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XXXXXXX 00-XX - XXXXX XXXXXXXX PROSPECT AGREEMENT
XXXXXX ENERGY LTD.
XXXXX 000, 0000 XXXXXXXXX XXXXX XXXXXXXXX
XXXXXXXXX, XXXXXXXX
X.X.X. 00000
BUSINESS: (000) 000-0000
FACSIMILE: (303) 773-9057
February 3, 1998
Xxxxx X. Xxxxxxxxx
c/o Canaccord Capital Corporation
2200, #609 Granville Street
Vancouver, British Columbia
Canada
X0X 0X0
Dear Clive:
This is to confirm our agreement to provide you with, or arrange for the
provision to you of, the funds necessary to exercise your option (the "Orbit
Option") to acquire a 10% working interest in approximately 2,982 gross acres
subject to oil and gas leases located in Cameron Parish, Louisiana and
referred to as the South Lakeside Prospect. The Orbit Option is provided for
in an agreement between you and Orbit Oil & Gas Inc. ("Orbit") dated January
7, 1998 (the "Orbit Agreement"), a copy of which is appended hereto as
Schedule "A". Orbit has represented in the Orbit Agreement that it has
acquired a 50% working interest in the South Lakeside Prospect pursuant to an
agreement between Orbit and Oilexco Incorporated, The Wiser Oil Company, CMS
NOMECO Oil & Gas Co., Atlas Energy Group, Inc., NuGas Resources (U.S.) Inc.
and FCP Petroleum Inc. dated November 27, 1997 (the "Oilexco Agreement"), a
copy of which is attached hereto as Schedule "B", of which it has assigned a
20% interest to Xxxx Resources Ltd., and retained the remaining 30%. The oil
and gas leases comprising the South Lakeside Prospect (the "Leases") are
described in Schedule "A" to the Oilexco Agreement.
Pursuant to the Orbit Option, you may acquire a 10% working interest in the
Leases by providing Orbit with notice of your intent to exercise the Orbit
Option, together with your cheque in the amount of U.S. $584,844 (the "Option
Price") on or before March 6, 1998 (the "Exercise Date"). The Option Price
will be subject to adjustment as provided in the Orbit Agreement, depending
on the interest Orbit is able to acquire in the Louisiana State Lease
referred to therein.
As you know, it is our intention to raise a portion of the funds necessary
for you to exercise the Orbit Option through a private placement (the
"Private Placement") of our equity securities through Canaccord Capital
Corporation ("Canaccord"), as agent. As you also know, Canaccord has advised
us it will be able to raise a maximum of Cdn. $700,000 by way of the Private
Placement. It is our intention to arrange for the provision of the balance
of the Option Price to you by a third party.
Our agreement is as follows:
1. We will provide you with our cheque in the amount of some or all of
the Option Price, as it may be adjusted (the "Xxxxxx Funds"), and will
arrange for the provision to you of a cheque or cheques in the amount
of the balance of the Option Price by a third party or parties (the
"Third Party Funds"), on or before March 3, 1998 (the "Termination
Date");
2. Forthwith upon receipt of the Xxxxxx Funds and the Third Party Fundson
or before the Exercise Date, you will provide Orbit with written
notice of your intent to exercise the Orbit Option and your cheque in
the amount of the Option Price, and take all other measures and
execute all other documents as we, acting reasonably, may consider
necessary in order for you to validly exercise the Orbit Option. You
will use the Xxxxxx Funds and the Third Party Funds for no other
purpose whatsoever; and
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3. Forthwith upon conveyance of a 10% working interest in the Leases to
you by Orbit, you will take all such measures and execute all such
documents as we, acting reasonably, consider necessary to convey such
interest to Xxxxxx Resources, Inc., or as we may otherwise direct.
In consideration of our entry into this Agreement, you will not:
1. Exercise the Orbit Option prior to the Termination Date, unless we
have provided you with the Xxxxxx Funds and the Third Party Funds have
been provided to you; or
2. Assign or otherwise transfer the Orbit Option to any party apart from
us, unless we have failed to provide you with the Xxxxxx Funds, or the
Third Party Funds have not been provided to you, by 5:00 p.m.
(Vancouver time) on the Termination Date.
Our agreement is subject to the following conditions precedent:
1. the Vancouver Stock Exchange will have provided to us such approval as
may be necessary for the Private Placement and the provision of the
Xxxxxx Funds to you on or before 5:00 p.m. (Vancouver time) on that
day which falls three business days before the Termination Date;
2. The Private Placement will fully close on or before that day which is
one business day before the Termination Date;
3. We shall be satisfied, acting reasonably, with the state of title to
the Leases; and
4. We shall be satisfied, acting reasonably, with the form and substance
of Joint Operating Agreements concerning the Leases to be prepared by
Orbit.
In consideration of your entry into this Agreement, we will indemnify and
save you harmless from and against all legal proceedings or actions to which
you may be subject as a result of your entry into this Agreement and
consummation of the transactions described herein, and all costs, losses,
damages or liabilities which you may incur or suffer as a result of such
legal proceedings or actions. If the foregoing accurately reflects our
agreement, would you please sign the enclosed copy of this letter in the
space provided below, and return it to us at the above address.
Yours truly,
XXXXXX ENERGY LTD.
Per:
/s/ Xxxx X. Xxxxxxxxxx
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Xxxx X. Xxxxxxxxxxx
The foregoing accurately reflects our agreement
Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
