance with Clauses 2.03 and 2.04;
and
|
( b) | following compliance with Clause 2.05(a), a Notice of Assignment is served on Third Party in accordance with Article IV. |
2.06
(a
)
|
A Third Party who objects to the Notice of Assignment on the basis of a failure to comply with Clause 2.05 may, prior to the Binding Date, notify (pursuant to Article IV) Assignor and Third Party of its objections. |
(b)
|
If
a notice of objection is served pursuant to Clause 2.06(a), the Notice
of
Assignment to which the notice of objection relates will be of no
effect.
|
(c ) | If a Third Party does not object pursuant to Clause 2.06(a), the Notice of Assignment will be effective for purposes of Article 11\, but each Third Party will retain all other rights or remedies arising as a consequence of the failure of Assignor to comply with Clause 2.05 , including (without limitation), rights to seek damages for breach of the Agreement and rights to seek specific performance of a right of first refusal. |
3.01
|
If
a Notice of Assignment has become effective in accordance with
Clauses
2.05 or 2.06, then Assignor, Assignee and Third Party shall have
agreed
that:
|
|
(a)
|
Subject
to Clause 3.01 (d), Assignor and Assignee shall have acknowledged
and
represented that the Assignor has transferred, assigned and conveyed
the
Assigned Interest to Assignee as of the transfer Date.
|
|
(b)
|
Subject
to Clause 3.01(d), Assignee shall replace Assignor as a party to
the
Agreement with respect to the Assigned Interest on and after the
Transfer
Date.
|
|
(c)
|
Only
insofar as Third Party is concerned, notwithstanding the terms
and
provisions in the “Transfer Agreement” referenced in the Notice of
Assignment:
|
|
(i)
|
Subject
to Clause 3.01 (d), Assignee shall assume and be bound by, observe
and
perform all terms, obligations and provisions in the Agreement
with regard
to the Assigned Interest at all times on or after the Transfer
Date;
and
|
|
(ii)
|
Assignor
shall retain and be entitled to all rights, benefits and privileges
under
the Agreement with respect to the Assigned Interest at all times
prior to
the Transfer Date; and
|
|
(iii)
|
Subject
to Clause 3.01 (d), Assignee shall assume and be entitled to all
rights,
benefits and privileges under the Agreement with respect to the
Assigned
Interest at all times on and after the
Transfer
Date.
|
|
|
||
(d)
|
In
all matters relating to the Assigned Interest subsequent to the
Transfer
Date and prior to the Binding Date, Assignor acts as trustee for
and duly
authorized agent of Assignee, and Assignee, for the benefit of
Third
Party, ratifies, adopts and confirms all acts or omissions of the
Assignor
in such capacity as trustee and agent. Third Party agrees to recognize
and
accept Assignor as trustee and agent for Assignee.
|
|
(e)
|
On
and after the Transfer Date, Third Party:
|
|
(i)
|
releases
and discharges Assignor from the observance and performance of
all terms
and covenants of the Agreement and all obligations and liabilities
which
arise or occur on or after the Transfer Date under the Agreement
with
respect to the Assigned Interest; and
|
|
(ii)
|
does
not release and discharge Assignor from any obligation or liability
which
had arisen or accrued prior to the Transfer Date or which does
not relate
to the Assigned Interest.
|
|
(f)
|
Subject
to the terms and provisions of the “Transfer Agreement” referenced in the
Notice of Assignment, Assignee on and after the Transfer
Date:
|
|
(i)
|
releases
and discharges Assignor from the observance and performance of
all terms
and covenants of the Agreement and all obligations and liabilities
which
arise or occur on or after the Transfer Date under the Agreement
with
respect to the Assigned Interest; and
|
|
(ii)
|
does
not release and discharge Assignor from any obligation or liability
which
had arisen or accrued prior to the Transfer Date or which does
not relate
to the Assigned Interest.
|
|
(g)
|
The
address of Assignee for the purposes of the Agreement and the serving
of
notices under it shall be the address stated for Assignee in the
Notice of
Assignment.
|
|
(h)
|
The
Agreement shall continue in full force and effect from and after
the
Transfer Date with Assignee made a party thereto to the extent
of the
Assigned Interest, subject to Clause 3.01(d). The Agreement is
amended as
necessary to give effect to the Notice of Assignment and, as so
amended,
is ratified and confirmed by each party.
|
|
3.02
|
In
no event shall errors, inaccuracies or misdescriptions in a Notice
of
Assignment have any effect on the Third Party or the interests
of Third
Party in the Agreement, even if Third Party has knowledge of an
error,
inaccuracy or misdescription.
|
|
3.03
|
Assignor
and Assignee shall be solely responsible for any adjustment between
themselves with respect to the Assigned Interest as to revenues,
benefits,
costs, obligations or indemnities which accrue prior to Binding
Date.
|
4.01
|
All
notices and Notices of Assignment (herein called “notices”) required or
permitted by the terms of this Assignment Procedure shall be in
writing,
subject to the provisions of this Article. This Article applies
only to
notices served pursuant to this Assignment Procedure. Any notice
to be
given under this Assignment Procedure 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. Personally served notices shall be deemed
received by the addressee when actually delivered as aforesaid,
if such
delivery is during normal business hours, on any day other than
a
Saturday, Sunday or statutory holiday. If a notice is not delivered
during
normal business hours, such notice shall be deemed to have been
received
by such party at the commencement of the day next following the
date of
delivery, other than a Saturday, Sunday or statutory holiday;
or
|
|
(b)
|
by
telecopier or telex (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 (however, an original executed
copy of a Notice of Assignment shall subsequently be provided to
all
addressees without delay). A notice so served shall be deemed received
by
the respective addressees:
|
|
(i)
|
when
actually received by them, if received within the normal business
hours on
any day other than a Saturday, Sunday or statutory holiday;
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
of
Canada) registered post, postage prepaid, directed to the party
on whom it
is to be served at that party’s address for service. Notices so served
shall be deemed to be received by the addressees 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
mailing.
However, 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.
|
|
4.02
|
The
addresses for service of a notice pursuant to this Assignment Procedure
shall be as set out (and amended from time to time) in the
Agreement.
|
1.
|
Assignor
(specify proportions if more than one
Assignor):
|
2
|
Assignee
(specify proportions if more than one Assignee and include address
for
service of notice pursuant to Master
Agreement):
|
3.
|
Current
Third Party to Master
Agreement:
|
4.
|
Assigned
Interest: (Check A or B below):
|
5.
|
Subject
to Clause 7 of this Notice of Assignment, Assignor and Assignee,
in
accordance with the terms of the Transfer Agreement, acknowledge
that:
|
(i)
|
Assignor has transferred and conveyed the Assigned Interest to the Assignee as of the Transfer Date; and | |
(ii)
|
Assignee agrees to replace Assignor, on and after the Transfer Date, as a party to the Master Agreement with respect to the Assigned Interest; and | |
(iii) | Assignee agrees to be bound by and observe all terms, obligations and provisions in the Master Agreement with respect to the Assigned Interest on and after the Transfer Date. |
6.
|
Subject
to the terms and provisions of the Transfer Agreement, Assignee on
and
after the Transfer
|
(i)
|
discharges and releases the Assignor from the observance and performance of all terms and covenants in the Master Agreement and any obligations and liabilities which arise or occur under the Master Agreement with respect to the Assigned Interest, and | |
(ii)
|
does not release and discharge the Assignor from any obligation or liability which had arisen or accrued prior to the Transfer Date or which does not relate to the Assigned Interest. |
7.
|
Assignee
and Assignor agree that in all matters relating to the Master Agreement
with respect to the Assigned Interest, subsequent to the Transfer
Date and
prior to the Binding Date, Assignor acts as trustee for and duly
authorized agent of the Assignee and Assignee, for the benefit of
the
Third Party, ratifies, adopts and confirms all acts or omissions
of the
Assignor in such capacity as trustee and
agent.
|
9.
|
This
Notice of Assignment shall become binding on all parties to the Master
Agreement on the first day of the second calendar month following
the
month this notice is served on Third Party in accordance with the
terms of
the Master Agreement (“Binding Date-). In addition, Assignor and Assignee
agree that they shall be solely responsible for any adjustment between
themselves with respect to the Assigned Interest as to revenues,
benefits,
costs, obligations or indemnities which accrue prior to the Binding
Date.
|
9.
|
Assignor
represents and certifies that this Notice of Assignment and its service
are in compliance with all the terms and provisions of the Master
Agreement.
|
1.
|
THIS
AGREEMENT
, made this 8 day of June, 2004 between, Deep Well Oil
& Gas, Inc.; hereinafter referred to as “Company”, located at Suite
1804, Sun Life Plaza, 144 Fourth Avenue S. W., Calgary, Alberta
and Menno
Wiebe, an individual; hereinafter referred to as “Independent Contractor”,
collectively referred to as the “Parties”.
|
|
RECITALS
|
||
2.
|
Independent
Contractor is engaged in providing professional business services,
with
their principal place of business at 310 Garrison Sq. SW Calgary,
Alberta,
T2T 6B3. Independent Contractor represents that he or she has complied
with all, Federal, Provincial and/or State, and local laws regarding
business permits, sales permits, licenses, reporting requirements,
tax
withholding requirements, and other legal requirements of any kind
that
may be required to carry out said business and the Scope of Work
which is
to be performed as an Independent Contractor pursuant to this Agreement.
Independent Contractor is or remains open to conducting similar
tasks or
activities for entities other than the Company and holds himself
or
herself out to the public to be a separate business
entity.
|
|
3.
|
Company
desires to engage and contract for the services of independent
Contractor
to perform certain tasks as set forth below. Independent Contractor
desires to enter into this Agreement and perform as an independent
contractor for the company and is willing to do so on the terms
and
conditions set forth below.
|
|
NOW,
THEREFORE, in consideration of the above recitals and the mutual
promises
and conditions contained in this Agreement, the Parties agree as
follows:
|
||
STATUS
OF INDEPENDENT CONTRACTOR
|
||
4.
|
This
Agreement does not constitute a hiring by either party. It is the
parties
intention that Independent Contractor shall have an independent
contractor
status and not be an employee for any purposes, including, but
not limited
to, the application of the Federal Insurance Contribution Act,
the Social
Security Act, the Federal Unemployment Tax Act, the provisions
of the
Internal Revenue Code, the State Revenue and Taxation Code relating
to
income tax withholding at the source of income, the Workers’ Compensation
Insurance Code 40 1(k) and other benefit payments and third party
liability claims. Independent Contractor shall retain sole and
absolute
discretion in the manner and means of carrying out their activities
and
responsibilities under this Agreement. This Agreement shall not
be
considered or construed to be a partnership or joint venture, and
the
Company shall not be liable for any obligations incurred by Independent
Contractor unless specifically authorized in writing. Independent
Contractor shall not act as an agent of the Company, ostensibly
or
otherwise, nor bind the Company in any manner, unless specifically
authorized to do so in writing.
|
|
TASKS,
DUTIES, AND SCOPE OF WORK
|
||
5.
|
Independent Contractor agrees to devote as much time, attention, and energy as necessary to complete or achieve the following: | |
a.
|
To
provide a Geological Assessment and Economic Analysis Report and
Presentation hereinafter referred to as “Report” suitable for the
presentation to the Investment Banking Community.
|
|
b.
|
The
specific property referred to in the Report shall be define those
lands
found within the Sawn Lake Oil Sands Project, Alberta, Canada and
controlled by Mikwec Energy Canada Ltd. subject to the terms and
conditions of Attachment A, “The Area of Exclusion”.
|
|
c.
|
To
present the Report and to represent the Company with reference
to the
technical content of the Report at such meetings and demonstrations
as may
be held from time to time and presented to representatives of the
Investment Community as may be required, including those meetings
that may
occur overseas.
|
|
d.
|
To
improve upon and to update the Report as required from time to
time, as
economic conditions and/or the Company situation change as the
case may
be.
|
|
6.
|
The
above item 5 to be referred to in this Agreement as the “Scope of Work.”
It is expected that the Report contained within the Scope of Work
will be
substantially completed by June 30, 2004. Further effort by the
Independent Contractor on behalf of the Company executing the Scope
of
Work including such travel time as may be required shall be invoiced
to
the company on a per incident basis.
|
|
7.
|
Independent
Contractor shall additionally perform any and all tasks and duties
associated with the Scope of Work set forth above, including but
not
limited to, work already being performed or related change orders.
Independent Contractor shall not be entitled to engage in any activities
which are not expressly set forth by this Agreement.
|
|
8.
|
Other
Projects, Properties and/or Prospects may, from time to time, be
appended
to the Independent Contractor’s Tasks, Duties, and Scope of Work by way of
execution of a separate Independent Contractor
Agreement.
|
|
9.
|
The
books and records related to the Scope of Work set forth in this
Agreement
shall be maintained by the Independent Contractor at the Independent
Contractor’s principal place of business and open to inspection by Company
during regular working hours. Documents to which Company will be
entitled
to inspect include, but are not limited to, any and all contract
documents, change orders/purchase orders and work authorized by
Independent Contractor or Company on existing or potential projects
related to this Agreement.
|
|
10.
|
Independent
Contractor shall be responsible to the management and directors
of
Company, but Independent Contractor will not be required to follow
or
establish a regular or daily work schedule, Independent Contractor
shall
supply all necessary equipment, materials and supplies. Independent
Contractor will not rely on the equipment or offices of Company
for
completion of tasks and duties set forth pursuant to this Agreement.
Any
advice given to Independent Contractor regarding the Scope of Work
shall
be considered a suggestion only, not an instruction. Company retains
the
right to inspect, stop, or alter the work of Independent Contractor
to
assure its conformity with this Agreement.
|
|
COMPENSATION
|
||
11.
|
Independent Contractor shall be entitled to compensation for performing those tasks and duties related to the Scope of Work as follows: | |
a.
|
Such
compensation of CAN$800.00 per day shall become due and payable
to
Independent Contractor upon receiving an invoice upon completion
of the
Report.
|
|
b.
|
Such
compensation as may be necessary for further tasks and duties related
to
the Scope of Work after completion of the Report shall become due
and
payable to Independent Contractor upon receiving an invoice at
a rate of
CAN$800.00 per day.
|
|
c.
|
The
minimum per diem invoice-able is one half day.
|
|
d.
|
While
providing such services as described above in the Scope of Work,
Independent Contractor shall be entitled to receive, subject to
all
applicable corporate and regulatory approvals and compliance with
any
conditions to such approval, options to purchase up to 900,000
common
shares of Company exercisable three (3) years from the date of
grant at an
exercise price per common share equal to US$.75 subject to standard
vesting and anti-dilution provisions set forth below.
|
|
e.
|
Those
Options received above shall become vested at a rate of not greater
than
1% of 900,000 per calendar quarter for the first 36 months, the
first
quarter commencing no sooner than first day of the month following
the
signing date of this Independent Contractor Agreement. After the
completion of the 36 month vesting period and if the Independent
Contractor Agreement has not been terminated, the remaining unexercised
options shall become fully vested.
|
|
f.
|
The
Independent Contractor acknowledges that the common shares of Company
issued upon exercise of vested stock options shall be subject to
any
resale restrictions under applicable United States Securities Laws,
and
including applicable law in Alberta.
|
|
g.
|
The
Independent Contractor shall be entitled to be reimbursed for any
expenses
and disbursements as may be incurred in providing the services
to Company
that have been approved in advance by the President or Vice President
of
Company.
|
|
NOTICE
CONCERNING WITHHOLDING OF TAXES
|
||
12.
|
Independent
Contractor recognizes and understands that it will receive an IRS
1099
statement and related tax statements, and will be required to file
corporate and/or individual tax returns and to pay taxes in accordance
with all provisions of applicable Federal and Provincial and/or
State
laws. Independent Contractor hereby promises and agrees to indemnify
Company for any damages or expenses, including attorney’s fees, and legal
expenses, incurred by Company as a result of independent contractor’s
failure to make such required payments.
|
|
AGREEMENT
TO WAIVE RIGHTS TO BENEFITS
|
||
13.
|
Independent
Contractor hereby waives and foregoes the right to receive any
benefits
given by Company to its regular employees, including, but not limited
to,
health benefits, vacation and sick leave benefits, profit sharing
plans,
such as 40 1(k) plans. This waiver is applicable to all non-salary
benefits which might otherwise be found to accrue to the Independent
Contractor by virtue of their services to Company, and is effective
for
the entire duration of Independent Contractor’s agreement with Company.
This waiver is effective independently of Independent Contractor’s
employment status as adjudged for taxation purposes or for any
other
purpose.
|
|
TERMINATION
|
||
14.
|
This
Agreement may be terminated at will prior to the completion or
achievement
of the Scope of Work by either party giving 30 days written notice.
Such
termination shall not prejudice any other remedy to which the terminating
party may be entitled, either by law, in equity, or under this
Agreement.
|
|
NON-DISCLOSURE
OF TRADE SECRETS, CUSTOMER LISTS AND OTHER PROPRIETARY
INFORMATION
|
||
15.
|
Independent
Contractor agrees not to disclose or communicate, in any manner,
either
during or after Independent Contractor’s agreement with Company,
proprietary information about Company, its operations, clientele,
or any
other proprietary information, that relate to the business of Company
including, but not limited to, the names of its customers, its
marketing
strategies, operations, or any other information of any kind which
would
be deemed confidential, a trade secret, a customer list, or other
form of
proprietary information of Company. Independent Contractor acknowledges
that the above information is material and confidential and that
it
affects the profitability of Company. Independent Contractor understands
that any breach of this provision, or that of any other Confidentiality
and Non-Disclosure Agreement, is a material breach of this Agreement.
To
the extent Independent Contractor feels they need to disclose confidential
information, they may do so only after obtaining written authorization
from the President or Vice President of the Company.
|
|
NON-SOLICITATION
COVENANT
|
||
16.
|
Independent
Contractors shall not, during the Agreement and for a period of
one year
immediately following termination of this Agreement, either directly
or
indirectly, call on, solicit, or take away, or attempt to call
on,
solicit, or take away, any of the customers or clients of the Company
on
whom Independent Contractor called or became acquainted with during
the
terms of this Agreement, either for their own benefit, or for the
benefit
of any other person, firm, corporation or organization.
|
|
NON-RECRUIT
COVENANT
|
||
17.
|
Independent
Contractor shall not, during this Agreement and for a period of
one year
immediately following termination of this agreement, either directly
or
indirectly, recruit any of Company’s employees for the purpose of any
outside business.
|
|
RETURN
OF PROPERTY
|
||
18.
|
On
termination of this Agreement, or whenever requested by the parties,
each
party shall immediately deliver to the other party all property
in its
possession, or under its care and control, belonging to the other
party to
them, including but not limited to, proprietary information, customer
lists, trade secrets, intellectual property, computers, equipment,
tools,
documents, plans, recordings, software, electronic data records
and all
related records or accounting ledgers.
|
|
EXPENSE
ACCOUNTS
|
||
19.
|
Independent
Contractor and the Company agree to maintain separate accounts
in regards
to all expenses related to performing the Scope of Work. Independent
Contractor is solely responsible for payment of expenses incurred
pursuant
to this Agreement unless provided otherwise in writing by the President
or
Vice President of the company. Independent Contractor agrees to
execute
and deliver any agreements and documents prepared by Company and
to do all
other lawful acts required to establish document and protect such
rights.
|
|
WORKS
FOR HIRE
|
||
20.
|
Independent
Contractor agrees that the Scope of Work, all tasks, duties, results,
inventions and intellectual property developed or performed pursuant
to
this Agreement are considered “works for hire” and that the results of
said work is by virtue of this Agreement assigned to the Company
and shall
be the sole property of Company for all purposes, including, but
not
limited to, copyright, trademark, service mark. patent. and trade
secret
laws.
|
|
LEGAL
COMPLIANCE
|
||
21.
|
Independent
Contractor is encouraged to treat all company employees, customers,
clients, business partners and other affiliates with respect and
responsibility. Independent Contractor is required to comply with
all
laws, ethical codes and company policies, procedures, rules or
regulations, including those forbidding sexual harassment, discrimination,
and unfair business practices.
|
|
LICENSING,
WORKERS’ COMPENSATIONAND GENERAL LIABILITY
INSURANCE
|
||
22.
|
Independent
Contractor agrees to immediately supply the Company with proof
of any
licensing status required to perform the Scope of Work pursuant
to this
Agreement, Workers’ Compensation Coverage where required by law and
General Liability Insurance, upon request of the
Company.
|
|
PERSONS
HIRED BY INDEPENDENT CONTRACTOR
|
||
23.
|
All
persons hired by Independent Contractor to assist in performing
the tasks
and duties necessary to complete the Scope of Work shall be the
employees
of Independent Contractor unless specifically indicated otherwise
in an
agreement signed by all parties. Independent Contractor shall immediately
provide proof of Workers’ Compensation insurance and General Liability
insurance covering said employees, upon request of the
Company.
|
|
NOTICES
|
||
24.
|
Any
notice to be given hereunder by any party to the other may be affected
either by personal delivery in writing, or by mail, registered
or
certified, postage pre-paid with return receipt requested. Mailed
notices
shall be addressed to the parties at the addresses appearing in
the
introductory paragraphs of this Agreement, but each party may change
their
address by written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of actual
receipt;
mailed notices shall be deemed communicated as of five (5) days
after
mailing. Independent Contractor agrees to keep Company current
as to their
business and mailing addresses, as well as telephone, facsimile,
e-mail
and pager numbers.
|
|
ATTORNEY’S
FEES AND COSTS
|
||
25.
|
If
any action at law or in equity is necessary to enforce or interpret
the
terms of this Agreement, the prevailing party shall be entitled
to
reasonable attorney’s fees, costs and necessary disbursements incurred
both before or after judgment in addition to any other relief to
which
such party may be entitled.
|
|
MEDIATION
AND ARBITRATION
|
||
26.
|
Any
controversy between the parties to this Agreement involving the
construction or application of any of the terms, provisions, or
conditions
of this Agreement, shall on written request of either party served
on the
other, be submitted first to mediation and then if still unresolved
to
binding arbitration. Said mediation or binding arbitration shall
comply
with and be governed by the provisions of the American Arbitration
Association for Commercial Disputes unless the Parties stipulate
otherwise. The attorneys’ fees and costs of arbitration shall be borne by
the losing party, as set forth in paragraph 24 above, unless the
Parties
stipulate otherwise, or in such proportions, as the arbitrator
shall
decide.
|
INDEMNIFICATION
|
||
27.
|
Independent
Contractor shall defend, indemnify, hold harmless, and insure Company
from
any and all damages expenses or liability resulting from or arising
out
of, any negligence or misconduct on Independent Contractor’s part, or from
any breach or default of this Agreement which is caused or occasioned
by
the acts of Independent Contractor. Independent Contractor shall
insure
that its employees and affiliates take all actions necessary to
comply
with the terms and conditions set forth in this Agreement. Independent
Contractor shall name Company as an additional insured on all related
insurance policies including workers compensation, and general
liability.
|
|
CONTAINMENT
OF ENTIRE AGREEMENT
|
||
28.
|
This
Agreement is an independent document and supersedes any and all
other
Agreements, either oral or in writing, between the parties hereto,
except
for any separately signed Confidentiality, Trade Secret, Non-Compete
or
Non-Disclosure Agreements to the extent that these terms are not
in
conflict with those set forth herein.
|
|
REPRESENTATION
|
||
29.
|
Each
party of this Agreement acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been made by
any party
hereto, or anyone acting on behalf of any party hereto, which are
not
embodied herein, and that no other agreement, statement or promise
not
contained in this Agreement shall be valid or binding. Any modification
of
this Agreement shall be effective only if it is in writing, signed
and
dated by all parties hereto.
|
|
PARTIAL
INVALIDITY
|
||
30.
|
If
any provision of this Agreement is held by a Court of competent
jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect
without
being impaired or invalidated in any way.
|
|
LAWS
OF NEVADA
|
||
31.
|
The
Parties agree that this Agreement shall for all purposes be construed
and
interpreted according to the laws of the State of Nevada, and that
the
courts having jurisdiction with respect to matters relating to
this
Agreement shall be the courts of said State, to the jurisdiction
of which
courts the parties by their execution of this Agreement do hereby
submit.
|
|
COUNTERPART
EXECUTION
|
||
32.
|
This
Agreement may be executed by the parties in counterpart and when
each
party has executed a counterpart, all counterparts taken together
shall
constitute one agreement.
|
Independent
Contractor
|
||
|
|
|
By: | /s/ Menno Wiebe | |
|
||
Menno Wiebe |
Deep Well Oil & Gas, Inc. | ||
|
|
|
By: | /s/ Steven Gawne | |
|
||
Steven
Gawne
President/CEO
|
1.
|
The
effective date would be November 15
,
2004
|
2.
|
$10,000
per month paid semi monthly, subject to all the usual governmental
withholdings, withhold $250 per pay period to be paid to A. Ron Hardie
on
your behalf and $278.29 per pay period withheld to repay the employee
loan
made to you as per our October
21
St
Letter.
|
3.
|
As
part of your base salary you will receive shares in Deep Well Oil
&
Gas, Inc. We will issue 300,000 common Deep Well Oil & Gas, Inc.
common shares in your name to be held by your receiver, A. Ron Hardie.
These shares will be subject to any restrictions and withholdings
imposed
by any regulatory authorities, Securities or Tax, Canadian or US.
You will
earn these shares at the rate of 100,000 shares per year, earned
at the
end of each of three years. At the end of each year, any withholdings
for
tax will be calculated and submitted to the appropriate governments,
then
the portion going to the receiver will be deducted and then the residual
will be received by yourself. The Company (directly or via a nominee)
is
to get a right of first refusal on the sale of these shares, whether
by
yourself or the receiver.
|
4.
|
At
least annual bonuses, either in cash or
shares.
|
5.
|
Share
options in the company.
|
6.
|
Benefits
plan.
|
7.
|
Entering
into an employee agreement with the company that would encompass
these
terms plus what ever other standard terms that company will be having
in
its employment agreements such as confidentiality
etc.
|
8.
|
Attached
is a copy of the TD-1 Forms for both the Federal Government and the
Alberta Governments with their work sheets. We would need you to
fill
these out.
|
1.
|
INTERPRETATION
|
|
(a)
|
In
this Agreement, unless the context otherwise requires, the definitions
contained in clause 101 of the Operating Procedure shall apply,
and:
|
|
(i)
|
“Assignment
Procedure” means the 1993 CAPL Assignment Procedure as completed and
attached as Schedule “C”;
|
|
(ii)
|
“Effective
Date” means December 9, 2004;
|
|
(iii)
|
“Joint
Lands” means the lands described in Schedule “A” hereto, including where
the context requires the petroleum substances within, upon or under
such
lands, or any interest or interests in such lands from time to
time
remaining subject to this Agreement;
|
|
(iv)
|
“Operating
Procedure” means the Operating Procedure as completed and attached as
Schedule “B”, together with the Accounting Procedure as completed and
annexed thereto as Exhibit “A”
|
|
(v)
|
“Operator”
initially means Deep Well Oil & Gas, Inc., appointed as such in Clause
5 of this Agreement;
|
|
(vi)
|
“Participating
Interest” means the percentage interest of a party set forth in Clause 4
of this Agreement;
|
|
(vii)
|
“Title
Document” means the document of title set forth and described in Schedule
“A” hereto and any renewal, extension or replacement thereof, including
any leases selected from a license or reservation, insofar as they
relate
in each case to the Joint Lands; and
|
|
(b)
|
The
headings of the clauses of this Agreement and the Schedules are
inserted
for convenience of reference only and shall not affect the meaning
or
construction thereof.
|
|
(c)
|
Whenever
the singular or masculine or neuter is used in this Agreement or
the
Schedules, the same shall be construed as meaning plural or feminine
or
body politic or corporate and vice versa as the context
requires.
|
|
(d)
|
In
the event of any conflict or inconsistency between the provisions
of this
Agreement and those of any Schedule, the provisions of this Agreement
shall prevail. If any term or condition of this Agreement conflicts
with a
term or condition of any Title Document, then such term or condition
of
such Title Document shall prevail and this Agreement shall be deemed
to be
amended accordingly with respect to such Title
Document.
|
2.
|
SCHEDULES
|
|
The
following Schedules are attached to and are incorporated into this
Agreement:
|
||
(a)
|
Schedule
“A” which sets forth and describes the Joint Lands and the Title
Document;
|
|
(b)
|
Schedule
“B” which is the Operating Procedure together with the Accounting
Procedure annexed thereto as Exhibit “A”; and
|
|
(c)
|
Schedule
“C” which is the Assignment
Procedure.
|
3.
|
TITLE
|
|
No
party warrants title to its Participating Interest in the Title
Document
or the Joint Lands but each party covenants that it has complied
with the
terms of the Title Document to the extent necessary to keep it
in full
force and effect, has good right, full power and authority to enter
into
this Agreement and represents that it has not as of the Effective
Date of
this Agreement received any notice of default in respect of any
Title
Document.
|
4.
|
PARTICIPATING
INTERESTS
|
|
Except
as otherwise provided in the Operating Procedure, the parties shall
bear
all costs and expenses paid or incurred under this Agreement and
the
Operating Procedure and shall own the Title Document the Joint
Lands, all
wells thereon and information obtained therefrom and the equipment
pertaining thereto and the petroleum substances produced therefrom
in
accordance with the following respective Participating
Interests:
|
Deep
Well Oil & Gas, Inc.
|
80%
|
1132559
Alberta Ltd.
|
10%
|
Maxen
Petroleum Inc.
|
10%
|
5.
|
APPOINTMENT
OF OPERATOR
|
|
Deep
Well Oil & Gas, Inc. is hereby appointed initial Operator and shall be
responsible for the operation and development of the Joint Lands
for the
joint account and, subject to the terms and provisions of this
Agreement
and the Operating Procedure, shall have the sole and exclusive
control and
management of all operations conducted pursuant to this Agreement.
Deep
Well Oil & Gas, Inc. hereby accepts such appointment as Operator. The
Operator shall account for the Goods and Services Tax (Canada),
pursuant
to Subsection 273 (1) of the Excise Tax Act, on all purchases and
sales
occurring on the Joint Lands.
|
6.
|
OPERATING
PROCEDURE
|
|
The
parties agree that the Operating Procedure as amended by this Agreement
governs the relationship of the parties hereto and applies to all
operations conducted in respect of the exploration, development
and
maintenance of the Joint Lands for the production of petroleum
substances.
|
7.
|
INFORMATION
TO JOINT-OPERATOR
|
|
In
addition to the information and data required to be provided to
the
Joint-Operator by the Operator pursuant to the Operating Procedure,
the
Operator, upon any well reaching total depth, shall supply the
Joint-Operator with two (2) copies of a geological (factual) report
containing:
|
||
(a)
|
final
summary of survey log formation tops;
|
|
(b)
|
detailed
drillstem test data, if applicable;
|
|
(c)
|
lithologic
core and sample report, if applicable; and
|
|
(d)
|
core,
water, gas or oil analyses, if
applicable.
|
8.
|
ENCUMBRANCES
ON INTEREST
|
|
If
the interest of any party in the Joint Lands is now or hereafter
shall
become encumbered by any security interest or by any royalty, production
payment or other charge of a similar nature, other than the royalties
set
forth under the terms of the Title Document covering such lands
or any
compensatory royalty payments, then such security interest, additional
royalty, production payment or charge shall be charged to and paid
entirely by the party whose interest is or becomes thus encumbered.
Any
such encumbrance hereafter made or granted by a party shall be
expressly
made subject to the rights of the other parties hereunder. In no
event
shall a party hereto acquiring an interest in such lands by virtue
of the
operation of any provision of the body of this Agreement of the
Operating
Procedure (except Article XXIV of the Operating Procedure, where
applicable) ever be required to assume any part of such interest,
royalty,
payment or charge.
|
9.
|
NEW
ROYALTY APPLICATIONS
|
|
If
any well on the Joint Lands is completed for the taking of production
the
Operator shall be responsible for making timely application, on
behalf of
the parties, pursuant to the Regulations, for new royalty status
on any
petroleum substances and for any royalty holiday or abatement that
may be
applicable to operations hereunder.
|
10.
|
INCENTIVE
ASSISTANCE PROGRAM
|
|
Incentives
of any kind which are generated by operations on the Joint Lands
by the
parties shall be allocated and shared in accordance with each party’s
participation in such operation.
|
11.
|
CONFIDENTIAL
INFORMATION
|
|
Notwithstanding
the Operating Procedure, a party may release information obtained
in the
course of or as a result of operations on the Joint Lands to an
industry
scouting association in which the party is a participant, or to
a lawful
governmental authority to the extent required by law, or to a stock
exchange on which a party’s shares are listed or traded to the extent
required by the rules of such
exchange.
|
12.
|
TERM
OF AGREEMENT
|
|
This
Agreement is effective from the Effective Date and shall continue
for the
life of any Title Document in which the parties hold their interest
as
provided herein and any extensions or renewals of such
Title
Document whether by production or otherwise and until final settlement
of
accounts has been made among the
parties.
|
13.
|
ENTIRE
AGREEMENT
|
|
The
terms of this Agreement express and constitute the entire Agreement
among
the parties. No implied covenant or liability is created or shall
arise by
reason of this Agreement or anything herein
contained.
|
14.
|
COVENANTS
RUN WITH THE LAND
|
|
All
terms and provisions of this Agreement shall run with and be binding
upon
the Joint Lands during the term
hereof.
|
15.
|
ENUREMENT
|
|
This
Agreement shall be binding upon and enure to the benefit of the
parties
hereto and their respective successors and
assigns.
|
16.
|
LAWS
OF ALBERTA
|
|
The
Parties agree that this Agreement shall for all purposes be construed
and
interpreted according to the laws of the Province of Alberta, and
that the
courts having jurisdiction with respect to matters relating to
this
Agreement shall be the courts of said Province, to the jurisdiction
of
which courts the parties by their execution of this Agreement do
hereby
submit.
|
17.
|
COUNTERPART
EXECUTION
|
|
This
Agreement may be executed by the parties in counterpart and when
each
party has executed a counterpart, all counterparts taken together
shall
constitute one agreement.
|
DEEP
WELL OIL & GAS, INC.
|
||
|
|
|
By: | /s/ Steven Gawne | |
|
||
Per:
Steven
Gawne, Director, President, CEO
|
1132559
ALBERTA LTD.
|
||
|
|
|
By: | /s/ William Tighe | |
|
||
Per:
Wm
Tighe, Director, President
|
CLAUSE
311 - Insurance Election:
|
A___
|
B
x
|
CLAUSE
604 - Marketing Fee:
|
A
x
|
B
___
|
CLAUSE
903 - Casing Point Election:
|
A
x
|
B
___
|
CLAUSE
2401 - Disposition of Interests:
|
A
x
|
B
___
|
CLAUSE
2404 - Recognition upon Assignment
|
A
x
|
B
___
|
1.01
|
In this Assignment Procedure, the following terms, when capitalized, - shall have the meaning assigned to each below: | |
(a)
|
“Affiliate”
- for the purposes of this Assignment Procedure, means a corporation
or
partnership that is affiliated with the party in respect of which
the
expression is being applied, and, for the purpose of this definition
a
corporation or partnership is affiliated with another corporation
or
partnership if it directly or indirectly controls or is controlled
by that
other corporation or partnership, and for the purpose of determining
whether a corporation or partnership is so controlled, it shall
be deemed
that:
|
|
(i)
|
a
corporation is directly controlled by another corporation or partnership
if the shares of the corporation to which are attached more than
50% of
the votes that may be cast to elect directors of the corporation
are
beneficially owned by that other corporation or partnership and
the votes
attached to those shares are sufficient, it exercised, to elect
a majority
of the directors of the corporation;
|
|
(ii)
|
a
partnership is directly controlled by a corporation or other partnership
if that corporation or partnership beneficially owns more than
a 50%
interest in the partnership;
|
|
(iii)
|
a
corporation or partnership is indirectly controlled by another
corporation
or partnership if control, as defined above, is exercised through
one or
more other corporations or partnerships.
|
|
Where
two or more corporations or partnerships are affiliated at the
same time
with the same corporation or partnership, they shall be deemed
to be
Affiliates of each other.
|
||
(b)
|
“Agreement”
- means the agreement to which this Assignment Procedure is attached
and
made a part.
|
|
(c)
|
“Assigned
Interest” - means the interest in the Agreement which is the subject of an
assignment and which is specified in a Notice of Assignment, but
shall not
include rights of the Assignor as operator.
|
|
(d)
|
“Assignee”
- means the entity named in a Notice of Assignment as the
Assignee.
|
|
(e)
|
“Assignment
and Novation Agreement” - means an agreement by all parties to the
Agreement and a party to whom an interest in the Agreement has
been
assigned where:
|
|
(i)
|
the
assignee assumes the duties and obligations of the assignor for
the
Assigned Interest; and
|
|
(ii)
|
the
assignor is released from its duties for the Assigned Interest;
and
|
|
(iii)
|
the
assignee is substituted as a party to the Agreement in the place
of the
assignor to the extent of the Assigned Interest.
|
|
(f)
|
“Assignor”
- means the party to the Agreement named in a Notice of Assignment
as the
Assignor.
|
|
(g)
|
“Binding
Date” - means the first day of the second calendar month following the
month in which the Notice of Assignment is served in accordance
with
Article IV below.
|
|
(h)
|
“Notice
of Assignment” - means a ‘notice in the form entitled Notice of Assignment
attached hereto as Appendix A.
|
|
(i)
|
“Third
Party” - means the parties to the Agreement who are not the
Assignor.
|
|
(j)
|
“Transfer
Date” - means the effective date of the transfer of the Assigned Interest,
as specified in the Notice of Assignment.
|
|
1.02
|
In
this Assignment Procedure, when a numbered clause or Article is
referred
to, that clause or Article is of this Assignment
Procedure.
|
(i)
|
requires
parties to use; or
|
(ii)
|
entitles
parties to request; or
|
(iii)
|
is
silent as to the right of any party to
request;
|
3.01
|
If
a Notice of Assignment has become effective in accordance with
Clauses
2.05 or 2.06, then Assignor, Assignee and Third Party shall have
agreed
that:
|
|
(a)
|
Subject
to Clause 3.01 (d), Assignor and Assignee shall have acknowledged
and
represented that the Assignor has transferred, assigned and conveyed
the
Assigned Interest to Assignee as of the transfer Date.
|
|
(b)
|
Subject
to Clause 3.01(d), Assignee shall replace Assignor as a party to
the
Agreement with respect to the Assigned Interest on and after the
Transfer
Date.
|
|
(c)
|
Only
insofar as Third Party is concerned, notwithstanding the terms
and
provisions in the “Transfer Agreement” referenced in the Notice of
Assignment:
|
|
|
(i)
|
Subject to Clause 3.01 (d), Assignee shall assume and be bound by, observe and perform all terms, obligations and provisions in the Agreement with regard to the Assigned Interest at all times on or after the Transfer Date; and |
(ii)
|
Assignor
shall retain and be entitled to all rights, benefits and privileges
under
the Agreement with respect to the Assigned Interest at all times
prior to
the Transfer Date; and
|
|
(iii)
|
Subject
to Clause 3.01 (d), Assignee shall assume and be entitled to all
rights,
benefits and privileges under the Agreement with respect to the
Assigned
Interest at all times on and after the Transfer Date.
|
|
(d)
|
In
all matters relating to the Assigned Interest subsequent to the
Transfer
Date and prior to the Binding Date, Assignor acts as trustee for
and duly
authorized agent of Assignee, and Assignee, for the benefit of
Third
Party, ratifies, adopts and confirms all acts or omissions of the
Assignor
in such capacity as trustee and agent. Third Party agrees to recognize
and
accept Assignor as trustee and agent for Assignee.
|
|
(e)
|
On
and after the Transfer Date, Third Party:
|
|
(i)
|
releases
and discharges Assignor from the observance and performance of
all terms
and covenants of the Agreement and all obligations and liabilities
which
arise or occur on or after the Transfer Date under the Agreement
with
respect to the Assigned Interest; and
|
|
(ii)
|
does
not release and discharge Assignor from any obligation or liability
which
had arisen or accrued prior to the Transfer Date or which does
not relate
to the Assigned Interest.
|
|
(f)
|
Subject
to the terms and provisions of the “Transfer Agreement” referenced in the
Notice of Assignment, Assignee on and after the Transfer
Date:
|
|
(i)
|
releases
and discharges Assignor from the observance and performance of
all terms
and covenants of the Agreement and all obligations and liabilities
which
arise or occur on or after the Transfer Date under the Agreement
with
respect to the Assigned Interest; and
|
|
(ii)
|
does
not release and discharge Assignor from any obligation or liability
which
had arisen or accrued prior to the Transfer Date or which does
not relate
to the Assigned Interest.
|
|
(g)
|
The
address of Assignee for the purposes of the Agreement and the serving
of
notices under it shall be the address stated for Assignee in the
Notice of
Assignment.
|
|
(h)
|
The
Agreement shall continue in full force and effect from and after
the
Transfer Date with Assignee made a party thereto to the extent
of the
Assigned Interest, subject to Clause 3.01(d). The Agreement is
amended as
necessary to give effect to the Notice of Assignment and, as so
amended,
is ratified and confirmed by each party.
|
|
3.02
|
In
no event shall errors, inaccuracies or misdescriptions in a Notice
of
Assignment have any effect on the Third Party or the interests
of Third
Party in the Agreement, even if Third Party has knowledge of an
error,
inaccuracy or misdescription.
|
|
3.03
|
Assignor
and Assignee shall be solely responsible for any adjustment between
themselves with respect to the Assigned Interest as to revenues,
benefits,
costs, obligations or indemnities which accrue prior to Binding
Date
|
4.01
|
All
notices and Notices of Assignment (herein called “notices”) required or
permitted by the terms of this Assignment Procedure shall be in
writing,
subject to the provisions of this Article. This Article applies
only to
notices served pursuant to this Assignment Procedure. Any notice
to be
given under this Assignment Procedure 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. Personally served notices shall be deemed
received by the addressee when actually delivered as aforesaid,
if such
delivery is during normal business hours, on any day other than
a
Saturday, Sunday or statutory holiday. If a notice is not delivered
during
normal business hours, such notice shall be deemed to have been
received
by such party at the commencement of the day next following the
date of
delivery, other than a Saturday, Sunday or statutory holiday;
or
|
|
(b)
|
by
telecopier or telex (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 (however, an original executed
copy of a Notice of Assignment shall subsequently be provided to
all
addressees without delay). A notice so served shall be deemed received
by
the respective addressees:
|
|
(i)
|
when
actually received by them, if received within the normal business
hours on
any day other than a Saturday, Sunday or statutory holiday;
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
of
Canada) registered post, postage prepaid, directed to the party
on whom it
is to be served at that party’s address for service. Notices so served
shall be deemed to be received by the addressees 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
mailing.
However, 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.
|
|
4.02
|
The
addresses for service of a notice pursuant to this Assignment Procedure
shall be as set out (and amended from time to time) in the
Agreement.
|
1.
|
Assignor
(specify proportions if more than one
Assignor):
|
2.
|
Assignee
(specify proportions if more than one Assignee and include address
for
service of notice pursuant to Master
Agreement):
|
3.
|
Current
Third Party to Master Agreement:
|
4.
|
Assigned
Interest: (Check A or B below):
|
5.
|
Subject
to Clause 7 of this Notice of Assignment, Assignor and Assignee,
in
accordance with the terms of the Transfer Agreement, acknowledge
that:
|
(i)
|
Assignor
has transferred and conveyed the Assigned Interest to the Assignee
as of
the Transfer Date; and
|
|
(ii)
|
Assignee
agrees to replace Assignor, on and after the Transfer Date, as
a party to
the Master Agreement with respect to the Assigned Interest;
and
|
|
(iii)
|
Assignee
agrees to be bound by and observe all terms, obligations and provisions
in
the Master Agreement with respect to the Assigned Interest on and
after
the Transfer Date.
|
6.
|
Subject
to the terms and provisions of the Transfer Agreement, Assignee
on and
after the Transfer
|
(i)
|
discharges
and releases the Assignor from the observance and performance
of all terms
and covenants in the Master Agreement and any obligations and
liabilities
which arise or occur under the Master Agreement with respect
to the
Assigned Interest, and
|
|
(ii)
|
does not release and discharge the Assignor from any obligation or liability which had arisen or accrued prior to the Transfer Date or which does not relate to the Assigned Interest. |
7.
|
Assignee
and Assignor agree that in all matters relating to the Master Agreement
with respect to the Assigned Interest, subsequent to the Transfer
Date and
prior to the Binding Date, Assignor acts as trustee for and duly
authorized agent of the Assignee and Assignee, for the benefit of
the
Third Party, ratifies, adopts and confirms all acts or omissions
of the
Assignor in such capacity as trustee and
agent.
|
8.
|
This
Notice of Assignment shall become binding on all parties to the Master
Agreement on the first day of the second calendar month following
the
month this notice is served on Third Party in accordance with the
terms of
the Master Agreement (“Binding Date-). In addition, Assignor and Assignee
agree that they shall be solely responsible for any adjustment between
themselves with respect to the Assigned Interest as to revenues,
benefits,
costs, obligations or indemnities which accrue prior to the Binding
Date.
|
9.
|
Assignor
represents and certifies that this Notice of Assignment and its service
are in compliance with all the terms and provisions of the Master
Agreement.
|
1.1
|
Each
capitalized term used in this Head Agreement will have the meaning
given
to it in the Farmout & Royalty Procedure and, in
addition:
|
(a)
|
“
6.5
Section Block
”
means those lands designated as such in Schedule
“A”;
|
(b)
|
“
32
Section Block
”
means those lands designated as such in Schedule
“A”;
|
(c)
|
“
31
Section Block
”
means those lands designated as such in Schedule
“A”;
|
(d)
|
“
Assignment
Procedure
”
means the 1993 CAPL Assignment Procedure which will be deemed to
apply as
if it had been included as a separate schedule to this
Agreement;
|
(e)
|
“
Assumption
of Liabilities and Indemnity Agreement
”
means agreement entitled Assumption of Liabilities and Indemnity
Agreement
dated as of February 18, 2005 pursuant to which Farmor undertakes
to be
solely responsible for the Nearshore ORR as it pertains to the Farmee’s
interests in the Farmout Lands and to indemnify and save Farmee harmless
from any and all claims and demands made by Nearshore Petroleum
Corporation (or any person claiming by, through or under it) in respect
of
the Nearshore ORR;
|
(f)
|
“
Conditions
Satisfaction Date
”
means the date on which all conditions in Section 2.1 have been
satisfied;
|
(g)
|
“
Contract
Depth
”
means, with respect to each well drilled by Farmee under this Agreement,
a
vertical wellbore to a depth sufficient to penetrate 15 meters into
the
top of the Wabamun formation or to a subsurface depth of 800 meters
whichever shall first occur, followed by a minimum 600 meter horizontal
wellbore within the Bluesky
Formation;
|
(h)
|
“
Earning
Period
”
means a period of 24 months following the Conditions Satisfaction
Date;
|
(i)
|
“
Effective
Date
”
means
February 17, 2005;
|
(j)
|
“
Encumbrances
”
means
the royalty interests described under that heading in Schedule
“A”;
|
(k)
|
“
Existing
32 Section Block JOA
”
means the Joint Operating Agreement made as of April 26, 2004 originally
between Northern Alberta Oil Ltd. (formerly Mikwec Energy Canada
Limited
by name change) having an 80% participating interest and Pan Orient
Energy
Ltd. (formerly Maxen Petroleum Inc. by name change) having a 20%
participating interest pertaining to the 32 Section
Block;
|
(l)
|
“
Existing
31 Section Block JOA
”
means the Joint Operating Agreement made as of December 9th, 2004
among
Deep Well having an 80% participating interest, Pan Orient Energy
Ltd.
having a 10% participating interest (Execution Pending) and 1132559
Alberta Ltd. having a 10% participating interest (Executed) pertaining
to
the 31 Section Block;
|
(m)
|
“
Existing
JOAs
”
means, collectively, the Existing 32 Section Block JOA and the Existing
31
Section Block JOA;
|
(n)
|
“
Farmor’s
Pre-Farmout Working Interests
”
means the interests shown under that heading in Schedule
“A”;
|
(o)
|
“
Farmout
Lands
”
means the lands shown under the heading Farmout Lands in Schedule
“A”,
provided that the “Farmout Lands” shall not include the 6.5 Section Block
lands unless or until the Farmor acquires a legal or beneficial interest
in the Title Documents that comprise the 6.5 Section
Block;
|
(p)
|
“
Farmout
& Royalty Procedure
”
means
the 1997 CAPL Farmout & Royalty Procedure including the elections and
revisions thereof, which are attached to this Head Agreement as Schedule
“B”;
|
(q)
|
“
Head
Agreement
”
means this Agreement other than the
Schedules;
|
(r)
|
“
Mutual
Interest Lands
”
means any interest in any single parcel of petroleum and natural
gas
rights, oil sands leases, and oil sands permits where 50% or more
of that
parcel, by surface area, is within Townships 91 and 92, Ranges 12
and 13,
W5M;
|
(s)
|
“
Nearshore
ORR
“
means the 6.5% overriding royalty granted to Nearshore Petroleum
Corporation under the Royalty Agreement dated December 12, 2003 originally
entered into between Mikwec Energy Canada Ltd. and Nearshore Petroleum
Corporation;
|
(t)
|
“
Operating
Procedure
”
means
the 1990 CAPL Operating Procedure together with the 1996 PASC Accounting
Procedure including the elections and revisions thereof, which are
attached to this Head Agreement as Schedule
“C”;
|
(u)
|
“
Operator
”
means Farmee;
|
(v)
|
“
Parties
”
means Farmor and Farmee and “
Party
”
means either of them, as
applicable;
|
(w)
|
“
Proved
Reserves
”
means estimated volumes of crude oil, crude bitumen, oil sands, natural
gas and gas condensates, liquids and associated substances which
are
expected to be retrieved from deposits and used commercially, at
the
economic and technical conditions applicable at the time and according
to
current legislation, and includes:
|
(i)
|
proved
developed reserves, which are amounts of hydrocarbons that are expected
to
be retrieved through existing wells, facilities and operating methods;
and
|
(ii)
|
undeveloped
proved reserves, which are amounts of hydrocarbons that are expected
to be
retrieved following new drilling, facilities and operating methods;
and
|
(x)
|
“
Title
Documents
”
means
the documents of title under the heading Title Documents described
in
Schedule “A” attached hereto.
|
1.2
|
The
following Schedules are attached to, and made part of this
Agreement:
|
Schedule
“A” -
|
|
Description
of the Farmout Lands, Farmor’s Pre-Farmout Working Interests, the Title
Documents and Encumbrances;
|
|
|
|
Schedule
“B”
|
|
Farmout
& Royalty Procedure elections and amendments;
|
|
|
|
Schedule
“C”
|
|
Operating
Procedure elections and amendments;
|
|
|
|
Schedule
15.1(f)
|
|
Outstanding
Authorizations for Expenditure
|
|
|
|
Schedule
15.1(k)
|
|
Areas
of Mutual Interest
|
2.1
|
Farmee’s
obligations under this Agreement shall commence once each of the
following
conditions precedent have been
satisfied:
|
(a)
|
Farmor
having conveyed to Farmee a 40% undivided interest in the Title Documents
and Farmee having had transfers accepted for registration evidencing
Farmee as a registered lessee of a 40% undivided interest in each
of the
Title Documents, in each case free and clear of all royalties, burdens,
claims, encumbrances and other adverse interests of any nature or
kind
whatsoever, other than the
Encumbrances;
|
(b)
|
(1)
Farmee shall have received a fully executed copy of the Assumption
of
Liabilities and Indemnity
Agreement;
|
(c)
|
Farmor
shall use best efforts to obtain a fully executed copy of the Existing
31
Section Block JOA and the terms of such agreement and the parties
thereto
shall be satisfactory to Farmee, acting
reasonably;
|
(d)
|
Farmee
shall have received a fully executed copy of an agreement between
Nearshore Petroleum Corporation and Northern terminating the
Non-Disclosure/Area of Exclusion Agreement dated November 19, 2003
between
those parties.
|
(e)
|
Execution
of satisfactory Escrow Agreement and satisfactory evidence of completion
of Surge financing or sufficient funds to complete the drilling of
the
Test Well, as soon as practical following execution
hereof.
|
3.1
|
Farmee
shall, at its sole cost, risk and expense, and subject to having
obtained
a rig, all necessary surface access and Regulatory approvals, Spud
the
Test Well at a location of its choice on the Farmout Lands on or
before
150 days following the execution hereof and drill the Test Well to
Contract Depth.
|
3.2
|
Subject
to Article 3.00 of the Farmout & Royalty Procedure and Article 20 of
this Agreement, Farmee will earn 50% of Farmor’s Pre-Farmout Working
Interest in the section of land on which the Test Well is situated
together with 50% of the Farmor’s Pre-Farmout Working Interest in 5
additional sections of the Farmout Lands which are selected by Farmee
not
later than 90 days following the completion or abandonment, as applicable,
of the Test Well.
|
4.1
|
Within
60 days of rig release of the Test Well, Farmee shall have the right,
on
notice to Farmor, to elect to undertake the drilling of an Option
Well.
Farmee shall Spud the Option Well at a location selected by Farmee
and
Farmor acting reasonably on Farmout Lands not yet earned by Farmee
within
60 days of the date of the Farmee’s election notice (conditional upon rig
availability, Regulatory approvals and surface access). Farmee shall
continuously drill the Option Well to Contract
Depth.
|
4.2
|
Subject
to Article 3.00 of the Farmout & Royalty Procedure and Article 20 of
this Agreement, Farmee will earn 50% of Farmor’s Pre-Farmout Working
Interest in the section of land on which the Option Well is situated
together with 50% of the Farmor’s Pre-Farmout Working Interest in 5
additional sections of the Farmout Lands which are selected by Farmee
and
Farmor, acting reasonably, not later than 90 days following the completion
or abandonment, as applicable, of the Option
Well.
|
5.1
|
Farmee
shall have a continuous rolling option, during the Earning Period,
to
elect to drill additional Option Wells on the remaining unearned
Farmout
Lands in accordance with Article 4 hereof, until all of the Farmout
Lands
are earned or until Farmee’s right to further earning under this Agreement
is terminated. In respect of each Option Well which Farmee wishes
to
drill, Farmee must elect to drill the next Option Well by giving
notice to
Farmor within 90 days of rig release of the most recently drilled
Option
Well. All terms and conditions of this Agreement which apply to the
Option
Well shall apply,
mutatis
mutandis
,
to any additional Option Wells drilled by Farmee hereunder, provided
that
if Farmee drills a total of 8 Option Wells, it will have earned (to
that
point in time) a 40% undivided interest in 54 sections of the Farmout
Lands. Notwithstanding Section 4.2, if Farmee drills a 9
th
Option Well, it will earn 50% of the Farmor’s Pre-Farmout Working Interest
in the 9.0 remaining sections (which were not earned by the drilling
of
the Test Well and the prior 8 Option
Wells).
|
6.1
|
Promptly
following each determination by Farmee that it intends to drill a
well
under this Agreement, Farmor shall issue an operation notice (prepared
by
Farmee) pursuant to Article X (Independent Operations) of the applicable
Existing JOA and, thereafter, promptly advise Farmee whether either
or
both of the other Joint-Operators under the Existing JOA have elected
or
not elected (or are deemed to have elected or not elected) to participate
or not participate in the drilling of that well.
If:
|
(a)
|
either
or both of such Joint-Operators are participating in the operation,
Farmor
shall provide all assistance requested by Farmee in respect of such
Joint-Operator(s) including, without limitation, (1) by electing
to
participate in the operation (in order that Farmee can share in any
participating interest of a non-participating party), and (2) by
issuing
and collecting cash calls for costs of operations (to the extent
of
Farmor’s rights under the applicable Existing JOA);
and
|
(b)
|
either
or both of such Joint-Operators are not participating, Farmee will
be
required to pay the non-participant’s share of the cost of the operation
(to the extent not assumed by another participating party) and Farmee
shall be entitled to all benefits associated with such non-participation
including, without limitation, the right to receive the full amount
of the
penalty attributable to such non-participation in accordance with
Clause
1007 and the other provisions of the applicable Existing
JOA.
|
7.1
|
Upon
each occurrence of earning by Farmee in a 6 section block of Farmout
Lands
(and as between Farmor and Farmee), such Farmout Lands and the related
Title Documents (to the extend of such lands) will become subject
to the
Operating Procedure with Farmee being the initial Operator thereunder.
Subject to Section 7.2, the Operating Procedure will govern all future
joint operations of the Parties
upon
or with respect to such earned Farmout Lands and Title
Documents.
|
7.2
|
Upon
each occurrence of earning by Farmee in Farmout Lands governed by
an
Existing JOA, Farmor and Farmee shall take all necessary steps, using
the
Assignment Procedure, to have Farmee made a party to the Existing
JOA for
a 40% participating interest in respect of the earned Farmout
Lands.
|
8.1
|
Until
such time as Farmee either selects another operator to conduct operations
on Farmee’s behalf under this Agreement or assumes such activities itself,
Farmee and Northern agree that Northern shall conduct such operations
on
Farmee’s behalf as an independent contract operator. Northern shall be
entitled to be reimbursed for all costs and expenses incurred by
it in
connection with acting as contractor operator, but otherwise, shall
not be
entitled to be paid a fee for that service). Northern represents
and
warrants to Farmee that Northern holds all necessary permits and
other
authorizations required by Northern to hold well licenses in its
name and
conduct such operations on the Farmout Lands (including, without
limitation, those authorizations required from the Alberta Energy
and
Utilities Board).
|
8.2
|
At
such time as Farmee elects to replace Northern or use another contract
operator, Northern shall transfer the well licenses in its name to
the
successor designated by Farmee
|
9.1
|
Article
8.00 of the Farmout & Royalty Procedure will be in effect from
Effective date of this agreement until the end of the Earning Period.
Subject to that Article, the Parties will have the right to participate
in
an acquisition of Mutual Interest Lands in the following
percentages:
Farmor
- 50%
Farmee
- 50%.
|
9.2
|
Without
limiting the generality of Section 9.1, this Article 9 shall apply
in
respect of any interest acquired by Northern or any of its Affiliates
pursuant to the Non-Disclosure/Area of Exclusion Letter Agreement
dated
April 27, 2004 between Northern and Pan Orient Energy Ltd. (formerly
Maxen
Petroleum Inc. by name change). Northern shall promptly advise Farmee
of
any opportunities available to Northern under that agreement and
Northern
shall, if directed by Farmee, exercise its right to acquire the available
interest(s) (on the basis specified in Section 9.1
above).
|
9.3
|
Notwithstanding
Sections 9.1 and 9.2, and for greater certainty, Article 8.00 of
the
Farmout & Royalty Procedure shall not apply to the acquisition by the
Farmor of the lands comprising the 6.5 Section Block. Upon the Farmor
acquiring legal or beneficial title to the 6.5 Section Block, such
lands
such constitute “Farmout Lands” for the purposes of this
Agreement.
|
10.1
|
Promptly
following the end of the Earning Period, Farmee shall convey to Deep
Well
or Northern, as directed by Deep Well, a 40% beneficial interest
in those
Farmout Lands (if any) in which Farmee has not earned an interest
by the
end of the Earning Period. In the event Farmee has not earned a majority
interest in any of the lands included within a single Title Document,
then
Farmee shall also transfer to Deep Well or Northern in accordance
with
their interest as originally held, Farmee’s legal title to a 40% undivided
interest in such Title Document. However, if Farmee has earned a
majority
interest in the lands within a Title Document, Farmee shall be entitled
to
remain as a registered lessee for that Title Document (as to a 40%
undivided interest) but shall hold in trust for Farmor a 40% beneficial
interest in any Farmout Lands in that Title Document not earned by
Farmee
under this Agreement.
|
10.2
|
The
40% interests conveyed by Farmee to Farmor pursuant to this Article
shall
be free and clear of any and all royalties, burdens, claims, encumbrances
and other adverse interests created by, through or under Farmee including,
without limitation, any encumbrances registered by Farmee’s lender. Farmee
shall cause any such lender to provide no interest letters or, if
possible, partial discharges and releases, as necessary in respect
of any
such 40% interests reconveyed by Farmee to
Farmor.
|
11.1
|
Upon
completion of Farmee’s earning obligations under Article 3 (following the
drilling of the Test Well), or at any time thereafter, and if both
Parties
reasonably agree that further seismic data is required prior to the
drilling of any one or more of the Option Wells, then Farmor shall
participate with Farmee, each as to an undivided 50% interest (or
40%
interest if each of the other Joint-Operators participate), in the
shooting of additional seismic data on some or all of the Farmout
Lands.
|
12.1
|
Deep
Well is the agent for the Farmor for all purposes under this Agreement.
Farmee shall deal solely with Deep Well in respect of all matters
relating
to the Farmor or either of them. Farmee shall be entitled to rely
solely
on all communications from Deep Well as having been made by and on
behalf
of Deep Well and Northern. Northern shall be bound by all decisions,
elections and other determinations and communications made or issued
by
Deep Well under this Agreement and Northern shall not communicate
with
Farmee under any circumstances whatsoever (and Farmee shall be entitled
to
disregard any such Northern
communications).
|
12.2
|
Deep
Well and Northern are jointly and severally liable for the performance
of
all obligations and liabilities of Farmor under this Agreement regardless
of whether any particular obligation or liability pertains to either
or
both of the 32 Section Block or the 31 Section
Block.
|
13.1
|
In
recognition of the potential play developed by Farmor in respect
of the
Farmout Lands, Farmee shall pay to Farmor, at the following times
and
subject to the following legal obligations imposed on Farmee (if
any), the
aggregate amount of $2,000,000 USD (reduced by the deductions specified
herein) as a prospect fee, payable as 90% to Northern and 10% to
Deep
Well.
|
(a)
|
$1,000,000
USD payable 7 business days following the execution and delivery
of this
Agreement by the Parties such amount to be reduced by the aggregate
of the
following amounts:
|
(i)
|
$50,000
USD reflecting Farmor’s agreement to pay 50% of the commissions associated
with the payment of the first tranche of the Gemini Investment Strategies
LLC financing (“
Gemini
Financing
”);
|
(ii)
|
50%
of all legal fees, disbursements and associated taxes incurred (to
the
date of this Agreement) by Farmee and Surge Global Energy, Inc.
(“
SRGG
”)
in connection with this Agreement and the Gemini Financing (being
the
legal costs of Farmee’s Calgary counsel and SRGG’s corporate, commercial
and securities counsel in Denver and the legal fees of Gemini Investment
Strategies LLC); and
|
(b)
|
$1,000,000
USD payable upon the completion or abandonment of the first Option
Well
drilled by Farmee under this Agreement, such amount to be reduced
by the
following amount, $50,000 USD reflecting Farmor’s agreement to pay 50% of
the commissions associated with the payment of the second tranche
of the
Gemini Financing
|
14.1
|
Pursuant
to the Escrow Agreement to be completed by March 31
st
,
2005 among Farmor, Farmee, and an escrow agent, to be retained by
Surge.
The appointed escrow agent will hold one or more certificates representing
33 1/3 % of the fully diluted common shares of Surge Global Energy,
Inc.
(“
Shares
”)
outstanding as of February 17
th
2005 (approximately 11.6 Million Surge Shares to be issued to Farmor),.
The nature of the shares, the conversion mechanism to earn or transfer
of
these shares, the anti-dilutive provisions, the representations and
warranties of the parties regarding these shares, the registration
rights
and obligations of the parties pertaining to these shares shall all
be
mutually agreed upon as part of the Escrow Agreement. The Shares
are to be
held by the escrow agent thereunder for delivery to Farmor when Farmor
delivers to Farmee a reserves report (“
Report
”)
for the Properties which is in form and substance satisfactory to
Deep
Well and Farmee, acting reasonably, from a mutually acceptable reservoir
engineering firm and which confirms that the Proved Reserves for
the
Properties exceed $80,000,000 USD. The Report
shall:
|
(a)
|
use
the forward curve price forecast that is being used by that engineering
firm for the majority of the reserves studies that it is completing
at the
time the Report is prepared;
|
(b)
|
use
a 12.5% discount rate; and
|
(c)
|
attribute
a value of 100% to the Proved Reserves and no value to probable reserves
or undeveloped lands.
|
15.1
|
Farmor
hereby represents and warrants to Farmee (and acknowledges that Farmee
is
relying on such representations and warranties)
that:
|
(a)
|
Deep
Well is a body corporate duly incorporated and validly existing under
the
laws of Nevada and is extra-provincially registered in Alberta, and
Northern is a body corporate incorporated and validly existing under
the
laws of Alberta;
|
(b)
|
Farmor
has taken all necessary actions and has all requisite power and authority
to enter into this Agreement and to perform its obligations under
this
Agreement and any other agreements to be delivered hereunder and
this
Agreement constitutes and such other agreements will constitute legal,
valid and binding obligations of Farmor, enforceable against Farmor
in
accordance with and subject to the terms set forth herein and
therein;
|
(c)
|
The
consummation by Farmor of the transactions contemplated herein will
not
violate or conflict with any of the constating documents, by-laws
or
governing documents of Farmor, any judgment, decree, order, statute,
rule
or Regulation applicable to Farmor or any material agreement or instrument
to which it is a party or by which it is
bound;
|
(d)
|
Deep
Well is a non-resident of Canada and Northern is not a non-resident
of
Canada, in each case within the meaning of the
Income
Tax Act
(Canada);
|
(e)
|
There
are no claims, proceedings, actions, lawsuits, administrative proceedings
or governmental investigations in existence, or so far as Farmor
is aware,
contemplated or threatened against or with respect to the Farmor
(or
either of them) or any of the Farmout Lands or Title Documents and
there
is no particular circumstance, matter or thing known to Farmor which
could
reasonably be anticipated to give rise to any such claim, proceeding,
action, lawsuit, proceeding or
investigation;
|
(f)
|
There
are no outstanding authorizations for expenditures, mail ballots,
cash
calls or other financial commitments with respect to any of the Farmout
Lands other than those as itemized on schedule
15.1(f);
|
(g)
|
There
are no agreements for the purchase or sale of petroleum substances
that
may be deliverable from any of the Farmout
Lands;
|
(h)
|
No
exploration, development or other material activities of any kind
have
occurred on any of the Farmout Lands and, as a result, there are
no wells,
well sites or tangibles located on the surface of or within any of
such
lands; excepting the 6.5 Section Block referred to in
1.1(a)
|
(i)
|
There
are no rights of first refusal or other similar rights applicable
to any
of the Farmout Lands;
|
(j)
|
Farmor
shall not and has not knowingly withheld any records, files or other
documents in its possession relating to the Farmout Lands or Title
Documents and which Farmee has requested from Farmor;
and
|
(k)
|
There
are no areas of mutual interest or similar rights pertaining to any
of the
Farmout Lands that remain in effect as of the Effective Date, excepting
those listed on schedule 15.1(k).
|
15.2
|
Farmee
hereby represents and warrants to Farmor
that:
|
(a)
|
Farmee
is a corporation duly incorporated and validly existing under the
laws of
Alberta;
|
(b)
|
Farmee
has taken all necessary actions and has all requisite power and authority
to enter into this Agreement and to perform its obligations under
this
Agreement and any other agreements to be delivered hereunder and
this
Agreement constitutes and such other agreements will constitute legal,
valid and binding and obligations of Farmee, enforceable against
Farmee in
accordance with and subject to the terms set forth herein and
therein;
|
(c)
|
The
consummation by Farmee of the share transactions contemplated by
this
Agreement will not violate or conflict with any of the constating
documents, by-laws or governing documents of Farmee or any provision
of
any material agreement or instrument to which Farmee is a party or
is
bound, or any judgment, decree, order, statute, rule or regulation
applicable to Farmee;
|
16.1
|
The
address for service of notice hereunder for each of Farmor and Farmee
shall be as follows:
|
Farmor:
|
c/o
Deep Well Oil & Gas, Inc
|
|
Farmee:
|
Surge
Global Energy (Canada), Ltd.
|
|
|
Suite
2600, 144 - 4
th
Avenue SW
|
|
|
Suite
2600, 144 - 4
th
Avenue SW
|
|
|
Calgary,
AB T2P 3N4
|
|
|
Calgary,
AB T2P 3N4
|
|
|
Attention:
Steven Gawne, President
|
|
|
Attention:
Fred Kelly, President and CEO
|
|
|
Facsimile:
No. (403) 232-1464
|
|
|
Facsimile
No.: (858) 704-5011
and
(403) 355-3371
|
17.1
|
The
2-year period for seeking a remedial order under Section 3 of the
Limitations
Act
(Alberta), as amended, for any claim (as defined in that legislation)
arising in connection with this Agreement is extended
to:
|
(a)
|
for
claims disclosed by an audit, 2 years after the time this Agreement
permitted that audit to be performed;
or
|
(b)
|
for
all other claims, 4 years.
|
18.1
|
It
is the intentions of the Parties that Farmee is incurring significant
expenditures to earn a 40% undivided interest in the Farmout Lands
(to the
extent of Farmee’s drilling operations hereunder). If, immediately
prior to the time Farmor conveyed a 40% undivided interest in the
Farmout
Lands and Title Documents to Farmee, the Farmor had less than a 80%
beneficial interest in any of the Farmout Lands or the Title Documents,
the Farmee shall nevertheless earn a 40% undivided beneficial interest
in
and to the Farmout Lands earned hereunder even if the effect is that
the
Farmor’s residual beneficial interest (after earning by Farmee) is less
than a 40% undivided interest in those Farmout
Lands.
|
19.1
|
Notwithstanding
that:
|
(a)
|
the
Existing JOAs do not provide for a right of first refusal in the
event a
party wishes to dispose of an interest in any of the lands governed
by
such agreements; and
|
(b)
|
Farmee
will made a party to the Existing JOAs (as provided for in Article
7
hereof),
|
20.1
|
This
Agreement contains the final and entire agreement of the Parties
respecting earning by Farmee of interests in the Farmout Lands from
Farmor
and, as such and in respect of that subject matter, supercedes all
prior
agreements, memorandums of understanding, letters of intent, verbal
understandings and discussions to the extent specifically relating
to such
subject matter.
|
20.2
|
In
the event of any inconsistency or conflict between the provisions
of this
Head Agreement and those of any Schedule attached hereto, the provisions
of this Head Agreement shall
prevail.
|
20.3
|
The
terms, covenants and conditions in this Agreement shall run with,
attach
to, be binding upon, and form part of the Farmout Lands and the Title
Documents, and the estates affected thereby for the duration of this
Agreement.
|
20.4
|
If
any term of this Agreement is or becomes invalid, illegal or unenforceable
in any jurisdiction, such invalidity, illegality or unenforceability
shall
not affect the validity, legality or enforceability of any other
term of
this Agreement and such invalid, illegal or unenforceable term shall
be,
as to such jurisdiction, severable from this
Agreement.
|
20.5
|
This
Agreement shall be conclusively deemed for all purposes to be made
under,
and for all purposes to be governed by and construed in accordance
with
the laws of the Province of Alberta and of Canada applicable therein
and
shall be treated in all respects as an Alberta contract. Each of the
Parties hereby attorns to the Courts of Alberta at Calgary in respect
of
any suit, action or proceeding connected with this
Agreement.
|
20.6
|
Each
Party shall from time to time and at all times do all such further
acts
and execute and deliver all such further documents as may be reasonably
required in order to perform and carry out the terms and the intent
of
this Agreement.
|
20.7
|
This
Agreement may be executed in any number of separate counterparts
with the
same effect as if all Parties had signed the same copy of this
Agreement. All counterparts shall be construed together and
constitute one agreement. Each Party shall be entitled to rely on
the delivery of executed facsimile copies of counterpart execution
pages
of this Agreement and such facsimile copies shall be legally effective
to
create a valid and binding agreement between the
Parties.
|
20.8
|
This
Agreement shall inure to the benefit of and be binding upon the Parties
and their respective successors and permitted
assigns.
|
NORTHERN
ALBERTA OIL LTD.
|
|
DEEP
WELL OIL & GAS, INC.
|
|
||
|
|
|
|
||
Per:
|
/s/ Curtis J. Sparrow
|
|
Per:
|
/s/ Steven Gawne
|
|
|
|
|
|
||
Per:
|
President
|
|
Per:
|
President and Chief Executive Officer
|
|
|
|
|
|
||
SURGE
GLOBAL ENERGY Inc..
|
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
|
||
|
|
|
|
||
Per:
|
/s/ Fred W. Kelly
|
|
Per:
|
/s/ Fred W. Kelly
|
|
|
|
|
|
||
Per:
|
Chief Executive Officer
|
|
Per:
|
Chief Executive Officer
|
|
FARMOUT
LANDS
|
|
TITLE
DOCUMENTS
|
|
FARMOR’S
PRE-
FARMOUT
WORKING
INTERESTS
|
|
ENCUMBRANCES
|
32
Section Block *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Township
91, Range 12:
Sections
27, 28, 29, 30, 31,
32;Township
91, Range 13: Sections 25, 26, 27, 35, 36
Oil
Sands (Top of the Peace
River
to Base of the
Pekisko)
Covering
2816 hectares
|
|
Alberta
Crown Oil Sands Development Lease 7403070365 dated July 10
th
2003 and currently standing in the name of Northern Alberta Oil,
Ltd. -
80%, Pan Orient Energy Ltd. - 10%, 1132559 Alberta Ltd.
10%
|
|
80%
|
|
Crown
Royalty
Nearshore
ORR **
|
|
|
|
|
|
|
|
Township
92, Range 13:
Sections
1, 2, 10, 11, 12, 13,
14,
15, 22, 23, 24
Oil
Sands (Top of the Peace
River
to Base of the
Pekisko)
Covering
2816 hectares
|
|
Alberta
Crown Oil Sands Development Lease 7403070367 dated July 10
th
2003 and currently standing in the name of Northern Alberta Oil,
Ltd. -
80%, Pan Orient Energy Ltd. - 10%, 1132559 Alberta Ltd. -
10%
|
|
80%
|
|
Crown
Royalty
Nearshore
ORR **
|
|
|
|
|
|
|
|
Township
92, Range 13:
Sections
6, 7, 8, 9, 16, 17,
18,
19, 20, 21
Oil
Sands (Top of the Peace
River
to Base of the
Pekisko)
Covering
2560 hectares
|
|
Alberta
Crown Oil Sands Development Lease 7403070368 dated July10th 2003
and
currently standing in the name of Northern Alberta Oil, Ltd. - 80%,
Pan
Orient Energy Ltd. - 10%, 1132559 Alberta Ltd. - 10%
|
|
80%
|
|
Crown
Royalty
Nearshore
ORR **
|
|
|
|
|
|
|
|
31
Section Block *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Township
92, Range 12:
Sections
15, 16, 17, 18, 19,
20,
21, 28, 29, 30, 31, 32, 33
Oil
Sands (Top of the Peace
River
to Base of the
Pekisko)
Covering
3328 hectares
|
|
Alberta
Crown Oil Sands Development Lease 7404080870 dated August 19
th
2004 and currently standing in the name of Deep Well Oil & Gas, Inc. -
80%, Pan Orient Energy Ltd. - 10%, 1132559 Alberta Ltd. -
10%
|
|
80%
|
|
Crown
Royalty
Nearshore
ORR **
|
|
|
|
|
|
|
|
Township
92, Range 12:
Sections
22, 26, 27, 34, 35,
36
|
|
Alberta
Crown Oil Sands Development Lease 7404080871 dated August 19
th
2004 and currently standing in the
|
|
80%
|
|
Crown
Royalty
Nearshore
ORR **
|
FARMOUT
LANDS
|
|
TITLE
DOCUMENTS
|
FARMOR’S
PRE-
FARMOUT
WORKING
INTERESTS
|
|
ENCUMBRANCES
|
|
Oil
Sands (Top of the Peace River to Base of the Pekisko)
Covering
1536 hectares
|
|
name
of Deep Well Oil & Gas, Inc. - 80%, Pan Orient Energy Ltd. - 10%,
1132559 Alberta Ltd. - 10%
|
|
|
|
|
|
|
|
|
|
|
|
Township
92, Range 13:
Sections
25, 26, 27, 28, 29,
30,
31, 32, 33, 34, 35, 36
Oil
Sands (Top of the Peace
River
to Base of the
Pekisko)
Covering
3072 hectares
|
|
Alberta
Crown Oil Sands Development Lease 7404080872 dated August 19
th
2004 and currently standing in the name of Deep Well Oil & Gas, Inc. -
80%, Pan Orient Energy Ltd. - 10%, 1132559 Alberta Ltd. -
10%
|
|
80%
|
|
Crown
Royalty
Nearshore
ORR **
|
|
|
|
|
|
|
|
6.5
Section Block
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Township
91, Range 13: N
½
Section 28, Sections 32,
33,
34; Township 92, Range
13:
Sections 3, 4, 5
|
|
Alberta
Crown Oil Sands Permit 7003040812 dated
·
.
|
|
TBD
|
|
TBD
|
|
|
|
|
|
|
|
Oil
Sands (Top of the Peace River to Base of the Pekisko)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covering
1664 hectares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Township
91, Range 13: N
½
Section 28, Sections 32,
33,
34; Township 92, Range
13:
Sections 3, 4,5
Petroleum
& Natural Gas
(from
Surface to Basement)
Covering
1664 hectares
|
|
Alberta
Crown Petroleum and Natural Gas Lease 5495030101 dated
·
.
|
|
TBD
|
|
TBD
|
*
|
The
use of the headings “
32
Section Block” and “31 Section Block”
are intended for convenience of reference only and are not, under
any
circumstances whatsoever, to be taken into consideration when interpreting
this Agreement or when determining a Party’s rights or obligations under
this Agreement. Without limiting the generality of the foregoing,
Farmee
may (but is not required), when selecting any 6 section block of
lands in
which Farmee earns a 40% undivided interest by the drilling of the
Test
Well or any Option Well, include lands from each of the 38.5
Section Block and the 31 Section Block in any such 6 section
block.
|
**
|
Pursuant
to the Assumption of Liabilities and Indemnity Agreement, Farmor
shall be
solely responsible for the payment of the Nearshore ORR as it would
otherwise pertain to the interests earned by Farmee in the Farmout
Lands.
|
***
|
The
6.5 Section Block shall not constitute “Farmout Lands” for the purposes
hereof unless or until the Farmor acquires a legal or beneficial
interest
in the Title Documents that comprise the 6.5 Section
Block.
|
1. | Effective Date (Subclause 1.01(f) - February 17, 2005) |
2. | Payout (Subclause 1.01(t), if Article 6.00 applies) - Alternate ______ - N/A |
3.
|
Incorporation of Clauses from 1990 CAPL Operating Procedure (Clause 1.02) |
(l) Insurance (311) Alternate A - o Alternate B - x |
4. | Article 4.00 (Option Wells) will x /will not o apply. |
|
|
5. | Article 5.00 (Overriding Royalty) will o /will not x apply. |
6. |
Quantification of Overriding Royalty (Subclause
5.01A,
if applicable)
|
(i)
|
|
Crude
Oil (a)
|
-
|
Alternate
|
-
|
N/A
|
|||||||
|
|
|
-
|
If
Alternate 1 applies
|
%
|
||||||||
|
|
|
-
|
If
Alternate 2 applies
|
min
|
%
|
max
|
%
|
|||||
|
|
|
|
|
|||||||||
|
|
Other
(b)
|
-
|
Alternate
|
-
|
N/A
|
|||||||
|
|
|
-
|
If
Alternate 1 applies
|
%
|
||||||||
|
|
|
-
|
If
Alternate 2 applies
|
min
|
%
|
max
|
%
|
7. | Permitted Deductions (Subclause 5.04B, if applicable) - Alternate - N/A |
8. | Article 6.00 (Conversion of Overriding Royalty) will o /will not x apply. |
• If Article 6.00 applies, conversion to N/A OF Working interest in Subclause 6.04 A. |
9. | Article 8.00 (area of Mutual Interest) will x /will not o apply. |
10.
|
Reimbursement
of Land Maintenance Costs (Clause 11.02) will
o
/will
not
ý
apply.
If applies, reimbursement of
$________.
|
I.
|
|
Clause
311
|
|
Insurance
Election
:
|
|
A.
|
|
|
|
B.
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II.
|
|
Clause
604
|
|
Marketing
Fee
:
|
|
A.
|
|
X
|
|
B.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
III.
|
|
Clause
903
|
|
Casing
Point Election
:
|
|
A.
|
|
X
|
|
B.
|
|
|
IV. | Clause 1004 | Replace with the following : | ||||||||||
“Notwithstanding anything to the contrary contained in this Operating Procedure, if the Operator is a participating party, it shall carry out the operation for the account of the participating parties; provided that, if the Operator is not a participating party, the participating parties shall, as and among themselves and in accordance with the provisions of Clause 206, mutatis mutandis , appoint an Operator for the operation. If the operation is commenced prior to the time the Operator becomes a participating party, it is specifically understood that nothing in this Clause shall restrict or prohibit the proposing party from actually commencing operations as provided in Clause 1003. The Operator, upon becoming a participating party, shall have the right to take over and carry out the operation for the participating parties.” |
V. | Clause 1007 | Penalty for Independent Operations: |
1. | Development Wells: | 400 % | |
2. | Exploratory Wells: | 500 % | |
VI.
|
Clause 2202 |
Title
Preserving Well:
|
180 days |
VII.
|
Clause 2202 | Address for Notices: |
Farmor:
|
c/o
Deep Well Oil & Gas, Inc
|
|
Farmee:
|
Surge
Global Energy (Canada), Ltd.
|
|
|
•Suite 2600,
144-4
th
Avenue SW
|
|
|
Suite 2600,
144 - 4
th
Avenue SW
|
|
|
•Calgary,
AB T2p 3N4
|
|
|
Calgary,
AB T2P 3N4
|
|
|
•Attention
Steve Gawne, CEO
|
|
|
Attention:
Fred Kelly, CEO
|
VIII.
|
|
Clause
2401
|
|
Disposition
of Interests
:
|
|
A.
|
|
|
|
B.
|
|
X
|
IX.
|
Clause
2404
|
Deleted and replaced with the Assignment Procedure |
I. |
Clause 105
Operating
Fund:
10%
Clause
110
Approvals
:
2 or more Owners totaling 65%
Clause
112
Expenditure
Limitations:
|
(a)
|
excess of | $ 25,000.00 | |
(c) | excess of | $ 25,000.00 |
II. |
Clause
201(a) 6
Labour:
Delete and replace as follows:
“Salaries
and wages of the Operator’s employees
engaged in production Engineering who are either temporarily or
permanently assigned to and directly employed off-site in direct
support
of Joint Operations.”
|
II. |
Clause
202(b)
|
Employee Benefits - not to exceed : 25% |
Clause 207 | Services: replace “warehouse” with “Warehouse” throughout | |
Clause 213(b) | Camp and Housing : shall o /shall not x apply. | |
Clause 216 | Warehouse handling : 5% | |
Clause 221 | Allocation Options : n/a |
III. |
Clause
301(a)
Cost
:
Delete
and replace as follows:
“Cost”
means total expenditures described in Article II, excluding those
expenditures pursuant to Subclause 209(b) and Clause 218 of this
Accounting Procedure, and salvage credits for Material retired,
the value
of injected substances purchased for enhanced recovery and any
additional
exclusions as approved by the
Owners.
|
IV. |
Clause
302
|
Overhead Rates: |
(a)
|
For
each Exploration Project:
|
|||
(i) | 5% of first | $ 50,000 | ||
(ii) | 3% of first | $ 100,000 | ||
(iii)
|
1% of costs in excess of sum of (i) and (ii) |
(b)
|
For
each Drilling Well:
|
|||
(i) | 5% of first | $ 50,000 | ||
(ii) | 3% of first | $ 100,000 | ||
(iii)
|
1% of costs in excess of sum of (i) and (ii) |
(c)
|
For
each Initial Construction Project:
|
|||
(i) | 5% of first | $ 50,000 | ||
(ii) | 3% of first | $ 100,000 | ||
(iii)
|
1% of costs in excess of sum of (i) and (ii) |
(d)
|
For
each Subsequent Construction Project:
|
|||
(i) | 5% of first | $ 50,000 | ||
(ii) | 3% of first | $ 100,000 | ||
(iii)
|
1% of costs in excess of sum of (i) and (ii) |
(e)
|
For
Operation and Maintenance:
|
|||
(i) |
10%
of the cost of the Joint Property; and
|
|||
(ii) |
$350
per Producing Well per month; or
|
|||
(iii)
|
____ Flat rate per month | |||
Subclause 302(3)(ii) and 302 (e)(iii) shall o /shall not x apply. |
V. |
Clause
406
|
Dispositions: $25,000 |
Clause 406 | Dispositions: replace “affiliates” with “Affiliates” | |
VI. | Clause 501 | (b) Dispositions: replace “warehouse” with “Warehouse” |
1. |
Pursuant
to the Royalty Agreement (“Royalty Agreement”) dated December 12, 2003
between Mikwec Energy Canada Ltd. (now Northern Alberta Oil Ltd.
by name
change) and Nearshore Petroleum Corporation (“Nearshore”), Nearshore was
granted a 6.5% gross overriding royalty on petroleum and natural
gas
rights (including oil sands rights) in Townships 91 and 92, Ranges
12 and
13, W5M (the “GORR”);
|
2. |
Deep
Well as farmor and Sure, as farmee entered into a Farmout Agreement
dated
February 25, 2005 (“Farmout Agreement”) pursuant to which Surge will have
the right to earn a 40% undivided interest in some of all the Farmout
Lands;
|
3. |
The
Farmout Lands are encumbered by the
GORR;
|
4.
|
The
interests that are earned by Surge under the Farmout Agreement
(“
Earned
Interests
”)
will be encumbered by the GORR (which is not acceptable to Surge);
and
|
5.
|
In
order to induce Surge to enter into the Farmout Agreement and to
drill
wells thereunder, Deep Well has agreed to be responsible for and
to assume
the obligation to pay the GORR as it pertains to the Earned Interests,
and
the parties are entering into this Agreement to confirm those
arrangements.
|
1. |
Capitalized
terms used in this Agreement but not defined herein shall have the
meanings given to those terms in the Farmout
Agreement.
|
2. |
Deep
Well is solely responsible for and shall timely pay (at its sole
cost and
expense) the GORR and perform all other obligations of any kind or
nature
whatsoever arising under the Royalty Agreement, in each case as they
pertain to the Earned Interests. It is the intentions of the parties
that
Surge shall have no obligation or liability under any circumstances
whatsoever to pay the GORR, perform any obligation under the Royalty
Agreement or deal with any person(s) entitled to the GORR. Without
limiting the generality of the foregoing, if any owner of an interest
in
the GORR elects to take its royalty share of production in kind,
Deep Well
will provide that “in kind” production from is own production or from some
other source.
|
3.
|
Deep
Well shall indemnify and save harmless Surge and each of its Affiliates
and each of their respective directors, officers, employees, agents
and
representatives (collectively, the “
Indemnified
Persons
”)
from and against any and all claims and demands made by any person(s)
claiming to have an interest in or rights under the GORR or the Royalty
Agreement and for any and all direct costs, damages and expenses
whatsoever which any Indemnified Person may suffer, sustain, pay
or incur
in connection with any claim(s) by any person(s) in respect of the
GORR or
the Royalty Agreement (including, without limitation, Surge’s reasonable
legal costs on a solicitor and its own client
basis).
|
4.
|
Notwithstanding
that Surge has no obligations in respect of the GORR or the Royalty
Agreement, if a claim by any person in respect of any unpaid GORR
payment
might adversely affect any of the Earned Interests, then Surge shall
be
entitled, but not obligated, to make payment of the GORR, subject
always
to all rights to pursue indemnification from Deep Well hereunder,
at law,
in equity or otherwise and to set-off any amounts Surge pays in respect
of
the GORR against any amounts otherwise due and payable by Surge to
Deep
Well under the Farmout Agreement or, under an Existing JOA, except
for
such right-off, Surge shall not have any right, interest or benefit
in the
GORR or Royalty Agreement
whatsoever.
|
5.
|
Deep
Well Oil & Gas, Inc. and Northern Alberta Oil Ltd. shall be jointly
and severally liable for the obligations of Deep Well under this
Agreement.
|
6.
|
Deep
Well shall not assign this Agreement or any or all of its obligations
under this Agreement without the prior written consent of Surge,
which
consent may be arbitrarily withheld. Surge may assign this Agreement,
in
whole or in part, to any permitted assignee of any of the Earned
Interests.
|
7. |
The
obligations of Deep Well under this Agreement are absolute and shall
not
be lessened or modified in any respect notwithstanding any circumstances
whatsoever including, without limitation, any past, present or future
changes in the ownership of the
GORR.
|
8.
|
(a)
|
No
waiver by Surge of any breach (whether actual or anticipated) of
any of
the covenants, provisions or conditions herein contained shall take
effect
or be binding upon Surge unless the same is expressed in writing
executed
by an officer of Surge. Any waiver so given shall extend only to
the
particular breach so waived and shall not Limit or affect any rights
with
respect to any other or future breach whether of a similar or dissimilar
nature.
|
(b) |
The
parties acknowledge and confirm that this Agreement was negotiated
and
prepared by the parties with the advice of their respective legal
counsel
to the extent deemed necessary by each of the parties, and was not
prepared by one party to the exclusion of the other party and,
accordingly, should not be construed against either party by reason
of its
preparation, negotiation, or
drafting.
|
(c) |
If
any term of this Agreement is or becomes invalid, illegal or unenforceable
in any jurisdiction, such invalidity, illegality or unenforceability
shall
not affect the validity, legality or enforceability of any other
term of
this Agreement and such invalid, illegal or unenforceable term shall
be,
as to such jurisdiction, severable from this
Agreement.
|
(d)
|
This
Agreement shall be conclusively deemed for all purposes whatsoever
to be
made under and for all purposes to be governed by and construed in
accordance with the laws of the Province of Alberta and of Canada
applicable therein and shall be treated in all respects as an Alberta
law
contract. Each party agrees that any action or proceedings with respect
to
this Agreement shall be brought in the courts of Alberta at
Calgary.
|
(e)
|
A
derivative of a defined term shall have a corresponding meaning
herein.
|
(f)
|
No
amendment or other variation of the provisions of this Agreement
shall be
binding on the parties or either of them unless it is evidenced in
writing
executed by an officer of that
party.
|
(g)
|
Time
shall be of the essence hereof.
|
(h)
|
Each
party shall, from time to time and at all times hereafter, do all
such
further acts and execute and deliver all such further documents as
may be
reasonably required by the other party in order to perform and carry
out
the terms and the intent of this
Agreement.
|
(i) |
This
Agreement may be executed in any number of separate counterparts
with the
same effect as if all parties had signed the same copy of this Agreement.
All counterparts shall be construed together and constitute one agreement.
Each party shall be entitled to rely on the delivery of executed
facsimile
copies of counterpart execution pages of this Agreement and such
facsimile
copies shall be legally effective to create a valid and binding agreement
between the parties.
|
(j) |
This
Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted
assigns.
|
DEEP
WELL OIL & GAS, INC.
|
NORTHERN
ALBERTA OIL LTD.
|
||||
|
|
||||
Per:
|
/s/
Steven Gawne
|
Per:
|
/s/
Curtis Sparrow
|
||
Per:
|
President
and CEO
|
Per:
|
Director
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
|||||
|
|||||
Per:
|
/s/
Fred W. Kelly
|
||||
Per:
|
CEO
|
1. |
Nearshore
and Northern (formerly Mikwec Energy Canada Ltd. by change of name)
are
parties to a “Non-Disclosure/Area of Exclusion Athabasca and Sawn Lake Oil
Sand, Alberta Agreement” (“
Nearshore-Northern
Agreement
”)
dated November 19, 2003 pursuant to which,
inter
alia,
Nearshore
is provided with the option to purchase up to 100% of any interests
acquired by Northern within the specified of Exclusion Lands
(“
Nearshore
Rights
”);
|
2.
|
Surge
plan entered into the Farmout Agreement dated February 25, 2005 with
Northern and Deep Well Oil & Gas, Inc. (“Farmout
Agreement”);
|
3.
|
The
Farmout Agreement includes an area of mutual interest provision (“AMI”)
and the Nearshore Rights may conflict with Surge’s rights under the AMI;
and
|
4.
|
Nearshore
and Northern will benefit from the execution and performance of the
Farmout Agreement and, as a result, have agreed to terminate the
Nearshore-Northern Agreement and to enter into this Agreement to
confirm
such termination to Surge.
|
1.
|
Nearshore
and Northern agree with one another, and represent and warrant to
Surge,
that the Nearshore-Northern Agreement (including, without limitation,
the
Nearshore Rights) has been terminated by Nearshore and Northern effective
as of February 17th 2005.
|
2.
|
Nearshore
and Northern represent and warrant to each other and to Surge that
neither
of such parties has assigned or otherwise alienated its interests
in the
Nearshore-Northern Agreement and that it has all necessary power
and
authority to enter into this Agreement in order to terminate the
Nearshore-Northern Agreement in accordance with the terms
hereof.
|
3.
|
Nearshore
confirms to Surge that it did not acquire, and it is not entitled
to
acquire, any interests pursuant to the Nearshore-Northern Agreement,
and
there are no unperformed obligations or liabilities under that
agreement.
|
4.
|
Nearshore
and Northern intend that Surge will rely on this Agreement in order
to
enter into the Farmout Agreement.
|
5. |
Nearshore
forever releases and discharges Northern and Surge from any and all
claims
of any kind that Nearshore may have, or have had, against Northern
or
Surge in relation to the Nearshore - Northern
Agreement.
|
6.
|
(a)
|
No
waiver by Surge of any breach (whether actual or anticipated) of
any of
the covenants, provisions or conditions herein contained shall take
effect
or be binding upon Surge unless the same is expressed in writing
executed
by an officer of Surge. Any waiver so given shall extend only to
the
particular breach so waived and shall not limit or affect any rights
with
respect to any other or future breach whether of a similar or dissimilar
nature.
|
(b)
|
The
parties acknowledge and confirm that this Agreement was negotiated
and
prepared by the parties with the advice of their respective legal
counsel
to the extent deemed necessary by each of the parties, and was not
prepared by one party to the exclusion of any other party and,
accordingly, should not be construed against either party by reason
of its
preparation, negotiation, or
drafting.
|
(c)
|
If
any term of this Agreement is or becomes invalid, illegal or unenforceable
in any jurisdiction, such invalidity, illegality or unenforceability
shall
not affect the validity, legality or enforceability of any other
term of
this Agreement and such invalid, illegal or unenforceable term shall
be,
as to such jurisdiction, severable from this
Agreement.
|
(d)
|
This
Agreement shall be conclusively deemed for all purposes whatsoever
to be
made under and for all purposes to be governed by and construed in
accordance with the laws of the Province of Alberta and of Canada
applicable therein and shall be treated in all respects as an Alberta
law
contract. Each party agrees that any action or proceedings with respect
to
this Agreement shall be brought in the courts of Alberta at
Calgary.
|
(e)
|
No
amendment or other variation of the provisions of this Agreement
shall be
binding on the parties or any of them unless it is evidenced in writing
executed by an officer of that
party.
|
(t)
|
Each
party shall, from time to time and at all times hereafter, do all
such
further acts and execute and deliver all such further documents as
may be
reasonably required by another party in order to perform and carry
out the
terms and the intent of this
Agreement.
|
(g)
|
This
Agreement may be executed in any number of separate counterparts
with the
same effect as if all parties had signed the same copy of this Agreement.
All counterparts shall be construed together and constitute one agreement.
Each party shall be entitled to rely on the delivery of executed
facsimile
copies of counterpart execution pages of this Agreement and such
facsimile
copies shall be legally effective to create a valid and binding agreement
among the parties.
|
(h)
|
This
Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted
assigns.
|
NEARSHORE
PETROLEUM CORPORATION
|
||
|
|
|
Per:
|
/s/
Steven Gawne
|
|
Per:
|
President
|
NORTHERN
ALBERTA OIL LTD.
|
||
|
|
|
Per:
|
/s/
Curtis Sparrow
|
|
Per:
|
Director
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
||
|
|
|
Per:
|
/s/
Fred W. Kelly
|
|
Per:
|
CEO
|
Surge
Global Energy (Canada) Ltd.
|
March
3, 2005
|
2600,
144 - 4
th
Avenue SW
|
|
Calgary,
Alberta
|
|
T2P
3N4
|
RE: |
Farmout
Agreement Dated February 25, 2005
Extension
for Payment of Prospect Fee
|
/s/
Fred Kelly
|
|
Fred
Kelly, President, CEO
|
|
Agreed
to and Accepted this 3
rd
Day of March 2005 By
|
|
/s/
Steven Gawne
|
|
Deep
Well Oil & Gas, Inc.
|
|
Steven
Gawne
|
|
/s/
Curtis Sparrow
|
|
Northern
Alberta Oil Ltd.
|
|
Curtis
Sparrow
|
Re:
|
Farmout
Agreement dated February 25, 2005 between Deep Well Oil & Gas, Inc.
and Northern Alberta Oil Ltd., as Farmor, and Surge Global Energy
(Canada), Ltd. and Surge Global Energy, Inc., as Farmee (“Farmout
Agreement”)
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
||
SURGE
GLOBAL ENERGY, INC.
|
||
Per:
|
/s/
Fred Kelly
|
|
All
of the foregoing is acknowledged, confirmed and agreed to this
10
th
day of March, 2005
|
||
DEEP
WELL OIL & GAS, INC.
|
||
Per:
|
/s/
Steven Gawne
|
|
NORTHERN
ALBERTA OIL LTD.
|
||
Per:
|
/s/
Curtis Sparrow
|
Re:
|
Farmout
Agreement dated February 25, 2005 between Deep Well Oil & Gas, Inc.
and Northern Alberta Oil Ltd., as Farmor, and Surge Global Energy
(Canada), Ltd. and Surge Global Energy, Inc., as Farmee (“Farmout
Agreement”)
|
1.
|
Surge
Inc. is only a party to the Farmout Agreement for the purposes
of Article
14;
|
2.
|
Surge
Inc. has no rights or obligations under the Farmout Agreement except
for
those contained in Article 14; and
|
3.
|
without
limiting the generality of the foregoing, Surge Inc. has no right
or
obligation to participate in any well or to earn any interest in
the
Farmout Lands under the Farmout
Agreement.
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
||
SURGE
GLOBAL ENERGY, INC.
|
||
Per:
|
/s/ Fred Kelly
|
|
All
of the foregoing is acknowledged, confirmed and agreed to this
10
th
day of March, 2005
|
||
DEEP
WELL OIL & GAS, INC.
|
||
Per:
|
/s/ Steven Gawne
|
|
NORTHERN
ALBERTA OIL LTD.
|
||
Per:
|
/s/ Curtis Sparrow
|
1 |
EFFECTIVE
DATE
|
2 |
TERMS
OF CONTRACT
|
3 |
FEES
|
3.1 |
The
Company will pay fees to the Consultant in the sum of ONE HUNDRED AND
FIFTY THOUSAND ($150,000.00) DOLLARS per annum in Canadian currency
(the
“Fee”) by equal monthly installments of TWELVE THOUSAND FIVE HUNDRED
($12,500.00) DOLLARS (the “Monthly Fee”) each commencing on the last day
of July, 2005 and continuing thereafter on the last day of each month
up
to and including the last day of June, 2006, or until this Agreement
is
otherwise terminated in accordance with the terms set out herein. These
Fees do not include any fees or remuneration that the Consultant or
the
Consultant’s Representative receive for acting as a director of Deep Well
Oil & Gas, Inc.
|
3.2 |
the
Company (directly or through DWOG) will grant the Consultant the same
participation in all benefits or incentive programs, options, incentive
options, bonuses, deferred remuneration programs as it offers its most
favoured remunerated senior employee, consultant or
contractor.
|
4 |
EXPENSES
|
5 |
TERM
|
6 |
INDEPENDENT
CONTRACTOR
|
7 |
TERMINATION
|
7.1 |
receipt
of written notice as set out in Section 5 herein,
or
|
7.2 |
upon
the death of the Consultant’s Representative,
or
|
7.3 |
if
the Consultant’s Representative becomes physically or mentally disabled to
the extent that he can no longer carry out his duties as set forth
in this
Agreement.
|
8 |
TERMINATION
AFTER POTENTIAL OR REAL CHANGE IN
CONTROL
|
8.1 |
For
the purposes of this section, the following terms have the meanings
indicated:
|
8.1.1 |
"Voting
Shares" means any shares of capital stock of the Company or DWOG entitled
to vote generally in the election of directors of the Company or
DWOG;
|
8.1.2 |
"Person"
includes any individual, firm, partnership, trust, trustee, executor,
administrator, legal personal representative, government, governmental
body or authority, corporation or other incorporated or unincorporated
organization;
|
8.1.3 |
"Change
in Control" means the occurrence at any time after the date of this
Agreement of any change in the holding, direct or indirect, of Voting
Shares as a result of which a Person, or group of Persons, or Persons
acting jointly or in concert, together with any associate or affiliate
of
any such Person or Persons, are in a position to exercise effective
control of the Company and for the purposes of this Agreement a Person,
or
group of Persons, or Persons acting jointly or in concert, together
with
any associate or affiliate of any such Person or Persons, shall be
deemed
to be in a position to exercise effective control of the Company or
DWOG
if;
|
8.1.3.1 |
any
Person, or group of Persons, or Persons acting jointly or in concert,
together with any associate or affiliate of any such Person or Persons,
(other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or DWOG), is or becomes the
beneficial owner, directly or indirectly, of any Voting Shares or other
securities of DWOG. which directly or following conversion thereof
would
entitle the holder thereof to cast more than 15% of the votes outstanding
which could be cast in an election of directors of
DWOG;
|
8.1.3.2 |
pursuant
to a single election or appointment or a series of elections or
appointments over any period of 24 months from June 7, 2005 and after
the
date of this Agreement, those individuals who at the beginning of such
period constituted the Boards of the Company and DWOG, together with
any
new or additional director or directors whose election or appointment
to
the Boards of the Company or DWOG has been approved by those of such
individuals then remaining as directors from the original Boards, become
for any reason (other than the death, disability or retirement of those
individuals, or any of them,) to constitute a minority of the Board
of the
Company or DWOG;
|
8.1.3.3 |
the
Board of DWOG by resolution duly adopted by the affirmative vote of
a
majority of the votes cast by the entire Board of DWOG, determines
that
for purposes of this Agreement a change in control of DWOG has occurred;
or
|
8.1.3.4 |
the
Company or DWOG disposes of a majority of the capital stock of the
Company
or DWOG which is entitled to vote generally in the election of directors
of the Company or DWOG, as the case may be, or of all or substantially
all
of the business and assets of the Company or DWOG to any Person other
than
a Person who is deemed to be an affiliate of the Company or
DWOG;
|
8.1.4 |
"Potential
Change in Control" means the occurrence at any date hereafter of any
one
of the following events:
|
8.1.4.1 |
any
Person publicly announces an intention to take actions which, if carried
out, would constitute a Change in
Control;
|
8.1.4.2 |
the
Company or DWOG enters into an agreement or proposes to take action
which,
if carried out, would result in the occurrence of a Change in
Control;
|
8.1.4.3 |
any
Person, or group of Persons, or Persons acting jointly or in concert,
together with any associate or affiliate of any such Person or Persons,
acquires a holding, direct or indirect, of Voting Shares and/or other
securities in excess of the number which, directly or following conversion
thereof, would entitle the holders thereof to cast 15% of the votes
attaching to all Voting Shares; or
|
8.1.4.4 |
the
Board of the Company or the Board of DWOG, by resolution duly adopted
by
the affirmative vote of a majority of the votes cast by the entire
board
of the Company or DWOG, determines that for purposes of this Agreement
a
Potential Change in Control has occurred.
|
8.1.5 |
"Involuntary
Termination" means any one of the following events if such event occurs
within 24 months after a Change in
Control:
|
8.1.5.1 |
any
actual or express termination by the Company or DWOG of this Agreement
following any Change in Control which is not due to the death of the
Consultant’s Representative or a condition of total and continuing
disability which renders the Consultant’s Representative incapable of
performing his essential job duties as set out in this Section 7.3
of this
Agreement;
|
8.1.5.2 |
any
change in the Consultant's or Consultant’s Representative’s title,
reporting relationship, responsibilities or authority as in effect
immediately prior to any Change in Control which adversely affects
to a
material degree his role in the management of the Company or
DWOG;
|
8.1.5.3 |
any
reduction in the Consultant’s Fees paid by the Company as in effect
immediately prior to any Change in Control or, if such Fees has been
subsequently increased at any time or from time to time, any reduction
in
such increased Fees;
|
8.1.5.4 |
a
failure or refusal of the Company to renew this Agreement after any
Change
in Control shall have occurred;
|
8.2 |
Upon
the occurrence of a Change in Control or a Potential Change in Control
the
Consultant shall have the right, exercisable by notice to the Company
within three months from the date on which the Change in Control or
Potential Change in Control occurs, to terminate this Agreement. The
expiry of the Consultant's rights under his Section 8.2 with respect
to
any particular Change in Control or a Potential Change in Control will
not
prevent the Consultant from exercising such right of termination with
respect to any subsequent occurrence of a Change in Control or a Potential
Change in Control.
|
8.3 |
Upon
the occurrence of an Involuntary Termination the Consultant shall have
the
right, exercisable by notice to the Company within three months from
the
date on which the Involuntary Termination occurs, to terminate this
Agreement. If the Consultant does not terminate this Agreement with
in
such period, his right to terminate the Agreement under this Section
8.3
with respect to such Involuntary Termination shall expire but this
Agreement will otherwise continue in full force and effect. The expiry
of
the Consultant's rights under his Section 8.3 with respect to any
particular Involuntary Termination will not prevent the Consultant
from
exercising such right of termination with respect to any subsequent
occurrence of an Involuntary Termination.
|
8.4 |
If
the Consultant
terminates
this Agreement pursuant to Section 8.2 or 8.3, the Consultant shall,
at
the request of the Company, continue its services with the Company
for a
period up to one month following such termination at its then existing
Fee
level to assist the Company in an orderly transition of management.
The
amount paid to the Consultant under this Section 8.4 will not reduce
the
amount payable under Section 8.5
|
8.5 |
If
the Consultant terminates this Agreement pursuant to Section 8.2 or
8.3,
the Company shall, within 10 days of notice to the
Company:
|
8.5.1 |
pay
to the Consultant all outstanding amounts for past Fees and
expenses;
|
8.5.2 |
an
amount equal to the amounts remaining under the Term set out in Section
5
at the rates set out in Section 3.1, and
|
8.5.3 |
an
additional amount equaling :
|
8.6 |
If,
in relation to Termination because of a Change in Control, a Potential
Change in Control or an Involuntary Termination, a dispute arises
regarding:
|
8.6.1 |
whether
or not an Involuntary Termination has
occurred;
|
8.6.2 |
the
validity, interpretation or enforcement of this Agreement;
or
|
8.6.3 |
the
right of the Consultant to receive any remuneration or payments referred
to in this Agreement:
|
8.7 |
The
Company shall use its best efforts to require any successor, whether
direct or indirect to all or substantially all of the business and/or
assets of the Company or DWOG to expressly agree to assume and to perform
this Agreement in the same manner that the Company would have been
required to perform it if no such succession had occurred. If the Company
fails to obtain such Agreement prior to the effective date of such
succession, the Consultant shall be entitled to terminate this Agreement
and receive the payments and benefits outlined in Section 8.3 as if
the
Consultant had terminated this Agreement upon an Involuntary
Termination.
|
8.8 |
The
parties confirm that the provisions of this Article 8 are reasonable
and
that the total amounts payable as outlined herein are reasonable estimates
of the damages which will be suffered by the Consultant in the event
of a
Change in Control, Potential Change in Control or an Involuntary
Termination and shall not be construed as a penalty and shall not be
reduced if the Consultant shall secure, or shall not pursue, alternative
consulting engagements following the termination of this Agreement
under
this Article 8.
|
9 |
CONSULTANT’S
DUTIES
|
9.1 |
serve
the needs of the Company as an Advisor, Agent, and Project Manager
of the
Company’s business.
|
9.2 |
serve
the needs of DWOG for Chief Executive Officer and
President.
|
10 |
NOTICE
|
11 |
INDEMNITY
|
12 |
COMPLETE
AGREEMENT
|
13 |
RETURN
OF PROPERTY
|
14 |
ENUREMENT
|
15 |
GOVERNING
LAW
|
16 |
CONSTRUCTION
|
17 |
HEADINGS
|
18 |
TAXES
|
1 |
EFFECTIVE
DATE
|
2 |
TERMS
OF CONTRACT
|
3 |
FEES
|
3.1 |
The
Company will pay fees to the Consultant in the sum of ONE HUNDRED
AND
EIGHTY THOUSAND ($180,000.00) DOLLARS per annum in Canadian currency
(the
“Fee”) by equal monthly installments of FIFTEEN THOUSAND ($15,000.00)
DOLLARS (the “Monthly Fee”) each commencing on the last day of July, 2005
and continuing thereafter on the last day of each month up to and
including the last day of June, 2007, or until this Agreement is
otherwise
terminated in accordance with the terms set out herein. These Fees
do not
include any fees or remuneration that the Consultant or the Consultant’s
Representative receive for acting as a director of Deep Well Oil
&
Gas, Inc.
|
3.2 |
the
Company (directly or through DWOG) will grant the Consultant the
same
participation in all benefits or incentive programs, options, incentive
options, bonuses, deferred remuneration programs as it offers its
most
favoured remunerated senior employee, consultant or
contractor.
|
4 |
EXPENSES
|
5 |
TERM
|
6 |
INDEPENDENT
CONTRACTOR
|
7 |
TERMINATION
|
7.1 |
receipt
of written notice as set out in Section 5 herein,
or
|
7.2 |
upon
the death of the Consultant’s Representative,
or
|
7.3 |
if
the Consultant’s Representative becomes physically or mentally disabled to
the extent that he can no longer carry out his duties as set forth
in this
Agreement.
|
8 |
TERMINATION
AFTER POTENTIAL OR REAL CHANGE IN
CONTROL
|
8.1 |
For
the purposes of this section, the following terms have the meanings
indicated:
|
8.1.1 |
"Voting
Shares" means any shares of capital stock of the Company or DWOG
entitled
to vote generally in the election of directors of the Company or
DWOG;
|
8.1.2 |
"Person"
includes any individual, firm, partnership, trust, trustee, executor,
administrator, legal personal representative, government, governmental
body or authority, corporation or other incorporated or unincorporated
organization;
|
8.1.3 |
"Change
in Control" means the occurrence at any time after the date of this
Agreement of any change in the holding, direct or indirect, of Voting
Shares as a result of which a Person, or group of Persons, or Persons
acting jointly or in concert, together with any associate or affiliate
of
any such Person or Persons, are in a position to exercise effective
control of the Company and for the purposes of this Agreement a Person,
or
group of Persons, or Persons acting jointly or in concert, together
with
any associate or affiliate of any such Person or Persons, shall be
deemed
to be in a position to exercise effective control of the Company
or DWOG
if;
|
8.1.3.1 |
any
Person, or group of Persons, or Persons acting jointly or in concert,
together with any associate or affiliate of any such Person or Persons,
(other than a trustee or other fiduciary holding securities under
an
employee benefit plan of the Company or DWOG), is or becomes the
beneficial owner, directly or indirectly, of any Voting Shares or
other
securities of DWOG. which directly or following conversion thereof
would
entitle the holder thereof to cast more than 15% of the votes outstanding
which could be cast in an election of directors of
DWOG;
|
8.1.3.2 |
pursuant
to a single election or appointment or a series of elections or
appointments over any period of 24 months from June 7, 2005 and after
the
date of this Agreement, those individuals who at the beginning of
such
period constituted the Boards of the Company and DWOG, together with
any
new or additional director or directors whose election or appointment
to
the Boards of the Company or DWOG has been approved by those of such
individuals then remaining as directors from the original Boards,
become
for any reason (other than the death, disability or retirement of
those
individuals, or any of them,) to constitute a minority of the Board
of the
Company or DWOG;
|
8.1.3.3 |
the
Board of DWOG by resolution duly adopted by the affirmative vote
of a
majority of the votes cast by the entire Board of DWOG, determines
that
for purposes of this Agreement a change in control of DWOG has occurred;
or
|
8.1.3.4 |
the
Company or DWOG disposes of a majority of the capital stock of the
Company
or DWOG which is entitled to vote generally in the election of directors
of the Company or DWOG, as the case may be, or of all or substantially
all
of the business and assets of the Company or DWOG to any Person other
than
a Person who is deemed to be an affiliate of the Company or
DWOG;
|
8.1.4 |
"Potential
Change in Control" means the occurrence at any date hereafter of
any one
of the following events:
|
8.1.4.1 |
any
Person publicly announces an intention to take actions which, if
carried
out, would constitute a Change in
Control;
|
8.1.4.2 |
the
Company or DWOG enters into an agreement or proposes to take action
which,
if carried out, would result in the occurrence of a Change in
Control;
|
8.1.4.3 |
any
Person, or group of Persons, or Persons acting jointly or in concert,
together with any associate or affiliate of any such Person or Persons,
acquires a holding, direct or indirect, of Voting Shares and/or other
securities in excess of the number which, directly or following conversion
thereof, would entitle the holders thereof to cast 15% of the votes
attaching to all Voting Shares; or
|
8.1.4.4 |
the
Board of the Company or the Board of DWOG, by resolution duly adopted
by
the affirmative vote of a majority of the votes cast by the entire
board
of the Company or DWOG, determines that for purposes of this Agreement
a
Potential Change in Control has
occurred.
|
8.1.5 |
"Involuntary
Termination" means any one of the following events if such event
occurs
within 24 months after a Change in
Control:
|
8.1.5.1 |
any
actual or express termination by the Company or DWOG of this Agreement
following any Change in Control which is not due to the death of
the
Consultant’s Representative or a condition of total and continuing
disability which renders the Consultant’s Representative incapable of
performing his essential job duties as set out in this Section 7.3
of this
Agreement;
|
8.1.5.2 |
any
change in the Consultant's or Consultant’s Representative’s title,
reporting relationship, responsibilities or authority as in effect
immediately prior to any Change in Control which adversely affects
to a
material degree his role in the management of the Company or
DWOG;
|
8.1.5.3 |
any
reduction in the Consultant’s Fees paid by the Company as in effect
immediately prior to any Change in Control or, if such Fees has been
subsequently increased at any time or from time to time, any reduction
in
such increased Fees;
|
8.1.5.4 |
a
failure or refusal of the Company to renew this Agreement after any
Change
in Control shall have occurred;
|
8.2 |
Upon
the occurrence of a Change in Control or a Potential Change in Control
the
Consultant shall have the right, exercisable by notice to the Company
within three months from the date on which the Change in Control
or
Potential Change in Control occurs, to terminate this Agreement.
The
expiry of the Consultant's rights under his Section 8.2 with respect
to
any particular Change in Control or a Potential Change in Control
will not
prevent the Consultant from exercising such right of termination
with
respect to any subsequent occurrence of a Change in Control or a
Potential
Change in Control.
|
8.3 |
Upon
the occurrence of an Involuntary Termination the Consultant shall
have the
right, exercisable by notice to the Company within three months from
the
date on which the Involuntary Termination occurs, to terminate this
Agreement. If the Consultant does not terminate this Agreement with
in
such period, his right to terminate the Agreement under this Section
8.3
with respect to such Involuntary Termination shall expire but this
Agreement will otherwise continue in full force and effect. The expiry
of
the Consultant's rights under his Section 8.3 with respect to any
particular Involuntary Termination will not prevent the Consultant
from
exercising such right of termination with respect to any subsequent
occurrence of an Involuntary
Termination.
|
8.4 |
If
the Consultant
terminates
this Agreement pursuant to Section 8.2 or 8.3, the Consultant shall,
at
the request of the Company, continue its services with the Company
for a
period up to one month following such termination at its then existing
Fee
level to assist the Company in an orderly transition of management.
The
amount paid to the Consultant under this Section 8.4 will not reduce
the
amount payable under Section 8.5
|
8.5 |
If
the Consultant terminates this Agreement pursuant to Section 8.2
or 8.3,
the Company shall, within 10 days of notice to the
Company:
|
8.5.1 |
pay
to the Consultant all outstanding amounts for past Fees and
expenses;
|
8.5.2 |
an
amount equal to the amounts remaining under the Term set out in Section
5
at the rates set out in Section 3.1,
and
|
8.5.3 |
an
additional amount equaling :
|
8.6 |
If,
in relation to Termination because of a Change in Control, a Potential
Change in Control or an Involuntary Termination, a dispute arises
regarding:
|
8.6.1 |
whether
or not an Involuntary Termination has
occurred;
|
8.6.2 |
the
validity, interpretation or enforcement of this Agreement;
or
|
8.6.3 |
the
right of the Consultant to receive any remuneration or payments referred
to in this Agreement:
|
8.7 |
The
Company shall use its best efforts to require any successor, whether
direct or indirect to all or substantially all of the business and/or
assets of the Company or DWOG to expressly agree to assume and to
perform
this Agreement in the same manner that the Company would have been
required to perform it if no such succession had occurred. If the
Company
fails to obtain such Agreement prior to the effective date of such
succession, the Consultant shall be entitled to terminate this Agreement
and receive the payments and benefits outlined in Section 8.3
Error!
Reference source not found.
as
if the Consultant had terminated this Agreement upon an Involuntary
Termination.
|
8.8 |
The
parties confirm that the provisions of this Article 8 are reasonable
and
that the total amounts payable as outlined herein are reasonable
estimates
of the damages which will be suffered by the Consultant in the event
of a
Change in Control, Potential Change in Control or an Involuntary
Termination and shall not be construed as a penalty and shall not
be
reduced if the Consultant shall secure, or shall not pursue, alternative
consulting engagements following the termination of this Agreement
under
this Article 8.
|
9 |
CONSULTANT’S
DUTIES
|
9.1 |
serve
the needs of the Company for a President, Secretary, and Project
Manager
of the Company’s business.
|
9.2 |
serve
the needs of DWOG for Chief Financial Officer and
Secretary.
|
10 |
NOTICE
|
11 |
INDEMNITY
|
12 |
COMPLETE
AGREEMENT
|
13 |
RETURN
OF PROPERTY
|
14 |
ENUREMENT
|
15 |
GOVERNING
LAW
|
16 |
CONSTRUCTION
|
17 |
HEADINGS
|
18 |
TAXES
|
/s/
Horst A. Schmid
|
/s/
David Perez
|
Dr.
Horst A. Schmid
|
David
Perez
|
Chairman
|
Chairman
|
Board
of Directors
|
Board
of Directors
|
Deep
Well Oil & Gas, Inc.
|
Surge
Global Energy (Canada), Ltd. and
|
Surge
Global Energy Inc.
|
1. |
The
provision of Services shall be carried out by Contractor in strict
accordance with all of the provisions of the following documents,
which
are hereby incorporated into and constitute this
Agreement:
|
· |
General
Terms and Conditions
|
· |
Compensation
|
· |
Administrative
Procedures
|
· |
Scope
of Work
|
2. |
This
Agreement shall be effective as of
September
1, 2005
and
shall remain in force, in accordance with the terms and conditions
and
other requirements, as detailed
herein,
|
3. |
This
Agreement shall supersede and replace any verbal or written communication
heretofore made between Company and Contractor relating to the
Services.
|
For
and on behalf of Northern Alberta Oil Ltd.
|
||||||||
At
the city of
|
Edmonton
|
on
|
30
|
day
of
|
October
|
20
|
05
|
|
Signature:
|
/s/
Curtis Sparrow
|
|||||||
Name:
|
Curtis
J. Sparrow
|
|||||||
Title:
|
President
|
|||||||
For
and on behalf of Trebax Projects Ltd.
|
||||||||
At
the city of
|
Calgary
|
on
|
12
|
day
of
|
October
|
20
|
05
|
|
Signature:
|
/s/
Cyrus Spaulding
|
|||||||
Name:
|
Cyrus
Spaulding
|
|||||||
Title:
|
President
|
|||||||
Section
|
Title
|
Page
|
1.0
|
DEFINITIONS
|
6
|
2.0
|
DOCUMENTS
|
6
|
3.0
|
LANGUAGE
|
6
|
4.0
|
GOVERNING
LAW
|
6
|
5.0
|
COMPLIANCE
WITH LAWS AND REGULATIONS
|
6
|
6.0
|
TAXES
|
7
|
7.0
|
SAFETY
|
7
|
8.0
|
INSURANCE
|
7
|
9.0
|
LIABILITY
AND INDEMNITY
|
8
|
9.1
|
Liability
|
8
|
9.2
|
Indemnification
of the Parties
|
8
|
9.3
|
Third
Party Indemnification
|
8
|
9.4
|
Patent
Indemnity
|
8
|
9.5
|
Consequential
Damages
|
8
|
10.0
|
POLLUTION
DAMAGES
|
8
|
11.0
|
INSPECTION
|
9
|
12.0
|
AUDIT
|
9
|
13.0
|
ASSIGNMENT
|
10
|
14.0
|
SUBSTITUTION
|
10
|
15.0
|
RIGHT
TO DO BUSINESS
|
10
|
16.0
|
TITLE
|
10
|
17.0
|
LIENS
AND ENCUMBERANCES
|
10
|
18.0
|
CONFIDENTIAL
INFORMATION
|
11
|
19.0
|
PUBLICITY
|
11
|
20.0
|
INDEPENDENT
CONTRACTOR
|
11
|
21.0
|
FORCE
MAJEURE
|
11
|
22.0
|
TERMINATION
|
12
|
22.1
|
Completion
of this Agreement
|
12
|
22.2
|
By
Company - Without Cause
|
12
|
22.3
|
By
Company - With Cause
|
12
|
22.4
|
Force
Majeure Event
|
13
|
22.5
|
Default
by Company
|
13
|
22.6
|
Action
Upon Termination
|
13
|
23.0
|
SETTLEMENT
OF DISPUTES
|
14
|
2.0 | DOCUMENTS |
3.0 | LANGUAGE |
4.0 | GOVERNING LAW |
5.0 | COMPLIANCE WITH LAWS AND REGULATIONS |
6.0 | TAXES |
7.0 | SAFETY |
8.0 | INSURANCE |
9.0 | LIABILITY AND INDEMNITY |
9.1 | Liability |
9.2 | Indemnification of the Parties |
9.3 | Third Party Indemnification |
9.4 | Patent Indemnity |
9.5 | Consequential Damages |
10.0 | POLLUTION DAMAGES |
11.0 | INSPECTION |
12.0 | AUDIT |
13.0 | ASSIGNMENT |
14.0 | SUBSTITUTION |
15.0 | RIGHT TO DO BUSINESS |
16.0 | TITLE |
17.0 | LIENS AND ENCUMBERANCES |
18.0 | CONFIDENTIAL INFORMATION |
19.0 | PUBLICITY |
20.0 | INDEPENDENT CONTRACTOR |
21.0 | FORCE MAJEURE |
22.0 | TERMINATION |
22.1 | Completion of this Agreement |
22.2 | By Company - Without Cause |
22.3 | By Company - With Cause |
· |
Failure
to proceed with the performance of any part of the Services, with
due
diligence, or to otherwise comply with any of the obligations of
Contractor under this Agreement, as a result of a cause within the
control
of Contractor and failure to comply with or commence and diligently
continue remedial action within fifteen (15) days of any reasonable
instruction from Company requiring such remedial action,
or
|
· |
Persistent
disregard for applicable laws and regulations and safety and environmental
requirements, of any competent authority, wherever the Services are
performed, and failure to comply with or commence and diligently
continue
remedial action within fifteen (15) days of any reasonable instruction
from Company requiring such remedial action,
or
|
· |
Abandonment
of this Agreement and failure to comply with or recommence Services
within
fifteen (15) days of any reasonable instruction from Company requiring
recommencement of Services, or
|
· |
Assignment
of any part of this Agreement or subcontracting of any part of the
Services, without having first obtained the written consent of Company,
or
|
· |
If
Contractor is declared bankrupt, becomes insolvent, generally fails
to pay
its obligations and debts as and when they become due, makes an
arrangement, compromise, or composition with it creditors, is placed
in
liquidation or receivership, or upon any analogous event, or if any
legal
proceeding for such should be commenced in any court having jurisdiction,
or
|
· |
If
Contractor fails to maintain any required insurance or
bond.
|
22.4 | Force Majeure Event |
22.5 | Default by Company |
22.6 | Action Upon Termination |
23.0 | SETTLEMENT OF DISPUTES |
23.1 | Arbitration |
23.2 | Appointment of Arbitrators |
23.3 | Arbitration Decision |
24.0 | GRATUITIES |
25.0 | CONFLICT OF INTEREST |
26.0 | COOPERATION |
27.0 | LOCAL CONTENT |
28.0 | CONTINUING OBLIGATION |
29.0 | HEADINGS AND ORDER |
30.0 | WAIVER |
31.0 | AMENDMENT |
Section
|
Title
|
Page
|
1.0
|
PURPOSE
|
16
|
2.0
|
STATUTORY
REQUIREMENTS
|
18
|
3.0
|
PAYMENT
FOR SERVICES
|
18
|
4.0
|
PAYMENT
FOR EXPENSES
|
18
|
4.1
|
Out
of Pocket
|
18
|
4.2
|
Use
of Personal Automobile
|
19
|
4.3
|
Third
Party Charges
|
19
|
4.4
|
Long
Distance Phone, Facsimile and Courier
|
19
|
5.0
|
INCENTIVE
PLAN
|
19
|
5.1
|
Stock
Option
|
19
|
5.2
|
Bonus
Plan
|
19
|
1.0 | PURPOSE |
2.0 | STATUTORY REQUIREMENTS |
3.0 | PAYMENT FOR SERVICES |
4.0 | PAYMENT FOR EXPENSES |
4.1 | Out of Pocket |
4.2 | Use of Personal Automobile |
4.3 | Third Party Charges |
4.4 | Travel |
4.5 | Long Distance Phone, Facsimile and Courier |
5.0 | INCENTIVE PLAN |
5.1 | Stock Option |
5.2 |
Bonus
Plan
|
Section
|
Title
|
Page
|
1.0
|
PURPOSE
|
20
|
2.0
|
INVOICES
|
22
|
3.0
|
PAYMENT
|
22
|
4.0
|
NOTICE
|
23
|
1.0 |
PURPOSE
|
2.0 |
INVOICES
|
3.0 |
PAYMENT
|
4.0 |
NOTICE
|
Section
|
Title
|
Page
|
1.0
|
PURPOSE
|
24
|
2.0
|
POSITION
|
26
|
3.0
|
SKILLS
AND EXPERIENCE
|
26
|
4.0
|
RESPONSIBILITY
|
26
|
5.0
|
AUTHORITY
|
27
|
4.0
|
NOMINATED
INDIVIDUAL
|
27
|
5.0
|
DUTIES
|
27
|
6.0
|
TERM
|
27
|
6.1
|
Intent
to Extend
|
27
|
7.0
|
PRIMARY
LOCATION OF WORK
|
27
|
8.0
|
HOURS
OF WORK
|
27
|
9.0
|
PROVISION
OF EQUIPMENT AND SUPPLIES
|
28
|
3.0 |
PURPOSE
|
· |
The
requirements of Contractor in the provision of the
Services
|
· |
The
nature of the Services to be provided by Contractor, through its
Nominated
Individual
|
· |
The
Position the Nominated Individual is to fill, to provide an understanding
of the general nature of the
Services
|
· |
The
other key requirements for the Position and therefore the Nominated
Individual
|
2.0 |
POSITION
|
3.0 |
SKILLS
AND
EXPERIENCE
|
· |
The
COO shall have a broad background of knowledge with hands on experience
in
no less than three different areas of corporate operations which
supports
Company’s business.
|
· |
Must
be registered or eligible to be registered as a Professional Engineer
(P.Eng), in the province of Alberta
|
· |
Experience
in managing large facilities projects and consulting
engineers
|
· |
Experience
in the engineering design and operations of heavy oil
facilities.
|
4.0 |
RESPONSIBILITY
|
· |
The
have such responsibilities and powers and shall hold the office of
COO of
the Company and perform such duties normally associated with such
position
and those that the CEO may reasonable request from time to time.
|
· |
The
COO shall use his best efforts to promote the interests of the Company,
provided however, that nothing herein shall prohibit the COO from
engaging
in enterprises and activities which do not conflict with his duties
and
which do not materially affect his performance or that of the
Company.
|
· |
At
all times act in the best interest of Company and act in a manner
which
best increases shareholder value in DWOG et al, consistent with the
other
requirements in this Agreement.
|
· |
Be
responsible for management of the day to day overall corporate operational
activities of the Company, and until as such time as it is deemed
necessary for Company to have department managers, oversee the Drilling,
Production, Exploitation, Engineering and Projects, IT and Communications,
Health Safety and Environment and Human Resources, and report them
to the
CEO.
|
· |
Be
responsible for coordination and continuous monitoring and general
management of Company operational budget as it best supports the
business
plan.
|
· |
Support
and assist where necessary the CEO in the implementation of board
decisions and initiatives that are in the best interest if the
Company.
|
· |
To
report to the CEO on the status and progress of activities and the
associated budgets and schedules.
|
· |
Contracting
services and hiring employees as the COO deems necessary to support
the
Company’s business plan.
|
5.0 |
AUTHORITY
|
· |
Allocate
resources as the COO sees fit to ensure the approved budget and schedule
supports the business plan, including any and all required personnel
resources, operational expenditures, and capital
expenditures.
|
· |
Ultimate
and direct authority with accountability to the CEO, for the overall
day
to day operations of the company in Drilling, Production, Exploitation,
Engineering and Projects, IT and Communications, Health Safety and
Environment, and Human Resources.
|
4.0 |
NOMINATED
INDIVIDUAL
|
5.0 |
DUTIES
|
· |
Attend
senior management and steering committee
meetings
|
· |
Compilation
of the overall operations budgets
|
· |
Supervision
of senior managers
|
· |
Assist
with and provide input to the operations
committee
|
6.0 |
TERM
|
6.1 |
Intent
to Extend
|
7.0 |
PRIMARY
LOCATION OF
WORK
|
9.0 |
PROVISION
OF EQUIPMENT AND
SUPPLIES
|
· |
Computer
not more than three years old
|
· |
Computer
software, including MS Office Suite,
email
|
· |
Internet
Service Provider for the purpose of email and internet
access
|
· |
Cellular
Phone
|
A.
|
DWOG,
NAOL, Farmee and Surge US entered into a farmout agreement dated
February
25, 2005, which has been amended from time to time, including, but
not
limited to, letter amending agreements dated March 10, 2005, March
10,
2005 and July 14, 2005 (the “
Farmout
Agreement
”).
|
B.
|
Pursuant
to and as a condition precedent to the closing of a private placement
of
gross proceeds in the amount of $8,550,000 CDN to Farmee by MGI Securities
Ltd. (the “
Private
Placement
”),
the Farmor, the Farmee and Surge US have agreed to amend certain
terms and
conditions of the Farmout
Agreement.
|
1.1 | Definitions |
2.1 | Condition Satisfaction Date |
2.2 | Earning Period |
2.3 | Conditions Precedent |
2.4 | Option Well |
2.5 | Reconveyance of Farmout Lands |
3.1 | 6 .5 Section Block |
3.2 | Article 13 |
3.3 | Surge Shares |
i.
|
pay
to NAOL the sum of Nine Hundred Thousand (US$900,000.00) US Dollars
and to
Deep Well Alberta the sum of One Hundred Thousand (US$100,000.00)
US
Dollars; and
|
ii.
|
issue
to NAOL Six Million Seven Hundred Ninety Five Thousand (6,795,000)
common
shares of Farmee and to Deep Well Alberta Seven Hundred Fifty Five
Thousand (755,000) common shares of Farmee, and which such Farmee
common
shares shall be fully paid and non-assessable as of November 15,
2005 and
shall be subject to the terms and conditions of the Voting Trust
Agreement
dated November 15, 2005 among NAOL, Deep Well Alberta, and Surge
US.”.
|
4.1 | Ratification |
4.2 | Counterpart Execution |
DEEP
WELL OIL & GAS (ALBERTA) LTD.
|
DEEP
WELL OIL & GAS, INC.
|
||||
|
|
||||
Per:
|
/s/
Horst A. Schmid
|
|
Per:
|
/s/
Horst A. Schmid
|
|
NORTHERN
ALBERTA OIL LTD.
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
|||||
|
|
|||||
Per:
|
/s/
Curtis J. Sparrow
|
|
Per:
|
/s/
Fred W. Kelly
|
|
|
|
|
|||||
SURGE
GLOBAL ENERGY, INC.
|
|
|||||
|
|
|||||
Per:
|
/s/
David Perez
|
|
|
|||
DEEP
WELL OIL AND GAS, INC,
|
SURGE
GLOBAL ENERGY, INC.
|
|||||
Per:
|
/s/
Horst A. Schmid
|
Per:
|
/s/
David Perez
|
|||
Name:
Horst A. Schmid
|
Name:
David Perez
|
|||||
Title:
President and CEO
|
Title:
|
|||||
NORTHERN
ALBERTA OIL LTD.
|
SURGE
GLOBAL ENERGY (CANADA), LTD.
|
|||||
Per:
|
/s/
Curtis J. Sparrow
|
Per:
|
/s/
Fred W. Kelly
|
|||
Name:
Curtis J. Sparrow
|
Name:
Fred W. Kelly
|
|||||
Title:
President
|
Title:
|
|||||
DEEP
WELL OIL AND GAS (ALBERTA) LTD.
|
MGI
SECURITIES LTD.
|
|||||
Per:
|
/s/
Horst A. Schmid
|
Per:
|
/s/
Tony P. Loria
|
|||
Name:
Horst A. Schmid
|
Name:Tony
P. Loria
|
|||||
Title:
President and CEO
|
Title:
|
|||||
1.
|
Grant
of Option
|
|
The
Corporation hereby grants Optionee the option (the “Option”) to purchase
all or any part of an aggregate of 375,000 shares (the “Shares”) of Common
Stock of the Corporation at the exercise price of $0.71 per share
according to the terms and conditions set forth in this Agreement
and in
the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the
“Plan”). The Option will not be treated as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is
subject to its terms and conditions. A copy of the Plan will be
furnished
upon request of Optionee.
|
||
The
Option shall terminate at the close of business five years from
the date
hereof (the “Option Termination Date”).
|
||
2.
|
Vesting
of Option Rights; Transferability
|
|
(A)
|
This
Option shall be exercisable, in whole or in part, according to
the
following vesting schedule:
|
|
(i)
|
175,000
Shares immediately,
|
|
(ii)
|
100,000
Shares on February 6, 2006,
|
|
(iii)
|
100,000
Shares on February 6, 2007,
|
|
subject
to Optionee’s continuing to provide services to the Corporation or any
Subsidiary as an employee, director or consultant, as the case
may be,
during the immediate annual period preceding such
dates.
|
||
(B)
|
During
the lifetime of Optionee, the Option shall be exercisable only
by Optionee
and shall not be assignable or transferable by Optionee, other
than by
will or the laws of descent and distribution. Notwithstanding the
foregoing, until such time as the Corporation inter-lists on an
exchange
in Canada, and with the prior written consent of the Corporation,
Optionee
may transfer the Option to any to a member of the immediate family
of such
Optionee or to a trust, partnership, limited partnership, limited
liability company or other entity formed exclusively for the benefit
of
such Optionee or members of the immediate family of such Optionee
(“Family
Member”), provided, however, that
|
|
(i)
|
Optionee
may not receive any consideration for such transfer,
|
|
(ii)
|
the
Family Member must agree in writing not to make any subsequent
transfers
of the Option other than by will or the laws of the descent and
distribution and
|
|
(iii)
|
the
Corporation receives prior written notice of such
transfer.
|
3.
|
Exercise
of Option after Death or Termination of Services or
Employment
|
|
Except
as otherwise determined by the Board:
|
||
(A)
|
In
the event that an Optionee ceases to provide services to the Corporation
as a result of termination for cause (as such term is defined at
common
law), each of the Options held by the Optionee shall cease to be
exercisable after the date of termination of employment or services
as a
director or consultant.
|
|
(B)
|
In
the event that an Optionee ceases to provide services to the Corporation
for any reason other than termination for cause or death, any vested
Option held by Optionee may continue to be exercised by the Optionee
to
and until the earlier of:
|
|
(i)
|
the
applicable expiration of the Option Period in respect of such Option;
and
|
|
(ii)
|
the
period after the date on which Optionee ceases to provide services
to the
Corporation that is permitted by the applicable laws, policies,
rules and
regulations of any stock exchange upon which the Underlying Shares
are
then listed, posted and/or quoted for trading;
|
|
(C)
|
In
the event of death, the heirs, administrators or legal representatives
of
a Optionee, or any person or persons to whom the Option is transferred
by
will or the applicable laws of descent, may exercise the Optionee's
Options within twelve months after the date of the Optionee's death
to the
extent such Options were by their terms exercisable prior to his
death or
within the period of twelve months following his death; but for
greater
certainty no Option shall be exercisable after its stated termination
date. In the event that the heirs, administrators or legal representative
of an Optionee who has died, or any person or persons to whom the
Option
is transferred by will or the applicable laws of descent, exercises
the
Optionee's Option in accordance with the terms of the Plan, the
Corporation shall have no obligation to issue the Common Shares
until
evidence satisfactory to the Corporation has been provided by such
persons
that persons are entitled to acquire the Common Shares under the
Plan.
|
|
(D)
|
Notwithstanding
the above, in no case may the Option be exercised to any extent
by anyone
after the Option Termination Date.
|
4.
|
Method
of Exercise of Option
|
|
Subject
to the foregoing, the Option may be exercised in whole or in part
from
time to time by serving written notice of exercise on the Corporation
at
its principal office within the Option period. The notice shall
state the
number of Shares as to which the Option is being exercised and
shall be
accompanied by payment of the exercise price. Payment of the exercise
price shall be made;
|
||
(A)
|
in
cash (including bank check, personal check or money order payable
to the
Corporation),
|
|
(B)
|
with
the approval of the Corporation (which may be given in its sole
discretion), by delivering to the Corporation for cancellation
shares of
the Corporation’s Common Stock already owned by Optionee having a Fair
Market Value (as defined in the Plan) equal to the full exercise
price of
the Shares being acquired,
|
|
(C)
|
with
the approval of the Corporation (which may be given in its sole
discretion), by electing to have the Corporation retain from the
number of
Shares to be issued to the Optionee upon the exercise of such Option
Shares having a Fair Market Value on the date of exercise equal
to the
aggregate exercise price payable upon exercise of such
Option;
|
|
(D)
|
through
a special sale and remittance procedure pursuant to which Optionee
(or any
other person or persons permitted to exercise the option) shall
concurrently provide irrevocable instructions
|
|
(i)
|
to
a Corporation designated brokerage firm to effect the immediate
sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to
cover the
aggregate exercise price payable for the purchased shares plus
all
applicable income and employment taxes required to be withheld
by the
Corporation by reason of such exercise and
|
|
(ii)
|
to
the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale;
or
|
|
(E)
|
by
any combination of the methods of payment described
above.
|
|
5.
|
Securities
Law Matters
.
|
|
(A)
|
Restricted
Securities
. The Optionee understands and acknowledges that neither the
Option nor the Shares have been registered under the United States
Securities Act of 1933, as amended (the “Securities Act”), that the Option
has been issued to it in reliance on an exemption from the registration
requirements of the Securities Act, and that the Option and the
Shares
are, or will be, as applicable, “restricted securities” as defined in Rule
144 under the Securities Act.
|
|
(B)
|
Accredited
Investor.
The Optionee represents that it is an “accredited investor”
within the meaning of Rule 501(a) under the Securities
Act.
|
|
(C)
|
Restrictions
on Exercise.
The Optionee understands and acknowledges that the Option
may be exercised only pursuant to an exemption from the registration
requirements of the Securities Act and applicable state securities
laws,
and that at the time of any proposed exercise, the Corporation
may require
an opinion of counsel or other evidence satisfactory to it to the
effect
that the Shares may be issued pursuant to such exercise without
registration under the Securities Act or applicable state securities
laws.
|
(D) |
Resale
Restrictions
. The Optionee understands and acknowledges that
notwithstanding anything to the contrary contained in this Agreement,
the
Option and the Shares may be offered, sold, pledged or otherwise
transferred only
|
|
(i)
|
to
the Corporation;
|
|
(ii)
|
outside
the United States in accordance with Rule 904 of Regulation S under
the
Securities Act and in compliance with applicable Canadian local
laws and
regulations; or
|
|
(iii)
|
within
the United States, in a transaction that does not require registration
under the Securities Act or any applicable state securities laws.
In
connection with any proposed sale, pledge or other transfer of
the Option
or the Shares, the Corporation may require an opinion of counsel
or other
evidence satisfactory to it to the effect that the proposed sale,
pledge
or other transfer may be effected without registration under the
Securities Act or applicable state securities laws.
|
|
(E)
|
Legend
.
The Optionee understands and acknowledges that upon the original
issuance
of the Shares, as applicable, and until such time as the same is
no longer
required under applicable requirements of the Securities Act or
state
securities laws, the certificates representing the Shares, and
all
certificates issued in exchange therefor or in substitution thereof,
shall
bear a legend with respect to the transfer restrictions set forth
above.
|
|
6.
|
Miscellaneous
|
|
(A)
|
Plan
Provisions Control
.
In the event that any provision of the Agreement conflicts with
or is
inconsistent in any respect with the terms of the Plan, the terms
of the
Plan shall control.
|
|
(B)
|
No
Rights of Stockholders
.
Neither Optionee, Optionee’s legal representative nor a permissible
assignee of this Option shall have any of the rights and privileges
of a
stockholder of the Corporation with respect to the Shares, unless
and
until such Shares have been issued in the name of Optionee, Optionee’s
legal representative or permissible assignee, as
applicable.
|
|
(C)
|
No
Right to Employment
.
The grant of the Option shall not be construed as giving Optionee
the
right to be retained in the employ of, or as giving a director
of the
Corporation or a Subsidiary (as defined in the Plan) the right
to continue
as a director of the Corporation or a Subsidiary, nor will it affect
in
any way the right of the Corporation or a Subsidiary to terminate
such
employment or position at any time, with or without cause. In addition,
the Corporation or Subsidiary may at any time dismiss Optionee
from
employment, or terminate the term of a director of the Corporation
or a
Subsidiary, free from any liability or any claim under the Plan
or the
Agreement. Nothing in the Agreement shall confer on any person
any legal
or equitable right against the Corporation or any Subsidiary, directly
or
indirectly, or give rise to any cause of action at law or in equity
against the Corporation or a Subsidiary. The Option granted hereunder
shall not form any part of the wages or salary of Optionee for
purposes of
severance pay or termination indemnities, irrespective of the reason
for
termination of employment. Under no circumstances shall any person
ceasing
to be an employee of the Corporation or any Subsidiary be entitled
to any
compensation for any loss of any right or benefit under the Agreement
or
Plan which such optionee might otherwise have enjoyed but for termination
of employment, whether such compensation is claimed by way of damages
for
wrongful or unfair dismissal, breach of contract or otherwise.
By
participating in the Plan, Optionee shall be deemed to have accepted
all
the conditions of the Plan and the Agreement and the terms and
conditions
of any rules and regulations adopted by the Committee and shall
be fully
bound thereby
.
|
|
(D)
|
Governing
Law
.
The validity, construction and effect of the Plan and the Agreement,
and
any rules and regulations relating to the Plan and the Agreement,
shall be
determined in accordance with the internal laws, and not the law
of
conflicts, of the State of Nevada.
|
|
(E)
|
Severability
.
If any provision of the Agreement is or becomes or is deemed to
be
invalid, illegal or unenforceable in any jurisdiction or would
disqualify
the Agreement under any law deemed applicable by the Committee
(as defined
in the Plan), such provision shall be construed or deemed amended
to
conform to applicable laws, or if it cannot be so construed or
deemed
amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Agreement, such
provision shall be stricken as to such jurisdiction or the Agreement,
and
the remainder of the Agreement shall remain in full force and
effect.
|
(F)
|
No
Trust or Fund Created
.
Neither the Plan nor the Agreement shall create or be construed
to create
a trust or separate fund of any kind or a fiduciary relationship
between
the Corporation or any Subsidiary and Optionee or any other
person.
|
|
(G)
|
Headings
.
Headings are given to the Sections and subsections of the Agreement
solely
as a convenience to facilitate reference. Such headings shall not
be
deemed in any way material or relevant to the construction or
interpretation of the Agreement or any provision
thereof.
|
|
(H)
|
Conditions
Precedent to Issuance of Shares
;
Repurchase Rights.
Shares shall not be issued pursuant to the exercise
of the Option unless such exercise and the issuance and delivery
of the
applicable Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities
Act of
1933, as amended, the Exchange Act of 1934, as amended, the rules
and
regulations promulgated thereunder, the requirements of any applicable
Stock Exchange or the Nasdaq National Market and the corporate
laws of the
state of Nevada. As a condition to the exercise of the purchase
price
relating to the Option, the Corporation may require that the person
exercising or paying the purchase price represent and warrant that
the
Shares are being purchased only for investment and without any
present
intention to sell or distribute such Shares if, in the opinion
of counsel
for the Corporation, such a representation and warranty is required
by
law.
|
|
(I)
|
Withholding.
In order to comply with all applicable federal, state or provincial
income
tax laws or regulations, the Corporation may take such action as
it deems
appropriate to assure that all applicable federal, state or provincial
payroll, withholding, income or other taxes are withheld or collected
from
Optionee.
|
|
(J)
|
Adjustment
to Number of Shares and Exercise Price
. Subject to approval if
necessary of any relevant stock exchange, the Board will adjust
the number
of Shares subject to an Option, and the exercise price per Share
payable
upon exercise of an Option, upon the occurrence of any stock dividend,
stock split, reverse stock split, combination of shares, reclassification
of shares, recapitalization or other similar corporate transaction
with
respect to the Shares. Notwithstanding the preceding sentence to
the
contrary, no such adjustment will be made upon the conversion of
any debt
instrument, share of preferred stock or other convertible security
of the
Corporation into Shares.
|
|
(K)
|
Review
of Plan.
Optionee acknowledges receipt of a copy of the Plan and
represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms
and
provisions thereof. Optionee has reviewed the Plan and this Option
in
their entirety, has had an opportunity to obtain the advice of
counsel
prior to executing this Option and fully understands all provisions
of the
Option. Optionee hereby agrees to accept as binding, conclusive
and final
all decisions or interpretations of the Board upon any questions
arising
under the Plan or this Option.
|
|
(L)
|
Change
of Address
. Optionee further agrees to notify the Corporation upon any
change in the residence address indicated below.
|
|
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this
Agreement
as of the date set forth in the first
paragraph.
|
DEEP WELL OIL & GAS, INC. | ||
|
|
|
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
|
|
|
Name: | ||
Address: | ||
1.
|
Amendment
to Existing Agreement
|
|
This
Agreement shall be in addition to the and amend it
accordingly.
|
||
2.
|
Grant
of Option
|
|
The
Corporation hereby grants Optionee the option (the “Option”) to purchase
all or any part of an aggregate of 390,000 shares (the “Shares”) of Common
Stock of the Corporation at the exercise price of $0.71 per share
according to the terms and conditions set forth in this Agreement
and in
the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the
“Plan”). The Option will not be treated as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is
subject to its terms and conditions. A copy of the Plan will be furnished
upon request of Optionee.
|
||
The
Option shall terminate at the close of business five years from the
date
hereof (the “Option Termination Date”).
|
||
3.
|
Vesting
of Option Rights; Transferability
|
|
(A)
|
This
Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
|
|
(i)
|
130,000
Shares on July 1, 2006,
|
|
(ii)
|
130,000
Shares on July 1, 2007,
|
|
(iii)
|
130,000
Shares on July 1, 2008,
|
|
subject
to Optionee’s continuing to provide services to the Corporation or any
Subsidiary as an employee, director or consultant, as the case may
be,
provided that the Optionee continues to provide services on such
anniversary date.
|
||
(iv)
|
During
the lifetime of the consulting contract with the Optionee, the Option
shall be exercisable only by Optionee and shall not be assignable
or
transferable by Optionee.
|
4.
|
Exercise
of Option after Death or Termination of Services or
Employment
|
|
Except
as otherwise determined by the Board:
|
||
(A)
|
In
the event that an Optionee ceases to provide services to the Corporation
as a result of termination for cause (as such term is defined in
clause
22.3 of the Consulting Agreement), each of the Options held by the
Optionee shall cease to be exercisable after the date of termination
of
services as a consultant.
|
|
(B)
|
In
the event that an Optionee ceases to provide services to the Corporation
for any reason other than termination for cause, any vested Option
held by
Optionee may continue to be exercised by the Optionee to and until
the
earlier of:
|
|
(i)
|
the
applicable expiration of the Option Period in respect of such Option;
and
|
|
(ii)
|
the
period after the date on which Optionee ceases to provide services
to the
Corporation that is permitted by the applicable laws, policies, rules
and
regulations of any stock exchange upon which the Underlying Shares
are
then listed, posted and/or quoted for trading;
|
|
(C)
|
Notwithstanding
the above, in no case may the Option be exercised to any extent by
anyone
after the Option Termination Date.
|
|
5.
|
Method
of Exercise of Option
|
|
Subject
to the foregoing, the Option may be exercised in whole or in part
from
time to time by serving written notice of exercise on the Corporation
at
its principal office within the Option period. The notice shall state
the
number of Shares as to which the Option is being exercised and shall
be
accompanied by payment of the exercise price. Payment of the exercise
price shall be made;
|
||
(A)
|
in
cash (including bank check, personal check or money order payable
to the
Corporation),
|
|
(B)
|
with
the approval of the Corporation (which may be given in its sole
discretion), by delivering to the Corporation for cancellation shares
of
the Corporation’s Common Stock already owned by Optionee having a Fair
Market Value (as defined in the Plan) equal to the full exercise
price of
the Shares being acquired,
|
|
(C)
|
with
the approval of the Corporation (which may be given in its sole
discretion), by electing to have the Corporation retain from the
number of
Shares to be issued to the Optionee upon the exercise of such Option
Shares having a Fair Market Value on the date of exercise equal to
the
aggregate exercise price payable upon exercise of such
Option;
|
|
(D)
|
through
a special sale and remittance procedure pursuant to which Optionee
(or any
other person or persons permitted to exercise the option) shall
concurrently provide irrevocable instructions
|
|
(i)
|
to
a Corporation designated brokerage firm to effect the immediate sale
of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the
aggregate exercise price payable for the purchased shares plus all
applicable income and employment taxes required to be withheld by
the
Corporation by reason of such exercise and
|
|
(ii)
|
to
the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale;
or
|
|
|
||
(E) | by any combination of the methods of payment described above. |
6.
|
Securities
Law Matters.
|
|
(A)
|
Restricted
Securities
. The Optionee understands and acknowledges that neither the
Option nor the Shares have been registered under the United States
Securities Act of 1933, as amended (the “Securities Act”), that the Option
has been issued to it in reliance on an exemption from the registration
requirements of the Securities Act, and that the Option and the Shares
are, or will be, as applicable, “restricted securities” as defined in Rule
144 under the Securities Act.
|
|
(B)
|
Accredited
Investor.
The Optionee represents that it is an “accredited investor”
within the meaning of Rule 501(a) under the Securities
Act.
|
|
(C)
|
Restrictions
on Exercise.
The Optionee understands and acknowledges that the Option
may be exercised only pursuant to an exemption from the registration
requirements of the Securities Act and applicable state securities
laws,
and that at the time of any proposed exercise, the Corporation may
require
an opinion of counsel or other evidence satisfactory to it to the
effect
that the Shares may be issued pursuant to such exercise without
registration under the Securities Act or applicable state securities
laws.
|
|
(D)
|
Resale
Restrictions
. The Optionee understands and acknowledges that
notwithstanding anything to the contrary contained in this Agreement,
the
Option and the Shares may be offered, sold, pledged or otherwise
transferred only
|
|
(i)
|
to
the Corporation;
|
|
(ii)
|
outside
the United States in accordance with Rule 904 of Regulation S under
the
Securities Act and in compliance with applicable Canadian local laws
and
regulations; or
|
|
(iii)
|
within
the United States, in a transaction that does not require registration
under the Securities Act or any applicable state securities laws.
In
connection with any proposed sale, pledge or other transfer of the
Option
or the Shares, the Corporation may require an opinion of counsel
or other
evidence satisfactory to it to the effect that the proposed sale,
pledge
or other transfer may be effected without registration under the
Securities Act or applicable state securities laws.
|
|
(E)
|
Legend
.
The Optionee understands and acknowledges that upon the original
issuance
of the Shares, as applicable, and until such time as the same is
no longer
required under applicable requirements of the Securities Act or state
securities laws, the certificates representing the Shares, and all
certificates issued in exchange therefor or in substitution thereof,
shall
bear a legend with respect to the transfer restrictions set forth
above.
|
7.
|
Miscellaneous
|
|
(A)
|
Plan
Provisions Control
.
In the event that any provision of the Agreement conflicts with or
is
inconsistent in any respect with the terms of the Plan, the terms
of the
Plan shall control.
|
|
(B)
|
No
Rights of Stockholders
.
Neither Optionee, Optionee’s legal representative nor a permissible
assignee of this Option shall have any of the rights and privileges
of a
stockholder of the Corporation with respect to the Shares, unless
and
until such Shares have been issued in the name of Optionee, Optionee’s
legal representative or permissible assignee, as
applicable.
|
|
(C)
|
No
Right to Employment
.
The grant of the Option shall not be construed as giving Optionee
the
right to be retained in the employ of, or as giving a director of
the
Corporation or a Subsidiary (as defined in the Plan) the right to
continue
as a director of the Corporation or a Subsidiary, nor will it affect
in
any way the right of the Corporation or a Subsidiary to terminate
such
employment or position at any time, with or without cause. In addition,
the Corporation or Subsidiary may at any time dismiss Optionee from
employment, or terminate the term of a director of the Corporation
or a
Subsidiary, free from any liability or any claim under the Plan or
the
Agreement. Nothing in the Agreement shall confer on any person any
legal
or equitable right against the Corporation or any Subsidiary, directly
or
indirectly, or give rise to any cause of action at law or in equity
against the Corporation or a Subsidiary. The Option granted hereunder
shall not form any part of the wages or salary of Optionee for purposes
of
severance pay or termination indemnities, irrespective of the reason
for
termination of employment. Under no circumstances shall any person
ceasing
to be an employee of the Corporation or any Subsidiary be entitled
to any
compensation for any loss of any right or benefit under the Agreement
or
Plan which such optionee might otherwise have enjoyed but for termination
of employment, whether such compensation is claimed by way of damages
for
wrongful or unfair dismissal, breach of contract or otherwise. By
participating in the Plan, Optionee shall be deemed to have accepted
all
the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be
fully
bound thereby
.
|
|
(D)
|
Governing
Law
.
The validity, construction and effect of the Plan and the Agreement,
and
any rules and regulations relating to the Plan and the Agreement,
shall be
determined in accordance with the internal laws, and not the law
of
conflicts, of the State of Nevada.
|
|
(E)
|
Severability
.
If any provision of the Agreement is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or would disqualify
the Agreement under any law deemed applicable by the Committee (as
defined
in the Plan), such provision shall be construed or deemed amended
to
conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Agreement, such
provision shall be stricken as to such jurisdiction or the Agreement,
and
the remainder of the Agreement shall remain in full force and
effect.
|
|
(F)
|
No
Trust or Fund Created
.
Neither the Plan nor the Agreement shall create or be construed to
create
a trust or separate fund of any kind or a fiduciary relationship
between
the Corporation or any Subsidiary and Optionee or any other
person.
|
|
(G)
|
Headings
.
Headings are given to the Sections and subsections of the Agreement
solely
as a convenience to facilitate reference. Such headings shall not
be
deemed in any way material or relevant to the construction or
interpretation of the Agreement or any provision
thereof.
|
(H)
|
Conditions
Precedent to Issuance of Shares
;
Repurchase Rights
. Shares shall not be issued pursuant to the exercise
of the Option unless such exercise and the issuance and delivery
of the
applicable Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities
Act of
1933, as amended, the Exchange Act of 1934, as amended, the rules
and
regulations promulgated thereunder, the requirements of any applicable
Stock Exchange or the Nasdaq National Market and the corporate laws
of the
state of Nevada. As a condition to the exercise of the purchase price
relating to the Option, the Corporation may require that the person
exercising or paying the purchase price represent and warrant that
the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel
for the Corporation, such a representation and warranty is required
by
law.
|
|
(I)
|
Withholding.
In order to comply with all applicable federal, state or provincial
income
tax laws or regulations, the Corporation may take such action as
it deems
appropriate to assure that all applicable federal, state or provincial
payroll, withholding, income or other taxes are withheld or collected
from
Optionee.
|
|
(J)
|
Adjustment
to Number of Shares and Exercise Price.
Subject to approval if
necessary of any relevant stock exchange, the Board will adjust the
number
of Shares subject to an Option, and the exercise price per Share
payable
upon exercise of an Option, upon the occurrence of any stock dividend,
stock split, reverse stock split, combination of shares, reclassification
of shares, recapitalization or other similar corporate transaction
with
respect to the Shares. Notwithstanding the preceding sentence to
the
contrary, no such adjustment will be made upon the conversion of
any debt
instrument, share of preferred stock or other convertible security
of the
Corporation into Shares.
|
|
(K)
|
Review
of Plan.
Optionee acknowledges receipt of a copy of the Plan and
represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms
and
provisions thereof. Optionee has reviewed the Plan and this Option
in
their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Option and fully understands all provisions
of the
Option. Optionee hereby agrees to accept as binding, conclusive and
final
all decisions or interpretations of the Board upon any questions
arising
under the Plan or this Option.
|
|
(L)
|
Change
of Address.
Optionee further agrees to notify the Corporation upon any
change in the residence address indicated
below.
|
DEEP WELL OIL & GAS, INC. | ||
|
|
|
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
|
|
|
Name: | ||
Address: | ||
NORTHERN ALSERTA OIL LTD. | ||
|
|
|
Per: | ||
Per: |
DEEP WELL OIL & GAS, INC. | ||
|
|
|
Per: | ||
Per: | ||
Witness: |
1. |
I
have reviewed this annual report on Form 10-KSB of Deep Well Oil
&
Gas, Inc. (formerly Allied Devices
Corporation);
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
I
am responsible for establishing and maintaining disclosure controls
and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for
the registrant and have:
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b) |
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
c) |
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case
of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
5. |
I
have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing
the
equivalent functions):
|
a) |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information;
and
|
b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
By:
/s/ Horst A. Schmid
|
Dr.
Horst A. Schmid
|
President
and Chief Executive Officer
|
1. |
I
have reviewed this annual report on Form 10-KSB of Deep Well Oil
&
Gas, Inc. (formerly Allied Devices
Corporation);
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4. |
I
am responsible for establishing and maintaining disclosure controls
and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for
the registrant and have:
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b) |
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
c) |
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case
of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
5. |
I
have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing
the
equivalent functions):
|
a) |
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information;
and
|
b) |
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
By:
/s/ Curtis Sparrow
|
Curtis
Sparrow
|
Chief
Financial Officer
|
By:
/s/ Horst A. Schmid
|
Dr.
Horst A. Schmid
|
President
and Chief Executive Officer
|
By:
/s/ Curtis Sparrow
|
Curtis
Sparrow
|
Chief
Financial Officer
|