NATION ENERGY INC.
Suite F - 1500 West 16th Avenue
Vancouver BC V6H 4B9 Canada
 

August 30, 2015
 

 

TO:
Paltar Petroleum Limited

1555 Blake Street, Suite 1002
Denver, Colorado  80202 
 
Attention:                      Mr. Marc Bruner
 
Dear Sirs:
 

RE:           THIRD AMENDED AND RESTATED AGREEMENT regarding Paltar Petroleum
Limited Australia Permits & Applications
 

This letter sets out the Third Amended and Restated Agreement (“Agreement”)
reached between Nation Energy Inc., as farmee and optionee (“Nation”), and
Paltar Petroleum Limited (“Paltar”), as farmor and optionor, regarding (i) the
immediate grant of earning rights to Nation relating to a portion of the oil and
gas exploration permits listed on Schedule A; (ii) the later grant of earning
rights relating to additional portions of the oil and gas exploration permits
listed on Schedule A or portions of new permits granted as a result of the
pending applications listed on Schedule A (the “Applications”); (iii) the
possible later sale to Nation, at Nation’s option, of Paltar’s entire interest
in all such permits, the outstanding shares of Officer Petroleum Pty Ltd.
(“Officer”), and, when issued, any additional exploration permits issued as a
result of the Applications (collectively, the “Assets”); or (iv) a possible
business combination transaction in which substantially all of the equity
interests of Paltar would be exchanged for newly issued equity interests of
Nation (an “Exchange Transaction”), all on the terms and conditions set forth
herein (collectively, the “Transactions”).  Marc Bruner (“Bruner”) and John
Hislop (“Hislop”), as major shareholders (indirectly or directly) of Paltar and
Nation, respectively, agree to the terms hereof. This Agreement replaces in its
entirety the Second Amended and Restated Agreement dated June 13, 2015.
 
All dollar amounts in this Agreement are expressed in Australian dollars, except
those specially indicated in Paragraph 3 as being in US dollars.
 
First Farmout Group
 
1.  
On the date hereof (the “Earn-In Closing Date”) and under seven separate Earning
Agreements (the “Initial Earning Agreements” and together with the Additional
Earning Agreements (as defined below), the “Earning Agreements”), Paltar will
farm out three specific graticular blocks in each of the six petroleum
exploration permits listed on Schedule A and will cause Officer to farm out
forty blocks in Exploration Permit 468 (collectively, the “Nation Blocks”) to
Nation Energy (Australia) Pty Ltd, an Australian limited company and wholly
owned subsidiary of Nation (“Nation Australia”), in exchange for the
consideration specified in each Initial Earning Agreement.  Under each Earning
Agreement, applications for Production Licenses (as defined therein) may only be
made where there has been a Discovery (as defined in such Earning Agreement), so
there is no assurance that Production Licenses will be granted covering any of
the Nation Blocks.  There has been no discovery of petroleum on any of the
exploration permits listed on Schedule A and the exploration permits currently
produce no revenues.  The Earning Agreements and the rights of Nation thereunder
shall be evidenced by approval and registration under the relevant petroleum
legislation of the Northern Territory and Western Australia, respectively, at
Nation’s option following December 31, 2015.

 
 

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Second Farmout Group
 
2.  
On December 17, 2015, or such other date as the parties may mutually agree,
Paltar and Nation will enter into additional earning agreements (the “Additional
Earning Agreements”) farming out to Nation Australia on terms substantially
similar to the Earning Agreements six additional graticular blocks in
Exploration Permit 136, three additional blocks in Exploration Permit 143, and
18 blocks in exploration permits (whether now existing or hereafter issued under
the Applications) covering lands in the Victoria Basin, with the specific blocks
covered by such agreements to be selected by Nation in its sole discretion (or,
if Nation fails to select blocks by 5:00 PM MST on December 16, 2015, then by
Paltar), in exchange for the consideration specified therein.  The Additional
Earning Agreements and the rights of Nation thereunder shall be evidenced by
approval and registration under the relevant petroleum legislation of the
Northern Territory at Nation’s option following December 31, 2015.

 
Share Issuance
 
3.  
Nation agrees to issue an aggregate of 600,000,000 Nation common shares (the
“Earning Agreement Shares”) to Paltar, with an agreed value of US$0.03 and
one-third cent per share, by December 17, 2015; provided, that in the event that
an Exchange Transaction is consummated on or prior to December 16, 2015, Nation
shall not be required to issue the Earning Agreement Shares to Paltar and this
Agreement shall automatically be deemed to have been amended by the parties
without any action of any person such that the text of this Paragraph 3 is
deleted in its entirety and replaced with the words “[Reserved]”.

 
Option
 
4.  
On the Earn-In Closing Date, Paltar and Nation will execute an Option Agreement
(the “Nation Purchase Option”), which will provide for an option of Nation,
exercisable in its sole discretion (or its permitted designee as set forth
therein) at any time before August 30, 2016 (but only if prior to such time
Nation Australia (i) has executed the Additional Earning Agreements and (ii)
performed its material obligations under all earning agreements to be performed
through the date of exercise) to purchase (A) all of the Assets (including the
right to exploration permits when the Applications for such permits are granted)
and (B) all of the outstanding securities of Officer for an aggregate cash
purchase price of $10,000,000.  The existence of the Nation Purchase Option and
the rights of Nation thereunder may be evidenced by a filing on the personal
property securities register kept under the Personal Property Securities Act
(Cth) upon mutual agreement of the parties thereto.  In the event that an
Exchange Transaction is consummated on or prior to December 16, 2015, the Option
Agreement shall automatically terminate by its terms.

 
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Exchange Transaction
 
5.  
Promptly following the Earn-In Closing Date, Nation and Paltar will endeavor to
negotiate the terms of an Exchange Transaction.  Unless and until Nation and
Paltar execute definitive documentation applicable thereto (the “Exchange
Documentation”), neither Party is or will be under any obligation to enter into
an Exchange Transaction.

 
Document Preparation and Closing
 
6.  
The parties agree to instruct their attorneys to co-operate and complete
comprehensive documents required to complete the Transactions (the “Closing
Documents”), including the Exchange Documentation.

 
7.  
The Earning Agreements and the Option Agreement will be executed and delivered
on the Earn-In Closing Date.

 
8.  
Nation will be required within four days after the Earn-In Closing Date to file
a comprehensive material change report on Form 8-K, and Paltar promises to
provide on a timely basis such information as Nation or its attorneys or
auditors consider necessary to prepare the 8-K.

 
9.  
If the Nation Purchase Option is exercised or an Exchange Transaction is
consummated, Nation will be required within four business days after transfer of
the Officer Shares to Nation Australia or completion of the Exchange Transaction
to file a comprehensive material change report on Form 8-K and Paltar promises
to provide, and to cause Officer to provide, on a timely basis, such information
as Nation or its attorneys or auditors consider necessary to prepare the
8-K.  On or before delivery of the Officer Shares to Nation Australia, Paltar
will provide audited financial statements regarding Officer and Paltar for the
three most recent fiscal years prepared in accordance with US GAAP and
accompanied by an audit report thereon from a PCAOB and SEC approved auditor
which report complies with the rules and requirements of the Securities and
Exchange Commission, and such additional fiscal period financial statements as
may be required under SEC regulations.

 
10.  
Paltar acknowledges that, until registered in accordance with Paragraph 18(b),
all of the Earning Agreement Shares, if issued, will be restricted as to sale by
US securities laws and rules and will carry a restrictive legend indicating such
restrictions.  Paltar also acknowledges that following the issuance of the
Earning Agreement Shares, if any, Paltar will become an “affiliate” of Nation
and will be required to file insider reports and otherwise comply with
applicable SEC rules.  In addition, Paltar acknowledges that Nation is a
reporting issuer in Canada under Multilateral Instrument 51-105, Issuers Quoted
in the U.S. Over-the-Counter Markets, and will remain so for a year after
Closing, and Canadian securities filings will be required during that
time.  Paltar shall not sell any of the Earning Agreement Shares in Canada or to
a resident of Canada for so long as Nation continues to be a reporting issuer in
Canada under Multilateral Instrument 51-105.

 
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11.  
All of the Earning Agreement Shares or, in the event that an Exchange
Transaction is consummated, all shares of the common stock of Nation issued to
the Paltar shareholders pursuant to the terms of the Exchange Documentation (the
“Exchange Shares”), shall be held in an escrow account subject to the terms of
an escrow agreement.  The escrow agreement shall provide, among other things,
that (A) in the event an Exchange Transaction is consummated on or prior to
December 16, 2015, the Exchange Shares issued in connection therewith shall be
held in the escrow account for a period of at least 3 years, or (B)
alternatively, in the event that an Exchange Transaction is not consummated on
or prior to December 16, 2015 and the Earning Agreement Shares are issued on
December 17, 2015, all of the Earning Agreement Shares shall be held in the
escrow account for a period of at least (1) with respect to a percentage of
Earning Agreement Shares then beneficially held by Bruner, 5 years, and (2) with
respect to a percentage of Earning Agreement Shares beneficially held by persons
other than Bruner, 3 years, in each case subject to earlier release by the
escrow agent.  The escrow agreement shall provide that the escrow agent will be
a newly formed Delaware limited liability company that shall be managed by a
board of managers.  The board of managers shall be composed of the following 4
members, each of whom shall have equal voting rights under the terms of the
escrow agent’s governing document:

 
(a)  
2 managers appointed by Bruner and David Siegel, an individual resident of
Denver, Colorado (“Siegel”); so long as each of them continues to hold directly
or indirectly at least 1/2% of the issued and outstanding shares of Nation’s
common stock, or, if one or both of them does not hold at least 1/2% of the
issued and outstanding shares of Nation’s common stock, 1 or 2 managers, as the
case may be, appointed by the Nation Board (as defined below) that does not hold
any equity securities of Paltar;

(b)  
1 manager appointed by Hislop, so long as he continues to hold directly or
indirectly at least 1% of the issued and outstanding shares of Nation’s common
stock, or, if Hislop does not hold at least 1% of the issued and outstanding
shares of Nation’s common stock, 1 manager appointed by the Nation Board that
does not hold any equity securities of Paltar; and

(c)  
the Independent Director (as defined below).

In the event of deadlock among the members of the board of managers of the
escrow agent, the chairman of the board of managers shall possess an additional
tie-breaking vote. The governing document of the escrow agent shall provide that
the chairman of the board of managers of the escrow agent be Bruner or, if
Bruner ceases to serve on the board of managers, then a person elected by the
board of managers after the vacancy created by Bruner’s departure has been
filled.
 
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12.  
At the time of issuance of (A) the Earning Agreement Shares, Paltar and Hislop
or (B) the Exchange Shares, Hislop, Bruner, Siegel, Darrel Causbrook and their
affiliates, whichever of (A) and (B) occurs earlier, shall enter into a
shareholder agreement (the “Shareholder Agreement”) which shall include a
covenant that Paltar and Hislop will each vote their Nation common shares to
increase the number of Nation directors to 5 and, for 5 years thereafter, to
elect Hislop (or his nominee), Darrel Causbrook, Siegel, and Bruner (or such
other nominees as Paltar may nominate from time-to-time), so long as each of
them directly or beneficially holds at least 1% of the issued and outstanding
shares of Nation’s common stock, and one independent person as members of the
Board of Directors (the “Nation Board”), although there may be as many other
directors of Nation as its shareholders may determine.  Prior to any issuance of
the Earning Agreement Shares or the consummation of an Exchange Transaction (but
not thereafter), Hislop agrees to vote his shares of Nation common stock to
elect Hislop, Darrel Causbrook, Siegel, Bruner and one independent person that
is also not an equity holder of Paltar (the “Independent Director”) as members
of the Nation Board.

 
13.  
Provided that Paltar (or a successor operator approved by Nation that has
executed a joinder to this Agreement for the purposes of this Paragraph 13) is
then the operator under the applicable Earning Agreement, Paltar shall have the
right of first offer to provide goods, services and work supplied or performed
(i) on the Nation Blocks specified in such Earning Agreements, including permits
issued as a result of the Applications, and (ii) in respect of all hydrocarbons
produced therefrom (collectively, the “Proposed Work”) as follows: (A) the
operator under the Earning Agreements relating to the concerned permit, in its
capacity as the operator, shall first offer to Paltar, in its capacity as a
third-party service provider, the contractual right to provide the Proposed
Work; if Paltar indicates (1) that it or one of its affiliates, whether acting
alone or in a joint venture or in some other contractual arrangement with others
(in any of these events, a “Paltar entity”), is capable of providing the
Proposed Work in a good and workmanlike manner and (2) that such Paltar entity
wishes to enter into a contract with such operator to provide the Proposed Work,
then such operator shall, before seeking any other proposals or bids concerning
the Proposed Work, first negotiate in good faith with the Paltar entity in a
good faith effort to reach a final contract concerning the provision of the
Proposed Work; (B) such operator shall award the contract for the Proposed Work
to the Paltar entity if the price and terms proposed by the Paltar entity and
otherwise negotiated between such operator and the Paltar entity are competitive
with and comparable to those customarily available in the open market from an
arm’s length third party; and (C) Paltar shall have the first right to purchase
petroleum produced from lands covered by the applicable permits at a price and
upon terms competitive with and comparable to those customarily available in the
open market from an arm’s length third party.  If, despite good faith efforts to
do so, an agreement contemplated by the foregoing sentence cannot be reached
within 30 days after the contractual rights were initially offered to Paltar,
the operator shall be free to contract therefor with arms-length third parties
on terms no less favorable than those offered by Paltar.  In the event an
Exchange Transaction is consummated on or before December 16, 2015, the
foregoing rights of Paltar shall expand to all permits set forth on Schedule A
(including retention and production licenses issued in respect thereof),
including permits issued after the date hereof in respect of the Applications.

 
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14.  
The parties hereto agree to work in good faith with one another to minimize the
aggregate tax liability to the parties incurred in connection with the
consummation of the transactions contemplated by this Agreement.

 
Representations of Nation
 
15.  
Nation represents and warrants to Paltar that:

 
(a)  
the authorized capital of Nation consists of 5,000,000,000 common shares with no
par value per share, of which there are presently 150,020,000 common shares
issued and outstanding;

 
(b)  
other than as contemplated under this Agreement, there are no other rights,
warrants or options outstanding pursuant to which any shares of Nation may be
issued and there are no other securities issued and outstanding or issuable
which are or may be convertible or converted into shares of Nation;

 
(c)  
Nation is duly incorporated under the laws of Wyoming; and

 
(d)  
all of Nation’s continuous disclosure filings with the Securities Exchange
Commission of the United States are up to date and were, at the date they were
filed, complete and accurate and, other than as contemplated herein, there are
not and shall not, at the Earn-In Closing Date, be any material adverse changes
in Nation’s business and affairs from that which was disclosed in Nation’s most
recently-filed continuous disclosure documents.

 
Representations of Paltar
 
16.  
Each of Paltar and Bruner represents and warrants to Nation that:

 
(a)  
subject to required governmental and other approvals as required by law, which
Paltar will use its best efforts to obtain, Paltar has the full power and
authority to transfer or cause to be transferred the Assets to Nation or Nation
Australia free and clear of any charges, encumbrances, liens or claims, other
than royalties and overriding royalties in existence at the date of this
Agreement, including without limitation the overriding royalties referred to in
Paragraph 1.1 of the Joint Venture Operating Agreement between Paltar and
Sweetpea Petroleum Pty Limited;

 
(b)  
other than as contemplated under this Agreement, there are no other rights or
options outstanding pursuant to which any third party has any right or interest
in the Assets;

 
(c)  
Paltar is duly incorporated and in good standing under the laws of Australia;
and

 
(d)  
other than liens arising under the Joint Venture Operating Agreement between
Paltar and Sweetpea Petroleum Pty Limited, Paltar’s interest in the Assets is
free and clear of all encumbrances.

 
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Covenants
 
17.  
Nation covenants to Paltar that, except as contemplated hereby.

 
(a)  
Nation shall conduct its business in the ordinary and normal course and shall
not, without the prior written consent of Paltar, enter into any transaction
which would cause any of its representations or warranties or agreements in this
Agreement to be incorrect or to constitute a breach of any covenant or agreement
of Nation herein;

 
(b)  
Nation shall not issue or redeem any shares in its capital nor issue any
securities convertible or exchangeable into shares other than as disclosed in
this Agreement.

 
18.  
Paltar covenants to Nation that, except as contemplated hereby:

 
(a)  
Paltar shall conduct its business in the ordinary and normal course and shall
not enter into any transaction which would cause any of Paltar’ representations
or warranties in this Agreement to be incorrect or constitute a breach of any
covenant or agreement of Paltar in this Agreement;

 
(b)  
If an Exchange Transaction is not consummated on or prior to December 16, 2015,
within 60 days after the issuance of the Earning Agreement Shares on December
17, 2015, Nation shall file a registration statement with the SEC seeking
registration under the Securities Act of 1933 of as many of the approximately
750 million shares of common stock of Nation (on a pro rata basis) anticipated
then to be beneficially owned by Hislop and Paltar as may be permitted by the
SEC.  If an Exchange Transaction is consummated on or prior to December 16,
2015, within 60 days after the issuance of the Exchange Shares, Nation shall
file a registration statement with the SEC seeking registration under the
Securities Act of 1933 of as many of the approximately 145 million shares of
common stock of Nation anticipated then to be beneficially owned by Hislop as
may be permitted by the SEC.  As soon as practicable after the Earn-In Closing
Date the parties may, at the request of Hislop or Paltar, as applicable,
negotiate and sign a Registration Rights agreement with Hislop or Paltar, or
both, as applicable, which sets out these rights and provides for penalties if
registration does not occur as contemplated;

 
(c)  
Paltar shall not take any action which would result in any material adverse
change to Paltar or to sell, transfer, encumber or dispose of any of the Assets
or related entitlements, except as permitted in writing by Nation;

 
(d)  
Paltar shall deliver to Nation, within 60 days following the Earn-In Closing
Date, consolidated financial statements for Paltar’s three most recently
completed fiscal years audited by a PCAOB approved auditor in US GAAP, together
with such additional fiscal period financial statements as may be required under
SEC regulations; and

 
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(e)  
Paltar will not, without the prior written consent of Nation, which may be
granted or withheld by Nation in its sole and absolute discretion, transfer any
of the Assets to any other party except in accordance with the terms of this
Agreement.

 
Binding Agreement
 
19.  
Upon acceptance of the terms of this Agreement by all of the parties hereto,
this Agreement shall be deemed to constitute and shall be a legally valid and
binding agreement.

 
Confidentiality
 
20.  
Paltar acknowledges that Nation is a public company and has an obligation to
disclose all material information about its affairs.  Paltar agrees that it will
not trade in the securities of Nation while in possession of, and will ensure
that its management does not so trade, nor will Paltar inform others of (except
on a need to know basis and subject to a non-disclosure agreement), any
non-disclosed material information about Nation.

 
General
 
21.  
The parties acknowledge that any provision of this Agreement that would effect
an acquisition of an interest in Australian urban land [within the meaning of
the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“FATA”)] is subject to
and conditional upon the person making the acquisition not having received any
order or notice under FATA prohibiting the person from making the acquisition or
making the acquisition subject to conditions which are unacceptable to the
person.  The parties further acknowledge that the Nation Purchase Option may
constitute the acquisition of an interest in Australian urban land and,
accordingly, Nation Australia and/or Hislop shall, on or as soon as practicable
after the date of this Agreement make and pursue all necessary applications and
notifications under FATA as required.  The “FATA Approval Date” referred to in
Paragraph 1 of this Agreement shall be the earliest to occur of the following:
(i) The date upon which Nation Australia receives notice that the grant of the
Nation Purchase Option is not prohibited under FATA (provided that any
conditions placed on the notice (if any) are acceptable to Nation Australia);
(ii) the date upon which a notice prohibiting the acquisition can no longer be
delivered to Nation Australia and / or Hislop under the FATA; and (iii) the date
upon which Nation Australia and / or Hislop (as applicable) waive this condition
in accordance with Paragraph 22.

 
22.  
The obligation to pursue applications and notifications under FATA, and the
receipt of any approvals thereunder, may be waived by Nation Australia or Hislop
(as applicable) in its or his sole and absolute discretion.

 
23.  
Each party will pay its own legal costs, whether or not the transactions
contemplated hereby are completed.

 
24.  
This Agreement shall be governed and interpreted under the laws of the State of
Wyoming.

 
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25.  
This Agreement may be executed in counterparts with the same effect as if each
of the parties hereto had signed the same document and all counterparts will be
construed together and constitute one and the same instrument.

 
26.  
This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, personal representatives,
successors and assigns.

 
27.  
This Agreement represents the entire agreement between the parties regarding the
transactions contemplated herein and supersedes all other prior agreements,
understandings, negotiations and discussions.

 
28.  
No modification or amendment of any provisions of this Agreement shall be valid
unless it is in writing and signed by the parties hereto and the Nation Board
has expressly voted in favor of such amendment (in writing or at a properly
convened meeting of the Nation Board in which any holders of equity interests of
Paltar have abstained from such vote).

 
[remainder of page intentionally blank]
 
 
 

 
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If the foregoing correctly sets out our agreement, please execute this letter in
the space provided.
 

 
NATION ENERGY
INC.                                                                                     PALTAR
PETROLEUM LIMITED
 
 
Per:           /s/ John R.
Hislop                                                                 Per:           /s/
Marc Bruner                                                      
                John R.
Hislop                                                                                             Marc
A. Bruner
 

 
AGREED TO AND ACCEPTED,
 

 
/s/ Zachary Bruner
)
   
Witness Signature
)
     
)
   
Zachary Bruner
)
 
/s/ Marc Bruner
Name
)
 
MARC A. BRUNER
 
)
   
___________________________
)
   
Address
)
   

 
 
AGREED TO AND ACCEPTED THIS 30th DAY OF AUGUST, 2015.

 
/s/ Carolyn Laurin
)
   
Witness Signature
)
     
)
   
Carolyn Laurin
)
 
/s/ John Hislop
Name
)
 
JOHN HISLOP
 
)
   
___________________________
)
   
Address
)
   

 
 
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SCHEDULE A

 

EXPLORATION PERMITS:
 
100% interest in the following permits:

Permits
Holder
Permit Date
EP 231
Paltar
05/09/2012
EP 232
Paltar
03/10/2013
EP 234
Paltar
05/09/2012
EP 237
Paltar
05/09/2012

 
and
 
 
50% interest in Northern Territory Exploration Permits 136 and 143, which are
subject to the Joint Venture Operating Agreement between Paltar and Sweetpea
Petroleum Pty Limited, dated September 16, 2011.

APPLICATIONS FOR EXPLORATION PERMITS
 
As to which Paltar will promise to deliver transfer instruments to Nation when
and if exploration permits are issued to Paltar:

Applications
Applicant
Application Date
EP(A) 197
Sweetpea
09/03/20101
EP(A) 230
Paltar
19/08/2011
EP(A) 233
Paltar
19/08/2011
EP(A) 235
Paltar
19/08/2011
EP(A) 236
Paltar
19/08/2011
EP(A) 238
Paltar
19/08/2011
EP(A) 239
Paltar
19/08/2011
EP(A) 240
Paltar
19/08/2011
EP(A) 241
Paltar
19/08/2011
EP(A) 242
Paltar
19/08/2011
EP(A) 243
Paltar
19/08/2011
EP(A) 244
Paltar
19/08/2011
EP(A) 245
Paltar
19/08/2011
EP(A) 246
Paltar
19/08/2011
EP(A) 247
Paltar
19/08/2011
EP(A) 248
Paltar
19/08/2011
EP(A) 249
Paltar
19/08/2011
EP(A) 250
Paltar
23/08/2011
EP(A) 251
Paltar
23/08/2011
NTC/P 12
Paltar
23/08/2011
NTC/P 13
Paltar
23/08/2011
EP(A) 266
Paltar
18/10/2011
EP(A) 267
Paltar
18/10/2011
EP(A) 268
Paltar
18/10/2011
EP(A) 269
Paltar
18/10/2011
EP(A) 270
Paltar
18/10/2011
EP(A) 271
Paltar
18/10/2011
EP(A) 272
Paltar
18/10/2011
EP(A) 273
Paltar
18/10/2011
EP(A) 306
Paltar
22/08/2011

 

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1 Partial interest in any exploration permit granted as a result of the
Application, as provided in the Joint Venture Operating Agreement with Sweetpea
Petroleum Pty Limited dated 16 September 2011, but only if such permit is
granted on or before 31 December 2016.

 
 
 
 
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