February 25, 2010
Exhibit
10.1
February
25, 2010
Xxxx
Xxxxxx (“Xxxxxx”)
0000 X.
Xxxxxxxxx Xx.
Xxxxxxx,
XX 00000
And
Xxx
Xxxxxxx (“Jefferd”)
00000 –
00X Xxxxxx
Xxxxxx,
XX, X0X 0X0
(Xxxxxx
and Jefferd together referred to as “the Sellers”)
Dear
Sirs:
Re: Letter
Agreement
This letter is further to our recent
discussions regarding the acquisition of Elk Hills Heavy Oil, LLC (“EHHO”) a
Washington State limited liability company and a to be created limited liability
company to be named Four Bear Heavy Oil, LLC (“FBHO”). Stellar
Resources Ltd. (“Stellar”) shall acquire 100% of EHHO and FBHO from the Sellers
upon the following terms and conditions.
EHHO has
approximately 20,000 acres of oil and gas leases in Carbon County, Montana
attached as Schedule “A”.
FBHO has
approximately 6,400 acres of oil and gas leases in Park County, Wyoming attached
as Schedule “B”.
The oil
and gas leases owned by EHHO and FBHO are referred to as the
“Properties”.
Stellar
shall pay to the Sellers the following consideration to acquire a 100% interest
in EHHO and FBHO:
(a)
|
Stellar
will issue a total of three (3) million fully paid and non-assessable
common shares to the Sellers as
follows:
|
i.
|
1,500,000
to Xxxx Xxxxxx
|
xx.
|
1,500,000
to Xxx Xxxxxxx
|
(b)
|
Stellar
will grant to the Sellers a Net Profits Interest (NPI) of five percent
(5%). The NPI is that share of production measured according to
the net profits from operations of the Property. Created out of a
working interest, it is similar to an overriding royalty in that it is
effective throughout the life of the working interest and does not pay or
contribute to development or operating costs. Income from the NPI is
equal to its share of net revenues
|
1
|
reduced
by its share of specified development and operating costs (income = net
revenues - development and operating costs.) The Sellers, owners of
the net profits interest, shall receive no income unless the property
generates a net profit. This NRI will be paid on a quarterly basis;
and
|
(c)
|
Xx.
Xxxxxxx Xxxxxxx will be appointed to the board of Stellar;
and
|
(d)
|
A
cash payment totalling US$250,000 shall be paid to the Sellers upon
Stellar obtaining future financing for the development of the Properties
on or before December 31, 2011; and
|
An Area
of Mutual Interest (AMI) shall be as follows: Any additional properties within
one mile of the existing borders of all Properties pertaining to this Agreement,
but shall not include any properties in Big Horn County, Montana, which shall
form part of this agreement if acquired in the future by Stellar or the Sellers
or any affiliate of any of them.
This
Letter Agreement when executed will be binding upon Stellar and the Sellers. The
parties may elect to work towards the preparation of a more definitive agreement
(the “Definitive
Agreement”) in respect of the transaction that may add clarity and
certainty to provisions of this Letter Agreement.
2.
|
Representations
and Warranties
|
The
Sellers represents and warrants the following:
(i)
|
EHHO
and FBHO are to be properly registered and in good standing by the closing
date;
|
(ii)
|
EHHO
and FBHO have no liabilities other than future lease rentals due under the
terms of the oil and gas leases owned by EHHO and FBHO
respectively;
|
(iii)
|
EHHO
and FBHO are the registered owners of their respective oil and gas leases
and all leases are free and clear of liens or encumbrances except 20%
royalty on the production of oil, gas and other
hydrocarbons.
|
Stellar
represents and warrants the following:
(i)
|
Stellar
is duly incorporated, registered and in good standing in regards to all
filings;
|
(ii)
|
Stellar’s
total liabilities contingent or otherwise do not exceed
US$200,000;
|
2
3.
|
Definitive
Agreement
|
If the
parties mutually agree to enter into a further agreement (the “Definitive
Agreement”) is shall be subject to commercial arbitration which shall be
concluded March 10, 2010. If the Definitive Agreement is not mutually
agreed by the Closing Date then this Letter Agreement shall remain binding and
enforceable. The Definitive Agreement shall be in form and substance
satisfactory to each of Stellar and the Sellers and shall include customary
terms and conditions, including representations and warranties, covenants,
conditions and completion mechanics (including without limitation, the
representation of warranties, covenants, conditions and completion of mechanics
contained in this agreement to the extent still applicable), for a transaction
of this nature. In addition, the Definitive Agreement may include the
following mutual conditions precedent to the consummation of the
Transaction:
(a)
|
all
governmental, court, regulatory, third person and other approvals,
consents, waivers, orders, exemptions, agreements and all amendments and
modifications to agreements which either Stellar or the Sellers, acting
reasonably, shall consider necessary or desirable in connection with the
Transaction shall have been obtained or entered into, as applicable, in
form and substance satisfactory to Stellar and the
Sellers;
|
(b)
|
there
shall have been no action taken under any applicable law or by any
government or governmental or regulatory authority
which:
|
(i)
|
makes
it illegal or otherwise directly or indirectly enjoins or prohibits the
completion of the Transaction; or
|
(ii)
|
results
or could reasonably be expected to result in a judgment, order, decree or
assessment of damages directly or indirectly relating to the Transaction
which is or could be, materially adverse to Stellar or the Sellers
respectively, on a consolidated
basis;
|
(c)
|
Stellar
shall have received a title chain report on the
Properties;
|
(d)
|
the
Sellers shall have obtained a satisfactory understanding of the short and
long term obligations of Stellar and shall have confirmed to its
satisfaction that such obligations are
reasonable.
|
4.
|
Due
Diligence
|
The
obligation to close the transaction shall be subject to each party being
satisfied with their due diligence review of the other party. Each
party and their respective accountants, legal counsel, technical and financial
advisors and other representatives thereof shall be entitled to perform a due
diligence review and examination of the other of them and the business and
affairs thereof.
3
5.
|
Confidentiality
|
Whereas
the parties have previously entered into a confidentiality agreement, the
Transaction and this Letter Agreement shall be considered confidential in its
entirety pursuant to the provisions of that confidentiality
agreement. Subject to applicable law, the parties shall agree with
each other on the form, content and timing of any public announcement regarding
the Transaction.
6.
|
Governing
Law
|
This
Letter of Intent and all matters arising hereunder shall be governed by,
construed and enforced in accordance with the laws of the state of Nevada and
the parties hereby irrevocably submit to the exclusive jurisdiction of the
courts of Nevada.
7.
|
Counterparts
and Facsimile
|
This
Letter of Intent may be executed by each of the parties in counterparts and by
facsimile or other electronic means, each of which when so executed and
delivered will be an original, but both such counterparts, whether executed and
delivered in the original or by facsimile or other electronic means, will
together constitute one and the same agreement.
8.
|
Time
of the Essence
|
Time
shall be of the essence with respect to this Letter Agreement.
9.
|
Successors
and Assigns
|
This
Letter Agreement shall enure to the benefit of and are binding upon the parties
hereto and their respective successors and permitted assigns. Neither
party may assign this Letter Agreement to other than an affiliate without the
prior written consent of the other party. An assignment by a party
hereto to an affiliate will not relieve the assigning party of its rights and
obligations hereunder.
10.
|
Entire
Agreement
|
This
Letter Agreement contains the entire understanding between the parties hereto
with respect to the subject matter hereof, and supersedes and replaces all
negotiations, correspondence, letters of intent and prior agreements or
understandings relating thereto, whether written or oral.
11.
|
Severability/Illegality
|
The
invalidity or unenforceability of any provision or part of any provision of this
Letter Agreement shall not affect the validity or enforceability of any other
provision or part thereof, and any such invalid or unenforceable provision or
party thereof will be deemed to be separate, severable and distinct, and no
provision or part thereof will be deemed dependent upon any other provision or
part thereof unless expressly provided for herein.
4
12.
|
Costs
|
Each
party will be responsible for their own costs of completing the negotiation of
this Letter Agreement and performing their respective obligations under this
Letter Agreement.
13.
|
Notice
|
Any
notice or other writing required or permitted to be given hereunder or for the
purposes hereof shall be sufficiently given if delivered personally, or if sent
by prepaid mail or transmitted by facsimile to such party:
(a)
in the case of a notice to the Sellers at:
Xxxx
Xxxxxx Xxx
Xxxxxxx
0000 X.
Xxxxxxxxx
Xx. 00000
– 19A Avenue
Spokane,
WA
99204 Xxxxxx,
XX, X0X 0X0
(b)
in the case of a notice to Stellar at:
000 X.
Xxxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx,
Xxxxxx 00000-0000
Attention:
Xxxxx Xxxxxxx
Or at
such other address or addresses as the party to whom such notice or other
writing is to be given shall have last notified the party giving the same in the
manner provided in this section. Any notice or other writing delivered to the
party to whom it is addressed hereinbefore provided shall be deemed to have been
given and received on the day it is so delivered at such address, provided that
if such day is not a business day in the city where the notice is delivered,
then such notice or other writing shall be deemed to have been given and
received on the next following business day. Any notice or other
writing transmitted by facsimile or other form of recorded communication shall
be deemed to have been given and received on the first business day after its
transmission.
14.
|
Additional
Assurances
|
Each of
the parties shall provide such further documents or instruments required by the
other party as may reasonably be necessary or desirable in order to give effect
to the terms and conditions of this Letter Agreement and carry out its
provisions.
5
15.
|
Binding
Nature of Agreement
|
This
Letter Agreement is subject to the terms and conditions hereof and shall be
binding upon the parties following execution of this Letter
Agreement.
16.
|
Closing
|
This
Letter Agreement shall close on or before March 15, 2010.
17.
|
Independent
Legal Advice
|
The
parties to this Agreement have obtained or have chosen not to seek independent
legal advice prior to entering this Agreement.
To
confirm your acceptance to the terms of this Letter Agreement, please sign below
where indicated and return the signed copy to the undersigned as soon as
possible. If you have any questions or would like to discuss this
Letter Agreement further, please feel free to call me
at 000-000-0000.
Yours
sincerely,
By: Xxxxx
Xxxxxxx
_____________________
President
Accepted
on behalf of the Sellers
this 25 day of February, 2010.
By:
Xxxx
Xxxxxx
By:
Xxx
Xxxxxxx
6
SCHEDULE
'A'
ASSIGNMENT
OF OIL AND GAS LEASES
LEASE
SCHEDULE
TOWNSHIPS
4 SOUTH, 5 SOUTH, RANGE24 EAST,25 EAST
COUNTY:
CARBON
STATE:MONTANA
LESSOR
|
DOCUMENT
NUMBER
|
Xxxx
X. Xxxxxx
|
333157
|
Northwest
Farm Credit Services, FLCA
|
333162
& 000000
|
Xxxxx
xx Xxxxxxx
|
XX-00000-00
|
Xxxxx
Land, LLC
|
333146
|
Xxxxxx
Xxxxxxxx
|
333152
|
Xxxxxxx
XxXxxxxxxx
|
333145
|
Xxxxxxxx
Xxxxxx
|
333147
|
H.
Xxxxx Xxxxxxx Family Trust
|
335899
|
H.
Xxxxx Xxxxxxx Family Trust
|
335897
|
Xxx
Xxxxxxx
|
335898
|
Xxxxxxx
and Xxxxx Xxxxxxxx
|
333148
|
Xxxxxxx
Xxxxxxx
|
333144
|
Xxxxxxx
Xxxxxx
|
333143
|
Xxxxx
Xxxxxx
|
333159
|
Xxxxx
Xxxxxx
|
333160
|
Xxxxx
Xxxxxx
|
333158
|
Xxxxx
Xxxxxxxx
|
333156
|
Xxxxxx
and Xxxx Xxxxxxx
|
333958
|
Xxxxx
and Xxxxxx Xxxxxxx
|
333959
|
Xxxxx
and Xxxxxx Xxxxxxx
|
333960
|
J
Bar F Ranch
|
333957
|
Xxxxxx
X. Xxxxx
|
333149
|
Xxxx
X. Xxxx
|
333150
|
Xxxxx
X. Xxxxxxxx
|
333154
|
MarionT.
Xxxxxx
|
333151
|
Xxxxxx
X. Xxxxxx
|
333155
|
Xxxxxxxxx
Xxxxxxx
|
335895
|
Etaenor
Xxxxxxxx
|
335896
|
Xxxx
X. Xxxxxx
|
335890
|
Xxxxx
X. Xxxxxx
|
335891
|
Xxxxxxx
Xxxxxxxx
|
335892
|
Xxxxxx
Xxxxx
|
335893
|
Xxxxxx
Xxxxxx
|
335889
|
Xxxxxx
and Xxxxxx Xxxxxx
|
333153
|
Xxxxxxxxx
Xxxxxxxx Xxxxxx
|
333479
|
BLM
|
97824
|
BLM
|
97825
|
BLM
|
97826
|
BLM
|
97828
|
BLM
|
98752
|
BLM
|
98753
|
7
SCHEDULE
“B”
Four
Bear Heavy Oil, LLc.
Oil
and Gas Leases
Park
County, Wyoming, USA
LEASE
#
|
ACRES
|
08-00097
|
639.77
|
08-00098
|
640.00
|
08-00099
|
480.00
|
08-00100
|
640.00
|
08-00531
|
558.64
|
08-00532
|
400.99
|
08-00534
|
160.00
|
08-00535
|
320.00
|
08-00536
|
600.00
|
08-00537
|
600.00
|
08-00538
|
640.00
|
08-00539
|
640.00
|
08-00540
|
160.00
|
TOTAL | 6,479.40 |
8