AMENDMENT TO PURCHASE AND OPTION AGREEMENT
Exhibit
10.6
AMENDMENT
TO PURCHASE AND OPTION AGREEMENT
THIS
AMENDMENT TO PURCHASE AND OPTION AGREEMENT (“Amendment”) is made as of September
14, 2004
BETWEEN:
QUANECO,
L.L.C.,
a
limited liability company organized under the laws of the State of Oklahoma
(hereinafter referred to as “Quaneco”)
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and
-
FELLOWS
ENERGY, LTD., a
body
corporate incorporated under the laws of the State of Nevada (hereinafter
referred to as “Fellows Energy”)
WHEREAS
Quaneco and Fellows Energy entered into that certain PURCHASE AND OPTION
AGREEMENT dated as of March 16, 2004 and desire to amend said PURCHASE AND
OPTION AGREEMENT as provided herein;
NOW
THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the Parties agree to amend the PURCHASE AND
OPTION AGREEMENT as follows:
1.
The
following definitions in the PURCHASE AND OPTION AGREEMENT are amended in their
entirety to read as follows:
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“o)
“Option
Period”
means:
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(i)
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for
Phase One of the Option Lands, as described in Schedule “A”, the period
ending on July 31, 2005, provided that if the Phase One Drilling
Program
is not completed within such time, due to delays caused by Force
Majeure
situations, the Option Period will be extended for a concurrent period
of
time equal to the period of time the Force Majeure situation existed;
and
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(ii)
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for
Phase Two of the Option Lands, as described in Schedule “A”, the period in
time from August 1, 2005 through April 30, 2006 provided that if
the Phase
Two Drilling Program is not completed within such time due to delays
caused by Force Majeure situations, the Option Period will be extended
for
a concurrent period of time equal to the period of time the Force
Majeure
situation existed;”
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“t)
“Phase
One Drilling Program”
means
the expenditures and work previously undertaken by Fellows Energy under the
PURCHASE AND OPTION AGREEMENT, of approximately One Million Dollars
($1,000,000.00), and in addition, the following. Fellows Energy will complete
a
study of the geology of the Utah/Wyoming Overthrust area. This study will enable
Fellows to better evaluate the potential in various areas of the Quaneco
acreage. Fellows Energy Ltd. will also run an RST log suite in the Crane 13-8
well to correlate with the cores recovered from the Crane 6-7 and to correlate
it with the Xxxxxx Ridge 1-32 well. Following the geological study and RST
log
evaluation, Fellows and Quaneco will mutually determine whether a pilot program
in the Xxxxxx Ridge area is the most prudent course of action to take next
or
whether Fellows should explore to the south, north, and/or west of the Xxxxxx
Ridge area. Fellows agrees to drill and complete a five (5) well pod, with
four
(4) xxxxx on 40 acre spacing and the center well on 20 acre spacing, in the
mutually agreeable area around the Xxxxxx Ridge. Quaneco and Fellows will also
mutually determine a location to drill a core hole in the Coalville area where
if the results justify it, Fellows will drill and complete the core hole. Both
Quaneco and Fellows Energy Ltd. will negotiate an earn-in with Anadarko on
the
checkerboard in the Coalville area. During the period from September 16, 2004
to
July 31, 2005, the Phase I Drilling Program will complete the required
obligations as set forth in this paragraph (t) which will require an expenditure
of an additional $1.5 million (minimum) on the geology and logging described
above and drilling and completing a pilot program and a coring program.” In the
event that Fellows does not spend a minimum of an additional 1.5 million dollars
on the Phase One Drilling Program by July 31, 2005, Fellows will pay the
difference between $1.5 million and the amount spent by Fellows in the Phase
One
Drilling Program in cash to Quaneco on or before August 10, 2005.
1
“u)
"Phase
Two Drilling Program"
means
the expenditures by Fellows Energy after the Phase One Drilling Program of
at
least One Million Five Hundred Thousand Dollars ($1,500,000.00) to expand a
pilot well program or expand the coring work performed in the Phase I Drilling
Program.”
“w)
“Purchase
Price 1”
means
the consideration payable by Fellows Energy to Quaneco, if Fellows Energy
exercises the Option on Phase I of the Option Lands, of $20 per net mineral
acre
acquired of part or all of the Option Lands (maximum investment of 183,945
net
mineral acres x 65% x $20);”
2.
The
following definition is added to the PURCHASE AND OPTION AGREEMENT for use
in
connection with this Amendment:
“Shares”
means shares of common stock of Fellows Energy Ltd., with the greatest rights
of
any capital stock which at the time of issuance shall either be fully registered
shares or be the subject of a registration statement filed prior to issuance
or
filed within 90 days of issuance and diligently pursued by Fellows
Energy.
3.
The
following provisions of the PURCHASE AND OPTION AGREEMENT are amended in their
entirety to read as follows:
“3.3 Phase
One Drilling Program
Fellows
Energy agrees to complete the Phase One Drilling Program on or prior to July
31,
2005. The expenditure amount required by Fellows Energy in the Phase One
Drilling Program will include all direct costs incurred by Fellows Energy’s
staff or consultants (limited to ten (10%) percent of the total spent) to manage
the Phase One Drilling Program, but will not include any of Fellows Energy’s
overhead and managerial costs. All information, data, records and related
materials from the Phase One Drilling Program activity will be the joint
property of the Parties and Fellows Energy will provide such information to
Quaneco as it is obtained. In the event Fellows Energy does not elect to
exercise the Purchase Price 1, then any costs incurred and paid by Fellows
Energy in the Phase One Drilling Program in excess of the additional $1,500,000
will vest and inure to the sole benefit of Quaneco.”
2
“3.4 Phase
Two Drilling Program
In
the
event that Fellows Energy elects to exercise Purchase Price 1, Fellows Energy
agrees to complete the Phase Two Drilling Program on or prior to April 30,
2006.
The expenditure amount required by Fellows Energy in the Phase Two Drilling
Program will include all direct costs incurred by Fellows Energy’s staff or
consultants (limited to ten (10%) percent of the total spent) to manage the
Phase Two Drilling Program, but will not include any of Fellows Energy’s
overhead and managerial costs. All information, data, records and related
materials from the Phase Two Drilling Program activity will be the joint
property of the Parties and Fellows Energy will provide such information to
Quaneco as it is obtained In the event Fellows Energy does not elect to exercise
the Purchase Price 2, then any costs incurred and paid by Fellows Energy in
the
Phase Two Drilling Program, including any costs incurred in excess of the One
Million Five Hundred Thousand Dollars ($1,500,000.00), will vest and inure
to
the sole benefit of Quaneco.”
“4.1 Exercise
of the Option (s)
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a)
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On
or before July 31, 2005, Fellows Energy may elect to exercise the
Option
to perform the Phase Two Drilling Program of the Option Lands. If
Fellows
Energy elects to exercise the Option to perform the Phase Two Drilling
Program on the Option Lands, it must provide its election in writing
to
Quaneco and pay to Quaneco the Purchase Price 1, plus an additional
200,000 Shares. On or before April 30, 2006, Fellows Energy may elect
to
exercise the Purchase Price 2 to acquire the Assets in the Option
Lands,
and it must provide its election in writing to Quaneco and pay to
Quaneco
the Purchase Price 2. Upon Fellows Energy electing to exercise the
Option
and concurrently with Fellows Energy paying the Purchase Price 2,
Quaneco
will deliver the assignments and other conveyances of the Assets
in the
Option Lands to Fellows Energy within ten business days, and Fellows
Energy and Quaneco will thereafter participate in all future work
on the
Option Lands and Leases at their respective working interests, subject
to
the Operating Agreement, with Fellows Energy named as operator therein.
In
the event Fellows Energy does not elect to exercise the Option to
pay
Purchase Price 2 and to acquire the Assets in the Option Lands, then
Fellows Energy’s right to acquire the Assets will terminate, Fellows
Energy will no longer be the operator of any of the Option Lands
and the
Option Payment and any other payments and all information from the
Drilling Program will be retained by
Quaneco.”
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THIS
SPACE INTENTIONALLY LEFT BLANK
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4.
As
additional consideration for the execution of this Amendment, Fellows Energy
shall pay to Quaneco the amount of $100,000 and issue to Quaneco 200,000 Shares
on or before October 11, 2004. In addition, the operative date in Section 9.3
of
the PURCHASE AND OPTION AGREEMENT is hereby changed to be two years from
September 16, 2004.
IN
WITNESS WHEREOF the Parties have executed this Agreement as of the day and
year
first above written.
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QUANECO,
L.L.C.
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Per:
/s/
Xxxx X. Xxxxx
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Name:
Xxxx X. Xxxxx
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Title:
Managing Member
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FELLOWS
ENERGY
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Per:
/s/
Xxxxxx X. Xxxxx
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Name:
Xxxxxx X. Xxxxx
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Title:
President
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