INITIAL AGREEMENT
BELMONT RESOURCES INC.
0000 - 000 Xxxxxxx Xx.
Xxxxxxxxx, X.X.
X0X 0X0
TO: EUROGAS INCORPORATED
000 X. 0000 X., #000X
Xxxxxxx, Xxxx
00000
DANUBE INTERNATIONAL PETROLEUM COMPANY
Xxxxxxxx 00, 000 00
Xxxxxxxxxx, Xxxxxx Xxxxxxxx
April 21, 1997
RE: FARMOUT AGREEMENT
The following is an Initial Agreement between Belmont Resources Inc.
("Belmont"), Eurogas Incorporated ("Eurogas") and its wholly owned subsidiary,
Danube International Petroleum Company ("Danube"), with respect to the
acquisition of a 40% interest by Belmont in a certain oil and gas property known
as the Area of Mutual Interest 3 ("AMI3") located in Slovakia described in the
Agreement executed November 20, 1996 amending the Association Agreement between
Nafta a.s. Gbely and Danube and dated July 15, 1995 (collectively, the "Nafta
Agreements"). By execution of this Initial Agreement, Belmont, Eurogas and
Danube agree to enter into a formal definitive purchase agreement on or before
May 20, 1997, and other documents that more fully delineate and formalize the
terms outlined in this Initial Agreement (collectively, the "Farmout
Agreement"). In addition, these agreements and documents shall be subject to
the approval of such regulatory authorities as have jurisdiction over the
affairs of Belmont (hereafter referred to as "Regulatory Authorities") and shall
be based on the following terms and conditions:
1. Eurogas and Danube grant Belmont an option to acquire a 40% working
interest in the AMI3 property (the "Option") free and clear of all liens,
charges, encumbrances, claims rights or interest of any person and such
option shall be deemed to have been exercised upon completion of the
following:
(a) the payment by Belmont to Eurogas in the amount of CDN $100,000 which
shall be a non-refundable deposit;
(b) the completion of a due diligence assessment of AMI3 comprising the
work of Testing Phase #1 as required under the Nafta Agreements, which
shall be completed within 90 days of the date of execution of this
Initial Agreement and shall cost no more than USD $20,000 (the "Due
Diligence Assessment"), the cost of which shall be non-refundable.
(c) the payment by Belmont to Eurogas of 5,000,000 shares of Belmont (the
Shares");
(d) written notification by Belmont to Eurogas of its intention to
exercise the Option; and
(e) the delivery by Belmont of an agreement to carry Danube's 10% interest
in the AMI3 property.
2. During the Due Diligence Assessment, Eurogas shall allow full access to the
AMI3 property and all records located in the United States and Slovakia
related tot the AMI3 property. It is understood that it shall be a
condition precedent of this Initial Agreement for the sole benefit of
Belmont that the results of the Due Diligence Assessment shall be
satisfactory in all material respects to Belmont, its advisors and the
Vancouver Stock Exchange;
3. The payment of the Shares shall be subject to:
(a) the receipt by Belmont of a Form 55 (as prescribed by the British
Columbia Securities Commission) and a valuation report (collectively,
the "Valuation Report") acceptable to Belmont AND the Vancouver Stock
Exchange showing a valuation of a 40% interest in the AMI3 property
equal to at least the following amount:
USD $2,000,000 + 5,000,000xBMP
where BMP = market price of Belmont shares at the time of announcement
of this Initial Agreement
(b) the satisfaction of any requirements imposed by the Vancouver Stock
Exchange of the acquisition by Belmont of the 40% interest in the AMI3
property pursuant to the Nafta Agreements (the "Interests").
(c) the receipt by Belmont of written confirmation of the registration of
Belmont's interest with the applicable Slovakian government
authorities (the "Registration") and closing legal opinions from the
Slovakian and United States legal counsel of Eurogas and Danube
relating thereto.
4. The Shares shall be subject to:
(a) a 1 year Canadian hold period commencing from the date of the
Registration (the "Hold Period");
(b) a voluntary pooling arrangement wherein 25% of the shares are to be
released upon the expiry of the Hold Period and 25% to be released
every 90 days thereafter. Until such shares are released from the
pool, they shall be kept in trust (the "Pooling Arrangement"); and
(c) notwithstanding any provision in this Initial Agreement, an escrow
arrangement providing for, inter alia, the escrowing of the Shares
until the completion of a USD $1,000,000 financing by Belmont. The
escrow period shall run concurrently with the Hold Period.
5. Subject to the exercise of the Option, the Registration, the Payment of the
Shares, the execution of the Pooling Agreement and the completion of a
financing of not less than USD $1,000,000 within 150 days at which time,
the obligation by Belmont to carry out the USD $1,000,000 work program
shall commence and any penalty relating to any and all non-payments shall
become effective. Belmont agrees to grant to EuroGas the first right of
refusal on the USD $1,000,000 financing and any further financing that may
be required. For greater certainty, it is agreed that Belmont shall not be
responsible for any work commitments and penalties until the occurrence of
the Events and in the event that the penalty arises, such penalty shall be
paid out of Belmont's entitlement to the proceeds of production from the
AMI3 property. Further, this Initial Agreement provides for an option
only, and except as specifically provided otherwise, nothing herein
contained shall be construed as obligating Belmont to do any acts or make
any payments hereunder and any act or acts or payment or payments as shall
be made hereunder shall not be construed as obligating Belmont to do any
further act or make any further payment.
6. Eurogas covenants to provide to Belmont:
(i) Copies of all records and information as they relate to the AMI3
property and all previous activities carried out on such property as
is reasonably requested by Belmont;
(ii) An on-site due diligence review of the AMI3 property by Belmont.
7. The parties shall execute such of the documents and do such other things
that may be reasonably necessary to give full effect to the transactions
contemplated hereby.
8. This Initial Agreement is subject to Vancouver Stock Exchange and shall be
subject to and governed in accordance with the laws of the Province of
British Columbia and the parties hereto do attorn to the exclusive
jurisdiction of the Courts of the Province of British Columbia. This
Initial Agreement constitutes the entire agreement between the parties and
supersedes all prior letters of intent, agreements, representations,
warranties, statements, promises, information, arrangement and
understanding, whether oral or written, express or implied. No
modification or amendment to this Initial Agreement may be made unless
agreed to by the parties thereto in writing. Time shall be of the essence
9. This Initial Agreement may be executed i n counterpart and the counterparts
altogether shall constitute a fully executed Initial Agreement, and any
facsimile signature shall be taken as an original.
10. Upon acceptance of this Initial Agreement, the parties will instruct their
attorneys and solicitors to prepare forthwith a definitive agreement to be
executed and substituted for this Initial Agreement. Such definitive
agreement shall contain inter alia the terms and conditions set out herein
and such other terms, conditions, representations and warranties which may
be required by the Belmont's solicitors and which may be agreed upon by the
counsel for Eurogas and Danube, acting reasonably. This Initial Agreement
shall remain in full force and effect until the earlier the execution and
delivery of a definitive agreement or May 20, 1997. For greater certainty,
if this Initial Agreement shall terminate before a definitive agreement is
reached, Belmont shall have no obligation whatsoever relating to this
Initial Agreement.
Yours truly,
BELMONT RESOURCES INC.
/s/ V. Agyaeos
Per: Authorized Signatory
Name: V. Agyaeos
Accepted and agreed to this April 21, 1997
EUROGAS INCORPORATED
/s/ Xxxx Xxxxxxxxxxxx
Per: Authorized Signatory
Name: Xxxx Xxxxxxxxxxxx
Accepted and agreed to this April 21, 1997
DANUBE INTERNATIONAL PETROLEUM COMPANY
/s/ Xxxx Xxxxxxxxxxxx
Per: Authorized Signatory
Name: Xxxx Xxxxxxxxxxxx
Accepted and agreed to this April 21, 1997