Exhibit 10.1

March 20, 2007
Angel LLC
CN Energy LLC
Swanson Energy Company, LLC
Fuel Exploration, LLC
MHBR Energy, LLC
Rocky Mountain Rig LLC

c/o Howard L. Farkas
6601 East Progress Avenue
Greenwood Village, Colorado 80111

Re:
Ute Muddy Sand Unit, Fence Creek Muddy Sand Unit, Boos Unit

    Campbell and Sheridan Counties, Wyoming

 
 
Dear Mr. Farkas:
 
 
This letter constitutes a letter of intent regarding the terms and conditions
under which True North Energy Corporation (“Buyer”) is willing to acquire all
interests of Angel LLC, CN Energy LLC, Swanson Energy Company, LLC, Fuel
Exploration, LLC and MHBR Energy, LLC (collectively “Sellers”) in the units
described above (the “Units”) together with the workover rig (the “Rig”) owned
by Rocky Mountain Rig LLC (“RMR”), a wholly owned subsidiary of Sellers.
 
1. Properties. The "Properties" are all interests in the Units owned by Sellers
as of 7:00 a.m., local time on March 1, 2007 (the Effective Date") as described
in the offering brochure made available to Buyer by P&M Petroleum Management LLC
(“P&M”) on February 20, 2007, including without limitation the interests in the
wells listed on Exhibit A attached hereto and all of Seller's right, title and
interest in and to the producing and nonproducing oil and gas properties
contained in the areas of the Units outlined on the plats attached hereto as
Exhibits B-1, B-2 and B-3 together with a corresponding interest in all related
oil and gas interests (including related oil and gas units and the unit and/or
pooling declarations, agreements, and orders that affect those units), oil and
gas wells, injection and disposal wells, equipment, materials, production
facilities, pipelines, plants, gathering lines, contracts (in-cluding farmout or
other acquisition agreements, oil and gas sales contracts, and operating
agreements), options, easements, rights-of-way, permits, and surface leases; and
all other rights, properties and privileges associated with the use, ownership,
and/or operation of any of the foregoing. The "Properties" also include the Rig
and all of Sellers’ and RMR’s files and information relating to the foregoing.
 
 
 
 

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2. Purchase Price. The purchase price for the Properties other than the Rig (the
"Units Purchase Price") shall be $22,000,000, payable by Buyer to Seller at
closing 50% in cash and 50% in the issuance of a number of shares of Buyer’s
common stock computed by dividing $11,000,000 by the sum of $0.20 per share of
Buyer’s common stock plus average closing trading price of Buyer’s common stock
for the ten trading days immediately preceding the day on which the Definitive
Agreement is executed. The purchase price for the Rig shall be $650,000 payable
entirely in cash (the “Rig Purchase Price”). Sellers will be granted piggyback
rights pursuant to which Sellers may request that Buyer include the common stock
consideration provided as part of the Purchase Price in any registration
statement filed with the Securities and Exchange Commission to register other
common stock of Buyer (other than a registration on Form S-4 or S-8, or any
successor or other forms promulgated for similar purposes). Each party will be
responsible for payment of its own costs and expenses in connection with this
transaction. Each party agrees to discharge its own brokerage or finders’ fees
or agents’ commissions or like payment in connection with the transactions
contemplated by this letter of intent.
 
3. Definitive Agreement. Upon execution of this letter, the parties agree to
undertake, diligently and in good faith, to execute a definitive purchase and
sale agreement (the "Definitive Agreement") no later than June 1, 2007, which
shall contain the provisions of this letter of intent and other mutually
acceptable provisions customary in transactions of this sort. The Definitive
Agreement will contain representations, warranties and indemnification customary
in an asset purchase agreement for this type of property, including
representations, warranties and indemnification as to good and marketable title
to the Properties, material contracts, due payment of royalties and taxes,
litigation matters, environmental condition, and compliance with law. All
representations will be made as of the execution and delivery of the Definitive
Agreement and shall survive the Closing for a period of one (1) year, except for
all representations regarding environmental, royalty, and tax matters, which
will extend for the applicable statute of limitations. Upon execution of the
Definitive Agreement, Buyer shall deposit into escrow with an independent escrow
agent the sum of $220,000 which shall be paid to Sellers as part of the Purchase
Price delivered at closing or paid to Sellers upon Buyer’s wrongful failure to
close, and refunded to Buyer in the event of Sellers’ wrongful failure to close
in addition to any other remedies available to Buyer under the Definitive
Agreement or applicable law.
 
4. Closing. Buyer’s obligation to close the purchase of the Properties shall be
subject to satisfactory results of Buyer’s due diligence as described below and
to Buyer’s obtaining a satisfactory commitment to finance payment of the
Purchase Price and to other customary closing conditions. In addition, Buyer’s
obligation to close the purchase of the Rig shall be subject to Buyer’s
obtaining a satisfactory commitment from the operator of the Rig to remain
contracted for work on the Rig for a satisfactory period after the Closing.
Closing of the purchase and sale of the Properties shall occur upon satisfaction
of all conditions to closing but no later than July 16, 2007 in the offices of
Buyer’s counsel, and the transfer of the Properties shall be effective as of the
Effective Date. At the Closing, Sellers shall convey the Properties other than
the Rig to Buyer by assignment and bill of sale containing a special warranty of
title, i.e., a warranty against claims arising by, through and under Sellers,
and shall deliver governmental assignment forms, certificates, opinions of
counsel relating to due authorization, enforceability of the transaction and
other corporate matters relating to Sellers’ execution and performance of the
Definitive Agreement and related documents, and post-closing financial
assurances as shall be reasonably required to provide Buyer with appropriate
indemnity security. At the Closing RMR shall convey the Rig to Buyer by bill of
sale and certificate of title containing a special warranty of title. The
Properties will be conveyed free and clear of all encumbrances and other burdens
not disclosed to and accepted by Buyer prior to execution of the Definitive
Agreement.
 
 
 

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5. Due Diligence. Upon execution of this letter of intent and until the first to
occur of the termination of this letter of intent pursuant to paragraph 11 below
or the Closing, Buyer shall have the opportunity to conduct a complete and
unrestricted "due diligence" inspection of the Properties and review of the
files relating thereto, including files and operations of third parties
operating the Properties, in order to satisfy itself with respect to the
Properties. In particular, Buyer will have the opportunity to satisfy itself
with respect to the following matters (and such other matters as the parties
shall agree in the Definitive Agreement):
 

a.  
That Sellers have good and marketable title to the working interests and net
revenue interests in the Properties evaluated by Buyer, subject to mutually
agreeable dollar thresholds and baskets for excepting minor ownership variances;

 

b.  
That the wells, equipment, and facilities included in the Properties presently
being produced are in good condition and are operational;

 

c.  
That none of the Properties are subject to or involved in any demands, lawsuits,
disputes, investigations, or controversies prior to Closing that might
materially adversely affect their ownership or their value;

 

d.  
That the Properties have been operated in a prudent manner, in compliance with
law, and that there are no conditions on the Properties giving rise to liability
under any environmental laws;

 

e.  
That all royalties and taxes have been properly and completely paid;

 

f.  
That all leases and contracts included in the Properties are in full force and
effect, and that there are no unusual or onerous provisions in any of the leases
or contracts that would materially affect the value, ownership or operation of
any of the Properties;

 

g.  
That Sellers have obtained or will obtain at Closing all necessary approvals for
transfer of the Properties to Buyer;

 

h.  
That the Rig is in satisfactory condition for safe and adequate operation and is
in good repair with all required ratings and licenses and is not subject to any
contracts with any third parties or to any indebtedness or other claims or
approvals of third parties other than the approval of Sellers; and

 

i.  
That production from the Properties is not committed to any gathering agreement,
purchase agreement, hedging agreement, call on production, prepayment agreement
or other agreement relating to the gathering, treatment, transportation,
processing, sale or marketing of production not terminable by Buyer upon
occurrence of the Closing.

 
 
 

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6. Adjustments to Purchase Price; Indemnities. All liabilities and benefits
relating to the Properties shall be apportioned between the parties as of the
Effective Date. The Purchase Price shall also be subject to the usual and
customary adjustments for title defects, environmental defects, production in
tanks, gas take imbalances, the net operating income received by Sellers for the
period after the Effective Date, ad valorem and severance taxes based on
ownership of property or production, and such other adjustments as are usual or
customary in the purchase and sale of producing oil and gas properties, or as
are agreed upon by the parties. Each party shall either indemnify or defend the
other against the liabilities retained or assumed by such party and against any
breaches of representations and warranties and covenants of such party contained
in the Definitive Agreement, whether discovered before or after the Closing.
 
7. Exclusivity. Until the first to occur of the termination of this letter of
intent or the execution of the Definitive Agreement, Sellers and RMR shall not,
directly or indirectly, encourage, solicit, or entertain any other offers,
inquiries, or proposals for the purchase and sale of the Properties, or conduct
any negotiation or discussion or provide any information pertaining to the sale
of the Properties with any person or entity other than Buyer or its
representatives.
 
8. Disclosure. Except as and to the extent required by law or otherwise as a
result of Buyer’s status as a public company, without the prior written consent
of either Buyer or Sellers and RMR as to the disclosure by the other, neither
Sellers nor RMR nor Buyer shall, and each shall direct its respective officers,
directors, owners, managers, employees, affiliates, and advisors not to,
directly or indirectly, make any public comment, statement or communication with
respect to, or otherwise disclose or permit the disclosure of the existence of
discussions regarding, a possible transaction between the parties or any of the
terms, conditions or other aspects of the transaction proposed in this letter of
intent.
 
9. Non-Public Information. Sellers and RMR hereby acknowledge that during the
period from the date hereof through the Closing, Sellers and RMR may become
aware of “material non-public information” (as defined under applicable
securities laws) regarding Buyer. Sellers and RMR shall refrain, and shall
communicate to other persons, including their respective officers, directors,
owners, managers, employees, affiliates and advisors, having knowledge of such
information that they are required under applicable securities laws to refrain
from trading in Buyer’s securities while such information is material.
 
10. Counterparts. This letter of intent may be executed in one or more
counterparts, each of which will be deemed to be an original copy and all of
which, when taken together, will be deemed to constitute one and the same
document. This letter of intent shall not be effective for any purpose as
against any party hereto unless and until all parties hereto have executed a
counterpart of this letter.
 
11. Term. If all parties have not executed this letter of intent by March 31,
2007, this letter of intent shall be deemed to have terminated. Following
execution of this letter of intent by all parties, this letter of intent shall
remain in effect until the earlier of 60 days from the date of this letter or
the execution of the Definitive Agreement.
 
 
 

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12. Limitations on Binding Obligations. This letter is a letter of intent and
except for the provisions of paragraphs 7, 8 and 9 shall not contain a binding
or contractual obligation of any party hereto with respect to the purchase and
sale of the Properties. Such binding obligations shall be created, if at all, by
execution of the Definitive Agreement.
 
If the provisions of this letter are acceptable, please have all Sellers and RMR
execute and return one executed counterpart to the undersigned. We appreciate
the opportunity to acquire these Properties, and we look forward to working with
you to close this transaction as soon as possible.
 
Sincerely,
True North Energy Corporation
 

By
/s/ John Folvonic 

 

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John I. Folnovic
President and CEO

The foregoing accepted and agreed to this 22nd day of March, 2007:

Rocky Mountain Rig, LLC

By
/s/ Jerry Calley

 

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Manager

Angel, LLC

By
/s/ Howard L. Farkas

 

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Manager

 
CN Energy, LLC

By
/s/ Jerry Calley

 

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Manager

 
Swanson Energy Company, LLC
 

By
/s/ Vern Swanson

 

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Manager

 
Fuel Exploration, LLC

By
/s/ Ray Danton

 

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Manager

 
MHBR Energy, LLC

By
/s/ Meyer H. Saltzman

 

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Manager