ASSIGNMENT AGREEMENT
for
CARBONERA BLOCK
by and between
PETROSOUTH ENERGY CORPORATION SUCURSAL
COLOMBIA
and
DELAVACO ENERGY COLOMBIA INC. SUCURSAL
COLOMBIA
ASSIGNMENT
AGREEMENT
THIS AGREEMENT is entered into on
the [DAY] day of [MONTH] 2009 by and between PETROSOUTH ENERGY
CORPORATION SUCURSAL COLOMBIA , a branch of the foreign
corporation Petrosouth Energy Corp., a Colombian Branch Office of a
BVI Corporation established by public deed 657 dated March 05 of
2.007, from Notary 35 of Bogotá legally represented by its
authorized officer, Mr. FELIPE PIMIENTA BARRIOS, Colombian citizen,
domiciled in Bogotá, DC, identified with the citizen
identification card number 79.785.924, according to the Certificate
of Legal Existence and Representation issued by the Chamber of
Commerce of Bogotá, attached hereto as Exhibit A
(hereinafter referred to as “Assignor”); and
DELAVACO ENERGY COLOMBIA INC. SUCURSAL COLOMBIA , a branch
of the foreign corporation DELAVACO ENERGY COLOMBIA INC.,
established in the Republic of Colombia, domiciled in the city of
Bogotá, DC, legally represented by its authorized officer,
Mr. ANDREW DE FRANCESCO, Canadian citizen, domiciled in Toronto,
Canada, identified with Canadian passport number WJ709416,
according to the Certificate of Legal Existence and Representation
issued by the Chamber of Commerce of Bogotá, attached hereto
as Exhibit B (hereinafter referred to as “Assignee”).
The companies named above, and their respective successors and
assignees (if any), may sometimes individually be referred to as
“Party” and collectively as the
“Parties”.
WITNESSETH:
WHEREAS, on December 28
th , 2.005, the Colombian Agencia Nacional de
Hidrocarburos – ANH and Well Logging Ltda. entered into an
Exploration and Production Agreement for the exploration,
development and production of hydrocarbons in the Contract Area
(“the Carbonera Contract”);
WHEREAS, since August 1, 2007
Assignor holds six percent (6%) of the rights and obligations of
the Carbonera Contract and the Carbonera Contract Area; according
to the Assignment of Participating Interests Agreement entered into
by Assignor and OMEGA ENERGY COLOMBIA;
WHEREAS, as of the date of this
Agreement, Assignor holds, directly or indirectly, six percent (6%)
of the rights and obligations of the Carbonera Contract and the
Carbonera Contract Area;
WHEREAS, there are no preemptive
rights or obligation related to Assignor’s ability to assign
and/or transfer its participating interest in the Carbonera
Contract; and
WHEREAS, Assignor is willing to
assign and transfer a certain undivided interest in its rights and
obligations under the Carbonera Contract to Assignee in accordance
with the terms set forth herein and Assignee wishes to acquire such
interest;
NOW, THEREFORE, in consideration
of the premises and the mutual covenants and obligations set out
below and to be performed, the Assignor and Assignee agree as
follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the
following capitalized words and terms shall have the meaning
ascribed to them below. Any capitalized term used in this Agreement
and not specifically defined in this Agreement shall have the same
meaning as in the Carbonera Contract.
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1.1
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Agreement
means this Assignment Agreement
together with the Exhibits, and any extension, renewal or amendment
hereof agreed to in writing by the Parties;
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1.2
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ANH
means the Agencia Nacional de
Hidrocarburos;
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1.3
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Approval
Date means the date
on which the ANH formally approves or endorses the Assignment of
the Participating Interest transferred hereunder;
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1.4
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Assignment
means the document, attached as
Exhibit D, by which the interest in the Carbonera Contract is
transferred and conveyed to the Assignee directly by the Assignor
or through the Operator (Well Logging Ltda.) therein, as provided
hereunder;
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1.5
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Consideration has the meaning given in Article 4.
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1.6
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Carbonera Contract or
Contract means the
Hydrocarbon Exploration and Production, entered into by ANH and
Well Logging Ltda. on December 28 th , 2.005, attached
as Exhibit C and any extension, renewal or amendment
thereto.
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1.7
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Contract
Area means the area
or block more particularly described in the Carbonera
Contract.
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1.8
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Documents
means the Carbonera Contract, the
JOA, any Assignment Agreement referred to the Carbonera Contract,
and any Participation Agreement referred to the Carbonera
Contract.
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1.9
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Effective
Date is the date set
out in Article 2.5.
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1.10
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Government
means the government of the Republic
of Colombia and any political subdivision, agency or
instrumentality thereof, including the ANH.
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1.11
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JOA
means the Joint Operating Agreement
to be negotiated pursuant to Article 2.2.
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1.12
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Laws/Regulations means those laws, statutes, rules and
regulations governing activities under the Carbonera
Contract.
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1.13
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Lien
means any mortgage, charge, pledge,
hypothec, security interest, assignment, lien (statutory or
otherwise), easement, title retention agreement or arrangement,
conditional sale, deemed or statutory trust, restrictive covenant
or other encumbrance of any nature or any other arrangement or
condition which, in substance, secures payment or performance of an
obligation.
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1.14
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Operator
means the entity designated to
conduct operations in the Carbonera Contract Area in accordance
with the terms of the JOA.
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1.15
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Participating
Interest means as to
any Party to the Carbonera Contract, the undivided interest of such
party expressed as a percentage of the total interest of all
parties in the rights and obligations derived from the Carbonera
Contract.
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1.20
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Permitted
Lien means (i) the
Government’s economic and other rights as described in the
Carbonera Contract, and (ii) easements, encroachments and other
minor imperfections of title which do not, individually or in the
aggregate, detract from the value of or impair the use or
marketability of any underlying right in the Carbonera
Contract.
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1.21
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Preferential
Rights means a right
held by any third party under the terms of the Carbonera Contract,
JOA, and Documents or under applicable law rule or regulation to
pre-empt the transaction contemplated by this Agreement or affect
its terms in any way.
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ARTICLE 2
ASSIGNMENT OF INTEREST
2.1
Grant
In exchange for the
Consideration, Assignor assign and transfer to Assignee, and
Assignee agrees to accept, a six percent (6%) Participating
Interest in the Carbonera Contract and the Parties shall execute
and deliver the Assignment.
Upon payment, in full, of the
Consideration established in Article 4.1 herein, Assignee shall
hold all rights related to Assignor’s six percent (6%)
Participating Interest in the Carbonera Contract.
Until payment of the
Consideration established in Article 4.1 herein, Assignor will
retain the right to receive any and all revenues derived from
production from the Carbonera Contract.
2.2
Binding Effect
Assignor and Assignee shall be
bound by this Agreement as of the date hereof and shall fully
perform all of their respective obligations under this
Agreement.
2.3
Participating Interest
The Participating Interests of
the Parties at the Effective Date are:
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WELL LOGGING
LTDA
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4.0%
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PETROSOUTH
ENERGY CORPORATION
SUCURSAL COLOMBIA
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6.0%
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DELAVACO ENERGY COLOMBIA INC.
SUCURSAL COLOMBIA
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39.0%
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ALANGE CORP.
COLOMBIA
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51.0%
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Total
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100.0%
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After the
assignment contemplated under this Article 2, the Participating
Interests in the Carbonera Contract shall be:
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WELL LOGGING
LTDA
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4.0%
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DELAVACO
ENERGY COLOMBIA INC. SUCURSAL COLOMBIA
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45.0%
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ALANGE CORP.
COLOMBIA
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51.0%
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Total
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100.0%
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2.4
Effective Date
Notwithstanding the date of this
Agreement or the date on which the Assignment was executed, the
effective date of this Agreement as between the Parties (hereafter
the "Effective Date") shall be deemed to be June 9,
2009.
2.5
Approval
Concurrent with the execution of
this Agreement, Assignee shall execute and Assignor shall cause the
Operator under the Carbonera Contract to execute and submit the
Assignment to the Government for approval.
2.5.1 Assignor
shall make its best efforts and shall conduct every action,
underwrite any obligation, provide any guarantee, obtain any
authorization or certificate, including but not limited to any
document, information or action required from Operator, in order
for the Assignee to obtain approval of the Assignment by the
ANH.
2.5.2 Assignor
hereby agrees and undertakes to cause the Operator under the
Carbonera Contract to issue the document attached hereto as Exhibit
F, the delivery of which shall be a Condition Precedent to this
Agreement.
2.5.3 The
cost of obtaining such approvals and consents shall be borne by
Assignor and Assignee equally.
2.5.4 If the
approval is not obtained within sixty (60) days of filing, the
Parties shall determine, in writing, if they agree to extend the
term. Otherwise, the Parties will proceed to terminate the
Agreement pursuant to Article 3.3.
2.6
Operator’s rights and obligations
This Assignment does not include
the transfer of the rights and obligations of Operator under the
Carbonera Contract.
ARTICLE 3
3.1
No Misrepresentation. As of the date hereof and as of the
Effective Date, each of the Assignor’s representation and
warranties as contained herein shall be true and accurate in all
material respects and each of the covenants of the Assignor have
been satisfied in all material respects.
3.2
Acts to be Performed:
Each party shall use its best
endeavors to execute all documents, and do and procure to be done
all such acts and things as are reasonably within its power to
ensure the Approval is obtained as soon as is reasonably
practicable after execution of this Agreement.
3.3
Termination
Notwithstanding any period of
Force Majeure under Article 12, in the event of a breach under
Articles 7.3 and 2.6 herein, Assignee shall have the right to
terminate this Agreement by giving notice to the Assignor in
accordance with the provisions of Article 10. In the event of
termination pursuant to this Article 3.3, the proposed Assignment
shall terminate, and shall have no force or effect and Assignee
shall have no interest whatsoever in the Carbonera Contract and
shall be deemed to have reassigned any rights or equitable interest
it may have acquired under this Agreement to Assignor retroactive
to the Effective Date of this Agreement. In any case the
non-defaulting party will be able to exercise any rights and
remedies available under the applicable law to recover any loss or
damage caused by the defaulting party.
Cash Consideration referred to in
sections (a), (b) and (c) of article 4 would not be refundable to
Assignee in the event that Assignee does not pay the cash
consideration set out in section (c) of Article 4 herein, except
that if Assignor or any of it affiliates, as applicable, is unable
to or does not fulfill any of its obligation(s) or breaches any of
the terms under this Agreement; if such is the case, any cash
consideration paid would be reimbursed by Assignor to Assignee no
later than ten (10) business days after termination.
3.4
ANH Conditions
If the ANH imposes conditions for
approval of the Assignment in excess of those which are usually
imposed in similar circumstances or which approval contains unusual
and onerous conditions which either Party is not willing to accept,
then without delay the Parties shall agree on a mutually beneficial
course of action.
ARTICLE 4
CONSIDERATION
4.1
Cash Consideration
In consideration for receiving
the Carbonera Assignment of the Participating Interest hereunder,
Assignee agrees to pay Assignor seven hundred five thousand dollars
(USD$750,000.oo), which shall be paid as follows:
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(a)
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One hundred and fifty thousand US
dollars (USD$150.000.oo), which the Parties acknowledge were paid
by Assignee on June 19, 2009;
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(b)
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One hundred and fifty thousand US
dollars (USD$150.000.oo), which the Parties acknowledge were paid
by Assignee on August 7, 2009;
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(c)
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Four hundred and fifty thousand
US dollars (USD$450,000.oo), which Assignee shall pay to Assignor
or its nominee, on October 1, 2009, in the form of a certified
cheque, bank draft or wire transfer of immediately available funds
as agreed by the Parties.
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4.2
Cash Calls
Additional to any cash
consideration paid by Assignee, Assignee shall honor any cash calls
hereafter incurred, in respect to Assignor’s Participating
Interest in the Carbonera Block.
Additionally, Assignee shall pay
for Assignor’s participation regarding any cash call issued
by ISLEMA RESOURCES, CORP. SUCURSAL COLOMBIA, and/or ALANGE CORP.,
provided it was included in the settlement agreement entered into
by PETROSOUTH ENERGY CORPORATION SUCURSAL COLOMBIA; DELAVACO ENERGY
COLOMBIA INC. SUCURSAL COLOMBIA and ISLEMA RESOURCES, CORP.
SUCURSAL COLOMBIA.
ARTICLE 5
OBLIGATIONS UNDER CONTRACT
5.1
Acceptance of Prior Terms
Assignee hereby ratifies,
confirms and accepts the terms of the Carbonera Contract and agrees
to abide by the terms of such agreements to the extent of its
Participating Interest.
ARTICLE 6
UNDERTAKING OF THE PARTIES
6.1
Assignor Obligations
As of the Effective Date,
Assignor shall comply with the following:
A.
Material Developments .
Assignor shall promptly notify
Assignee and provide details upon the occurrence of:
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Any written notice of default or
termination received or given by Assignor with respect to the
Carbonera Contract or the JOA;
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b)
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Any written notice of any pending
or threatened claim, demand, action, suit, inquiry or proceeding
related to the Carbonera Contract or the JOA;
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c)
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Any material damage, destruction
or loss to major assets under the Carbonera Contract or the JOA;
or
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d)
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Any event or condition between
the date of this Agreement and the Approval Date that
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(i) would have
a material adverse effect on the business, operations, financial
condition or results of operations under the Carbonera Contract or
the JOA, taken as a whole, or
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(ii) would
render impossible Assignee’s right to the
Assignment.
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B.
Consultation
Assignor agrees to consult with
Assignee before voting on all material decisions under the JOA, or
related to the Carbonera Contract, and vote as instructed by
Assignee.
6.2
Mutual Obligations
As of the Effective Date,
Assignee and Assignor shall comply with each of the following
undertakings:
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a)
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Each Party, as applicable, agrees
to use its best efforts to have the Assignment executed and
Approval granted as soon as possible upon execution of this
Agreement.
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b)
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The Parties shall not take any
action nor fail to take any action prior to the Approval Date that
would result in a breach of any of its representations and
warranties under this Agreement.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE
PARTIES
7.1
Assignor’s Representations and
Warranties
Except as otherwise disclosed on
the attached schedules, Assignor makes the following
representations and warranties to Assignee as of the date hereof
and repeated as of the Effective Date:
A.
Assignor's Rights
Assignor, directly, holds the
rights to a six per cent (6%) undivided Participating Interest in
the Carbonera Contract, free and clear of any Liens (other than
Permitted Liens) according to the terms of the Carbonera Contract
and applicable Laws. The Carbonera Contract is in full force and
effect and no notice of default, termination, or breach under the
Carbonera Contract has been received neither by Assignor nor, to
the knowledge of Assignor, any other party to the Carbonera
Contract. The Carbonera Contract, together with applicable Laws,
contains the entirety of the obligation of Assignor to the
Government, and no other understanding or agreement exists between
Assignor and the Government in relation to the subject matter of
the Carbonera Contract except as otherwise disclosed under this
Agreement. There are no Preferential Rights that have not been
expressly disclosed by Assignor to Assignee and no third party
consents required in relation to the execution and perfection of
this Agreement and the interests assigned to Assignee.
B.
Carbonera Assignment
After the Carbonera Assignment
contemplated under Article 2 herein, Assignee shall have full legal
and beneficial ownership free and clear of any and all Liens, other
than Permitted Liens of a six per cent (6%) Participating Interest
in the Carbonera Contract.
C.
Documents
