Re: Farmin and Participation Agreement - Twps. 23, 24, 25 Rges. 2, 4, 6 W4M Bindloss Area, Alberta
October
12, 2005
Angels
Exploration Fund Inc. Frontier
Energy Resources Corp.
000,
0xx Xxxxxx
XX 7045 Wild
Wave Drive
Calgary,
Alberta Xxx
Xxxxx, XX 00000
X0X
0X0
Fax:
000-000-0000
|
Re: |
Farmin
and Participation Agreement - Twps. 23, 24, 25 Rges. 0, 0, 0 X0X Xxxxxxxx
Xxxx, Xxxxxxx |
Dear
Sirs:
This
letter (the “Agreement”)
outlines the terms upon which Frontier Energy Resources Corp., an Alberta
corporation, and a wholly owned subsidiary of Frontier Energy Corp., a Nevada
corporation (“Frontier”)
proposes to farmin (the “Farmin”) on
certain lands known as the Bindloss Project (hereinafter “Bindloss”),
located in South-Eastern Alberta.
1. Definitions
and Schedules
|
1.1 |
In
this Agreement, the definitions provided by the 1997 CAPL Farmout and
Royalty Procedure (the “Farmout
and Royalty Procedure”),
Article 1.01, will apply; however, unless inconsistent therewith or unless
the context otherwise requires, specific terms will have the meanings set
forth below: |
|
(a) |
“Angels
Exploration Fund” means Angels Exploration Fund Inc., the “Farmor” under
this Agreement; Frontier Energy means the under this Agreement the
“Farmee” |
|
(b) |
“CAPL”
means the Canadian Association of Petroleum
Landmen; |
|
(c) |
“Contract
Depth” means a depth sufficient to penetrate at least 20 meters below the
top of the Colony Formation, or 900 meters subsurface, whichever occurs
first; |
|
(d) |
“Farmin
Lands” means those lands described in Schedule “A” hereto;
and |
|
(e) |
“Well”
means a well drilled on the Farmin Lands. |
|
1.2 |
The
following Schedules are attached to and deemed to form part of this
Agreement: |
|
(a) |
Schedule
“A” - which describes the Title documents and Farmout
lands; |
|
(b) |
Schedule
“B” - 1997 CAPL Farmout and Royalty Procedure (Elections and Amendments);
and |
|
(c) |
Schedule
“C” - Drilling Information to be supplied by Frontier to Angels
Exploration Fund pursuant to the Farmout and Royalty
Procedure. |
- 1
-
2. Drilling/Payment
Obligations
|
2.1 |
On
the date that Angels Exploration Fund signs this Agreement, Frontier will
pay to Angels Exploration Fund the sum of
C$1.00 |
|
2.2 |
On
the date that the parties receive approval from the Securities and
Exchange Commission (the “Exchange”)
of this Agreement and the transactions contemplated herein, Frontier will
issue Xxxx Cocks 5,000,000 common shares in the capital of Frontier Energy
Corp (the “Payment
Shares”)
subject to certain provisions set forth below. The Payment Shares will be
subject to such resale restrictions as required by the Exchange or
applicable regulatory authorities. |
| (a) |
Restrictive
Legend.
The Secretary of the Company may endorse all certificates representing the
Payment Shares and all certificates representing Shares issued or
transferred after this Agreement is entered into with a legend
substantially in the following form, the terms of which are agreed upon by
the Investor: |
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE LAW, AND NO
INTEREST MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (a) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION
INVOLVING SAID SECURITIES, (b) THIS CORPORATION RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THIS
CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR
(c) THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION.
THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
| (b) |
Stop
Transfer Order;
No Transfer in Violation of Agreement.
Mr. Cocks agrees that, in order to ensure compliance with this Agreement’s
restrictions, the Company may issue appropriate “stop transfer”
instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the
same effect in its own records. The Company will not be required
(i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this
Agreement or (ii) to treat as owner of such Shares or to accord the
right to vote or pay dividends to any purchaser or other transferee to
whom such Shares will have been so transferred. |
- 2
-
| (c) |
Upset
Provision.
In the event that Angels or Mr. Cocks are unable to finance $1,000,000
(USD) in 90 days from the signing of this Agreement (at terms acceptable
to the Board of Directors), the Company will acquire 4,500,000 of the
Payment Shares in exchange for the mutual release of this Agreement by all
parties. In the event that Angels and Mr. Cocks are unable to finance less
than $2,000,000 (USD) within 90 days from the signing of this Agreement,
the Company will have the right to cancel 2,500,000 of the total Payment
Shares. |
|
2.3 |
On
or before November 30, 2005, Frontier (the “Farmee”)
will, subject to surface access and all regulatory approvals, commence the
drilling of a test Well (the “First
Test Well”)
at Angels Exploration Fund’s pre-determined location on the Farmin Lands.
Frontier will drill the First Test Well diligently and continuously to
Contract Depth and either complete, cap or abandon the First Test Well.
The budget for the First Test Well will be approximately C$250,000 dry
hole cost and/or C$400,000 to completion. |
|
2.4 |
Within
90 days of completing, capping or abandoning the First Test Well, Frontier
will, subject to surface access and all regulatory approvals, commence the
drilling of a second test Well (the “Second
Test Well”)
at Angels Exploration Fund’s pre-determined location on the Farmin Lands.
Frontier will drill the Second Test Well diligently and continuously to
Contract Depth and either complete, cap or abandon the Second Test Well.
The budget for the Second Test Well will be approximately C$250,000 dry
hole cost and/or C$400,000 to completion. The Farmee will have a
continuing option to drill Option Xxxxx to earn undrilled sections of the
farmout lands until the Farmee fails to drill an option well or all of the
Farmout Lands that have been earned. |
|
2.5 |
If,
after drilling to Contract Depth, Frontier elects to take the First Test
Well to completion, then upon completion of the First Test Well (the
“Completion
Date”),
Frontier will issue to Angels Exploration Fund 100,000 common shares in
the capital of Frontier (the “Completion
Shares”).
The Completion Shares will be issued subject to such resale restrictions
required by the Exchange or applicable regulatory authorities. For greater
certainty, Frontier will not have any obligation to issue Completion
Shares to Angels Exploration Fund in the event Frontier does not complete
the First Test Well. Notwithstanding the foregoing, if Frontier does not
complete the First Test Well, but does complete the Second Test Well, then
Frontier will issue the Completion Shares as above, with the Completion
Date being the date that Frontier completes the Second Test Well.
|
|
3. |
Interest
Earned |
|
3.1 |
Provided
Frontier has fulfilled its obligations under Section 2 of this Agreement,
Frontier will, subject to Article 3.00 of the Farmout and Royalty
Procedure, have earned 80% of Angels Exploration Fund’s working interest
in the Farmin Lands, from the surface to the base of the Colony formation
or 900 meters subsurface, subject to A 10% Overriding Royalty with no
right of conversion in Article 6.00 of the Farmout and Royalty
Procedure. |
- 3
-
|
4. |
Reasonable
Extension |
|
4.1 |
If,
in Frontiers’s reasonably held opinion, ground conditions or other
industry-related conditions render the drilling of the First Test Well or
the Second Test Well impossible or impracticable, an extension of the time
required to spud the Well will be allowed until such time as the adverse
condition(s) ceases to exist, with sufficient time then allowed to
reasonably permit the drilling of the Well. |
|
5. |
Substitute
Well |
|
5.1 |
Frontier
may, during the course of drilling the First Test Well or the Second Test
Well, abandon it and within 30 days of the time of such abandonment,
commence and thereafter diligently and continuously carry on the drilling
of a substitute Well at a location mutually agreed to by all parties on
the Farmin Lands to Contract Depth and either complete, cap or abandon the
substitute Well. In such event, the earning provisions as set forth herein
will apply to the substitute Well with the same force and effect.
|
|
6. |
Assignment |
|
6.1 |
Frontier
will have the right to contract with an industry partner to share its
obligations hereunder; however, unless a written amendment to this
Agreement is executed by all involved parties, no such arrangements will
reduce or otherwise affect Frontiers’s obligations hereunder. Upon earning
an interest in the Farmin Lands, the 1993 CAPL Assignment Procedure will
apply. |
|
7. |
Operator |
|
7.1 |
Angels
Exploration Fund Inc will in its absolute discretion appoint the operator
(the “Operator”)
of all drilling programs conducted pursuant to this Agreement, and Well
operations will be performed in accordance with the 1990 CAPL Operating
Procedures. |
|
8. |
Title |
|
8.1 |
Angels
Exploration Fund represents and warrants
that: |
|
(a) |
it
has an option to acquire Geocan Energy’s Corporation’s undivided 100%
working interest in the Farmin Lands, subject to a 10% Overriding Royalty
and with no right to conversion in Article 6.00 of the Farmout and Royalty
Procedure, pursuant to an agreement between Geocan Enegry Corporation and
Angels Exploration Fund dated August 24, 2005 (the “Underlying
Agreement”); |
|
(b) |
it
has complied with all the terms of the Underlying Agreement to the extent
necessary to maintain it in force and effect as of the date hereof;
and |
|
(c) |
the
Farmin Lands are not currently subject to any contracts for the sale of
petroleum substances. |
- 4
-
|
8.2 |
Angels
Exploration Fund does not warrant title with respect to: (i) Response
Energy Corporation’s undivided 100% working interest in the Farmin Lands;
or (ii) the Title Documents. Angels Exploration Fund does not agree to
convey any better title to the Farmin Lands than Response Energy
Corporation conveys to it pursuant to the Underlying Agreement.
|
|
9. |
Abandonment
and Reclamation Costs |
|
9.1 |
Angels
Exploration Fund and Geocan Energy Corporation will have the right for a
24 hour period following notice from Frontier to Angels Exploration Fund
of its intention to abandon the First Test Well, to take over such Well at
their sole cost and expense and conduct such further tests or other
operations that they may wish to do. Failure to respond to such notice
will be deemed an election not to take over such Well. In the event Angels
Exploration Fund and Geocan Energy Corporation elect not to take over the
First Test Well, Frontier agrees that it will pay all reclamation costs
associated with the First Test Well to a maximum of C$40,000. This
obligation will survive the termination of this
Agreement. |
|
10. |
Termination |
|
10.1 |
The
drilling and payment obligations described in Section 2 will be at the
sole discretion of Frontier. In the event Frontier does not fulfil its
obligations under Section 2 of this Agreement, this Agreement will
terminate and the interest in the Farmin Lands will revert to the
interests prior to this Agreement and, subject to Section 9.1, neither
party will be indebted to the other. |
|
11. |
Regulatory
Approval |
|
11.1 |
The
obligations of Frontier in pursuance of this Agreement are subject to
receipt of all requisite regulatory and Exchange
approval. |
|
12. |
Counterpart
Execution |
|
12.1 |
This
Agreement may be executed in counterpart. All of the executed counterpart
pages when taken together will constitute the Agreement. Facsimile
signatures are acceptable and binding. |
|
13. |
Rentals |
|
13.1 |
Rentals
will be shared in accordance with the working interests in the Farmin
Lands. |
|
14. |
Confidentiality |
|
14.1 |
The
parties agree that all information shared between them concerning the
Farmin Lands and the development thereof will be held in confidence and
will not be used for any purposes other than completing this transaction
and matters directly related thereto. |
- 5
-
|
15. |
General |
|
15.1 |
Prior
to the generation of the initial Authorization For Expenditure (A.F.E.) on
the First Test Well, each of the parties will bear its own out-of-pocket
costs, including legal, accounting, engineering and consulting expenses,
incurred in connection with the subject matter
hereof. |
|
15.2 |
The
rights and obligations of the parties hereunder will be binding on and
enure to the benefit of and be enforceable by each of the parties hereto,
and their respective successors and permitted assigns. Except as provided
herein, the rights or obligations of the parties may not be assigned by
any party hereto without the consent of the other parties
hereto. |
|
15.3 |
|
15.4 |
Any
notices required hereunder will be given by delivery to the addressee,
whether by hand, by facsimile or by registered mail, to the address on the
first page of this Agreement. |
|
15.5 |
This
Agreement constitutes the entire agreement between the parties hereto and
no variation of the terms hereof will be binding unless the same is
contained in a written document which is signed by all
parties. |
|
15.6 |
Wherever
any term or condition of any Schedule conflicts or is at variance with any
term or condition in the body hereof, the latter will
prevail. |
|
15.7 |
Each
party will from time to time perform all such further acts and execute and
deliver all further documents as may be reasonably required in order to
fully perform its obligations under this
Agreement. |
If this
reflects your understanding of the terms and conditions agreed upon, please sign
and return two counterpart pages to the attention of Xxxxx Xxxxxxxxxx for
distribution to the parties.
Very
truly yours,
Name
/s/ Xxxxxx Xxxxxx
Xxxxxx
Xxxxxx, President
Frontier
Energy Resources Corp.
Accepted
and agreed to this 12TH day of
October 2005.
ANGELS
EXPLORATION FUND INC. FRONTIER
ENERGY RESOURCES CORP.
Per:
/s/ Xxxxx Xxxxxxxxxx Per: /s/
Xxxxxx Xxxxxx
Name
& Title: XXXXX
XXXXXXXXXX, PRES. Name
& Title:XXXXXX
XXXXXX, PRESIDENT
- 9
-
- 6
-
Schedule
“A”
attached
to and forming part of a Farmin Agreement dated October 12, 2005 between
Frontier Energy Resources Corp. and Angels Exploration Fund Inc.
|
Farmin
Lands |
Title
Lease Documents |
Title
Interest |
Encumberances |
|
Xxx
00 Xxx 0 X0X: 00
Xxx
00 Xxx 0 X0X: 25
Twp
24 Rge 4 W4M: 15
Xxx
00 Xxx 0 X0X: 00
Xxx
00 Xxx 0 X0X: 4 |
0404030614
0404020025
0403070042
0403070043
0403080443 |
Geocan
Energy Corporation - 100%(1) |
Crown
Lessor Royalty |
(1)
Farmin Agreement dated August 24,2005 among Geocan Energy Inc and Angels
Exploration Fund Inc.
- 9
-
- 7
-
