Document:

ex10-3.htm

Exhibit 10.3

 

Legend:

Certain parts of this document have not been disclosed and have been filed separately with the Secretary of the Securities and Exchange Commission, and are subject to a confidential treatment request pursuant to Rule 406 of the Securities Exchange Act of 1933.  These sections have been marked with asterisks. For following information has been removed:

	  	
Term(s) or Type of Term:

	
Section:

	
1. 

 

	
Location of well.

	
Page 1, Recitals.

Page 4, Section 7.

Page 6, Section 14.01.

Page 7, Section 14.02.

Schedule “B”.

 

	
2. 

 

	
Material pricing terms of the agreement.

	
Page 1, Recitals.

Page 1, Section 1(A).

Page 2, Section 1(B).

Page 2, Section 3.

Page 2, Section 4.

Page 3, Section 6(D).

Page 4, Section 9.

Page 7, Section 14.02.

Schedule “A”.

Schedule “B”.

 

	
3. 

 

	
Timing of payments under the agreement.

	
Page 2, Section 1(B).

 

 

  

  

  

SERVICE AND GROSS OVERRIDING ROYALTY AGREEMENT

THIS AGREEMENT made as of the 7th day of October 2011

BETWEEN:

ADMIRALTY OILS LTD.

a company incorporated under the laws of the Province of Saskatchewan

having an office in the City of Saskatoon, Saskatchewan

(Hereinafter referred to as “AOL”)

OF THE FIRST PART

- and -

FALCONRIDGE OIL CANADA LIMITED,

incorporated under the laws of the Province of Ontario, Canada,

having an office in the City of Richmond Hill, Ontario;

(hereinafter referred to as “FRO”)

OF THE SECOND PART

THIS AGREEMENT CONTAINS PROVISIONS WHICH INDEMNIFY AND/OR RELEASE THE INDEMNIFIED AND/OR RELEASED PARTY FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE AND OTHER LEGAL FAULT;

Whereas AOL wishes for FRO to provide Terra SlicingTM technology services, equipment and engineering consulting to AOL for use on AOL’s well named ******************************************;

Whereas AOL shall pay FRO for said Services, a fee comprised of an upfront fee, to be paid to FRO prior to Services being rendered, a Success Fee, to be paid after Services have been rendered,  and as additional compensation AOL shall transfer to FRO a *************************************************, according to the terms and conditions stated herein; and

Whereas any additional terms to or modifications of these terms and conditions, or any terms and conditions inconsistent herewith, shall not bind the parties unless accepted in writing by an authorized representative of each party.

NOW THEREFORE in consideration of the agreements and covenants herein, the parties hereto agree as follows:

 

1. FEES & PAYMENT TERMS

The Parties agree that there shall be three components to the fee for FRO’s services, as follows:

A. Up Front Fee: *****************************. AOL shall pay the Up Front Fee upon signing of this Agreement by bank wire to FRO.  If FRO is not able to satisfy AOL with on-site workover evidence the workover of the Well, that a minimum of one (1) tonne of rock cuttings from the producing formation has been excavated to the surface, in form of cutting returns from the metal casing, cement, and formation, then FRO shall refund the Up Front Fee in its entirety within five (5) days of the date of the workover. AOL will continue to be responsible for payment of all third-party workover services and equipment charges pursuant to Article 5.

 

  

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B. Success Fee: The success fee shall be incrementally based upon the initial production as determined by the average daily rate of oil produced in a 240-hour standard production test.  Attached hereto as Schedule A to this Agreement is the Table defining the Success Fee and the technical regime of the standard production test.   The success fee shall be paid by AOL to FRO in ******** equal monthly payments beginning ************ from the date of Services, on the first business day of each month.

C. Gross Over-Riding Royalty: Gross Over-Riding Royalty (“GORR”) on the PNG interests from which the Well produces, as defined in Article 14 herein. Attached hereto as Schedule “B” to this Agreement, is the Lease and Royalty Lands, defined herein, upon which the GORR is hereby granted to FRO by AOL. The GORR will only apply to Formations that are excavated by FRO. AOL will also not commingle any zones except the Bakken and Torquay. .

 

2. SERVICES PROVIDED

“Services” shall be defined as all levels of completion engineering, including completion and fracture program design and advice, and use of proprietary completion equipment, to be provided by FRO. Specifically FRO shall provide: completion program, including Terra Slicing TM and fracturing specifications; two (2) certified Terra SlicingTM Engineers on site during the completion workover, with two (2) sets of Terra SlicingTM equipment, which shall be released at the conclusion of the completion workover. For the purpose of payment of the fees described above in Section 1, FRO shall have demonstrated that Services are complete upon the production of evidence during the workover of the Well, of cuttings excavation from the producing formation, in the form of rock cuttings and other returns from the metal casing and satisfy AOL that one tone of the targeted Formation has been excavated and brought to the surface in the form of cuttings.

 

3. OVERDUE ACCOUNT

At FRO's option, interest may be charged at the rate of ***************************** on any overdue payment, unless such rate contravenes local law in which case the interest charged will be the maximum allowed by law.  Operating, production or well conditions which prevent satisfactory operation of Equipment, Services or Products do not relieve AOL of its payment responsibility.

4. CANCELLATION

If AOL should cancel the orders for Services after acceptance by FRO, such cancellation will be subject to a cancellation charge of *****************, plus any actual packing, shipping, and related transportation costs.  Shall cancellation occur, AOL shall be liable for all costs incurred by FRO in the mobilization/demobilization related thereto, and any other reasonable costs incurred by FRO incident to such cancellation.

5. THIRD-PARTY CHARGES, TAXES

AOL shall pay all third-party charges and taxes, in compliance with FRO's current price list, and any sales, use, rental or other taxes that may be applicable to transactions hereunder.  Attached hereto as Schedule "C".  AOL shall pay all applicable customs, excise, import and other duties unless otherwise agreed to in writing by an authorized representative of FRO. AOL shall provide necessary import licenses and extensions thereof.

  

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6. LIABILITIES, RELEASES AND INDEMNIFICATION:

A. In this Agreement, "Claims" shall mean all claims, demands, causes of action, liabilities, damages, judgments, fines, penalties, awards, losses, costs, expenses (including, without limitation, attorneys' fees and costs of litigation) of any kind or character arising out of, or related to, the performance of or subject matter of this Agreement (including, without limitation, real or personal property loss, damage or destruction, personal or bodily injury, illness, sickness, disease or death, loss of services or wages, or loss of consortium or society).

B. FRO shall release, indemnify, defend and hold AOL, its parent, subsidiary and affiliated or related companies, and the officers, directors, employees, consultants and agents of all of the foregoing (referred to in this Agreement as "AOL INDEMNITEES") harmless from and against any and all Claims asserted by or in favor of any member of FRO INDEMNITEES (as defined in paragraph C. below) or FRO INDEMNITEES' subcontractors at any tier or their employees, agents, or invitees.

C. AOL shall release, indemnify, defend and hold FRO, its parent, subsidiary and affiliated or related companies, and the officers, directors, employees, consultants and agents of all of the foregoing (referred to in this Agreement as "FRO INDEMNITEES") harmless from and against any and all Claims asserted by or in favor of any member of AOL INDEMNITEES or AOL INDEMNITEES' contractors at any tier (except FRO INDEMNITEES or FRO INDEMNITEES' subcontractors) or their employees, agents or invitees.

D. Notwithstanding paragraph B. above, should any of FRO INDEMNITEES' or FRO INDEMNITEES' subcontractors’ instruments, equipment or tools ("Tools") become lost or damaged in the well when performing or attempting to perform the Services hereunder, it is understood that AOL shall make every effort to recover the lost or damaged Tools. AOL shall assume the entire responsibility for such fishing operations in the recovery or attempted recovery of any such lost. None of FRO'’s employees are authorized to do anything whatsoever, nor shall any of FRO'’s employees be required by AOL to do anything, other than consult in an advisory capacity with AOL in connection with such fishing operations.

Should AOL fail to recover such Tools lost in the well, or should such Tools become damaged in the well, or damaged during recovery, AOL shall pay to FRO ************************************.  Further, all risks associated with loss of or damage to property of FRO INDEMNITEES or FRO INDEMNITEES’ subcontractors while in the custody and control of AOL or during transportation arranged by or controlled by AOL, shall be borne by AOL.

E. Notwithstanding anything contained in this Agreement to the contrary, AOL, to the maximum extent permitted under applicable law, shall release, indemnify, defend and hold FRO INDEMNITEES and FRO INDEMNITEES' subcontractors harmless from and against any and all Claims asserted by or in favor of any person or party, including FRO INDEMNITEES, AOL INDEMNITEES or any other person or party, resulting from: (i) loss of or damage to any well or hole (including but not limited to the costs of re-drill), (ii) blowout, fire, explosion, cratering or any uncontrolled well condition (including but not limited to the costs to control a wild well and the removal of debris), (iii) damage to any reservoir, geological formation or underground strata or the loss of oil, water or gas therefrom, (iv) pollution or contamination of any kind (other than surface spillage of fuels, lubricants, rig sewage or garbage, to the extent attributable to the negligence of FRO INDEMNITEES) including but not limited to the cost of control, removal and clean-up, or (v) damage to, or escape of any substance from, any pipeline, vessel or storage facility.

F. Neither party shall be liable to the other for any indirect, special, punitive, exemplary or consequential damages or losses (whether foreseeable or not at the date of this Agreement), including without limitation damages for lost production, lost revenue, lost product, lost profit, lost business or lost business opportunities.

 

  

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H. THE EXCLUSIONS OF LIABILITY, RELEASES AND INDEMNITIES SET FORTH IN PARAGRAPHS B. THROUGH F. OF THIS ARTICLE 6. SHALL APPLY TO ANY CLAIM(S), LOSSES OR DAMAGES WITHOUT REGARD TO THE CAUSE(S) THEREOF INCLUDING BUT NOT LIMITED TO PRE-EXISTING CONDITIONS, WHETHER SUCH CONDITIONS BE PATENT OR LATENT, IMPERFECTION OF MATERIAL, DEFECT OR FAILURE OF PRODUCTS OR EQUIPMENT, BREACH OF REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED), STRICT LIABILITY, TORT, BREACH OF CONTRACT, BREACH OF DUTY (STATUTORY OR OTHERWISE), BREACH OF ANY SAFETY REQUIREMENT OR REGULATION, OR THE NEGLIGENCE OR OTHER LEGAL FAULT OR RESPONSIBILITY OF ANY PERSON (INCLUDING THE INDEMNIFIED OR RELEASED PARTY), WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE.

I. REDRESS UNDER THE INDEMNITY PROVISIONS SET FORTH IN THIS ARTICLE 6. SHALL BE THE EXCLUSIVE REMEDY(-IES) AVAILABLE TO THE PARTIES HERETO FOR THE MATTERS, CLAIMS, DAMAGES AND LOSSES COVERED BY SUCH PROVISIONS.

7. AOL WARRANTY/BINDING AUTHORITY

AOL warrants that AOL is the sole lessee of the Bakken/Torquay PNG interests at ************ and/or is the duly constituted agent of the owners or shareholders of the mineral interests and has full authority to represent the interests of the same with respect to all decisions taken throughout the provision of any Services hereunder.  AOL will defend, release, indemnify and hold FRO INDEMNITEES harmless from and against all Claims resulting from the allegation by any person that AOL has misrepresented or lacked sufficient authority to represent such person as warranted by AOL in this Article.

8. ACCESS TO WELL AND STORAGE

With respect to Services, AOL shall provide at its expense adequate means required for equipment and FRO personnel to gain access to or return from a well site, and shall obtain at AOL’s sole cost and expense all permits, licenses or other authorization required for FRO to enter upon work areas for the purposes contemplated. When necessary to repair roads or bridges or to move equipment or FRO personnel, such shall be arranged and paid for by AOL. AOL shall meet all applicable safety and security requirements and consistent with good industry practices, for the equipment and FRO personnel.

9. WARRANTY

A. Services: FRO warrants that the Services to be provided by FRO pursuant to this Agreement shall conform to the material aspects of the specifications set forth in this Agreement.  In the event that the Services fail to conform to such specifications, FRO shall re-perform that part of the non-conforming Services, provided FRO is notified thereof by AOL prior to FRO’s departure from the work site.  FRO warrants that the equipment to be provided by FRO pursuant to this Agreement shall conform to FRO’s published specifications and shall be in good operating condition. Liability for loss or damage to TerraSlicingTM Equipment is set forth in Article 6.  If any of the equipment fails to conform to such specifications upon inspection by FRO, FRO, at its option, shall replace the non-conforming equipment with the type originally furnished.  If neither the non-conforming equipment nor the replacement for said non-conforming equipment can be repaired on site, FRO shall return to AOL the escrow amount  of************************************, due and payable within thirty (30) days after the date of Services.

  

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FRO’s warranty obligations hereunder shall not apply if the non-conformity was caused by (i) AOL’s failure to provide proper on-site storage or maintenance of equipment, (ii) abnormal well conditions, corrosion due to aggressive geological fluids or incorrect wellbore specifications provided by AOL, (iii) unauthorized alteration or repair of the equipment by AOL (iv) the equipment or any components are lost or damaged while on AOL’s site due to AOL’s or any third party’s negligence, vandalism or force majeure (including, but not limited to, lightning), or (v) unauthorized use or handling of the equipment by AOL or AOL contractors in a manner inconsistent with FRO’s recommendations.

Interpretations, research, analysis, recommendations, advice or interpretational data (“Interpretations and/or Recommendations”) furnished by FRO hereunder are opinions based upon inferences from measurements, empirical relationships and assumptions, and industry practice, which inferences, assumptions and practices are not infallible, and with respect to which professional geologists, engineers, drilling consultants, and analysts may differ. Accordingly, FRO does not warrant the accuracy, correctness, or completeness of any such Interpretations and/or Recommendations, or that AOL’s reliance or any third party’s reliance on such Interpretations and/or Recommendations will accomplish any particular results. AOL assumes full responsibility for the use of such Interpretations and/or Recommendations and for all decisions based thereon (including without limitation decisions based on any oil and gas evaluations, production forecasts and reserve estimates, furnished by FRO to AOL hereunder), and AOL hereby agrees to release, defend and indemnify FRO from any Claims arising out of the use of such Interpretations and/or Recommendations.

FRO will endeavor to transmit data to AOL as accurately and securely as practicable in accordance with current good oilfield industry practice. Notwithstanding the foregoing, FRO does not warrant the accuracy of data transmitted by electronic processes and will not be responsible to AOL for accidental or intentional interception of such data by others.

THIS ARTICLE 9 SETS FORTH AOL'S SOLE REMEDY AND FRO'S ONLY OBLIGATION WITH REGARD TO NON-CONFORMING SERVICES, EQUIPMENT OR PRODUCTS. EXCEPT AS IS OTHERWISE EXPRESSLY PROVIDED PURSUANT TO THE PROVISIONS OF THE ARTICLE 9 PRO MAKES NO WARRANTY OR GUARANTEE OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, REGARDING ANY SERVICES PERFORMED OR EQUIPMENT OR PRODUCTS SUPPLIED BY FRO HEREUNDER.

10. INSURANCE

Upon written request, AOL shall furnish to FRO certificates of insurance evidencing the fact that adequate insurance to support AOL’s obligations hereunder has been secured. To the extent of each party's release and indemnity obligations hereunder, each party agrees that all such insurance policies shall (i) be primary to the other party's insurance, (ii) include the other party, its parent, subsidiary and affiliated or related companies, and its and their respective officers, directors, employees, consultants and agents as additional insured, and (iii) be endorsed to waive subrogation against the other party, its parent, subsidiary and affiliated or related companies, and its and their respective officers, directors, employees, consultants and agents.

11. CHANGE OF DESIGN

FRO expressly reserves the right to change or modify the design and construction of any of its equipment without obligation to notify AOL as long as the functionality of such changes and/or modifications meet or exceed the functionality of FRO’s published specifications.

 

  

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12. PATENTS

FRO warrants that the equipment used by FRO personnel is licensed, which license is valid and in good standing, and will not infringe patents of others by reason of the use.  FRO hereby agrees to hold AOL harmless against judgment for damages for infringement of any such patent, provided that AOL shall promptly notify FRO in writing upon receipt of any claim for infringement, or upon the filing of any such suit for infringement, whichever first occurs, and shall afford FRO full opportunity, at FRO's option and expense, to answer such claim or threat of suit, assume the control of the defense of such suit, and settle or compromise same in any way FRO sees fit. FRO does not warrant that such Equipment or Products: (a) will not infringe any such patent when not of FRO's manufacture, or specially made, in whole or in part, to the AOL’s design specifications; or (b) if used or sold in combination with other materials or apparatus or used in the practice of processes, will not, as a result of such combination or use, infringe any such patent, and FRO shall not be liable and does not indemnify AOL for damages or losses of any nature whatsoever resulting from actual or alleged patent infringement arising pursuant to (a) and (b) above. THIS PARAGRAPH STATES THE ENTIRE RESPONSIBILITY OF FRO CONCERNING PATENT INFRINGEMENT.

13. CONFIDENTIALITY

The design, construction, application and operation of FRO's Services and AOL’s Well embody proprietary and confidential information. Each party shall maintain all technical data and information obtained from the other party, drawings, specifications, calculations and other documents about either Terra SlicingTM or the Well in strict confidence, subject only to disclosure required by law or legal process.

For greater clarity, the parties may photograph or videotape the workover operations and all information gathered there from shall remain confidential. The release of any confidential information may only be done by written consent of both parties.

ARTICLE 14. ROYALTY

14.01 DEFINITIONS

In this Agreement, the following definitions shall apply:

	
(a)  

	
“Lease”: The respective document of title, plus any extension, renewal, or replacement of such document pursuant to which AOL holds an interest in the Royalty Lands (hereinafter plural “Leases”);

	
(b)  

	
“Petroleum Substances”: Natural gas, unrefined crude oil, condensate and related hydrocarbons and any other substances produced in association therewith but only to the extent that such hydrocarbons are granted by the Lease;

	
(c)  

	
“Regulations”: All statutes, laws, rules, orders, regulations, or directives in effect from time to time and made by any governmental authority having jurisdiction over the Royalty Lands and operations to be conducted therefrom; and

	
(d)  

	
“Royalty Lands”: All lands in which AOL or any Co-AOL individually, currently owns a working interest, but limited to the Bakken/Torquay formation in which Terra-SlicingTM is used in the drilling unit on the *****************, all of which are included and described in Schedule "B" to this Agreement as amended from time to time pursuant to Article 14 hereof.

 

 

  

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14.02 GRANT OF OVERRIDING ROYALTY

AOL hereby grants to FRO a Gross Over-Riding Royalty in the PNG Interest in ************* for the Formation(s) that are excavated using Terra SlicingTM technology, in an amount equal to *****************, which shall not be subject to any royalties, burdens, encumbrances, costs or other deductions whatsoever, payable in respect of the Royalty Lands or Petroleum Substances derived therefrom, subject only to governmental or other regulatory taxes, levies, or fees (hereinafter "Royalty"). FRO shall record and register such Royalty in the RM recorder's office where the Royalty Lands are located. It is up to FRO to register the caveat on the title document.

14.03 PAYMENT SCHEDULE

AOL shall pay FRO the Royalty due under this Agreement on or before the 15th day of the second month following the month in which the Petroleum Substances were produced, saved, and sold or used by AOL. Accompanying the funds, AOL shall submit to FRO a statement summarizing the quality and kind of Petroleum Substances produced, deemed to be produced or allocated to, saved and sold from or used off the Royalty Lands in the immediately preceding calendar month, together with a qualification of FRO's share of Petroleum Substances, the sale price and the gross proceeds received for such Petroleum Substances, and a copy of AOL's governmental production and/or royalty statement and a copy of the transmission report by the pipeline, transmission, or distribution agent for the immediately preceding month.

14.04 MAINTENANCE OF LEASES

AOL shall comply with all the covenants and conditions contained in the Leases insofar as they relate to the Royalty Lands and shall do all things necessary to maintain the Leases in full force and effect during the term of this Agreement, including timely payment of all rentals, all renewal and extension fees, all taxes, all payments in lieu of actual production and royalties due or becoming due in respect of the Royalty Lands and the Leases.

14.05 POOLING AND UNITIZATION

The Royalty Lands are prohibited from being pooled or unitized unless the Saskatchewan Government requests that the unit be pooled pursuant to the government regulations.

14.06 BOOKS AND RECORDS

AOL shall keep true and current books, records and accounts showing the quantity of Petroleum Substances produced from or allocated to the Royalty Lands and the sales and dispositions made thereof from time to time. The books, records, vouchers and accounts maintained by AOL shall be open to inspection at all reasonable times during business hours by any officer, agent or employee appointed or authorized by FRO, in writing, to examine the same. All information obtained by FRO shall be treated as confidential and shall not be disclosed to third persons without the prior written consent of AOL.

  

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14.07 AUDIT

FRO, upon Notice to AOL, shall have the right (at its own expense) to audit AOL’s accounts and records for the previous calendar year, insofar as they relate to any matter or item relating to this Agreement, within the 24 month period following the end of that calendar year. Any payment made or statement rendered by AOL hereunder that is not disputed by FRO on or before the last day of the 26th month following the end of that calendar year shall be deemed to be correct.

14.08 FAIR MARKET VALUE

If FRO's share of Petroleum Substances is sold by AOL at less than fair market value in any transaction (including those transactions which are not at arm's length or any transaction involving any arrangement from which AOL obtains a collateral advantage in consideration of the reduced price), then the gross proceeds of the sale of such Petroleum Substances shall, for the purposes of quantifying the Royalty, be calculated on the basis of its fair market value and not the actual value received by AOL for the sale of such Petroleum Substances.  AOL shall notify FRO of any proposed contract of sale of Petroleum Substances to third parties which is for a period in excess of forty-five (45) days providing reasonable details thereof.  If FRO can find and demonstrate to AOL, terms of a competitive contract of sale that exceed AOL’s contract of sale, FRO shall have the right to take in kind FRO's share of Petroleum Substances and separately dispose of its share of Petroleum Substances.

15. SECURITY IN ROYALTY LANDS

FRO shall have a lien, first charge and security interest (the “Lien”) on the interest of AOL in the Royalty Lands and in the Petroleum Substances within, upon or under the Royalty Lands or produced from, deemed to be produced from or allocated to the Royalty Lands and the wells and surface equipment thereon for any unpaid monies owed it pursuant to this Agreement.  Both the Royalty and the Lien shall be interests in land and shall run with the Royalty Lands.  Upon the failure of AOL to pay FRO in accordance with the terms of this Agreement any monies hereunder due to FRO, become bankrupt, insolvent, go into receivership, or should any creditor or other person attach or levy AOL’s lease, property, or equipment, FRO shall immediately have the right without notice and without liability for trespass or damages to perfect the Lien and pursue all recourse under law to maintain the Lease in good standing.

16. OTHER PROVISIONS

16.01 INDEPENDENT PARTIES

FRO and AOL hereby agree that this Agreement is a Service Agreement and nothing herein contained or otherwise shall constitute any of the parties hereto as being partners, one with the other, or render them liable to contribute for liability of any party outside the scope of this Agreement.  Neither party, nor their principals, partners, employees, or subcontractors are servants, agents, or employees of each other.  Further, neither party is an agent for the other and has no right to represent or contract for the other, and has no fiduciary obligations to the other.  This Agreement does not give the right to either party to acquire, own, use, or have an interest in the other party’s intellectual property, technology, products, proprietary information, or business outside the scope of this Agreement.  Each party shall be responsible for the payment of all taxes properly assessed against it.

  

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16.02 ASSIGNMENT

Neither party shall transfer, sell, assign or otherwise dispose of any of its obligations, rights or interests under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld.  Regardless of such consent, each party shall continue to be responsible to carry out the terms and provisions of this Agreement, and the other party shall only be required to look to the assigning party for performance hereunder. In the case of assignment of a Lease by AOL, consent is deemed to have been ratified by the addition of said Lease to the Agreement in Schedule “B” under the procedure described in Article 15, and the conveyance and recording of the gross over-riding royalty to FRO described in Article 15 prior to the assignment.

16.03 NOTICES

All notices, requests or other communications required or permitted under the terms of this Agreement shall be in writing and may be delivered by hand, mailed by registered post or certified first class airmail or sent by facsimile, telex, telecopier or other form of recorded communication tested prior to transmission and be given to or made to the representatives of the parties, at the respective addresses which are indicated below:

	
Falconridge Oil Limited

120 West Beaver Creek Road

Richmond Hill, Ontario

 

Attention: Mr. Mark Pellicane

Telephone: 905-771-8282

Facsimile: 905-771-8520

	
Admiralty Oils Limited

********************

********************

Attention: ****************

Telephone: ***************

Facsimile:

Or such other address of which Notice has been given. Any Notice mailed as aforesaid shall be deemed to have been given and received on the third business day following the date of its mailing. Any Notice delivered personally will be deemed to have been given and received on the day it is personally delivered. Any Notice transmitted by facsimile, telex, telecopier or other form of recorded communication will be deemed given and received on the first business day after its transmission. The original copy of any Notice transmitted by facsimile telex, telecopier or other form of recorded communication shall be mailed or personally delivered on the third business day following the date of the transmission.  In no event will transmission by email be considered proper Notice.  Acknowledgement of receipt of such Notice, together with a response to the subject matter of the Notice, must be delivered by the other party within three (3) days after receipt of the Notice.  Any notice concerning a claimed default under the terms of this Agreement must be sent by Overnight Courier or by registered mail.

16.04 JURISDICTION

The parties agree that this Agreement or FRO’s or AOL’s performance hereunder, shall for all purposes be construed and interpreted in accordance with the laws of the Province of Saskatchewan.  However, the parties agree that the Royalty Lands added to the Agreement as Schedule “B” as described in Article 15, shall be subject to all laws, rules, and regulations of the provincial government or regulatory body having jurisdiction over the Royalty Lands or the province in which the Royalty Lands are located.

  

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16.05 ENTIRE AGREEMENT

The terms of this Agreement express and constitute the entire agreement between the parties insofar as the specific subject matter contained in this Agreement.  No implied covenant or implied liability of any kind on the part of the parties is created or shall arise by reason of these presents or anything contained in this Agreement. This Agreement contains all representations of the parties and supersedes all prior oral or written agreements or representations.

16.06 AMENDMENTS

This Agreement shall not be varied, supplemented, qualified, or interpreted by any prior course of dealing between the parties or by any usage of trade and may only be amended in writing and supersedes all other agreements, documents, writings and verbal understandings among the parties.

16.07 SEVERABILITY

Each provision of this Agreement is severable, and if any one or more of the provisions is determined to be unenforceable or invalid by a court of competent jurisdiction in whole or in part, the remaining provisions shall nevertheless be binding and enforceable and in full force and effect. The invalidity of any one or more phrases sentences, clauses, Articles or sub-sections of this Agreement does not affect the remaining portions.

16.08 NO WAIVER

No consent or waiver by either party to or of any breach or default by the other party in its performance of its obligations under this Agreement will be deemed or construed to be a consent to or waiver of a continuing or subsequent breach or default or any other breach or default of those or any other obligations of that party. No consent or waiver will be effective unless in writing and signed by both parties.

16.09 FORCE MAJEURE

If either party is unable by reason of Force Majeure to carry out any of its obligations under this Agreement, other than the obligation to pay money, then on such party giving notice and particulars in writing to the other party within a reasonable time after the occurrence of the cause relied upon, such obligations shall be suspended. "Force Majeure" shall include acts of God, laws and regulations, government action, war, civil disturbances, strikes and labor problems, delays of vendors or carriers, lightening, fire, flood, washout, storm, breakage or accident to equipment or machinery, shortage of raw materials, and any other causes that are not reasonably within the control of the party so affected.

16.10 DEFAULT

If either party defaults, upon Notice both parties agree to enter into binding arbitration.

16.11 BINDING ARBITRATION

The parties agree to engage in good faith negotiations to reach a rapid and equitable solution in a spirit of cooperation.  If the parties are unable to resolve a dispute through direct negotiation, they will use the services of an arbitrator and avoid litigation.  The use and rules of the Arbitration Institute of Saskatchewan, Inc. (ADR Saskatchewan) will apply to the arbitration.  Each party will bear its own expenses and an equal share of the costs of the arbitrator(s).  The parties agree that all findings by the arbitrator shall be binding and agree to be bound by the decision of the arbitration.   Notwithstanding the provisions of this paragraph, if any party does not obey the arbitrator’s decision, they may take proceedings for injunctive or similar relief in the courts of the proper jurisdiction to restrain or prevent any breach of this Agreement.

 

  

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16.12 ENUREMENT

Where otherwise permissible under the terms and conditions herein, this Agreement shall be binding upon both parties and shall inure to the benefit of the successors and heirs of the parties.

16.13 ATTORNEY’S FEES

After arbitration, in which remedies for costs are provided, in any action or proceeding brought to enforce any provision of this Agreement, the successful party is entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

16.14 TIME

Time is of the essence in this Agreement.

16.15 COUNTER-PARTS

This Agreement may be signed in counter-parts.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and attested to by their duly authorized representatives on the date and year first above written.

FALCONRIDGE OIL CANADA LIMITED

 

By:  /s/ Alfred Morra                

Name: Alfred Morra

Title: Managing Director

ADMIRALTY OILS LIMITED

By:  /s/ Quinton Hardage               

Name: Quinton Hardage

Title: CEO & President

  

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Schedule "A"

	
to Service Agreement by and between Admiralty Oils Ltd.

	
and Falconridge Oil Canada Ltd.

	
dated October 7, 2011.

	  
	
The success fee shall be incrementally based upon the initial production as determined by the average daily rate of oil produced in a standard

	
production test of *******. The standard production test shall quantify the gross production of fluids over the initial 240 hours of open flow, or if the

	
well is unable to lift fluids by open flow, then flow will be assisted by pump jack.

	  

 

 

	  	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	
BOPD

	  	
0.0-0.99

	
1.0-1.99

	
2.0-2.99

	
3.0-3.99

	
4.0-4.99

	
5.0-5.99

	
6.0-6.99

	
7.0-7.99

	
8.0-8.99

	
9.0-9.99

	
10.0-10.99

	
11.0-11.99

	
12.0-12.99

	
13.0-13.99

	
14.0-14.99

	
15.0-15.99

	
16.0-16.99

	
17.0-17.99

	
18.0-18.99

	
19.0-19.99

	
20.0-20.99

	
21.0-21.99

	
22.0-22.99

	
23.0-23.99

	
24.0-∞

	
Fixed Fee

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
******

	
Variable Fee

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Success Fee

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
***

	
GORR

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	
Yes

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  

 

 

	
Notes:

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	
(1) Fixed Fee does not change with production or outcome of well

	  	
Fee is paid into an Escrow Account and earned as soon as evidence is case cuttings and formation rocks appear in the cutting return filter.

	  	  
	  	
(2) Variable Fee varies with oil production

	  	
(3) Success Fee is based on Initial Production as determined by  ******* standard production test; ********************

	  	
(4) **************** with oil production and actual price of oil.

  

12

  

Schedule "B"

Lease & Royalty Lands

The only land in the lease agreement that applies to the Royalty Lands is the PNG rights for the Formation(s) that are successfully excavated in the wellbore located at ************.

  

13ex10-4.htm

Exhibit 10.4

 

Legend:

 

Certain parts of this document have not been disclosed and have been filed separately with the Secretary of the Securities and Exchange Commission, and are subject to a confidential treatment request pursuant to Rule 406 of the Securities Exchange Act of 1933.  These sections have been marked with asterisks. For following information has been removed:

	  	
Terms or Type of Term(s)

	
Section:

	
1. 

 

	
Material pricing terms of the agreement.

	
Page 3, under “Consideration”.

Page 15, Schedule “B”.

Page 16, Schedule “B”.

Page 18, Schedule “C”.

 

	
2. 

 

	
Terms regarding exclusivity.

	
Page 14, Schedule “A”.

	
3. 

 

	
Material pricing terms with sub-agents.

	
Page 17, Schedule “C”.

	
4. 

 

	
Material terms regarding marketing expenses and revenue.

	
Page 18, Schedule “C”.

 

 

  

  

  

License Agreement

THIS AGREEMENT (the "Agreement") is effective as of October 1, 2012 and is hereby entered into between:

Hydroslotter Corporation of Canada (Hereinafter referred to as "HSC" and/or Licensor)

10 Valleyview Court

Kleinburg, Ontario, Canada

L0J 1C0

AND

Falconridge Oil Canada Inc. (Hereinafter referred to as "FOC" and/or Licensee)

120 West Beaver Creek, Unit 17

Richmond Hill, Ontario, Canada

L4B 1L2

Hereinafter collectively FOC and HSC herein after may be referred to as "Parties"

WHEREAS HSC and FOC are registered corporations incorporated under the laws of Ontario with their head offices in Ontario, Canada.

AND WHEREAS Falconridge, an oil and gas company, which in addition to direct marketing activities to oil and gas parties also contracts agents, consultants and marketing partners for the implementation of its represented technologies globally.

AND WHEREAS HSC represents a proprietary enhanced oil recovery technology and related equipment, patents and services, which includes patented and proprietary oil and gas stimulation and recovery technology fee-based products, including the supply of specialized proprietary equipment, services, interpretations and/or recommendations, and supply or sale of "non-standard" customized products (hereinafter referred to as "HSC Technology").

AND WHEREAS HSC grants FOC the non-exclusive right to market, represent, and use HSC technology in order to explore and develop utilization of the HSC technology on any and all new and existing oil, gas, and hydrocarbon wells on an unlimited basis in any geographical region, country, or territory.

AND WHEREAS FOC shall market the HSC technology under the Falconridge banner and utilize the proprietary terminology and marketing material TST (Terraslicing) in future marketing efforts promoting HSC technology.

AND WHEREAS under this relationship, FOC shall deliver full-cycle project development, including expert financial analysis, marketing, communications, deal structuring, qualifying client business risk and administration, and when necessary, providing risk capital investment; and HSC shall deliver full cycle technological implementation, including expert TST geotechnical analysis, engineering, supervision, and post-workover well monitoring, and when FOC is required to provide risk capital investment HSC will also provide prerequisite reservoir assessment, engineering job costing, and logistics planning.

  

1

  

NOW, THEREFORE, in consideration of representations, warranties and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

DEFINITIONS:

GROSS REVENUE shall be deemed the revenue received by Falconridge, as set forth in Schedule "B" to this agreement

GROSS OVER RIDING ROYALTY is when an operator or owner hereby grants to Falconridge a Gross Over-Riding Royalty Interest in respect of the Petroleum Substances within, upon, or under the Royalty Lands, in an amount equal to a contracted percentage, which shall not be subject to any royalties, burdens, encumbrances, costs or other deductions whatsoever, payable in respect of the Royalty Lands or Petroleum Substances derived therefrom, subject only to governmental or other regulatory taxes, levies, or fees (hereinafter "Royalty"). Where possible Falconridge and owner/operator shall record and register such Royalty in the RM recorder's office where the Royalty Lands are located. In addition, Falconridge shall be entitled to a division order of its Royalty, where such orders are available.

LEASE: The respective document of title, plus any extension, renewal, or replacement of such document pursuant to which owner/operator holds an interest in the Royalty Lands (hereinafter plural "Leases");

PETROLEUM SUBSTANCES: Natural gas, unrefined crude oil, condensate and related hydrocarbons and any other substances produced in association therewith but only to the extent that such hydrocarbons are granted by the Lease;

REGULATIONS: All statutes, laws, rules, orders, regulations, or directives in effect from time to time and made by any governmental authority having jurisdiction over the Royalty Lands and operations to be conducted therefrom; and

ROYALTY LAND: All lands in which owner/operator or any Co-owner/operator individually, currently owns a working interest, all of which are included and described in the relevant documents to the contract

SUCCESS FEE: shall be determine as any fee received by Falconridge under the definition of "GROSS REVENUE" whereby a fee is paid by the owner/operator to Falconridge based upon the net improved production from the oil and or gas property (well or wells) resultant from the implementation of the TerraslicingTM technology. Any success fees will be outlined in accordance with the terms of the contract between Falconridge and the owner/operator.

THIRD PARTY COST: Are those costs to be borne/incurred by the operator including but not limited to the cost for service rigs, high pressure pumps, sand, tubing, crew costs, water, generators, subcontractors, and any and all costs directly and indirectly related to those services required by FOC to implement the TerraslicingTM technology or terms of the client contract.

OPPORTUNITY or "opportunities" or "target(s)" shall be defined as any potential client, contact, company, or initiative identified by parties, representative of parties, or individual result, or potentially resulting, in benefit, financial or otherwise to either party. This would include but not be limited to, development of target oil and gas properties, investment, merger or financial prospects.

  

2

  

TERRITORY:

	
  

	
FOC shall act as the exclusive marketing agent for HSC technology in United Arab Emirates in accordance with the terms and limitations as outlined herein;

	
  

	
FOC shall act as the exclusive marketing principal of TerraSlicingTM Technology (TST) globally, with non-exclusive rights to HSC Technology in any territory that does not infringe on the territorial rights of any other exclusive arrangements for HSC technology that does not involve FOC.

CONSIDERATION:

	
  

	
In consideration of HSC granting FOC this licensing agreement FOC agrees to pay to HSC ***********************************, before any invoiceable work is done by HSC.

BRANDING AND MARKETING:

	
  

	
Parties agree that FOC will represent itself as the exclusive marketing principal of TerraSlicingTM Technology (TST) and refer to the collaborative efforts of FOC and HSC, as operating under one "umbrella" corporation with FOC providing the marketing infrastructure and HSC providing the engineering and technology implementation infrastructure specific to the TST brand only.

	
  

	
Parties agree that FOC will market HSC technology under the trade name TerraSlicing and/or Terraseal Technology or TST and/or TSS globally. The term TerraSlicing and/or TerraSeal, or TST and/or TSS, shall be deemed the intellectual property of FOC. This shall include other branding under FOC for complimentary products distributed jointly such as, but not limited to, TerraSeal. FOC branding and marketing shall operate under a white label of the HSC technology for marketing and implementation purposes of the FOC agent, client base and throughout FOC marketing efforts.

REPRESENTATIONS AND WARRANTIES OF HSC:

HSC hereby covenants, represents, and warrants as follows:

	 	
(a)  

	
that HSC Technology now is and shall remain proprietary, and that HSC shall not, during the Term or any renewal thereof, reveal any Confidential Information about HSC Technology to any party, including without limitation, FOC;

 

	 	
(b)  

	
that HSC is authorized to deal in and with, all proprietary rights in and to HSC Technology and entitled to make applications evidencing the proprietary rights of HSC in respect thereof;

 

	 	
(c)  

	
that HSC has the right and capacity to enter into this Agreement and to grant the exclusive license hereby granted, and that there are no outstanding assignments, grants, licenses, encumbrances, obligations, or agreements, either written, oral or implied, that are inconsistent with the terms of this Agreement; and

 

	 	
(e)  

	
that HSC will obtain and maintain, at all times hereunder the requisite capacity and the capability to supply FOC with HSC Technology, and related products and services on a timely basis, provided that HSC Technology and services required are ordered and paid for by either FOC or a represented company or client.

  

3

  

2.2           INDEMNITY OF HSC:

	
  

	
HSC agrees to indemnify and hold FOC, its successors, Agents, Subagents, marketing partners, and permitted assigns and their respective officers, directors, shareholders, agents and employees harmless from and against any and all claims, losses, damages, and expenses (including reasonable legal fees) that may be incurred by them or any of them by reason of the breach of HSC'S representations, warranties, and agreements herein contained in relation to the use or exploitation of HSC Technology which is in accordance with this Agreement.

	
  

	
HSC warrants that on all projects where the technology is being implemented under FOC's name that HSC technology will conform to the technical and budgetary specifications and the well(s) upon which HSC technology is used will produce or exceed the production amounts, all as agreed to in writing by the Parties at the time of the signing of a contract with a third party.

	
2.3

	
REPRESENTATIONS AND WARRANTIES OF FOC:

	
  

	
FOC hereby covenants, represents, and warrants as follows:

	 	
(a)  

	
that FOC has the right and capacity to enter into this Agreement and to carry out and observe the provisions of this Agreement to be performed or observed by it;

	 	
(b)  

	
that HSC Technology now is and shall remain proprietary and confidential to HSC and that FOC shall not, during the term of this Agreement reveal any "Confidential Information", as defined in of this agreement, without the written approval of HSC, save and except for such disclosure as is contained in marketing materials for the Products which have been approved by HSC in writing prior to use by FOC;

	 	
(c)  

	
that, FOC acknowledges that HSC is the exclusive owner of, or is authorized to deal in and with all rights in and to HSC Technology, and that HSC is entitled to make or to cause to be made all patent, trade-mark, copyright and other applications evidencing the proprietary rights of HSC in respect thereof;

	 	
(d)  

	
that all proprietary equipment shall be stored and transported by or on behalf of HSC by reputable carriers in accordance with HSC's published specifications. HSC may communication to FOC from time to time any changes to its transport specifications and;

	 	
(e)  

	
that FOC shall observe any and all applicable laws in a Territory in regard to the implementation and or the exploitation of HSC Technology, in a professional manner and in accordance with good oil field/gas field practice.

INDEMNITY OF FOC:

	
2.4

	
FOC agrees to indemnify and hold HSC, its respective successors and assigns that its and their respective officers, directors, shareholders, agents and employees harmless from and against any and all:

	 	
(a)  

	
claims, losses, damages, and expenses (including reasonable legal fees) that may be incurred by any of them by reason of the breach or purported breach of, or any claim by a third party inconsistent with, FOC's representations, warranties, and agreements herein contained; and

	 	
(b)  

	
any unfair or fraudulent advertising charges or claims, warranty claims, product liability claims, damage claims, claims for breach of contract, breach of fiduciary duties, claims in negligence and actions for strict liability in tort, all in relation to the use or exploration of HSC Technology by FOC that are not in accordance with the specifications and standards prescribed herein by HSC.

  

4

  

	 	
(d)  

	
FOC warrants that on all projects where the technology is being implemented under FOC's name that FOC will pay HSC all amounts within 90 days from the respective due date, all as agreed to by the Parties at the time of the signing of a contract with a third party.

FOC ACTIVITY:

FOC will engage in the activity of promotion of the TerraslicingTM technology and as such parties agree to the following:

	
3.1

	
FOC shall market the TerraslicingTM technology globally and appoint sales agents and representatives subject to the conditions outlined in Schedule "C", Appointment of Sub-agents.

	
3.2

	
FOC shall have the ability to negotiate contracts and interface with any and all potential targets for the deployment of TerraslicingTM technology under the Terraslicing name.

	
3.3

	
All targets brought forth and introduced by FOC shall be the exclusive domain of FOC for the life of the client. All commercial activity shall be handled by FOC with the assistance of HSC. Both FOC and HSC agree that any first contact made by any prospective Agent or Client either through phone contact, email contact, website contact or any direct contact with FOC personnel shall constitute that contacting person or corporation as a client of FOC.

	
  

	
TO ATTAIN THIS, FOC SHALL IN PARTICULAR:

	
3.4

	
Identify suitable targets for the implementation and use of TerraslicingTM technology.

	
3.5

	
Provide marketing material and services related to the promotion of TerraslicingTM technology. FOC agrees to develop and provide parties (i) adequate and relevant information, (ii) marketing and promotional material, (iii) sales and technical literatures.

	
3.6

	
FOC agrees to develop and promote an online presence for the purpose of furthering the promotion of TerraslicingTM technology under the Terraslicing name.

	
3.7

	
FOC will negotiate and appoint agents and marketing representatives for the purpose of identifying targets, potential clients, clients, and promoting marketing channels for the deployment of TerraslicingTM technology.

	
3.8

	
Work with potential independent and Joint Ventures partners, for the formation of companies, acquisition of hydrocarbon assets, and implementation of business models conductive to the deployment of TerraslicingTM technology.

	
3.9

	
Assist wherever possible in the development of a wider scope of marketing and representation when it falls within its area of expertise provided such initiative may be services by HSC and beneficial to both parties on implementation.

	
4.0

	
SALES AND TECHNICAL PROFICIENCY:

	
  

	
FOC warrants that they will maintain personnel within their organization to a sufficient level to represent educate and provide sales and marketing support for the purpose of representing and marketing FOC services and more specifically TerraslicingTM technology.

  

5

  

	
4.1

	
EXPENSES:

	
  

	
FOC shall assume its marketing costs for the promotion of TerraslicingTM Technology under the Terraslicing name. Parties agree that no costs may be assigned to FOC by HSC unless approved in writing by FOC. Any and all third party costs associated with marketing FOC must be approved by FOC.

	
  

	
It is understood between the parties that the costs related to any target or potential target must be specially allocated to either respective party based upon the type of cost and activity involved. It is therefore agreed that costs be allocated between the parties as follows:

	 	
(i)  

	
HSC Implementation Costs: All costs relating to geological or engineering services and the implementation of the TerraslicingTM Technology are for the account of HSC, regardless of whether said costs are incurred by either party. It is agreed to by the parties to this agreement that all of the costs incurred by HSC will be covered by any agreement contracting the use of the TerraslicingTM Technology presented to the HSC which is being negotiated with any third party. Should HSC decide to accept a contract which does not totally cover HSC's costs based only upon HSC knowledge of operating costs for the project then such decision is made solely by HSC only, in which case FOC shall not be held liable or accountable for any portion of implementation revenue under the contract. Implementation revenue relates only to that revenue stipulated in the contract and is applicable only to the geological or engineering services and the use of the TerraslicingTM Technology and does not include any Success Fees, GORR or Performance Fees.

	 	
(ii)  

	
FOC Costs: All costs related to marketing of the TerraslicingTM Technology under FOC "White Label" branding will be for the account of FOC. These costs are to include local and international travel, entertainment, offices, local staffing requirements, business fees and licensing costs required by local governments or agencies and costs related to the pre-examination of an assigned Territory's industry and government specific costs and regulations.

	 	
(iii)  

	
Third Part Costs: It is agreed to between the parties to this agreement that all third party costs incurred as a result of the implantation of the TerraslicingTM Technology at a Target site are for the account of the Target owner/operator and are not contemplated to be neither part of this Agreement or the responsibility of HSC or FOC.

	 	
(iv) 

	
Taxes: Each party shall be responsible for payment of their own taxes and should the withholding tax or taxes be applicable, then such amount shall be deducted from payments made to the FOC. It shall be the sole responsibility of the FOC to obtain, with the Agent's assistance, if possible, any tax waivers that may be available from time to time.

4.2           NO SOLICITATION:

	
  

	
During the Term of this Agreement and for a period of Two Year after its termination both Parties agree not to hire, solicit, nor attempt to solicit the services of any employee or contractor of the other party without the prior written consent from the other Party. This clause shall not apply to the hiring or engagement of third party independent contractors which may be used by either or both parties for the purposes of enhancing their business or provisioning of services required for the implementation of HSC technology or FOC services.

  

6

  

	
4.3

	
PROPRIETARY RIGHTS

	
  

	
CONFIDENTIAL INFORMATION:

(a) "Confidential Information" means any and all proprietary information provided by either Party at any time, whether or not owned or developed by either Party, including, but not limited, to proprietary methods and methodology, technical data, trade secrets, know-how, research and development information, product plans, products, potential products, financial models, services, client lists and clients, prospective clients, client information, source codes, engineering information, hardware configuration information, and matters of a business nature such as information regarding, marketing, costs, pricing, finances, financial models and projections, billings, business plans or other similar business information whether disclosed orally, in writing or in machine-readable form. All Confidential Information shall at all times remain the property of the respective Party providing or disclosing the confidential information to the other Party.

(b) Parties agree that (i) it shall hold the Confidential Information in strict confidence and not disclose such Confidential Information to any third parties, including consultants; (ii) it shall disclose the Confidential Information only to those employees of the parties who need to know such information in order to carry out the purpose of this agreement and only to the extent necessary for such purpose; (iii) it will not disclose any confidential information to affiliates of parties without prior written consent of the Parties; (iv) it will take all measures necessary to safeguard the confidential information in order to prevent it from falling into the public domain or into the possession of persons other than those persons authorized hereunder to have any such information; such protective measures shall include but in no event less than the highest degree of care that parties utilize to protect its own confidential information of a similar nature; (v) it will only use confidential information to the benefit of both parties and not use such confidential information for its own exclusive financial benefit; (iv) it shall not directly or indirectly, either during or subsequent to the term of this Agreement, disclose the existence, content, and/or substance of this agreement or any of the confidential information to any third party, nor utilize the confidential information for its own use or otherwise than in strict compliance with the provisions of this agreement. Parties will advise any employees who are provided access to Confidential Information of the confidential nature thereof and shall be responsible for any breach of this Agreement by its employees.

Confidential Information shall not include information for which Parties can demonstrate (i) has been approved for release by written authorization for either Party; (ii) is or becomes part of information in the public domain through no fault of the Parties; (iii) was known by Parties prior to the disclosure thereof by either Party; or (iv) properly comes into the possession of Parties from a third party which is not under any obligation to maintain the confidentiality of such information. Parties may disclose Confidential Information pursuant to a judicial or other government order, provided that either Party shall provide the other Party with prompt notice prior to any disclosure so that the notified Party may seek other legal remedies to maintain the confidentiality of such Confidential Information, and Parties shall comply with any applicable protective order or equivalent.

5.0 HSC SPECIFIC:

This Agreement, HSC Technology, and any other information which shall have been or may hereafter be communicated by either of the parties to the other of them in confidence under this Agreement, or which by its nature ought to be regarded as confidential, shall be treated by the recipient as confidential unless and until one or more of the following events or circumstances shall have occurred:

 

  

7

  

	
(a)  

	
the public publication of the same by communicating party;

 

	
(b)  

	
the inclusion of the same in a publicly published patent specification;

 

	
(c)  

	
the same can be shown to have fallen into the public domain or become generally known through no act or omission by either of the parties to this Agreement or any person for which either of them is at law responsible.

5.1           DISCLOSURE:

The following acts shall not constitute a breach of the above:

	
(a)  

	
disclosure occurring by the use of HSC Technology or such other information in the Products;

 

	
(b)  

	
disclosure in the process of securing regulatory approvals or that occurring by inspection in the ordinary course of business;

 

	
(c)  

	
disclosure by reproduction of drawings as may be necessary in advertising literature and instruction materials.

 

	
(d)  

	
disclosure in the process of preparing or delivering to a potential client required information for the purpose of securing a target, client or opportunity.

6.0           PROPRIETARY PROTECTION:

PROPERTY OF HSC:

	
  

	
At all times parties warrant that the HSC technology shall be exclusive property of HSC. Each party shall, at the request of the other, execute and deliver to the requesting party, from time to time, such documents and do such acts and things as may be reasonably requested by the requesting party to further evidence HSC's ownership of and to HSC Technology.

	
  

	
No alterations and Improvements.

	
(a)

	
FOC shall not make, attempt to make, or allow any other Person to make any investigations, analysis, reverse engineering, alterations, modifications and/or improvements to HSC Technology.

 

	
(b)

	
FOC acknowledges that the continued integrity and proprietary nature of all Confidential Information, herein defined, are of paramount importance to HSC, and that, if this Section is breached by FOC, in certain instances, no action can remedy the damage so done.

 

	
(c)  

	
If HSC becomes aware of a breach of this provision, it shall give Notice, with reasonable particulars, to FOC, and if HSC is of the view, acting reasonably in the circumstances, that:

 

	
(i)  

	
FOC was or is careless in not preventing the breach, or was involved in any way, directly or indirectly, in the breach, the Notice will be a Notice of termination of this Agreement, effective upon receipt, and without limitation of the subsequent exercise of any additional common law or equitable rights and remedies of the HSC against FOC, or others, or

	
(ii)  

	
FOC was not careless in not preventing the breach, or was not involved in any way directly or indirectly, in the breach, the Notice will require FOC to remedy the breach, forthwith, to complete satisfaction of HSC, and in any event, FOC shall remedy the breach within 30 days of its receipt of the Notice, failing which remedy, this Agreement shall thereupon automatically terminate without further notice.

  

8

  

 

	
(d)  

	
HSC shall have the exclusive right, but not the obligation, to develop, improve or otherwise change HSC Technology, in which event, FOC shall continue in its marketing efforts to promote the new technology without change to any other part of this agreement.

7.0           WITH RESPECT TO TRADE MARKS:

FOC covenants and agrees:

	
(a)  

	
Subject to the provisions of this Agreement, to use the name "HydroSlotter" only in connection with HSC Technology, its use and the advertising and promotion thereof and for no other purpose;

	
(b)  

	
Use the FOC trade and operating names for the promotion of TerraslicingTM technology in FOC marketing efforts.

8.0           NON-DISCLOSURE OF TECHNOLOGY SPECIFICIATIONS:

NON-DISCLOSURE:

	
  

	
FOC acknowledges and agrees that it shall have no entitlement whatsoever to any disclosure relating to HSC Technology and FOC shall not, directly or indirectly compel or attempt to compel the disclosure of HSC Technology by any person, including HSC, by any means, including without limitation, litigation or any other judicial or regulatory process.

	
  

	
PROPERTY OF HSC:

	
  

	
FOC acknowledges, understands and agrees that the proprietary nature of and the copyright in and to the proprietary information supplied by HSC hereunder shall belong to and remain vested in the respective parties.

	
9.0

	
ADMINISTRATION:

	
  

	
RECORDS:

	
  

	
FOC hereby agrees to provide HSC with full financial disclosure regarding FOC's ongoing financial records of FOC within 60 days from receiving a formal request for such disclosure in such that the request relates to financial information relevant to the provisioning of Royalties, or payments to HSC by FOC.

	
  

	
PAYMENTS:

	
(a)  

	
FOC shall make all payments to HSC in the form of a wire transfer to HSC's designated financial institution or by directive of HSC. HSC shall be responsible to provide all invoicing and documents in order for FOC to properly keep records in accordance with regulatory requirements.

9.1           REVENUE DISTRIBUTION:

	
(a)  

	
FOC shall pay to HSC amounts as set forth in Schedule "B", which is attached to and forms part of this Agreement.

	
(b)  

	
Parties herein acknowledge that the revenue sharing described in Schedule "B" may be subject to changes which are beyond the control of either party acting prudently in all circumstances. Any changes to the schedule shall be agreed to by parties in writing prior to any contract being accepted that varies from said schedule.

  

9

  

	
(c)  

	
Parties herein agree to the payment to FOC from the Gross Revenue on any well enhancement contract a sum equal to the implantation cost of service as charged by and paid to HSC by FOC. This deduction from the Gross Revenue received by FOC is in compensation for marketing activity costs incurred by FOC to market and expand the HSC technology globally. Once this deduction is made revenues will be allocated to FOC and HSC as per Schedule "B".

10.0         DURATION and TERMINATION:

	
  

	
This Agreement shall commence upon October 1, 2012 shall continue in full force and effect for a period of fourteen months, with the ending date of December 1, 2013. The Agreement can be renewed annually by mutual consent and signature of both Parties from year to year unless either party gives a thirty (30) days notice prior to the expiration of the Agreement that it shall not be renewed.

	
  

	
This Agreement may be terminated if one of the Parties fails to carry out essential obligations of the Agreement, or cannot carry out for reasons involving force Majeure. Notice of termination must be sent by means of registered letter. Either party may terminate this Agreement upon thirty (30) calendar days advance written notice if the other party is in material violation of any provision hereof and such violation is not corrected (or corrective action reasonably accepted to the aggrieved party is not commenced) within such thirty (30) days period.

	
  

	
The payment provisions of this Agreement shall survive termination if an ongoing contract extends beyond the date of termination. Termination of this Agreement shall have no effect on the parties' obligations to pay fees on ongoing revenues, or provide services and fulfill obligations for contracts entered to prior to termination.

	
  

	
In the event of termination HSC agrees to continue provisioning of services as to not interrupt current projects and projects underway by FOC, FOC partners, Agents, or assigns, until such time the projects are complete and there is no causes of concern for lsot revenue on projects underway after the termination of this agreement.

	
11.0

	
CONTINUITY OF SERVICE:

	
  

	
Any granting of exclusivity and territory arrangements by HSC must include the provision for continued operations of FOC to its existing client base without limitation due to the granting of exclusivity or a territory by HSC. FOC shall be permitted to continue to operate through the provisioning of services, or allowance of operations within the target geographical area so as not to limit FOC marketing and implementation of Terraslicing to its existing client base.

	
12.0

	
ARBITRATION:

	
(a)  

	
Subject to Section (b), if at any time there is any dispute, question or difference of opinion between the parties concerning or arising out of this Agreement, or the construction, meaning, operation or effect of any Sections hereunder, or concerning the rights, duties or liabilities of parties, as the case may be, under this Agreement, parties shall forthwith confer in good faith to settle it, but if they fail to settle it within 21 days of first conferring, then upon application of either party, such matter shall be referred to arbitration, the rules and procedures for which shall be the UNCITRAL Model Law of International Commercial Arbitration. Such arbitration shall be conducted by three arbitrators, one to be chosen by each party hereto, and the third by the two thus chosen. If two arbitrators are unable to agree on a third arbitrator within 10 days after the appointment, then the third arbitrator shall be appointed by a Judge of the General Court of Canada. Such reference shall be considered a submission to the arbitration within the meaning of the laws of Canada, and be subject to the provisions of those laws relating to arbitration.

 

 

  

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(b)  

	
Notwithstanding anything herein contained, any dispute, question or difference of opinion between the parties which relates wholly or partially to HSC Technology or any other proprietary rights of the parties under this Agreement (the "Proprietary Matters"), shall not be submitted to arbitration without the written consent of both parties. In the absence of such mutual consent, either party hereto shall be entitled to enforce any right or remedy in law or equity in respect of the Proprietary Matters, without any obligation to seek such consent or to give further notice hereunder.

	
(c)  

	
The arbitrators which are chosen shall be conversant with the oil industry.

	
(d)  

	
The parties, their employees and all persons claiming through them shall, subject to any legal objection, submit to be examined by the arbitrators on oath or affirmation in relation to the matters in dispute  and shall, subject asforesaid, produce before the arbitrators all books, papers, accounts, writing and documents within their possession or under their control, respectively, which may be required or called for, and do all other things which during the proceedings on the reference the arbitrators may require.

	
(e)  

	
Unless otherwise agreed in writing by the parties, the arbitration shall be conducted in Toronto, Canada and all proceedings and materials shall be in the English language.

	
(f)  

	
The costs of submission, reference and aware (including the fees of the arbitrators) shall be in the discretion of the arbitrators who may direct to and by whom and in what manner those costs or any part of them shall be paid and may tax or settle the amount of costs to be so paid, or any part thereof, and may award costs to be paid as between attorney and client.

	
(g)  

	
The award made by the arbitrators shall be final and binding on the parties and the persons claiming under them, respectively, and shall be enforceable as if it were a judgment or order of the highest court of Canada and the parties accept the jurisdiction of the Courts of Canada.

	
(h)  

	
Pending the reference to arbitration and thereafter until the arbitrators make their award the parties shall continue to perform all of their obligations hereunder, without prejudice to a final adjustment in accordance with the award made by the arbitrators.

13.0       GENERAL PROVISIONS

	
13.1

	
BINDING EFFECT/ASSIGNMENT:  This Agreement shall be binding upon and shall more to the benefit of the parties hereto, and their respective representatives, successors and permitted assigns. Parties may assign this agreement provided the terms of this agreement and ability to perform parties responsibilities outlined herein are maintained by the assigned party. Parties agree that consent of assignment will not be reasonably withheld unless there is cause or concern that the assigned party may not be able to perform responsibilities outlined herein. Subject to the foregoing, this Agreement shall be binding upon and for the benefit of Parties and each of their respective successors and assigns, and no other person shall acquire or have any rights under this Agreement.

	
13.2

	
FORCE MAJEURE: No party shall be responsible to another for non-performance occasioned by any causes beyond his control, including without limiting the generality of the foregoing acts of civil or military authority, strike, lockouts, embargoes, insurrections, or acts of God. If any such delay occurs, any applicable time period shall be automatically extended for a period of equal to the time lost, provided that the party affected makes reasonable efforts to correct the reason for such delay and gives the other party prompt notice of any such delay.

  

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13.3

	

GOVERNING LAW: This Agreement shall be governed by the laws of the Province of Ontario without giving effect to the conflicts of law principles thereof. Each of the parties hereby submits itself to the nonexclusive jurisdiction and venue of the courts of the Province of Ontario for purposes of any such action and agrees that service of process may be effected by delivery of the summons via certified or registered mail. In the event the aforementioned venue is unable to provide the necessary jurisdictional process, a Jurisdiction may be chosen appropriate to facilitate remedy by law of any dispute.

	
13.4

	

NOTICES: Any notice which either party may desire to give the other party must be in writing and may be given by (i) personal delivery to an officer of the party, (ii) by mailing the same by registered or certified mail, return receipt requested, or by nationally recognized express courier service to the party to whom the party is directed at the address of such party as set forth at the beginning of this Agreement, or such other address as the parties may hereinafter designate, and (iii) by facsimile subsequently to be confirmed in writing.

	
13.5

	

COOOPERATION: Each party agrees to execute and deliver such further documents and to cooperate as may be necessary to implement and give effect to the provisions contained herein. Each party further agrees to provide a best effort for the well being and financial security in meeting the obligations of each party as outlined herein.

	
13.6

	

ATTORNEY'S FEES: In the event there is any dispute concerning the terms of this Agreement or the performance of any party hereto pursuant to the terms of this agreement, and any party hereto retains counsel for the purpose of enforcing any of the provisions of this Agreement or asserting the terms of this Agreement in defense of any suit filed against said party, each party shall be solely responsible for its own costs and attorney's fees incurred in connection with the dispute irrespective of whether or not a lawsuit is actually commenced or prosecuted to conclusion.

	
13.7

	

COUNTERPARTS: This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

	
13.8

	

SECTION HEADINGS: Section headings in this Agreement are for convenience only, and shall not be used in construing the Agreement.

	
13.9

	

SEVERABILITY: A judicial determination that any provision of this Agreement is valid in whole or in part shall not affect the enforceability of those provisions found to be valid. Any part of this Agreement determined by a court to be illegal or unenforceable shall be automatically be deemed conformed to the minimum requirements of law and, together with all other provisions, shall thereupon be given full force and effect.

 

  

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13.10

	

NO IMPLIED WAIVERS: If either party fails to require performance of any duty hereunder by the other party, such failure shall not affect its right to-require performance of that or any other duty thereafter. The waiver by either party of a breach of any provision of this Agreement shall not be a waiver of the provision itself or a waiver of any breach thereafter, or a waiver of any other provision herein. Waiver of any provision in one instance shall preclude enforcement on future occasions. No waiver or modification of any of the provisions of this agreement shall be implied, or valid unless authorized in writing by parties herein.

	
13.11

	

ENTIRE AGREEMENT: This document constitutes the entire agreement between the parties and cancels and supersedes all prior negotiations and agreements whether written or oral with respect to the subject matter hereof and may be amended only by a writing signed by the party against whom enforcement is sought.

	
13.12

	

AUTHORIZED REPRESENTATIVES: Parties warrant that they are able to enter this agreement and there are no outstanding considerations or obligations which may prohibit the activities or obligations outlined herein. This would include but not be limited to any form of non-compete or non-solicitation which may result in limiting the performance of either party.

WHEREOF, and intending to be legally bound, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.

	
IN WITNESS WHEREOF, the parties hereto have executed this Agreement

	  
	
Dated and signed at Ontario, Canada this 5th day of November, 2012

	  
	  
	
On behalf of Hydroslotter Corporation of Canada

	  
	  
	  
	
Per:

	
/s/Skip Taylor

	  	  
	
Lewis (Skip) Taylor President

	  	
Witness

	  
	  	  	  
	  	  	  
	  	  	  
	
Dated and signed at Ontario, Canada this 5th day of November, 2012

	  
	  
	
On behalf of Falconridge Oil Canada Ltd.

	  
	  
	  
	
Per:

	
/s/Alfred Morra

	  	  
	
Per: Alfred Morra, Managing Director

	  	
Witness

	  
	  	  	  
	  	  	  
	  	  	  
	
Per:

	
/s/Mark Pellicane

	  	
Witness

	  
	
Per: Mark Pellicane, President

	  	  

 

  

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"SCHEDULE A"

TERRITORY

 

Specific to United Arab Emirates

FOC shall be granted exclusivity in United Arab Emirates.

Specific to Elsewhere

Parties agree to a non exclusive marketing and sales arrangement where FOC shall market the HSC technology under the FOC brand name of TST or Terraslicing and TerraSeal on a global scale.

1. DESCRIPTION OF PRODUCTS AND SERVICES

	
a)  

	
TerraSlicing – well enhancement services

	
b)  

	
TerraSeal – well closure services

2.           EXCLUDED MARKETING TERRITORIES OF FOC

	
a)  

	
********* – For implementation of TerraSlicing ***************************** FOC must have a revenue interest in the property for which the technology is applied in the form of a GORR, override, Working interest, revenue share, or share in some form of the Hydrocarbon extraction from the property, contract, lease, or client.

 

 

  

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"SCHEDULE B"

REVENUE AND COSTS

It is agreed by the parties to this agreement that all contracts entered into for TST implementation will contain at a minimum one of the four (4) following revenue streams to be paid by the third party to FOC;

	
a)  

	
A work fee for services rendered.

	
b)  

	
a onetime success fee or bonus fee based upon achieving the successful performance results specified within the contact negotiated and signed with the Target owner/operator.

	
c)  

	
An ongoing working interest revenue, Gross Over-Riding Royalty (GORR)

	
d)  

	
A combination of the above.

	
1.0)  

	
Revenues

In all cases, gross revenues will be deemed BEFORE payment to Agents or authorized marketing representatives. This is inclusive of all considerations received by either party to include but not limited to any up-front fees, implementation, success fees, bonuses, and working interests.

In the event there is discussion of a remuneration structure outside the parameters defined herein either with a potential client, agent, representative, or project related to implementation of the HSC technology, parties warrant that they will discuss in good faith such a variation for the mutual benefit of both parties. Any variation to the remuneration structure method herein must be agreed to by both parties. Should there be no Agreement by either party then the agreeing party shall bear alone the costs of any credit or reduction from their respective share of Gross Revenue.

Service Fees for Non- United Arab Emirate contracts

Service fees in accordance with provisioning HSC technology to FOC is generally agreed upon as follows and HS will provide TST implementation at HSC cost of implementation prior to the commencement of any job quotation. As a general non binding guideline both HSC and FOC agree to the following cost structure and pricing matrix:

Workover Fee

1 well                              ***

2-9 wells                         *** each

9-99 wells                       *** each

100+ wells                      *** each

The above cost includes full implementation of the TST technology within the given assets and applies to implementation within a geographical region, inclusive of all expenses association with implementing the service. The above cost is generally doubled for all non-North American locations.

All terms of any deal shall be designated BEFORE any agency fees are paid and gross amounts paid out by FOC from representation or contractual obligations of FOC. Remittance to HS will be within ten (10) banking days of receipt and clearance from the receiving financial institution.

  

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Cost & Expense Recovery

In the event FOC or an FOC client is required to advance the cost of the work over (including but not limited to, cost of TST implementation and enhancement, and / or 3rd party costs related to the project) the right to recover costs associated with the work over prior to any revenue or royalty share stipulated or referred to in this agreement shall be agreed to before the time of the signing of the respective contract.

Expenses to be deducted from gross revenues before any revenue split are to include (a) Agent remuneration and/or compensation commission to third parties (b) additional expenses approved by parties in writing, prior to provisioning of services, and (d) operational or overhead costs and marketing costs incurred by FOC (HSC Work over fees are accounted for in Expenses, for the purpose of revenue share calculation).

United Arab Emirates Service Fees

Expenses to be deducted from gross revenues before any revenue split are to include (a) Agent remuneration and/or compensation commission to third parties (b) additional expenses approved by parties in writing, prior to submission of a quote to the potential target or client. (c) HSC cost of provisioning services directly related to provisioning of service, and (d) operational or overhead costs and marketing costs incurred by FOC. (HSC Work over fees are accounted for in Expenses, for the purpose of revenue share calculation)

From the gross oil/revenue paid to FOC by the client/owner, FOC will share in all success fees and royalty revenues ************. This shall be designated AFTER all agency fees are paid and gross amounts paid out from representation or contractual obligations. Remittance to HSC will be within Ten (10) banking days of receipt and clearance from the receiving financial institution.

HS shall be responsible for all costs associated with implementing the technology and providing technical support for the contract, engineering, geology, and costs directly associated with the provisioning of HSC technology to the contract. FOC will be responsible for all marketing expenses.

  

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"SCHEDULE C"

Appointment of Sub-Agents

North America

In regards to appointment of subagents and marketing in North America, FOC shall have the right to appoint subagents in any given area. Said agents will be non exclusive in nature for marketing rights of the TST services and technology.

In the event agents submit a specific amount or geographic area (territory), or target asset for exclusive consideration, FOC shall have the right to approve the agency agreement subject to the following:

	
1.  

	
Agent may be granted rights to a specific amount providing parties are not in negotiation with the account, it is not targeted or identified by another agent, and it is non-conflicting in nature with current business operations. Parties to this Agreement agree not to circumvent marketing activities or Agents specifically their accounts.

	
2.  

	
Parties must mutually agree on any territory granted to an agent for exclusivity and only providing that territory does not conflict with that of parties or another agent.

	
3.  

	
Authorized remuneration to an agent is as follows and agreed upon by parties:

	
4.  

	
FOC will be responsible to pay Agents fees from its share of Gross Revenues

	
5.  

	
Agent does not have the right to bind FOC for services.

All current North America Agency agreements and representations will be honored by parties and form part of the FOC marketing infrastructure. In the event of a conflict, notification will be given to the authorized agent of the intention to cancel the agency agreement.

International

FOC is currently representing the technology in numerous countries globally. Agents for international territories may be approved for the following considerations:

	
1.  

	
A maximum of *** of gross revenue generated by a contract to one or more agents within a designated international territory. This revenue is to be treated as an expense to parties and deducted from any gross revenue share equally prior to parties receiving disbursements as outlined in this agreement. Simply, agents get paid first and off the top. It is understood that in many cases agents will act as paymasters for secondary and teritiary parties on an overseas account.

	
2.  

	
Any amount above the  *** to be deducted of gross shared revenue will be agreed upon in writing by both parties. Simply, FOC has discretion for shared agent commission up to *** of gross revenue, inclusive of implementation billing, or any success fees, GORR, and any other form of revenue received by parties as a result of the agents representative account.

 

 

  

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3.  

	
It is understood Agents in overseas markets will require exclusivity for representation in that market and FOC may grant exclusivity for a period of 1 years renewable (upon deployment) to develop a market.

Provided that HSC does not have representation or planned representation in that market during the time of negotiation for the intended territory.

	
4.  

	
As a condition of each international agency agreement executed there will be a clause for automatic termination if any approved contract is not signed with a client in the territory prior to renewal (automated or initiated) of the agreement.

	
5.  

	
There will be no territory, licensing, or marketing fee charged to an Agent unless agreed to by all parties.

All current International agency agreements and representations will continue to be honored moving forward by all parties. In the event of a conflict, notification will be given to the authorized agent of the intention to cancel the agency agreement.

Approval of International agents granting any form of exclusivity shall be provided mutually by parties, and consent via e-mail by either party shall constitute acceptance and allowance of FOC to represent the arrangement to the agent (or potential agent) and shall be honored by both FOC and HSC.

In reference to current UAE Operations

FOC shall continue to work with UAE agents and partners for the closure of a contract within the UAE. FOC shall be further entitled to recover ***************** expenses which will be attributed to expenses prior to any ****************.

  

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