XXXXXX ENERGY, INC.
FARM-IN PARTICIPATION AGREEMENT
Maxim Resources, Inc.
000-000 Xxxxxxxx Xx.
Xxxxxxxxx, X.X.
X0X 0X0
RE: Xxxxx No. 3 Well
Xxxxx Ranch Deep Prospect
La Salle County, Texas
Gentlemen:
Maxim Resources, Inc. ("Maxim") desires to apply for the purchase of a
farm-in working interest in the Xxxxx Ranch No. 3 Well in La Salle County,
Texas. Maxim ("Participant") hereby acknowledges that Xxxxxx Energy, Inc.
("Xxxxxx") has a participation agreement dated June 3, 2005 for 3.25% WI in the
Xxxxx No. 3 Well in the Xxxxx Ranch Field Area for Xxxxxxx, Xxxxxxxx, Sligo,
Hosston, Cotton Valley and/or Smackover oil/gas production.
Participant hereby applies for the farm-in purchase in the Xxxxx Ranch
No. 3 Well of three and one quarter (3.25) percentage points at $117,000.00 per
each percentage point (1.00% farm-in interest) subject to a one half percent
(0.5) percentage carried WI interest to Xxxxxx and is payable upon this
application, and tenders herewith a copy of the wire instructions payable to
Bayshore in the amount of $380,250.00.
Participant hereby makes the following representations, warranties and
commitments:
Initial only what is applicable:
a. By executing this Participation Agreement, Participant has committed itself
to become a (3.25%) farm-in working interest owner in the Xxxxx No. 3 Well only.
[AB and RB initials]
b. The undersigned has such knowledge and experience in financial and business
matters that the undersigned is capable of evaluating the merits and risks of an
investment in this oil and gas prospect and of making an informed investment
decision. [AB and RB initials]
DRILLING OPERATIONS: Upon acceptance of the above recited consideration, on June
12, 2005, Bayshore, with Xxxxxxxxx Engineering L.P. as operator, commenced the
drilling of the Xxxxx Ranch #3 well, and if warranted, will complete and equip
one oil and/or gas well at the location of on the subject leases described on
Exhibit "A" attached hereto, with the following terms and conditions:
Page 2 July 25, 2005
1. Bayshore has permitted said test well with the Railroad Commission of Texas,
survey and staked the drilling location, built a necessary lease road, prepared
the location, cured title to the drillsite contracted with third party
contractors and began drilling with due diligence one test well to a total depth
of 21,000 feet, or a depth sufficient to test the Smackover formation, log and
test said well for the purpose of establishing commercial oil/gas production or
plugging and abandoning same. Bayshore shall have the right to cease drilling
operations if an impenetrable substance or formation is encountered during the
drilling of said well at any depth below 10,000 feet. Xxxxxx shall deliver a 70%
net revenue interest to Participant in the Xxxxx No. 3 Well. Xxxxxx and Maxim
agree that there shall be a one half (0.5%) carried WI interest attributable to
Participant's working interest in favor of Xxxxxx in said test well.
2. Bayshore agrees that, during drilling and completion operations, Participant
shall receive the following:
a. Daily drilling and completion reports on the subject well.
b. Copies of all logs, tests and samples gained from the drilling and
completion of the subject well.
c. Copies of all Railroad Commission of Texas filings on the subject
well.
3. In the event that an oil and/or gas well completion is attempted on the
subject test well, Participant agrees to pay its proportionate share of the
completion costs for the well per the Authority for Expenditure (AFE) for the
Xxxxx No. 3 Well which equals $19,820.00 per each percentage point upon written
and/or verbal notification from Xxxxxx.
4. In the event that commercial oil and/or gas production is established on the
subject lease with said test well, then both Bayshore and Xxxxxx shall enter
into a mutually acceptable Joint Operating Agreement Model Form 610-1989 for the
operation of the subject well. Xxxxxx shall then make the assignment of a two
and three quarter (2.75) percentage WI in the Xxxxx Ranch No. 3 Well and its
pro-ration unit acreage. All subsequent operations and subsequent xxxxx drilled
and completed on the pro-rata acreage shall be governed by the Joint Operating
Agreement.
Participant recognizes that an investment in oil and gas exploration
involves a high degree of risk of loss of its entire investment. Participant has
been advised to consult with its own financial advisors regarding this
investment. Its commitments to all investments bear a reasonable relationship to
its net worth and Participant is able to bear the risk of loss of its entire
investment in this prospect.
In the event that a dispute arises between Participant and Xxxxxx or
its affiliates, or any of their respective successors, representatives, agents,
officers or employees, in connection with this offering, the offer and farm-in
of working interest, or this farm-in Agreement, the parties hereto hereby
expressly agree that any such dispute shall be resolved through Arbitration
rather than litigation, and to submit the dispute to the American Arbitration
Association within 15 days after receiving a written request to do so. If any
party hereto fails to submit the dispute to Arbitration with in the specified
time above, the requesting party may then file any papers necessary to commence
arbitration. The parties hereto agree that any hearing scheduled after an
Arbitration proceeding is initiated, by either party, shall take place in Salt
Lake City, Utah.
This Participation Agreement, and all of its terms and conditions,
represent the entire agreement between Participant and Xxxxxx pertaining to the
Xxxxx Ranch No. 3 well, and supersedes any and all prior agreements, written or
oral. Any changes to this agreement must be agreed to in writing by both parties
hereto.
This Participation Agreement, and all of its terms and conditions,
shall be binding upon the parties hereto and shall extend to and be binding upon
their respective heirs, successors and assigns. Participant shall provide Xxxxxx
with written notice prior to assigning any or all of Participant's Farm-in
interest herein to a third party.
Page 3 July 25, 2005
Amount of Working Interest: Participant represents that it is
delivering herewith wire instructions for funds on or before June 25, 2005 in
the amount of $117,000.00 per each percentage point. The total point(s) for
which Participant is offering to purchase and the total amount of the
aforementioned funds are as follows:
Total Point(s) Desired: Three and One-Quarter (3.25)
Amount of Subscription: $380,250.00
**Wire funds to Bayshore Exploration L.L.C.
IN WITNESS HEREOF, the undersigned has executed this Agreement on the date set
forth below:
/s/ Xxxxxx Xxxxx
--------------------------- --------------------------
S.S. No/Federal I.D. No Participant's Signature
000-000 Xxxxxxxx Xx. Maxim Resources, Inc
--------------------------- --------------------------
Business Address - Street Participant's Name
Xxxxxxxxx, XX X0X 0X0 000-000 Xxxxxxxx Xxxxxx
--------------------------- --------------------------
City, State & Zip Home Address
604/630-0280 Xxxxxxxxx, X.X. X0X 0X0
--------------------------- --------------------------
Business Telephone City, State & Zip
604/688-7846 604/630-0280
--------------------------- --------------------------
Fax Number Home Telephone
Art(C)XxxxxXxxxxxxxx.xxx
E-Mail Address
**Please note where and how you would like to receive your reports.
ACCEPTANCE
Xxxxxx Energy, Inc. hereby accepts the offer represented by the
foregoing Farm-in Agreement, subject to the terms and conditions thereof.
AGREED AND ACCEPTED ON THIS 25 DAY OF JULY 2005.
By: /s/ Xxxxx X. XxXxxxxx
Xxxxx X. XxXxxxxx, COO
KJM:kjm
Exhibits "A"
