DEVELOPMENT AGREEMENT
▇▇▇▇▇ FIELD
BY AND BETWEEN:
NEW CENTURY ENERGY CORPORATION,
AQUATIC CELLULOSE INTERNATIONAL CORPORATION
AND
STRONG PETROLEUM GROUP, INC.
TABLE OF CONTENTS
PAGE
I. Parties 1
1.01. New Century 1
1.02. Aquatic 1
1.03. Strong 1
II. Interests 1
III. Work Program 1
3.01. Payment of $XXXXXXX 1
3.02. Strong Responsible for the Work Program 2
3.03. Scope of the Work Program 2
3.04. Work Program Account 3
3.05. Work Program Statements and Records 3
3.06. Expenditures in excess $2,000,000.00 4
3.07. Engineering, Geological, and Geophysical Expenses
Includible only to $100,000 4
3.08. Overhead 4
3.09. Title and Legal Expenses 4
3.10. Vendors 5
3.11. Strong Will Charge Market Rates 5
3.12. Transportation Charges 5
3.13. No Lease Operating Expenses to Work Program Account 5
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IV. Revenue Interests Operations and Accounting 6
4.01. Interests in Revenues 6
4.02. Order of Operations 6
4.03. Administration of Revenues and Expenses 6
4.04. Working Files Transfer 6
4.05. If Assignment Not Earned 7
4.06. Prudent Operator Standard 7
4.07. Access to Books, Records and Data 7
4.08. Force Majeure 8
V. Assignment 8
5.01. Conditions Precedent to Assignment 8
5.02. Delivery of the Assignment 9
5.03. Memorandum Pending Assignment 9
VI. New Century Group's Option to Increase Its Interest 9
6.01. Option to Increase Working Interest 9
6.02. Notice of Election and Payment 10
VII. Joint Operating Agreement and ▇▇▇▇▇ Agreement 10
7.01. Joint Operating Agreement 10
7.02. ▇▇▇▇▇ Agreement 10
VIII. Acquisition of Assets in Area of Mutual Interest 10
IX. Representations of Strong 11
9.01. Organization 11
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PAGE
9.02. Authority 11
9.03. Knowledge of Operations 12
9.04. Access to Property 12
9.05. No Breach of Statute, Decree or Contract 12
9.06. Strong's Property Investigations 12
9.07. Binding Obligation 13
9.08. No Litigation or Adverse Events 13
9.09. Further Distribution 13
9.10. Permits 13
X. Representations of New Century Group 14
10.01. Organization 14
10.02. Authority 14
10.03. Binding Obligation 14
10.04. No Breach of Statute, Decree or Contract 14
10.05. No Litigation or Adverse Events 15
10.06. Taxes 15
10.07. Accuracy of Documents 15
10.08. Disclaimer of Warranty 15
10.09. Payments 16
10.10. Working Interests 16
10.11. Net Revenue Interests 16
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PAGE
10.12. Compliance with Laws 16
10.13. Necessary Action 16
10.14. No Default 17
10.15. Operations 17
10.16. Existing Burdens 17
10.17. Inspection of Records 18
10.18. Permits 18
10.19. Environmental Condition of Assets 18
XI. Taxes 19
11.01. Apportionment of Ad Valorem and Property Taxes 19
11.02. Sales Taxes, Filing fees, Etc. 19
11.03. Other taxes 19
XII. General Provisions 20
12.01. Applicable Law 20
12.02. Arbitration of Disputes 20
12.03. No Representations 20
12.04. Non-alienation Pending Completion 21
12.05. Public Announcements 21
12.06. Amendments only in Writing 21
12.07. No Partnership 21
12.08. Closing Obligations 21
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PAGE
12.09. Survival 22
12.10. Payments 22
12.11. Further Assurances 23
12.12. Headings, Time of Essences, etc. 23
12.13. Notifications 23
12.14. Construction 23
12.15. Entire Agreement 24
Exhibits to Agreement:
A. Description of ▇▇▇▇▇ Assets.
B. Area of Mutual Interest.
C. Assignment.
D. Joint Operating Agreement.
E. Memorandum Regarding Development Agreement.
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DEVELOPMENT AGREEMENT
▇▇▇▇▇ FIELD REDEVELOPMENT
This Development Agreement (the "Agreement") is made by and between New
Century Energy Corporation and Aquatic Cellulose International Corporation
(together, the "New Century Group") and Strong Petroleum Group, Inc. ("Strong").
The Effective Date of this Agreement shall be April 1, 2005 ("Effective Date").
The Parties hereby agree as follows:
I. PARTIES
1.01. NEW CENTURY. New Century Energy Corporation is a corporation
organized and existing under the laws of Colorado, with offices located at ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
1.02. AQUATIC. Aquatic Cellulose International Corporation is a
corporation organized and existing under the laws of Nevada, with offices
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ VIT 6L1.
1.03. STRONG. Strong Petroleum Group, Inc. is corporation organized
and existing under the laws of Texas, with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
II. INTERESTS
The New Century Group or its affiliates own certain interests in oil and
gas leases, ▇▇▇▇▇, and equipment located and being utilized in the ▇▇▇▇▇ Field
in ▇▇▇ ▇▇▇▇ County, Texas (the "▇▇▇▇▇ Assets"). These interests are described
in Exhibit A hereto, which is incorporated by reference into this Agreement.
III. WORK PROGRAM
3.01. PAYMENT OF $XXXXXX. Upon receipt of the KMF Consent as described
in section 12.08, Strong shall, by wire transfer, pay XXXXXXXX ($XXXXXXX), to
the New Century Group. This represents a total payment of XXXXXXXXX ($XXXXXXXX)
less the deposit of XXXXXXXXXXX ($XXXXXXX), to the New Century Group. This
payment shall be a condition precedent to any obligations of the New Century
Group, and no assignment of interest as otherwise described herein shall be made
unless and until such payment is made.
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3.02. STRONG RESPONSIBLE FOR THE WORK PROGRAM. The parties agree that
Strong shall complete a program of development and redevelopment of the ▇▇▇▇▇
Assets (the "Work Program"). The Work Program shall begin as soon as is
reasonably practicable. Strong shall have sole responsibility for the costs of
the Work Program, calculated in accordance with sections 3.04 - 3.13, up to the
amount of $2,000,000.00.
3.03. SCOPE OF THE WORK PROGRAM. The Work Program shall, at a minimum,
include the following activities:
a. Strong will conduct a comprehensive study in the ▇▇▇▇▇ Field with
initial focus on by-pass pay, "wedge" up-dip field extension
locations, and drilling locations for the Yegua horizon;
b. Strong will run a slick line, and where possible swab to
determine the plugged back total depth and production capability
of the existing shut-in ▇▇▇▇▇; and where merited perform
workovers to include such possible activities as to run a case
hole log, pull the tubing, squeeze, and re-perforate in the same
zone or re-complete in a new zone, including testing and
completing through production facilities. In lieu of working over
▇▇▇▇▇, Strong may, at its election, substitute the drilling of
new well(s), or the workover of other ▇▇▇▇▇ in adjacent acreage
hereafter acquired and/or re-enter ▇▇▇▇▇ that are presently
shut-in or plugged and abandoned. The alternative operations
shall be pursued as necessary in combination with other workovers
until the Work Program required expenditure of $2,000,000 is met.
c. Strong will drill, test, and complete, if commercially viable, a
minimum of two (2) new ▇▇▇▇▇ to a TVD not to exceed five thousand
five hundred (5500) feet. At least one of the new ▇▇▇▇▇ will be a
Yegua test well.
3.04. WORK PROGRAM ACCOUNT. Strong shall be responsible for keeping a
Work Program Account consisting of a written contemporaneous accounting of all
expenses and charges associated with Strong performing the Work Program. The
costs includible in the Work Program Account shall include, but are not limited
to the following: (i) all costs to re-enter, drill, complete, equip, produce or
P&A in accordance with the rules and regulations of the Railroad Commission of
Texas any ▇▇▇▇▇ worked on by Strong on the ▇▇▇▇▇ Assets or additional leases
acquired in the AMI; (ii) the cost of abstracts of title, title examinations,
curative, surveys, permitting, surface/subsurface agreements and rights-of-way
acquired before the completion of the Work Program; (iii) the overhead as
provided in section 3.08; (iv) premiums for liability and well control
insurance; (v) the cost of reprocessing 2D or 3D seismic; and (vi) all drilling
location costs including restoration costs, surface damages, payments under
surface agreements and any required mitigation costs and waste fluid and
cuttings disposal costs associated with the completion of the Work Program.
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3.05. WORK PROGRAM STATEMENTS AND RECORDS. Strong shall mail to the
New Century Group a statement of the Work Program Account which shall include
the then current total of items charged to the Work Program Account as well as
an itemization of each item posted to the Account since the last statement on
the following dates:
a. July 11, 2005;
b. October 10, 2005;
c. November 10, 2005; and
d. December 31, 2005.
Strong shall maintain records with respect to all items charged to the Work
Program Account including, but not limited to all third-party invoices and
tickets as well as back-up data with respect to the extent, type and date of any
goods or services charged to the Work Program Account by Strong itself.
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3.06. EXPENDITURES IN EXCESS $2,000,000.00. Strong and the New Century
Group may agree to spend in excess of the $2,000,000.00 referenced above. In
such event, Strong shall submit an authorization for expenditure to the New
Century Group in accordance with the Joint Operating Agreement.
3.07. ENGINEERING, GEOLOGICAL, AND GEOPHYSICAL EXPENSES INCLUDIBLE ONLY TO
$100,000. All engineering, geological, and geophysical analysis services
provided by or for Strong shall only be includible in the Work Program Account
to the extent that they do not exceed one hundred thousand dollars
($100,000.00). All charges in excess of that amount must be mutually agreed
upon by Strong and the New Century Group.
3.08. OVERHEAD. Overhead associated with the Work Program shall only
be includible in the Work Program Account in the amount of up to $5,000.00 per
month. This will be the only overhead charged until the Work Program is
completed, except for the allowed Producing Well Rate per the ▇▇▇▇▇ Agreement.
All overhead associated with the Work Program in excess of that amount shall be
borne solely by Strong.
3.09. TITLE AND LEGAL EXPENSES. All legal expenses and expenses
related to title work performed by or for Strong shall only be includible in the
Work Program Account to the extent that they do no exceed forty thousand dollars
($40,000.00). All charges in excess of that amount shall be mutually agreed
upon by Strong and the New Century Group. Reasonable and necessary legal
expenses directly related to operations on the ▇▇▇▇▇ Assets shall be includible
in the Work Program Account if such expenses are not and cannot be reimbursed
under Strong's insurance.
3.10. VENDORS. The parties agree that any costs charged to the Work
Program Account shall be reasonable and necessary. The New Century Group shall
supply a list of approved third-party vendors (the "Vendors List"), and all
third-party goods or services that are part of the Work Program shall be
provided by such Vendors. Strong can add Vendors for any single service or
contract less than $25,000. Strong and the New Century Group shall have the
right, upon mutual agreement, to add and eliminate Vendors from the Vendors List
as necessary.
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3.11. STRONG WILL CHARGE MARKET RATES. The parties also agree that any
charges made by Strong to the Work Program Account for goods and services
provided directly by Strong shall be priced comparably with the same or similar
types of services provided by parties on the Vendors List, or when such goods
and services are not sold by companies on the Vendors List, other third-party
vendors servicing the ▇▇▇ ▇▇▇▇ County area.
3.12. TRANSPORTATION CHARGES. Strong may, at its election, transport
equipment and materials for use in the Work Program from overseas and/or other
Strong locations. However, the parties agree that Strong shall solely bear all
costs associated with such transportation to the Port of Houston and that
transportation costs to that point will not be charged to the Work Program
Account. All equipment and materials supplied and transported by Strong will be
charged to the Work Program Account as if f.o.b. Port of Houston, and any such
charges must be in accordance with the then-existing market rate as required by
3.11 herein.
3.13. NO LEASE OPERATING EXPENSES TO WORK PROGRAM ACCOUNT. No charges
for goods or services related to the normal operation of the oil and gas leases
for the ▇▇▇▇▇ Assets shall be includible in the Work Program Account. Instead,
such lease operating expenses will be handled in accordance with the Joint
Operating Agreement.
IV. REVENUE INTERESTS OPERATIONS AND ACCOUNTING
4.01. INTERESTS IN REVENUES. Upon the Effective Date, but before the
completion of the Work Program, Strong shall share in the revenues and expenses
involved in all the ▇▇▇▇▇ Asset ▇▇▇▇▇ in the ratio of eighty-seven and one-half
percent (87.5%) and the New Century Group twelve and one-half percent (12.5%).
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4.02. ORDER OF OPERATIONS. Strong shall not undertake operations on
existing producing ▇▇▇▇▇ unless and until production suitable to maintain the
leases shall be obtained from other ▇▇▇▇▇.
4.03. ADMINISTRATION OF REVENUES AND EXPENSES. The parties shall engage
Division Order Services, LLC, or some other mutually agreeable third-party, to
administer the revenues, expenses, and joint interest ▇▇▇▇▇▇▇▇ during the
pendency of the Work Program. The costs associated with such engagement shall
be borne one-hundred percent (100%) by Strong since these services fall under
the category of services provided by an Operator in return for the Producing
Well Rate overhead provided for in the Joint Operating Agreement.
4.04. WORKING FILES TRANSFER. The New Century Group shall make available
for physical transfer the Working Files to Strong for the ▇▇▇▇▇ Assets within
three (3) business days of the signing by all parties of this Agreement.
Working Files shall include existing well, operation, engineering, title and
geological files. If Strong earns the Assignment pursuant to section 5.01, then
the Working Files shall become the property of Strong. In the event that
Strong does not earn the Assignment, it shall immediately return the Working
Files, together with all updates thereto including all geological and
engineering interpretations, to the New Century Group.
4.05. IF ASSIGNMENT NOT EARNED. If, for whatever reason, Strong does
not earn the Assignment in accordance with section 5.01, then, unless otherwise
agreed by the New Century Group:
a. Strong's rights shall terminate with respect to any and all
producing ▇▇▇▇▇ associated with the ▇▇▇▇▇ Assets effective
December 31, 2005;
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b. Strong shall cease to be operator and shall cooperate in
returning operations, including all documents theretofore
received or generated in that capacity, to the New Century Group
or its designee;
c. Strong shall execute a release of rights indicating that it does
not own or claim any interest in the ▇▇▇▇▇ Assets and in the
event that Strong refuses the New Century Group is authorized as
Strong's attorney-in-fact to, in these circumstances only, to
execute and record such a release on Strong's behalf; and
d. all right, title and interest in all equipment theretofore
installed on the ▇▇▇▇▇ Assets lease shall become the property of
the New Century Group.
4.06. PRUDENT OPERATOR STANDARD. Strong shall operate and maintain the
▇▇▇▇▇ Assets as would a prudent operator under similar circumstances in
accordance with good oil field practices. Strong shall promptly (and, unless
the same are being contested in good faith and by appropriate proceedings,
before the same are delinquent) pay all costs and expenses (including without
limitation all taxes and all costs, expenses and liabilities for labor,
materials and equipment incurred in connection with the ▇▇▇▇▇ Assets and all
obligations to the holders of royalty interests and other interests affecting
the ▇▇▇▇▇ Assets) incurred from and after the Effective Date in developing,
operating and maintaining the ▇▇▇▇▇ Assets.
4.07. ACCESS TO BOOKS, RECORDS AND DATA. In addition to any reports
and information specifically required by the terms of this Agreement, Strong
agrees to furnish to the New Century Group full information pertaining to the
operation of the ▇▇▇▇▇ Assets, at all reasonable times, and in such form, as
Grantee may reasonably request. Strong will permit representatives designated
by the New Century Group, including independent accountants, agents, attorneys,
and other persons to visit and inspect Strong's books and records pertaining to
the Work Program Account and to make copies and photocopies from such records
and to write down and record such information as such representatives may
request.
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4.08. FORCE MAJEURE. In the event that Strong shall have diligently
prosecuted the Work Program, but due to an Event of Force Majeure is unable to
timely complete the Work Program, then, subject to the New Century Group's
agreement, an extension may be granted to complete the Work Program. An Event
of Force Majeure is an extraordinary, unanticipated and unavoidable barrier to
performance including the passage of any law, rules, regulations or orders by
any federal, state or local governmental body or agency or any court of law or
by the rules, regulations or orders of any public body or official purporting to
exercise authority or control respecting the activities and operations
contemplated hereunder, or due, occasioned or caused, directly or indirectly, by
strikes, action of the elements, weather or water conditions, inability to
obtain fuel or other critical materials or supplies, or any other cause beyond
the control of the non-performing party.
V. ASSIGNMENT
5.01. CONDITIONS PRECEDENT TO ASSIGNMENT. Strong shall be entitled to an
assignment, in the form attached hereto as Exhibit C, if and only if, the
following conditions are met:
a. the Work Program as outlined in section 3.03 is completed before
December 31, 2005;
b. Strong shall have expended, in accordance with the terms of the
Work Program Account, no less than two million dollars
($2,000,000);
c. Strong shall not then be in any material uncured breach of this
Agreement; and
d. there shall not be any outstanding unpaid debt incurred by Strong
which would or could support a lien against the ▇▇▇▇▇ Assets.
5.02. DELIVERY OF THE ASSIGNMENT. Within thirty (30) days of receiving
written notice of the satisfaction of each of the conditions referenced in
section 5.01, the New Century Group shall deliver to Strong an assignment to the
▇▇▇▇▇ Assets in the form attached hereto as Exhibit C. Also within this period
of time, New Century Group will also elect or not on increasing the Working as
provided in section 6.01 with the associated cash payment. Unless the New
Century Group exercises the option provided in section 6.01, the Assignment
shall equal eighty-seven and one-half percent (87.5%) of the working interest in
the ▇▇▇▇▇ Assets and a proportionate interest in the equipment located thereon.
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5.03. MEMORANDUM PENDING ASSIGNMENT. Within ten days of the execution of
this Agreement, the New Century Group shall furnish to Strong for filing in the
real property records of ▇▇▇ ▇▇▇▇ County, Texas the Memorandum attached hereto
as Exhibit E. Upon discontinuation or completion of the Work Program and
contemplated Assignment or upon it becoming apparent that no Assignment shall be
made, the parties will execute a second memorandum removing any burden placed on
the ▇▇▇▇▇ Assets by virtue of the Exhibit E memorandum.
VI. NEW CENTURY GROUP'S OPTION TO INCREASE ITS INTEREST.
6.01. OPTION TO INCREASE WORKING INTEREST. The parties agree that, upon
the receipt of the written notice described in section 5.01 above and for a
period of thirty (30) days thereafter, the New Century Group, or if Aquatic
elects not to, then New Century by itself, shall have an option to acquire up to
an additional twenty and eight-tenths percent (20.8%) working interest in the
▇▇▇▇▇ Assets from Strong for XXXXXXX ($XXXXXX) for each percentage point
increase. So, by way of illustration, if the New Century Group elected to
acquire the entire 20.8% increase then the purchase price would be XXXXXXXX
($XXXXXXX).
6.02. NOTICE OF ELECTION AND PAYMENT. At the time it exercises its option,
payment from the New Century Group shall be paid to Strong for any increase
elected by the New Century Group.
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VII. JOINT OPERATING AGREEMENT AND ▇▇▇▇▇ AGREEMENT
7.01. JOINT OPERATING AGREEMENT. Effective April 28, 2005, Strong shall be
Operator with respect to the ▇▇▇▇▇ Assets. The Joint Operating Agreement
attached hereto as Exhibit D shall govern the operation of the ▇▇▇▇▇ Assets by
Strong. All operations shall be conducted in accordance with the terms and
conditions of the Joint Operating Agreement, and such agreement is incorporated
by reference into this Agreement as though set forth in full herein. In the
event of conflict between the terms and conditions of this Agreement and those
contained in the Joint Operating Agreement, the terms and conditions of this
Agreement shall prevail until compliance with the Conditions Precedent in
section 5.01.
7.02. ▇▇▇▇▇ AGREEMENT. The Council of Petroleum Accountant Societies Form
1984 Onshore ("▇▇▇▇▇ Agreement") attached to the Joint Operating Agreement shall
govern the accounting of revenues, expenses, and joint interest ▇▇▇▇▇▇▇▇ for the
▇▇▇▇▇ Assets, however, the ▇▇▇▇▇ Agreement does not govern the treatment of
expenses for purposes of the Work Program Account, which shall be treated as
described in Articles III and IV herein. The ▇▇▇▇▇ Agreement is incorporated
herein by reference into this Agreement as though set forth in full.
VIII. ACQUISITION OF ASSETS IN AREA OF MUTUAL INTEREST
For the purposes of this Agreement, the parties establish as an Area of
Mutual Interest ("AMI") covering Surveys 87 and 88, and any other acreage owned
by the Kenedy Memorial Foundation ("KMF") as depicted in Exhibit B, its
successors and assigns, in ▇▇▇ ▇▇▇▇ County, Texas. The AMI shall be effective
for a period of two (2) years from the date hereof and so long thereafter as any
oil or gas interest subject hereto is in force and effect. If, during the
effective period, any party to this Agreement acquires any oil or gas interest
which lies wholly or partially within the AMI, such party shall immediately
notify the non-acquiring party of the facts concerning such acquisition,
including the cost thereof. For a period of thirty (30) days from the receipt
of such notice the other party shall have the right and option to purchase an
interest therein in the proportion then existing between the parties in the
working interests that are the subject of this Agreement.
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IX. REPRESENTATIONS OF STRONG
Strong represents and warrants to the New Century Group as follows:
9.01. ORGANIZATION. Strong is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas. Strong has
duly authorized the execution, delivery and performance of this Agreement by all
necessary corporate action, and the same is a binding obligation of Strong,
enforceable in accordance with its terms.
9.02. AUTHORITY. Strong has all requisite power and authority to carry on
its business as presently conducted, to enter into this Agreement and to perform
the obligations contained herein. The consummation of the transactions
contemplated by this Agreement will not violate nor be in conflict with, any
provisions of Strong's Articles of Incorporation, Bylaws or other governing
documents, or any material agreement or instrument to which Strong is a party or
by which Strong is bound, or any judgment, decree, order, statute, rule or
regulation applicable to Strong. The persons signing this Agreement on behalf of
Strong are duly appointed and authorized by Strong to bind Strong to this
Agreement.
9.03. KNOWLEDGE OF OPERATIONS. As of the Closing Date, Strong has been
given full and complete access to the New Century Group's files and operations
and has apprized itself of all production and legal obligations required therein
to commence operations as the owner and/or operator of the Property and to meet
all obligations associated therewith.
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9.04. ACCESS TO PROPERTY. Upon execution of this Agreement, Strong warrants
that Strong and/or its authorized representatives have had reasonable and prompt
access to the ▇▇▇▇▇ Assets in connection with Strong's due diligence review.
9.05. NO BREACH OF STATUTE, DECREE OR CONTRACT. The execution, delivery and
performance of this Agreement by Strong does not and will not breach any legal
requirement, will not conflict with or result in a breach of or default under
any agreement or any order, writ, injunction, decree, contract, agreement or
instrument to which Strong is a party, will not result in the creation or
imposition of any lien, charge or encumbrance of any nature upon any of the
▇▇▇▇▇ Assets and ▇▇▇▇▇, and will not give to others any interest or rights in,
or with respect to any of the ▇▇▇▇▇ Assets.
9.06. STRONG'S PROPERTY INVESTIGATIONS. The New Century Group has allowed
Strong and it authorized representatives to conduct inspections or
investigations on or with respect to the ▇▇▇▇▇ Assets including, without
limitation, environmental audits. The New Century Group has consented to Strong
and its authorized representatives entering upon the subject lands and leases to
inspect same and the equipment thereon, conduct soil and water tests and
borings, and conduct such other tests, examinations, investigations and studies
as may be necessary or appropriate in Strong's sole judgment for the preparation
of appropriate engineering and other reports relating to the ▇▇▇▇▇ Assets and
their condition. Strong agrees that it will hold in trust, keep confidential,
and not disclose to any third party or make any use of any confidential
information obtained from the New Century Group except to the extent necessary
to complete its investigations described herein unless the purchase and sale
contemplated herein is accomplished and the ▇▇▇▇▇ Assets are transferred to
Strong.
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9.07. BINDING OBLIGATION. This Agreement has been duly executed and
delivered on behalf of Strong. All documents and instruments required hereunder
to be executed and delivered to the New Century Group have been duly executed
and delivered. This Agreement does and all other documents to be executed in
connection herewith shall, constitute legal, valid and binding obligations of
Strong in accordance with their terms.
9.08. NO LITIGATION OR ADVERSE EVENTS. There is no suit, or legal,
administrative, arbitration or other proceeding, or governmental investigation,
pending or, to Strong's knowledge, threatened, by or against Strong, and no
event or condition of any character, to Strong's knowledge, pertaining to
Strong, that could prevent the consummation of the transactions contemplated by
this Agreement. To the best of Strong's knowledge and belief, there is no
bankruptcy, reorganization, or arrangement proceeding pending or being
contemplated by or threatened against Strong.
9.09. FURTHER DISTRIBUTION. Strong is purchasing the ▇▇▇▇▇ Assets for its
own account and does not currently intend to offer any of the ▇▇▇▇▇ Assets for
resale in such a manner that would subject the sale of such ▇▇▇▇▇ Assets to the
jurisdiction of the United States Securities and Exchange Commission or any
applicable state securities law.
9.10. PERMITS. Strong is bonded and qualified to own and/or operate the
▇▇▇▇▇ Assets and holds or will hold at Closing all required governmental
licenses, permits, bonds, certificates, orders and authorizations necessary to
own or operate the ▇▇▇▇▇ and equipment.
X. REPRESENTATIONS OF NEW CENTURY GROUP
10.01. ORGANIZATION. The New Century Energy Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Aquatic Cellulose International Corp. is a corporation duly organized,
validly existing and in good standing under the laws of Nevada.
10.02. AUTHORITY. The New Century Group has all requisite power and
authority to carry on its business as presently conducted, to enter into this
Agreement, and to perform its obligations under this Agreement. The consummation
of the transaction contemplated by this Agreement will not violate, nor be in
conflict with, any provisions of its Articles of Incorporation, Bylaws or other
governing document of the New Century Group.
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10.03. BINDING OBLIGATION. This Agreement has been duly executed and
delivered on behalf of the New Century Group. All documents and instruments
required hereunder to be executed and delivered to Strong shall have been duly
executed and delivered. This Agreement does, and such document and instrument
will, constitute legal, valid and binding obligations of the New Century Group
in accordance with their terms.
10.04. NO BREACH OF STATUTE, DECREE OR CONTRACT. The execution, delivery
and performance of this Agreement by the New Century Group does not and will not
breach any legal requirement, will not conflict with or result in a breach of or
default under any agreement or any order, writ, injunction, decree, contract,
agreement or instrument to which the New Century Group is a party or by which
the ▇▇▇▇▇ Assets are or may be bound, will not result in the creation or
imposition of any lien, charge or encumbrance of any nature upon any of the
▇▇▇▇▇ Assets and ▇▇▇▇▇, and will not give to others any interest or rights in,
or with respect to any of the ▇▇▇▇▇ Assets, except for the contracts set forth
on Exhibit "A" to this Agreement.
10.05. NO LITIGATION OR ADVERSE EVENTS. There is no suit, claim or action,
or legal, administrative, arbitration or other proceeding, or governmental
investigation, pending or, to the New Century Group's knowledge, threatened, by
or against the New Century Group, the ▇▇▇▇▇ Assets, and no event or condition of
any character, to the New Century Group's knowledge, pertaining to the New
Century Group, the ▇▇▇▇▇ Assets, that could prevent the consummation of the
transactions contemplated by this Agreement. To the best of the New Century
Group's knowledge and belief, there is no bankruptcy, reorganization, or
arrangement proceeding pending or being contemplated by or threatened against
the New Century Group.
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10.06. TAXES. To the extent that the New Century Group is responsible for
remitting same, the New Century Group has paid and discharged all property
taxes, assessments, excises and other levies which, if not paid, could
constitute liens or charges against the ▇▇▇▇▇ Assets, except for taxes being
contested in good faith and by appropriate proceedings. The New Century Group
remains responsible for its share of any taxes which may become due for periods
prior to the Effective Date.
10.07. ACCURACY OF DOCUMENTS. Exhibit A contains a list of all of the
material oil and gas contracts pertaining to the ▇▇▇▇▇ Assets. These oil and gas
contracts have not been amended or modified by any written or oral agreements,
except where specifically indicated on Exhibit A.
10.08. DISCLAIMER OF WARRANTY. EXCEPT WHERE OTHERWISE SPECIFICALLY
INDICATED IN THIS AGREEMENT, THE NEW CENTURY GROUP DISCLAIMS ANY WARRANTIES
EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, INCLUDING WARRANTIES WITH
RESPECT TO THE PRESENCE OF ENVIRONMENTAL CONDITIONS OR NATURALLY OCCURRING
RADIOACTIVE MATERIAL AFFECTING ANY PROPERTY (REAL, PERSONAL OR MIXED), OR
EQUIPMENT (INCLUDING PIPELINE EQUIPMENT) CONVEYED TO AND ACQUIRED BY STRONG,
WITH ALL SUCH REAL AND PERSONAL PROPERTY AND EQUIPMENT BEING TRANSFERRED,
ASSIGNED, SOLD, PURCHASED, ACCEPTED AND ACQUIRED "AS IS" AND "WHERE IS." THE NEW
CENTURY GROUP EXPRESSLY DISCLAIMS THE COVENANTS IMPLIED BY SECTION 5.023 OF THE
TEXAS PROPERTY CODE.
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10.09. PAYMENTS. To the best of the New Century Group's knowledge, all
royalties, overriding royalties, rentals, shut-in royalties, gas purchase
payments and other such payments due under the oil and gas leases have been
properly and timely paid. The New Century Group remains responsible for its
share of any payments which may be determined to be due for periods prior to the
Effective Date. To the best of the New Century Group's knowledge and belief, the
New Century Group has not been advised in writing by any lessor under any lease
of any material default under any lease which has not been remedied or waived or
of any requirement or demand to drill additional ▇▇▇▇▇ on any of the leases
which have not been satisfied.
10.10. WORKING INTERESTS. To the best of the New Century Group's knowledge,
the New Century Group's working interests in the ▇▇▇▇▇ Assets are as set forth
on Exhibit A.
10.11. NET REVENUE INTERESTS. To the best of the New Century Group's
knowledge, the New Century Group's Net Revenue Interests are as set forth on
Exhibit A.
10.12. COMPLIANCE WITH LAWS. To the best of the New Century Group's
knowledge, the New Century Group has complied in all material respects with all
applicable laws, regulations and orders of all governmental agencies having
jurisdiction over the ▇▇▇▇▇ Assets.
10.13. NECESSARY ACTION. The New Century Group shall take or cause to be
taken all such actions, as would a prudent businessman under the same or similar
circumstances, as may be necessary and advisable to consummate and make
effective the sale of the ▇▇▇▇▇ Assets contemplated by this Agreement and to
assure that the New Century Group will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the timely
consummation of such transactions; provided, however, that New Century Group
shall not be required to (i) file suit or assume any additional liabilities in
performing its obligations hereunder, or (ii) to perform any title curative.
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10.14. NO DEFAULT. To the New Century Group's knowledge, the New Century
Group is not in default under, and has not received a notice of default or
termination (to include a self-executing termination clause under an oil and gas
lease) with respect to any provision of the ▇▇▇▇▇ Assets or an oil and gas
contract affecting the ▇▇▇▇▇ Assets, or the title of the New Century Group
thereto and no condition exists that with notice or lapse of time or both would
constitute a default under any mortgage, indenture, loan credit agreement or
other agreement or instrument evidencing indebtedness for borrowed money, or
create a lien, charge or other encumbrance on the ▇▇▇▇▇ Assets, and has not
received any notice of default with respect to, any order, writ, injunction or
decree of any court, commission or administrative agency in connection with the
ownership, development or operation of the ▇▇▇▇▇ Assets, or any part thereof,
which would materially adversely affect the value of the ▇▇▇▇▇ Assets.
10.15. OPERATIONS. To the New Century Group's knowledge, the ▇▇▇▇▇ Assets
are being operated and produced in substantial compliance with all applicable
oil and gas contracts and in compliance, in all material respects, with all
applicable laws, rules and regulations and the ▇▇▇▇▇ Assets which constitute a
portion of the oil and gas contracts.
10.16. EXISTING BURDENS. To the best of the New Century Group's knowledge,
the lease burdens on the ▇▇▇▇▇ Assets do not reduce the Net Revenue Interest
below the percentages set forth on Exhibit A. The New Century Group do not
warrant Net Revenue Interest, except by through and under the New Century Group
as to the interests specifically set forth on Exhibit A, but not otherwise, such
warranty to be several and not joint and several as to the New Century Group Net
Revenue Interest.
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10.17. INSPECTION OF RECORDS. The New Century Group has provided and shall
continue to provide Strong with reasonable access to the records relating to the
▇▇▇▇▇ Assets. Any and all review of the records relating to the ▇▇▇▇▇ Assets by
Strong shall be conducted at the New Century Group's office during normal
business hours. Any and all such review of the records relating to the ▇▇▇▇▇
Assets by Strong shall be at no cost to the New Century Group.
10.18. PERMITS. All permits necessary for the operation of the ▇▇▇▇▇ of
which the New Century Group is the operator are in full force and effect.
10.19. ENVIRONMENTAL CONDITION OF ASSETS. To the New Century Group's actual
knowledge, there are no material Environmental Liabilities affecting the ▇▇▇▇▇
Assets. "Environmental Liabilities" means obligations, duties, losses,
liabilities, claims, fines, expenses, damages, costs, including attorney's fees
and expenses, or penalties created by, related to, or arising out of any
Environmental Law, whether Accruing before or after the Effective Date excluding
all Plugging and Abandonment Obligations. "Environmental Laws" means any
applicable laws, orders, rules, regulations, judgments, or decrees of any
federal, state, tribal, county or municipal governing authority having
jurisdiction over any Asset or Party which related to pollution, the protection
or cleanup of the environment, or the release or disposal of Deleterious
Substances into the environment, including but not limited to ambient air,
surface water, groundwater, land surface or subsurface strata; including all
such laws, orders, rules, regulations, judgments or decrees as they may be
amended, varied or modified in the future.
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XI. TAXES
11.01. APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES. All ad valorem
taxes, real property taxes, personal taxes and similar obligations shall be
apportioned as of the Effective Date between Strong and the New Century Group.
All such taxes allocable to the periods before the Effective Date shall be paid
by the New Century Group, and all such taxes allocable to periods after the
Effective Date shall be paid by Strong, subject to being handled in accordance
with the Joint Operating Agreement. Any refunds of taxes allocable to periods
prior to the Effective Date shall be the property of the New Century Group,
subject to being handled in accordance with the Joint Operating Agreement. Any
refunds of taxes allocable to periods after the Effective Date shall be the
property of Strong. Buyer shall file or cause to be filed all required reports
and returns incident to such taxes which are due on or after the Closing Date
and shall pay or cause to be paid to the taxing authorities all such taxes
reflected on such reports and returns, subject to reimbursement by the New
Century Group to Strong for Unocal's portion of such taxes, if any.
11.02. SALES TAXES, FILING FEES, ETC. The payment provided for hereunder is
net of any sales taxes or other transfer taxes. Strong shall be liable for any
sales tax or other transfer as well as any applicable conveyance, transfer and
recording fees, and real estate transfer stamp or taxes imposed upon the sale
for the ▇▇▇▇▇ Assets and Strong shall defend any action by a governmental agency
to collect such taxes or fees, and will hold the New Century Group harmless from
any cost or liability for taxes, fees, penalty, interest or costs, including
reasonable attorneys fees, assessed as a result of this transaction.
11.03. OTHER TAXES. All production, severance or excise taxes, conservation
fees and other similar such taxes or fees relating to oil and gas produced and
sold from the ▇▇▇▇▇ Assets prior to the Effective Date shall be paid by the New
Century Group, and all such taxes and fees relating to such oil and gas produced
or sold after the Effective Date shall be paid or reimbursed by Strong (or if
attributable to periods after the Effective Date and the New Century Group pays
such taxes, then Strong shall reimburse the New Century Group therefore). In the
event such taxes attributable to the Assets are not assessed on a current year
basis, it is agreed that when such taxes are assessed, insofar as they Accrued
to the Assets before the Effective Date, they shall be paid by the New Century
Group upon receipt of a statement and supporting documentation.
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XII. GENERAL PROVISIONS
12.01. APPLICABLE LAW. This agreement shall be governed and construed by
the laws of the State of Texas, without reference to its choice of law
provisions.
12.02. ARBITRATION OF DISPUTES. Any dispute arising out of or relating to
this Agreement including breach, termination or validity thereof, which has not
been resolved by agreement within fifteen (15) days after a written complaint,
shall be finally resolved by arbitration in accordance with the CPR Rules for
Non-Administered Arbitration then currently in effect by a sole arbitrator. The
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Sec.Sec.
1-16, and judgment upon the award rendered by the arbitrator(s) may be entered
by any court having jurisdiction thereof. The place of arbitration shall be
Houston, Texas. In the event that the parties cannot agree to an arbitrator, the
parties shall ask the CPR Dispute Resolution Institute to appoint one.
12.03. NO REPRESENTATIONS. The parties acknowledge that they are not
relying on any statement or representation other than those explicitly contained
herein.
12.04. NON-ALIENATION PENDING COMPLETION. Until completion of the Work
Program Account or December 31, 2005, whichever shall occur, none of the parties
will, without the permission of the other, sell their interest to anyone other
than parties to this Agreement. After the earlier of these events, the parties
shall be free, subject to the preferential rights provision of the Joint
Operating Agreement, to sell their respective interests.
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12.05. PUBLIC ANNOUNCEMENTS. Other than to their affiliates, agents and
advisors, neither party shall make or cause to be made any disclosure or notice
of this transaction to any third party or otherwise disseminate any news release
and/or public announcement of any kind with respect to the transaction
contemplated hereunder without the express written approval of the other. Such
consent shall not be denied if disclosure is required under applicable law, rule
or regulation or any stock exchange rules on which any security of the Party
seeking disclosure, or its affiliate, is listed. Strong recognizes that New
Century Energy Group and Aquatic are publicly listed companies and are subject
to exchange-imposed obligations to make prompt and timely disclosure of material
information and to file information with the SEC.
12.06. AMENDMENTS ONLY IN WRITING. The parties agree that this Agreement
may not be amended other than in a writing signed by all parties hereto.
12.07. NO PARTNERSHIP. The parties hereto do not intend to create, nor
shall this Agreement be construed as creating, a mining or other partnership or
association, nor does this Agreement render the parties hereto liable as
partners. The liabilities of the parties shall be several and not joint or
collective.
12.08. CLOSING OBLIGATIONS. At the Closing the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
a. The New Century Group and Strong shall execute, acknowledge and
exchange this Agreement with each other;
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b. The New Century Group and Strong shall begin to seek the KMF
Consent to assign, and
c. The New Century Group and Strong shall execute, acknowledge and
exchange the Joint Operating Agreement attached as Exhibit D.
Upon receipt of KMF's written Consent for the New Century Group to assign
the interests in the subject lease that are contemplated in this Agreement to
Strong, Strong shall make the XXXXXXXXXX ($XXXXXXX) payment referenced in
section 3.01. If, for any reason, the written Consent of KMF to assign cannot
be obtained within twenty (20) days after the Closing Date, then the XXXXXXXX
deposit referenced in paragraph 3.01 shall be refunded to Strong, all documents
delivered by the New Century Group to Strong shall be returned, the rights of
the parties shall be the same as specified in section 4.05, and neither party
shall have any further obligation to the other.
12.09. SURVIVAL. The representations, warranties, covenants, agreements and
indemnities provided for in this Agreement shall survive the Closing and shall
not be extinguished by the doctrine of merger by deed or any similar doctrine
and no waiver, release, or forbearance of the application of the provisions of
those paragraphs in any given circumstance shall operate as a waiver, release,
or forbearance of the provisions of the paragraphs as to any other
circumstances.
12.10. PAYMENTS. In the event a party is required to pay cash to the other
party, payments shall be by wire transfer unless otherwise agreed by the parties
at the time. When a wire transfer payment is required, the party to whom payment
is to made shall furnish written wire transfer instructions to the other party.
12.11. FURTHER ASSURANCES. The Parties agree to execute and deliver to each
other all such other and additional instruments, notices, division orders,
transfer orders and other documents and to do all such other and further acts
and things as may be necessary to more fully and effectively carry out the
obligations in and confer the rights provided by this Agreement.
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12.12. HEADINGS, TIME OF ESSENCE, ETC. The descriptive headings contained
in this Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement. Within this
Agreement words of any gender shall be held and construed to cover any other
gender, and words in the singular shall be held and construed to cover the
plural, unless the context otherwise requires. Time is of the essence in this
Agreement.
12.13. NOTIFICATIONS. Any notices or communications required or permitted
pursuant to this Agreement shall be deemed sufficiently given when sent by
certified mail, postage prepaid, or facsimile transmission addressed to the
party for whom intended at the following addresses:
New Century Group: Strong:
New Century Energy Corp. Strong Petroleum Group, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Attention: Mr. ▇▇▇▇▇ ▇▇▇▇
Residence Phone: Residence Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Business Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Business Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Mobile: (▇▇▇) ▇▇▇-▇▇▇▇ Mobile: (▇▇▇) ▇▇▇-▇▇▇▇
12.14. CONSTRUCTION. The Parties have participated jointly in the
negotiating and drafting of this Agreement. In the event ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement.
12.15. ENTIRE AGREEMENT. This Agreement reflects the entire agreement
between the parties. There are no other agreements, either written or oral, in
whole or in part, and the execution of this Agreement supersedes all earlier
representations, negotiations, or agreements about this matter.
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IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed by their duly authorized officers, general partners, or
attorneys-in-fact hereunto duly authorized as of the day and year first above
written.
NEW CENTURY ENERGY CORP. STRONG PETROLEUM GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------- ----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇, President
AQUATIC CELLULOSE INTERNATIONAL CORP
By: /s/ Sheridan Westgarde
-----------------------------------
Sheridan Westgarde, President
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