Agreement to Purchase - Digital Petrophysics Inc. and Ivanhoe Energy (USA) Inc.
AGREEMENT TO PURCHASE
THIS AGREEMENT, entered into as of January 26, 2001, between William R. Berry II
and Deborah M. Olson (herein collectively the "SELLER") and Ivanhoe Energy (USA)
Inc. ("IVANHOE"), a corporation organized under the laws of the State of Nevada
(d.b.a. USA Ivanhoe Inc. in California). Seller and Purchaser are sometimes
individually referred to herein as a "Party" and collectively as the "Parties".
Ivanhoe and Seller have agreed that Ivanhoe, or a designated affiliate, (the
"PURCHASER") would acquire from Seller, and Seller would sell to Purchaser, all
of the issued and outstanding shares of capital stock of Digital Petrophysics,
Inc., a California corporation ("DPI"), subject to the terms and conditions
herein specified.
1. STOCK PURCHASE AGREEMENT
A. The Parties shall promptly prepare, negotiate and execute a mutually
agreeable Stock Purchase Agreement for the purchase by Purchaser of all of
the issued and outstanding capital stock of DPI ("DPI STOCK"). The Stock
Purchase Agreement will contain terms, representations, warranties and
conditions normally found in such agreements. No such terms shall be
inconsistent with the terms set out in this agreement. Except as provided
in paragraph 1. B. herein, the Stock Purchase Agreement will also contain a
provision that Seller will not obtain overriding royalty ("ORRI") or other
interests in competition with Purchaser in areas described in the
"Enclosure A Lost Hills Deep Prospect AMI" to the January 18th 1999 "First
Amendment and Clarification of Provisions", to the "Diatom/Aera Exploration
Agreement dated May 1, 1998", below the base of the MacDonald Shale.
B. For disclosure purposes only, Seller represents that DPI may presently own
certain rights to interests in oil and gas leases that were outside of the
working interest partners' interest in the Almond Flank Participation
Agreement, dated August 1, 1996 ("AFPA"), AMI at the time leases were
taken. These interests, if any, will be assigned out of DPI prior to the
sale of the DPI Stock to Purchaser. The value of these interests is
therefore not included in the sale price of this transaction. This
Agreement is not intended to abridge or limit Seller's existing rights to
these interests in leases taken by non-parties to the AFPA, that were not
subject to the working interest partners' interest in the AFPA and were
outside of the working interest partners' interest in the AFPA, AMI at the
time they were taken. All such rights are expressly reserved, without
limitation, to Seller.
C. The Parties will endeavor to conclude the Stock Purchase Agreement by
February 15, 2001.
2. CONSIDERATION FOR THE PURCHASE
The Purchase Agreement will provide that the consideration for the purchase of
the DPI Stock will be the following:
A. Seller shall receive Eight hundred thousand (800,000) duly authorized
and issued shares of common stock of Ivanhoe Energy Inc. ("Ivanhoe
Stock"); and
B. Seller shall receive an ORRI of twenty-five one-hundredths of one
percent (0.25%) in areas below the MacDonald Shale in (i) areas under
existing leases which have been taken by or assigned to the working
interest partners in the Almond Flank AMI, (comprising approximately
1,503 net acres as set forth on exhibit "A"), in which DPI is
currently entitled to ORRI, and (ii) in the 592 net acres (set forth
on exhibit "B"), in which Ivanhoe previously acquired ORRI in the
purchase of Digital Petrophysics Resources, Inc., pursuant to the
Stock Purchase Agreement, dated September 3, 1999.
C. Seller shall cause to be assigned, sold, or otherwise conveyed,
granted or transferred out of DPI, to Seller or Seller's designee,
prior to the sale of DPI Stock to Purchaser all assets currently
owned by DPI with the exception of those interests identified in
exhibit "A". The
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<PAGE> 2
Parties agree that only those interests of DPI identified in exhibit
"A" shall be the sole remaining assets of DPI at the time of the
Closing of the stock sale transaction. Purchaser expressly agrees
that the consideration paid under this purchase agreement is only for
those interests identified in exhibit "A" and do not include any
interests which are not otherwise identified in this Agreement or are
expressly reserved or excluded from this transaction.
D. Nothing in this Agreement shall constitute a non-competition
agreement governing or restricting either Seller's right to engage in
any professional consulting services on behalf of any other entity.
Seller shall be free to accept or decline any consulting engagement
with any entity without notice or limitation to Purchaser.
E. Purchaser further agrees that in the event that an oil and gas lease
with Texaco pertaining to rights above the base of the McDonald Shale
covering the lands referenced in that Oil and Gas lease by and
between Texaco and West Best Resources, Ltd. dated June 26th 1999 as
recorded in the official records of the County of Kern document #
0200057248, is taken by either Purchaser or Aera Energy LLC, in which
Purchaser has any beneficial interest, then Purchaser shall assign to
Seller an ORRI of the difference between the existing burdens at the
time the lease is acquired and 23.5% as it pertains to the leased
lands, but in any event not less than 2%. Should Purchaser or any
other party negotiate a renewal lease covering the same land
described in exhibit "A" or "B" in which Purchaser has any beneficial
interest, then Purchaser shall assign to Seller the same ORRI as
Seller would have been entitled to under the previous lease, as such
lease pertains to the land from the surface down to the base of the
MacDonald Shale, and as such lease pertains to the land below the
base of the MacDonald Shale.
F. Purchaser further agrees to provide a copy of all logs, (including
but not limited to mud logs, wireline logs and all measurements made
while drilling), reports, (including well histories and daily
drilling reports) and studies, if any, from the surface to the base
of the MacDonald Shale, on any well drilled on acreage in the AFPA,
AMI which Seller has received and enjoys ORRI interests.
3. CLOSING OF PURCHASE
The Closing of the sale and purchase of the DPI stock ("Closing") will take
place within three (3) business days of the satisfaction of the conditions to
Closing specified in the Stock Purchase Agreement, including approval by the
Toronto Stock Exchange of the listing of the Ivanhoe Stock to be given as
consideration for the purchase. The specific terms and conditions of the Stock
Purchase Agreement shall be subject to the approval of Seller's tax consultants,
prior to Closing. The Parties agree that they shall mutually cooperate to ensure
that, to the highest extent practicable, this transaction meets the requirements
of IRC section 1031, for a tax deferred exchange treatment.
4. DISPUTE WITH AERA
Pending conclusion of the Stock Purchase Agreement and the Closing, Seller will
not permit or cause DPI to continue demands upon Aera Energy LLC and/or Ivanhoe
in respect of the dispute concerning the AFPA, AMI arising out of the AFPA or
the rights to ORRI in leases in the AFPA, AMI. It will be a condition to the
Closing, that Seller releases Ivanhoe and Aera from any and all claims arising
and liabilities out of the AFPA and ORRI thereunder, except with respect to the
ORRI referred to in Paragraph 2.B. above.
5. MISCELLANEOUS
This Letter of Intent shall be governed by the laws of the State of California,
excluding provisions of law that would refer the matter to the laws of another
jurisdiction.
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<PAGE> 3
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the day and year first above written.
SELLER:
<TABLE>
<S> <C>
/s/ WILLIAM R. BERRY II /s/ DEBORAH M. OLSON
-------------------------------------------- --------------------------------------------
William R. Berry II Deborah M. Olson
</TABLE>
PURCHASER:
IVANHOE ENERGY (USA) INC.
d.b.a. USA Ivanhoe Energy Inc. in California
by: /s/ OSCAR A. BLAKE
-------------------------------------------------------
Oscar A. Blake, Vice President
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<PAGE> 4
EXHIBIT A
RIGHTS TO ORRI'S FOR SALE BY DPI
NOTE: ALL ROYALTIES LIMITED TO BELOW BASE McDONALD SHALE
<TABLE>
<CAPTION>
FOC INTEREST GROSS NET DATE
TWP RNG SEC # DESCRIPTION LESSOR LESSEE % ACRES ACRES SIGNED
--- --- --- ---- ----------- ------ ------ -------- ----- --------- --------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C> <C>
25 20 21 1 SE/4 of NE/4 Texaco Ivanhoe 100 40 40.000 4/15/99
25 20 21 3 NE/4 of NE/4 Tuttle, Oliver D Fuller/Ivanhoe 85 40.1 34.068 2/16/99
25 20 21 3 NE/4 of NE/4 Tuttle, Carmelo V Fuller/Ivanhoe 10 40.1 4.008 2/16/99
25 20 21 3 NE/4 of NE/4 Tuttle, Steven M Fuller/Ivanhoe 1 40.1 0.401 3/10/99
25 20 21 3 NE/4 of NE/4 Bailey, Suzanne M. Fuller/Ivanhoe 1 40.1 0.401 6/28/99
25 20 21 3 NE/4 of NE/4 Luna, Laura Lee Fuller/Ivanhoe 1 40.1 0.401 3/31/99
25 20 21 4 W/2 of NE/4 Cronin, John Fuller/Ivanhoe 26.4 80 21.120 1/14/99
25 20 21 4 W/2 of NE/4 Denson TR Fuller/Ivanhoe 19.42 80 15.536 4/8/99
25 20 21 4 W/2 of NE/4 Texaco Ivanhoe 50 80 40.000 4/15/99
25 20 21 5 E/2 of SE/4 Enron Aera 100 80 80.000 11/23/99
25 20 21 6 W/2 of SE/4 Texaco Ivanhoe 10 80 8.000 4/15/99
25 20 22 9 SW/4 of SW/4 Enron Aera 100 40 40.000 11/23/99
25 20 22 9a S/2exclSW/4 SW/4 Enron Aera 100 280 280.000 11/23/99
25 20 28 27 NW/4 Texaco (pri) Ivanhoe 100 160 160.00 8/1/00
25 20 17 18 W 50 acres NE/4 Texaco Ivanhoe 100 50 50.000 4/15/99
25 20 17 21 ptn SE/4 NE/4 Miller Cameron Fuller/Ivanhoe 100 25 25.000 3/10/99
25 20 16 25 NW/4 Texaco Ivanhoe 100 160 160.000 4/15/99
25 20 16 26 SE/4 Hogerheide Fuller/Ivanhoe 16.67 160 26.672 1/5/99
25 20 16 26 SE/4 Heather, Thomas Fuller/Ivanhoe 16.67 160 26.672 1/21/99
25 20 16 26 SE/4 Windbegler Fuller/Ivanhoe 25 160 40.000 12/7/98
25 20 16 26 SE/4 Heather, Alice Fuller/Ivanhoe 16.67 160 26.672 1/25/99
25 20 16 26 SE/4 Eads, William Fuller/Ivanhoe 12.5 160 20.000 12/3/98
25 20 16 26 SE/4 Eads, John Fuller/Ivanhoe 12.5 160 20.000 12/9/98
25 20 22 33 NW4 Texaco(a) Ivanhoe 100 160 160.000 4/15/99
25 20 5 34 N/2 of SW/4 Swenson etal Fuller/Ivanhoe 50 80 40.000 1/1/99
25 20 17 19 PTN NE/4 Stoner, Wilma Fuller/Ivanhoe 16.67 50 8.335 1/20/00
25 20 17 19 PTN NE/4 Howard, Susan Fuller/Ivanhoe 33.33 50 16.665 2/10/00
25 19 1 77 NE/4 BLM CA40629 Fuller/Ivanhoe 100 159 159.200 7/20/99
---------
TOTAL 1,503.150
=========
<CAPTION>
ORRI ORRI AC%
OIRG ISE ALM FLNK 2WRB SOLD AC% 2WRB
DATE BASE DPI ROYALTY TOTAL DEPTH AMI & TO SOLD &
TWP RECORDED ROYALTY ORRI PERCENT ROYALTY LIMIT STATUS DMO IE TO IE DMO
--- -------- ------- ----- -------- ------- -------- -------- ----- ---- -------- ------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25 6/9/99 20.000 3.500 140.00 23.50 NONE Primary 0.25 3.25 130.00 10.00
25 4/20/99 16.667 6.833 232.79 23.50 NONE Primary 0.25 6.58 224.27 8.52
25 4/20/99 16.667 6.833 27.39 23.50 NONE Primary 0.25 6.58 26.38 1.00
25 4/20/99 16.667 6.833 2.74 23.50 NONE Primary 0.25 6.58 2.64 0.10
25 7/30/99 16.667 6.833 2.74 23.50 NONE Primary 0.25 6.58 2.64 0.10
25 4/20/99 16.667 6.833 2.74 23.50 NONE Primary 0.25 6.58 2.64 0.10
25 2/5/99 16.670 6.830 144.25 23.50 NONE Primary 0.25 6.58 138.97 5.28
25 7/30/99 16.670 6.830 106.11 23.50 NONE Primary 0.25 6.58 102.23 3.88
25 6/9/99 20.000 3.500 140.00 23.50 NONE Primary 0.25 3.25 130.00 10.00
25 12/29/99 21.500 2.000 160.00 23.50 NONE Primary 0.25 1.75 140.00 20.00
25 6/9/99 20.000 3.500 28.00 23.50 NONE Primary 0.25 3.25 26.00 2.00
25 12/29/99 21.500 2.000 80.00 23.50 NONE Primary 0.25 1.75 70.00 10.00
25 12/29/99 21.500 2.000 560.00 23.50 NONE Primary 0.25 1.75 490.00 70.00
25 6/9/99 20.000 3.500 560.00 23.50 basMcD Primary 0.25 3.25 520.00 40.00
25 6/9/99 20.000 3.500 175.00 23.50 NONE Primary 0.25 3.25 162.50 12.50
25 7/30/99 16.667 6.833 170.83 23.50 NONE Primary 0.25 6.58 164.58 6.25
25 6/9/99 20.000 3.500 560.00 23.50 NONE Primary 0.25 3.25 520.00 40.00
25 2/17/99 16.667 6.833 182.25 23.50 NONE Primary 0.25 6.58 175.58 6.67
25 2/5/99 16.667 6.833 182.25 23.50 NONE Primary 0.25 6.58 175.58 6.67
25 2/5/99 16.667 6.833 273.32 23.50 NONE Primary 0.25 6.58 263.32 10.00
25 2/17/99 16.667 6.833 182.25 23.50 NONE Primary 0.25 6.58 175.58 6.67
25 2/5/99 16.667 6.833 136.66 23.50 NONE Primary 0.25 6.58 131.66 5.00
25 2/5/99 16.667 6.833 136.66 23.50 NONE Primary 0.25 6.58 131.66 5.00
25 6/9/99 20.000 3.500 560.00 23.50 NONE Primary 0.25 3.25 520.00 40.00
25 2/5/99 16.667 2.000 80.00 18.67 NONE Second 0.25 1.75 70.00 10.00
25 9/11/00 16.667 6.833 56.95 23.50 NONE Primary 0.25 6.58 54.87 2.08
25 9/11/00 16.667 6.833 113.87 23.50 NONE Primary 0.25 6.58 109.71 4.17
25 8/1/99eff 12.500 2.000 318.40 14.50 NONE Second 0.25 1.75 276.60 39.80
-------- -------- ------
5,315.19 4,939.40 375.79
======== ======== ======
</TABLE>
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<PAGE> 5
EXHIBIT B
ORRI PREVIOUSLY PURCHASED BY IVANHOE
<TABLE>
<CAPTION>
FOC INTEREST GROSS NET DATE BASE DPR
TWP RNG SEC # DESCRIPTION LESSOR % ACRES ACRES SIGNED ROYALTY ORRI
--- --- --- --- ----------- ------ -------- ----- ------ -------- ------- ------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C> <C> <C>
25 20 8 23 S/2, excluding W of Union Bnk of Calif 100 250.8 250.76 9/10/96 16.667 6.8330
Aquaduct
25 20 16 7 SW/4, w of aquaduct Buck, Robt. B. 4.17 124.6 5.19 16.667 6.8330
25 20 16 7 SW/4, w of aquaduct Buck, C. B. 4.17 124.6 5.19 16.667 6.8330
25 20 16 7 SW/4, w of aquaduct Lodato, Carol B. 4.17 124.6 5.19 16.667 6.8330
25 20 16 7 SW/4, w of aquaduct Erdman, Christian P. 37.5 124.6 46.71 12/9/93 16.667 6.8330
25 20 16 7 SW/4, w of aquaduct Buck, Leonard C. Z. 4.16 124.6 5.18 16.667 6.8330
25 20 16 8 SW/4, E of aquaduct Buck, Robt. B. 4.17 35.45 1.48 16.667 6.8330
25 20 16 8 SW/4, E of aquaduct Buck, C. B. 4.17 35.45 1.48 16.667 6.8330
25 20 16 8 SW/4, E of aquaduct Lodato, Carol B. 4.17 35.45 1.48 16.667 6.8330
25 20 16 8 SW/4, E of aquaduct Erdman, Christian P. 37.5 35.45 13.29 12/9/93 16.667 6.8330
25 20 16 8 SW/4, E of aquaduct Buck, Leonard C. Z. 4.16 35.45 1.47 16.667 6.8330
25 20 17 17 N/2 of NW/4, SE/4 of NW/4 Reimers, Ann Burke 50 120 60.00 7/15/96 16.667 6.8330
25 20 17 17 N/2 of NW/4, SE/4 of NW/4 Booth, Franklin Otis 50 120 60.00 6/17/96 16.667 6.8330
25 20 17 17a SW/4 of NW/4 Reimers, Ann Burke 50 40 20.00 12/17/97 16.667 6.8330
25 20 17 17a SW/4 of NW/4 Booth, Franklin Otis 50 40 20.00 12/3/97 16.667 6.8330
25 20 17 20 Portion of SW/4 of NE/4 PRB Partnership 33.34 29.19 9.73 10/23/96 16.667 6.8330
25 20 17 20 Portion of SW/4 of NE/4 Arnold, Caroline A. 16.66 29.19 4.86 11/26/96 16.667 6.8330
25 20 17 20 Portion of SW/4 of NE/4 Phillips, Fred B. 16.66 29.19 4.86 11/1/96 16.667 6.8330
25 20 21 4 W/2 of NE/4 E. O. Miller Co. 4.18 80 3.34 16.667 6.8330
25 20 21 6 W/2 of SE/4 Waller, Rosalyn E 89.75 80 71.80 10/28/98 16.667 6.8330
------
592.03
======
<CAPTION>
AC%
DPR AC% RETAINED BY IVANHOE TO
BOT BY ORRI BACK2 ------------------- WRB
TWP IE WRB & DMO ROYALTY% AC% KEPT & DMO
--- ------- ---------- -------- -------- ------
<C> <C> <C> <C> <C> <C>
25 1713.44 0.25 6.5830 1650.75 62.69
25 35.49 0.25 6.5830 34.19 1.30
25 35.49 0.25 6.5830 34.19 1.30
25 35.49 0.25 6.5830 34.19 1.30
25 319.14 0.25 6.5830 307.47 11.68
25 35.40 0.25 6.5830 34.11 1.30
25 10.10 0.25 6.5830 9.73 0.37
25 10.10 0.25 6.5830 9.73 0.37
25 10.10 0.25 6.5830 9.73 0.37
25 90.84 0.25 6.5830 87.51 3.32
25 10.08 0.25 6.5830 9.71 0.37
25 409.98 0.25 6.5830 394.98 15.00
25 409.98 0.25 6.5830 394.98 15.00
25 136.66 0.25 6.5830 131.66 5.00
25 136.66 0.25 6.5830 131.66 5.00
25 66.50 0.25 6.5830 64.07 2.43
25 33.23 0.25 6.5830 32.01 1.22
25 33.23 0.25 6.5830 32.01 1.22
25 22.85 0.25 6.5830 22.01 0.84
25 490.61 0.25 6.5830 472.66 17.95
------- ------- ------
4045.37 3897.36 148.01
======= ======= ======
</TABLE>
NOTE: DPI retained all royalty above base McDonald and assigned all rights below
base McD into DPR. Ivanhoe acquired DPR and all of its assets in exchange for
stock in Ivanhoe.
E-56