EXHIBIT 10.1
 

FARMOUT AGREEMENT

This Agreement dated the 2nd  day of July, 2013

BETWEEN

BLUE WATER PETROLEUM LLC, a Montana limited liability company, having an office
at 1302 – 24th Street, Suite 342, Billings, MT  59102

(hereinafter referred to as “Farmor”)

OF THE FIRST PART

AND:
DEGARO INNOVATIONS CORP., a Nevada corporation having an office in Englewood,
Colorado.

(hereinafter referred to as the “Farmee” )

OF THE SECOND PART

WHEREAS, Farmor is the lessee under (i) an Oil and Gas Lease No.
14-20-0252-5163, dated May 27, 2008 and attached as Schedule D, as amended,
between The Crow Tribe of Indians of the Crow Indian Reservation (the “Tribe”),
as lessor, and Farmor as lessee, covering those certain lands as described on
Part 1 of Schedule A (the “Crow Lease”), (ii) those certain Oil and Gas Leases,
as amended, described on Schedule B attached hereto, with various allottees, as
lessors, and Farmor as lessee, covering those certain lands as described on
Part 2 of Schedule A (collectively the “Allottee Leases”), (iii) the H. Allen
Keebler Family Trust Lease, with H. Allen Keebler Family Trust, as lessor, and
Farmor as lessee, covering those certain lands as described on Part 3 of
Schedule A (the “Keebler Lease”), and (iv) the Paugh Land, LLC Lease, with Paugh
Land, LLC, as lessor, and Farmor as lessee, covering those certain lands as
described on Part 4 of Schedule A (the “Paugh Lease”).  The Crow Lease, Allottee
Leases, Keebler Lease and Paugh Lease are collectively referred to herein as the
“Leases” and all of the lands described on Schedule A hereto are collectively
referred to as the “Lease Lands”, represented by 12,979.28 Gross Acres, more or
less; and

WHEREAS, Farmor owns 100% of the working interests in that portion of the Lease
Lands with a legal description of NE/4SW/4 of Section 22, Township 5 South,
Range 25 East in Big Horn County, Montana (the "Initial Site"), and has the
right to earn 100% of the working interest in and to additional lands within the
Lease Lands by completing certain drilling activities and achieving production
as required under the Leases; and

WHEREAS, Farmee desires to earn all of Farmor’s leasehold interest in the
Leases, the working interest in the Initial Site, and any future working
interests earned by Farmor in and to the Lease Lands; and

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
contained herein, Farmor and Farmee (either individually, a "Party,"
collectively, the "Parties") hereby agree as follows:

 
 

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1.
Work Program and Interest Earned

 
(a)
Upon the execution of this Agreement, Farmor grants to Farmee, all of the rights
under the Leases necessary for Farmee to complete the Work Program.  Upon the
completion of the Work Program, Farmor shall assign to Farmee, pursuant to the
terms of this Agreement, all of Farmor’s right, title and interest in and to the
Leases, in the form attached hereto as Schedule C (“Assignment”) and dated
effective as of the execution of this Agreement, subject to a reservation of the
Reserved Override (the “Earned Interest”).

 
(b)
Farmor shall except, reserve and retain in the Assignment an overriding royalty
interest in the Leases of 8% prior to Payout and 16% after Payout for each 40
acre drillsite, or portion thereof, located within the Lease Lands (“Reserved
Override”).  For purposes of this Agreement, “Payout” means the point in time
when Farmee has received, from the production of hydrocarbons from the wells
located on the applicable 40 acre drillsite, revenues (including oil in the
tanks and less all royalties, production and severance taxes) equal to the costs
incurred to drill, complete, equip and operate all of the wells on the
applicable 40 acre drillsite. The Reserved Override shall be applicable to all
oil, gas, casinghead gas and other associated hydrocarbons produced, saved and
marketed from or otherwise allocated or attributable to the Leases, free and
clear of all costs and expenses of production, including, but not limited to,
costs or expenses relating to gathering, transportation, storing and separating,
treating, dehydration, compression or otherwise making oil, gas, casinghead gas
and other associated hydrocarbons ready for sale or use, but subject to all
lawfully assessed taxes against the Reserved Override. The First ARP and Second
ARP payments made under Sections 1(c)(iii) and 1(d)(iii) shall be fully
recoupable against the Reserved Override payments that become due and payable
and all such advance royalty credits shall be fully assignable by Farmee with
its interests in and to this Agreement and the Leases.

 
(c)
For and in consideration of the Earned Interest, Farmee shall complete the
following work program obligations (“Work Program”):

 
i.
On or before December 31, 2013, (A) provide general working capital as required
for the Operator (as defined herein) to prepare the one existing injection well
and two existing production wells located on the Initial Site for production
testing, run the required EPA tests, deepen the water source well and provide
for general working capital requirements including but not limited to the bonus
payment to the Tribe under the Crow Lease extension and further APD’s; (B)
provide working capital for steam production testing of the one existing
injection well and four (two currently existing) production wells located on the
Initial Site, and (C) drill two additional production wells, permitted as Tribal
31122 and Tribal 41122, on the Initial Site.

 
ii.
On or before December 31, 2013, drill and complete two exploration wells,
permitted as Tribal 10810 and Tribal 10121, to a depth not to exceed 1,500 feet,
in Sections 10 and 21, Township 5 South, Range 25 East in Big Horn County,
Montana.

 
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iii.
Provide Farmor with $50,000 working capital upon signing of this Agreement
(“First ARP”), which amount shall be considered an advanced royalty payment to
be applied by Farmee as a credit against the Reserved Override.

Upon completion of the Work Program, Farmor shall execute and deliver the
Assignment and seek the Approvals for the Assignment in accordance with
Section 6(a) of this Agreement.

 
(d)
Upon the completion of the Work Program, Farmee shall complete the following
drilling program obligations (“Drilling Program”):

 
i.
Drill and complete an injection well and four surrounding producing
wells.  Farmee must commence drilling on or before April 30, 2014 and commence
steam injection operations on the wells on or before August 31, 2014.

 
ii.
Drill and complete an injection well and four surrounding producing wells.
Farmee must commence drilling on or before April 30, 2015 and commence steam
injection operations on the wells on or before June 30, 2015.

 
iii.
Provide Farmor with $50,000 working capital by April 30, 2014 (“Second ARP”),
which amount shall be considered an advanced royalty payment to be applied by
Farmee as a credit against the Reserved Override.

 
(e)
If Farmee (i) elects, at its discretion, by written notice to Farmor not to
complete the Work Program or the Drilling Program (collectively referred to as
the “Programs”), or (ii) fails to complete the requirements of the Programs by
the deadlines set forth therein (collectively the “Program Deadlines”), then
Earned Interest (except as otherwise set forth herein) shall revert to Farmor,
this Agreement shall terminate, and Farmor shall have no further rights or
remedies with respect to Farmee’s failure to complete the Programs, provided
that if Farmee completes the Work Program, then Farmee shall retain the Earned
Interest with respect to the Initial Site and if Farmee has completed any
drilling activities under the Drilling Program, then Farmee shall retain the
Earned Interest with respect to any wells drilled under the Drilling
Program.  In the event any portion of the Earned Interest reverts to Farmor as
provided under this Section 1(e), Farmee shall execute and deliver any transfer
or assignment documents reasonably requested by Farmor to evidence the reversion
of the Earned Interest to Farmor.

 
(f)
Notwithstanding the foregoing, each of the Program Deadlines shall be extended
by an amount, not to exceed 120 days in total, calculated by adding (i) the
number of days equal to the greater of 60 days or the period spanning (x) the
date on which any permits necessary for conducting the activities comprising the
Programs are submitted to the appropriate governmental authority to (y) the date
on which any such permits are issued, and (ii) the number of days Farmee is
prevented from conducting the Programs by reason of fire, flood, weather, acts
of war, shortages or unavailability of rigs, equipment or labor, or any other
delays in the completion of the Programs that are outside of the control of
Farmee.

 
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2.
Additional Drilling

Farmee may elect, at its discretion, to conduct additional oil and gas drilling
operations on the Lease Lands as provided under the Leases. If at any time
Farmee decides not to move forward with additional oil and gas drilling
operations under the Leases or misses a deadline for such oil and gas drilling
operations under the Leases, Farmee shall retain its working interest under the
wells drilled and spacing units earned under the Leases, as provided herein.

3.
Royalties

Farmee acknowledges that the Lease Lands are subject to royalty burdens held by
third-party royalty holders totalling 20%, inclusive of the lessor’s royalty
owed to the lessors, under the Leases.

4.
Operations

 
 
(a)
The operator of the Lease Lands is Summit West Oil, LLC (the “Operator”). Farmee
agrees to directly fund the Operator for the amounts required to complete the
Programs, subject to Farmee’s rights not to complete the Programs under Section
1(e). Farmee is hereby granted the right to remove and replace the Operator for
cause, including but not limited to, the insolvency of the Operator or the
failure of the Operator to remain in good standing with respect to its
obligations relating to the Lease Lands, including its obligations under any
applicable operating agreements.

 
(b)
All operations conducted pursuant to this Agreement will be in a lawful manner
and in accordance with good oilfield practice.

 
(c)
All operations conducted by Farmee pursuant to this Agreement will be at
Farmee’s individual sole cost, risk and expense.

5.
Representations and Warranties

 
(a)
Farmor hereby represents and warrant to Farmee, as of the date hereof, that:

 
i.
Authority.  Farmor (i) is a limited liability company duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation, (ii) is duly qualified to carry on its business in the State of
Montana, and (iii) has all the requisite power and authority to enter into,
deliver and perform this Agreement and carry out the transactions contemplated
under this Agreement.

 
ii.
Valid Agreement.  This Agreement constitutes the legal, valid and binding
Agreement of Farmor. The execution and delivery by Farmor of this Agreement, the
consummation of the transactions set forth herein and the performance by Farmor
of its obligations hereunder have been duly and validly authorized by all
requisite company action on the part of Farmor and will not violate, conflict
with or result in any violation or breach of any provision of (i) any agreement,
contract, mortgage, lease, license or other

 
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instrument to which Farmor is a party or by which Farmor or the Leases and Lease
Lands are bound; (ii) any governmental franchise, license, permit or
authorization or any judgment or order of judicial or governmental body
applicable to Farmor, the Leases or the Lease Lands, or (iii) any law, statute,
decree, rule or regulation of any jurisdiction in the United States to which
Farmor, the Leases or the Lease Lands are subject.

 
iii.
Authorization.  This Agreement has been duly authorized, executed and delivered
by Farmor.  This Agreement and all documents executed by Farmor in connection
with this Agreement shall constitute legal, valid and binding obligations of
Farmor, enforceable against Farmor in accordance with their terms, subject to
the effects of bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect, as well as general principles of equity.

 
iv.
Lease Status and Title.  The Leases are in full force and effect and are each a
valid and subsisting document covering the entire estate which they purport to
cover and all royalties, rentals and other payments due under the Leases have
been fully, properly and timely paid. Farmor holds 100% of the leasehold
interest under the Leases, and currently holds or has the right to earn under
the Leases 100% of the working interest in the Lease Lands, subject to the
royalties described in Section 3, which royalties in total do not exceed 20%.

 
v.
Oil and Gas Operations.  All wells drilled under the Leases have been drilled
and (if completed) completed in material compliance with the applicable Leases
and applicable law.

 
vi.
Prepayments and Wellhead Imbalances.  Farmor is not obligated, by virtue of a
production payment, prepayment arrangement under any contract for the sale of
hydrocarbons and containing a "take or pay", advance payment or similar
provision, gas balancing agreement or any other arrangement to deliver
hydrocarbons produced from the Lease Lands at any time after the date of this
Agreement.

 
vii.
Taxes.  All due and payable ad valorem, property, production, severance and
similar taxes and assessments have been properly paid.

 
viii.
Brokers.  Farmor has incurred no obligation or liability, contingent or
otherwise, for brokers' or finders' fees with respect for this transaction for
which Farmee shall have any obligation or liability.

 
ix.
Suits and Claims.  No suit, action, claim, or other proceeding is now pending
or, to Farmor’s knowledge, threatened before any court or governmental agency
affecting the Leases or Lease Lands, and Farmor shall promptly notify Farmee of
any such proceeding which arises or is threatened after the execution of this
Agreement.

 
x.
Compliance with Law.  Farmor is not in violation of any applicable law,
regulations, permits or authorizations, including any environmental laws,

 
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applicable to the Lease Lands. No notice or action alleging such violation is
pending or, to Farmor’s knowledge, threatened against Farmor, the Leases or the
Lease Lands.

 
xi.
Outstanding AFEs, Commitments, etc. Except as otherwise provided herein, there
are no outstanding authorizations for expenditure, oral or written commitments
or proposals to conduct operations associated with the Lease Lands.

 
xii.
Preferential Purchase Rights and Consents.  The Leases, the Lease Lands or
associated assets, or any portion thereof, are not subject to any preferential
rights to purchase, rights of first negotiation or similar rights, and the
execution and delivery of this Agreement by Farmor does not, and the
consummation of the transactions contemplated by this Agreement do not (with or
without notice or lapse of time or both) require the consent of any third-party
or governmental authority, except for the Approvals as defined in Section 6(a),
or result in the acceleration of obligations under, or require a waiver, consent
or notice under any contracts or permits relating to the Leases, the Lease Lands
and associated assets.

 
(b)
The Farmee hereby represents and warrants to Farmor, as of the date hereof,
that:

 
i.
Authority.  Farmee (i) is a corporation duly formed, validly existing and in
good standing under the laws of the jurisdiction of its formation, (ii) prior to
commencing the Work Program will be duly qualified to carry on business in the
State of Montana, and (iii) has all the requisite power and authority to enter
into, deliver and perform this Agreement and carry out the transactions
contemplated under this Agreement.

 
ii.
Valid Agreement.  This Agreement constitutes the legal, valid and binding
Agreement of Farmee. The execution and delivery by Farmee of this Agreement, the
consummation of the transactions set forth herein and the performance by Farmee
of its obligations hereunder have been duly and validly authorized by all
requisite company action on the part of Farmee and will not violate, conflict
with or result in any violation or breach of any provision of (i) any agreement,
contract, mortgage, lease, license or other instrument to which Farmee is a
party or by which Farmee is bound; (ii) any governmental franchise, license,
permit or authorization or any judgment or order of judicial or governmental
body applicable to Farmee, or (iii) any law, statute, decree, rule or regulation
of any jurisdiction in the United States to which Farmee is subject.

 
iii.
Authorization.  This Agreement has been duly authorized, executed and delivered
by Farmee.  This Agreement and all documents executed by Farmee in connection
with this Agreement shall constitute legal, valid and binding obligations of
Farmee, enforceable against Farmee in accordance with their terms, subject to
the effects of bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect, as well as general principles of equity.

 
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6.
Covenants

 
 
(a)
Upon the completion of the Work Program and at the request of Farmee, Farmor
shall use its best efforts to obtain the approval of the lessors under the
Leases, and the Secretary of the U.S. Bureau of Indian Affairs for this
Agreement, the Assignment and the transaction contemplated hereunder, including
the transfer of the Earned Interest to Farmee as provided under Section 1(a), as
required under the Leases and in accordance with federal regulations
(“Approvals”). Farmee shall cooperate in good faith with Farmor to make all
necessary applications and filings to receive the Approvals and shall promptly
provide all information and documentation in Farmee’s possession or control that
may be reasonably requested by Farmor in connection with Farmor’s efforts to
obtain the Approvals.

 
(b)
Farmor will use commercially reasonable efforts to prepare and provide Farmee
with financial data, to permit Farmee to timely file its quarterly and annual
reports with the Securities and Exchange Commission in accordance with Farmee’s
obligations under the Securities and Exchange Act of 1934, as amended.

 
(c)
From and after the date of execution of this Agreement up to and until Farmee
has completed the Work Program and Drilling Program or until the earlier
termination of this Agreement, Farmee shall pay in a timely manner any and all
delay rentals, minimum royalties, shut-ins, bonus payments or any other lease
payments necessary to perpetuate the Leases, other than royalty payments on
production, and shall make any filings required to maintain the Leases in full
force and effect and in good standing with the lessor thereunder. Farmor shall
cooperate with Farmee and facilitate (as the lessee under the Leases) the
payments and filings to be made by Farmee hereunder.  Farmor shall promptly
provide Farmee with copies of (i) any notices or correspondence received from
the lessor under the Leases, and (ii) any operational or permitting notices or
correspondence received by Farmor relating to the Lease Lands. Notwithstanding
the forgoing, Farmor shall have the right, at its election, to pay any delay
rentals, minimum royalties, shut-ins, bonus payments or any other lease payments
necessary to perpetuate the Leases and to make any filings required to maintain
the Leases, provided that in the event Farmor makes any lease payments or
filings as provided hereunder, Farmee shall promptly reimburse Farmor the amount
of any such payments and the costs reasonably incurred by Farmor to make any
such lease filings.

 
(d)
Unless Farmor obtains the prior written consent of Farmee to act otherwise,
Farmor shall not: (i) abandon any portion of the Leases, the Lease Lands or any
of the assets related to the existing wells drilled on the Lease Lands; (ii)
convey or dispose of any interests in the Leases or Lease Lands or any of the
assets related to the existing wells drilled on the Lease Lands; (iv) amend or
change the terms of the Leases; (v) plug or abandon any of the wells drilled on
the Lease Lands; (vi) voluntarily relinquish any rights as operator in to the
Lease Lands to anyone other than Farmee or such party designated as Operator by
Farmee as provided hereunder; (vii)  waive, compromise or settle any claims,
demands, complaints, causes of action, suits, actions, judgments, awards,
recoveries, settlements, and appeals, relating to the Leases or Lease Lands; or
(viii)  cause

 
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any security interest, lien or encumbrance to attach to or burden the Leases or
Lease Lands.

 
(e)
Farmor shall take or cause to be taken all actions necessary or advisable to
consummate the transactions contemplated by this Agreement and to assure that it
will not be under any corporate, legal, governmental or contractual restriction
that would prohibit or delay the timely consummation of such transactions
hereunder.  Farmor agrees to take any and all steps reasonably requested by
Farmee to assist Farmee in the development of the Lease Lands, including
assisting Farmee in obtaining consents and authorizations from the lessor under
the Leases and any regulatory authorities, including the U.S. Bureau of Indian
Affairs, for any oil and gas development activities or project financing,
proposed by Farmee.

 
(f)
Upon the execution of this Agreement, Farmor shall deliver to Farmee copies of
all geological, geophysical, seismic, engineering and other technical data,
information, maps and reports in Farmor’s possession or control relating to the
Lease Lands (the “Technical Data”).  Farmor further assigns, transfers and
conveys all Farmor’s right, title and interest in the Technical Data and grants
to Farmee the license and right to use, distribute and disclose such Technical
Data, and the content thereof at Farmee’s sole discretion.

 
(g)
Farmor hereby assigns, conveys and transfers to Farmee the rights and license to
use the name “Blue Water Petroleum,” and all intellectual property rights and
assets associated with Farmor’s business, including but not limited to, any and
all rights to use the trade names, trademarks, service marks, websites and
domain names currently used, reserved or owned by Farmor.  Farmee agrees to
change Farmee’s name to “Blue Water Petroleum, Inc.” as soon as practical
following the execution of this Agreement.

 
(h)
Farmor shall only use the First ARP and Second ARP payments for Farmor’s future
business activity, and such payments shall not be applied to any past bills or
past business activities. Upon the request of Farmee, Farmor shall provide a
full accounting, including copies of supporting invoices and records, of
Farmor’s use of the First ARP and Second ARP payments.

7.
Notices

All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed to have been duly given
and to be effective on the date such communications are received by personal
delivery, by nationally recognized overnight courier or three (3) business days
after the date on which the same is deposited with the United States Postal
Service as registered or certified mail, postage prepaid, return receipt
requested, or by email communication, with a confirmation sent by registered or
certified mail or overnight courier return receipt requested, addressed to the
Parties at the addresses specified below or at such other address as the Party
to whom the notice is sent has designated to the other Party in writing:
 
BLUE WATER PETROLEUM LLC
1302 – 24th Street, Suite 342
 
 
 
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Billings, MT 59102
Attention: Benjamin Landry
Email: beynolds@gmail.com
 
DEGARO INNOVATIONS CORP.
6025 S. Quebec Street, Suite 100,
Centennial, CO 80111
Attention: Thomas Hynes
Email: THynes6958@aol.com

8.
Transfer of Interest

 
Farmor shall execute and deliver any transfer or assignment documents reasonably
requested by Farmee to evidence the transfer and assignment of the Earned
Interest. The interest of Farmee shall be recorded in any division orders filed
with respect to producing wells on the Lease Lands.

9.
Termination

 
(a)
This Agreement and the transactions contemplated hereby may be terminated:

 
(i)
By mutual agreement of the Parties;

 
(ii)
As provided in Section 1(e);

 
(iii)
By either Party, if there has been a material breach of a covenant or agreement
contained in this Agreement on the part of the other Party, or the failure of a
condition, and such breach of a covenant or agreement or failure of a condition
continues uncured for fifteen (15) days after written notice thereof, provided
that if it shall be impracticable or impossible to remedy such breach within
such fifteen (15) day period, the cure period shall be extended for an
additional period reasonably necessary to remedy such failure, but subject to
the condition that during the additional period, the defaulting party shall be
diligently pursuing a remedy for the failure.

10.
General

 
(a)
The rights and obligations of the Parties hereunder will be binding and endure
for the benefit of and be enforceable by each of the Parties hereto, and their
respective successors and permitted assigns.

 
(b)
The respective obligations and liabilities of the Parties shall be separate and
each Party shall be responsible only for its own obligations. It is not the
purpose or intention of this Agreement to create, and this Agreement shall never
be construed as creating, a joint venture, agency, mining partnership or other
relationship whereby either of the Parties shall be liable for the acts or
omissions of the other Party.

 
(c)
Should Farmee be prevented from conducting any operations contemplated by this
Agreement by reason of fire, flood, weather, rig availability, act of war or

 
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application of any Federal, State, or local law, order, rule or regulation
promulgated by a governmental body of competent jurisdiction then while so
prevented, Farmee's obligations shall be suspended, and this Agreement shall be
extended while and so long as Farmee is prevented by any such cause from
conducting operations contemplated hereunder, provided that no single suspension
under this Section 10(c) shall exceed 120 days. The suspension of obligations
under this Section 10(c) shall run concurrently with and not duplicate any
extension of the Program Deadlines provided in Section 1(f) of this Agreement.
Farmee must notify Farmor of the condition under which Farmee seeks to excuse
performance under this Section 10(c), setting forth in detail the circumstances
pertaining to such condition and the point in time that operations ceased as a
result of the condition and estimated time for resumption of the operation that
has been interrupted.

 
(d)
This Agreement constitutes the entire Agreement between the Parties hereto and
no variation of the terms hereof will be binding unless the same is contained in
a written document that is signed by all of the Parties.

 
(e)
This Agreement shall be governed by and be construed in accordance with the laws
of the State of Montana.

 
(f)
Time is of the essence of this Agreement.

 
(g)
The headings of the paragraphs of this Agreement are inserted for convenience
only and do not define, limit, enlarge or alter the meanings of any paragraph or
clause herein.

 
(h)
The Farmee and the Farmor acknowledge that they have been advised to obtain and
have obtained independent legal advice.

 
(i)
This Agreement may be executed in two or more counterparts and delivered by
electronic transmission, each of which will be deemed to be an original and all
of which will constitute one agreement, effective as of the reference date given
above and executed electronic copies will be deemed for all purposes under this
Agreement to be valid executed copies of this Agreement.

 
(j)
All the monetary amounts shall be in the currency of the United States unless
otherwise stated.

 
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IN WITNESS WHEREOF each of the Parties has duly executed this Agreement to be
effective as of the date first above written.

BLUE WATER PETROLEUM LLC

per: /s/ Benjamin Landry                           
per: /s/ Benjamin Landry                           

DEGARO INNOVATIONS CORP.

per: /s/ Tom Hynes                                     
per: /s/ Tom Hynes                                     

 
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SCHEDULE "A"

Attached to and forming part of the Farmout Agreement dated the ___ day of June,
2013,
between BLUE WATER PETROLEUM LLC and DEGARO INNOVATIONS CORP.

Description of Lease Lands
 
PART 1    CROW LEASE LANDS
     
Township 5 South Range 25 East
 
Section 8: All
640 acres
Section 9: N1/2, NE1/4SW1/4
360 acres
Section 10: NE1/4, E1/2NW1/4
240 acres
Section 14: W1/2
320 acres
Section 16: NW1/4, E1/2SW1/4, SE1/4
400 acres
Section 20: NE1/4, E1/2NW1/4, SW1/4NW1/4, S1/2
600 acres
Section 21: NW1/4, S1/2
480 acres
Section 21: NE1/4
160 acres
Section 22: S1/2
320 acres
Section 23: W1/2W1/2, NE1/4SW1/4
200 acres
Section 26: N1/2NE1/4SE1/4
20 acres
Section 27: NW1/4
160 acres
Section 28: NE1/4, W1/2
480 acres
Section 29: All
640 acres
Section 32: All
640 acres
Section 33: W1/2NW1/4, S1/2
400 acres
Section 35: W1/2NW1/4, SW1/4, SW1/4SE1/4
280 acres
TOTAL TRIBAL ACRES
6,340 acres
more or less
       
PART 2    ALLOTTEE LEASE LANDS
   
Township 5 South Range 25 East
 
Section 9: NW1/4SW1/4, S1/2SW1/4, SE1/4
280 acres
Section 10: W1/2NW1/4, S1/2
400 acres
Section 15: All
640 acres
Section 16: W1/2SW1/4
80 acres
Section 17: NE1/4NE1/4, S1/2NE1/4, SE1/4NW1/4, E1/2SW1/4, SE1/4
400 acres
Section 22: N1/2
320 acres
Section 23: NW1/4NE1/4, NE1/4NW1/4, SE1/4SW1/4, SE1/4
280 acres
Section 25: All
640 acres
Section 26: N1/2N1/2, SW1/4NW1/4, SE1/4SW1/4, S1/2NE1/4SE1/4, NW1/4SE1/4,
SE1/4SE1/4
340 acres
Section 27: NE1/4, SE1/4SW1/4, W1/2SE1/4
280 acres
Section 34: W1/2, S1/2SE1/4
400 acres
Section 35: E1/2NE1/4, N1/2SE1/4, SE1/4SE1/4
200 acres
Section 36: N1/2, NE1/4SE1/4
360 acres
TOTAL ALLOTTEE ACRES
4,620 acres
more or less

 
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PART 3    KEEBLER LEASE LANDS
 
Township 4 South, Range 25 East
Section 5: Lot 4, SW1/4NW1/4, W1/2SW1/4
Section 6: Lots 1 and 2, SE1/4NE1/4, E1/2SE1/4
Section 20: W1/2NW1/4, SE1/4NW1/4, SW1/4, plus a 2.5 acre parcel in the
NW1/4SE1/4
Section 29: W1/2NW1/4

Containing 736.24 gross acres, and 548.76 net mineral acres, more or less.

PART 4    PAUGH LEASE LANDS
 
Township 4 South Range 25 East
Section 16: SW1/4NW1/4, NW1/4SW1/4
Section 17: S1/2NE1/4, SE1/4NW1/4, SE1/4
Section 20: S1/2NE1/4, SE1/4
Section 21: SW1/4NE1/4, NW1/4, W1/2SW1/4, Lot 5, Lot 6
Section 29: NE1/4NE1/4, W1/2NE1/4, NE1/4NW1/4, W1/2SW1/4, Lot 5, Lot 6

Containing 1,283.04 gross acres, and 601.52 net mineral acres, more or less.

 
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SCHEDULE "B"

Attached to and forming part of the Farmout Agreement dated the ___ day of June,
2013,
between BLUE WATER PETROLEUM LLC and DEGARO INNOVATIONS CORP.

Allottee Leases owned and in Farmor’s name

Contract Number
Allotment
Mineral Document
14-20-0252-5192
1874-A
202 7051921116
14-20-0252-5193
1872
202 7051931116
14-20-0252-5194
1912-A
202 7051941116
14-20-0252-5195
1873-A
202 7051951116
14-20-0252-5196
1979-B
202 7051961116
14-20-0252-5197
2094-E
202 7051971116
14-20-0252-5198
1913-C
202 7051981116
14-20-0251-5199
1908
202 7051991116
14-20-0252-5200
1900-A
202 7052001116
14-20-0252-5201
1947-B
202 7052011116
14-20-0252-5202
1946-C
202 7052021116
14-20-0252-5203
1978-A
202 7052031116
14-20-0252-5204
2093-B
202 7052041116
14-20-0252-5205
1945
202 7052051116
14-20-0252-5206
2183-B
202 7052061116
14-20-0252-5215
1910
202 7052151116

Allottee Leases owned by Farmor
(currently being transferred into Farmor’s name)

ALLOTTMENT #
ACRES
1849
120.00
1863
280.00
1874C
60.00
1877A
120.00
1888
120.00
1898A
200.00
1898B
40.00
1899C
80.00
1901C
120.00
1907
80.00
1909
120.00
1910
280.00
1911
120.00
1977A
80.00
M2129F
80.00
M2141
80.00
M2141A
240.00
M2142
160.00
M2183B
40.00
TOTAL AC
2420.00

 
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SCHEDULE "C"

Attached to and forming part of the Farmout Agreement dated the ___ day of June,
2013,
between BLUE WATER PETROLEUM LLC and DEGARO INNOVATIONS CORP.

Form of Assignment

THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (“Assignment”), dated effective
______, 2013, at 7:00 a.m. local time where the respective Assets are located
(the “Effective Time”), is to [Degaro Innovations Corp.], Nevada corporation
whose address is 6025 S. Quebec Street, Suite 100, Centennial, CO 80111
(“Assignee”) from Blue Water Petroleum LLC, a Montana limited liability company,
whose address is 1302 – 24th Street, Suite 342 Billings, MT  59102 (“Assignor”).
 
1.
This Assignment is being made pursuant to the terms of that certain Farmout
Agreement dated ________, 2013 by and among Assignee and Assignor (the “Farmout
Agreement”).  All capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to them in the Farmout Agreement.

 
2.
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor hereby sells, assigns, transfers, grants, bargains
and conveys to Assignee all of Assignor’s right, title and interest in and to
the following real and personal property interests (collectively, the “Assets”):
(i) all oil and gas leases specifically described in Exhibit A, together with
all amendments, renewals, extensions, and ratifications thereof (collectively,
the “Leases”); (ii) the lands covered by the Leases or pooled or unitized
therewith, including those specifically described in Exhibit B (the “Lands”);
(iii) the oil, gas, casinghead gas, coal bed methane, condensate and other
gaseous and liquid hydrocarbons or any combination thereof that may be produced
from under the Leases (the “Hydrocarbons”); (iv) all oil, gas, water or
injection wells located on or associated with the Lands, whether producing,
shut-in, or temporarily abandoned, together with all of the personal property,
equipment, fixtures and improvements used in connection therewith; (v) the
unitization, pooling and communitization agreements, declarations, spacing
orders, and the pools, units, or spacing units created thereby, relating to the
properties and interests described above and to the production of Hydrocarbons,
if any, attributable to said properties and interests, and the force-pooled and
non-consent interests associated therewith; (vi) all surface leases, permits,
rights-of-way, licenses, easements and other surface rights agreements used in
connection with the interests described above; (vii) all existing contracts,
operating agreements, and other contracts, agreements and instruments, insofar
as they directly relate to the properties and interests described above; (viii)
originals or copies of all the files, records, and data relating to the items
described above.

 
RESERVING unto Assignor an overriding royalty interest in the Leases of 8% prior
to Payout and 16% after Payout for each 40 acre drillsite, or portion thereof,
located within the Lands (“Reserved Override”).  For purposes of this Agreement,
“Payout” means the point in time when Assignee has received, from the production
of hydrocarbons from the wells located on the applicable 40 acre drillsite,
revenues (including oil in the tanks and less all royalties, production and
severance taxes) equal to the costs incurred to drill, complete, equip and
operate all of the wells on the applicable 40 acre drillsite. The Reserved
Override shall be applicable to all oil, gas, casinghead gas and other
associated hydrocarbons produced, saved and marketed from or otherwise allocated
or attributable to the Leases, free and clear of all costs and expenses of
production, including, but not limited to, costs or expenses
 
 
 
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relating to gathering, transportation, storing and separating, treating,
dehydration, compression or otherwise making oil, gas, casinghead gas and other
associated hydrocarbons ready for sale or use, but subject to all lawfully
assessed taxes against the Reserved Override.  The First ARP and Second ARP
payments made under the Farmout Agreement shall be fully recoupable against the
Reserved Override payments that become due and payable and all such advance
royalty credits shall be fully assignable by Assignee with its interests in and
to the Leases.
 
TO HAVE AND TO HOLD the Assets unto Assignee and its successors and assigns
forever together with all and singular the rights and appurtenances thereto and
anywise belonging unto Assignee, its successors, assigns and legal
representatives, forever.
 
3.
This Assignment is made subject to the following terms and conditions:

 
 
(a)
Assignor and Assignee intend that the terms of the Farmout Agreement remain
separate and distinct from and not merge into the terms of this Assignment.  In
the event of a conflict between the terms of the Farmout Agreement and this
Assignment, the Farmout Agreement shall control.

 
 
(b)
Assignor and Assignee incorporate herein, by reference, the representations and
warranties contained in the Farmout Agreement.

 
 
(c)
Assignee hereby agrees to assume, and to timely pay and perform, all duties,
obligations and liabilities relating to the ownership and/or operation of the
Assets after the execution and the delivery of this Assignment.

 
 
(d)
To the extent permitted by law, Assignee shall be subrogated to Assignor’s
rights in and to representations, warranties and covenants given with respect to
the Assets.  Assignor hereby grants and transfers to Assignee, its successors
and assigns, to the extent so transferable and permitted by law, the benefit of
and the right to enforce the covenants, representations and warranties, if any,
which such Assignor is entitled to enforce with respect to the Assets, but only
to the extent not enforced by Assignor.

 
 
(e)
The references herein to contracts, claims and other matters shall not be deemed
to ratify or create any rights in third parties or merge with, modify or limit
the rights of either Assignor or Assignee, as between themselves, as set forth
in the Farmout Agreement or other documents executed in connection therewith.

 
 
(f)
Each party covenants and agrees to take such other action and to execute such
additional instruments and documents as may be reasonably necessary or advisable
to consummate the purposes contemplated by this Assignment. Assignor or Assignee
may execute separate governmental form assignments of the Assets on officially
approved forms, in sufficient counterparts to satisfy applicable statutory and
regulatory requirements.  Those assignments shall be deemed to contain all of
the exceptions, reservations, warranties, rights, titles, power and privileges
set forth herein as fully as though they were set forth in each such
assignment.  The interests conveyed by such separate assignments are the same,
and not in addition to, the Assets conveyed herein.

 
 
(g)
This Assignment binds and inures to the benefit of Assignor and Assignee and
their respective successors and assigns.

 
 
(h)
This Assignment may be executed and delivered in counterparts.

 
[SIGNATURE PAGE FOLLOWS.]
 

 
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EXECUTED on the dates contained in the acknowledgments of this Assignment, to be
effective for all purposes as of the Effective Time.
 
ASSIGNOR:
 
BLUE WATER PETROLEUM LLC

per: ___________________________
per: ___________________________

STATE OF   ________________)
               ss.
COUNTY OF _______________)
 
This instrument was acknowledged before me on this the ___ day of ________,
20__, by _______________________, as _______________________ of BLUE WATER
PETROLEUM LLC, a Montana limited liability company, on behalf of said entity.
 
Witness my hand and official seal.
My commission expires:  __________
 
_______________________
Notary Public

ASSIGNEE:
 
[DEGARO INNOVATIONS CORP.]

per: ___________________________
per: ___________________________

STATE OF ________________)
               ss.
COUNTY OF ______________)
 
This instrument was acknowledged before me on this the ___ day of ________,
20__, by _______________________, as _______________________ of [DEGARO
INNOVATIONS CORP.], a Nevada corporation, on behalf of said entity.
 
Witness my hand and official seal.
My commission expires:__________
 
_______________________
Notary Public

 
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SCHEDULE "D"

Attached to and forming part of the Farmout Agreement dated the ___ day of June,
2013,
between BLUE WATER PETROLEUM LLC and DEGARO INNOVATIONS CORP.

Oil and Gas Lease No. 14-20-0252-5163

 
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