Document:

EXHIBIT 10.4

 

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES BEING OFFERED ARE EXEMPT FROM REGISTRATION. THE SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE.

 

CONVERTIBLE NOTE

 

FOR VALUE RECEIVED, BARREL ENERGY INC, a Nevada corporation (hereinafter called the "BORROWER"), hereby promises to pay to Gurminder Sangha  (the "HOLDER"), whose address for purposes hereof is, 14890 66a Ave, Surrey B.C  V3S 2W4, or his registered assigns or successors in interest, or order, without demand, the sum of Two Thousand Eight Hundred Dollars ($2,800.00), with any accrued and unpaid interest on or before December 31, 2015 (the "Maturity Date").

 

The following terms shall apply to this Note:

 

ARTICLE I 

INTEREST

 

INTEREST RATE. Interest payable on this Note shall accrue at the annual rate of five percent (5.0%) and be payable in arrears on the Maturity Date.

 

ARTICLE II

AMORTIZATION

 

PRINCIPAL PAYMENT. The Borrower shall repay the original principal amount of this Note (to the extent such amount has not been converted pursuant to Article III below), together with interest accrued to date on such portion of the original principal amount not previously paid (collectively the "PRINCIPAL AMOUNT"), on the Maturity Date.

 

ARTICLE III

CONVERSION RIGHTS

 

3.1. CONVERSION INTO THE BORROWER'S COMMON STOCK.

 

(a) The Holder shall have the right, but not the obligation, during the period from the date hereof until the close of business on December 31, 2015, to convert all or any portion of the principal portion of this Note and/or interest due and payable into fully paid, non-assessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, or any shares of capital stock of the Borrower into which such stock shall hereafter be changed or reclassified (the "COMMON STOCK") at the conversion price set forth below (the "CONVERSION PRICE").

 

	 
	
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Upon delivery to the Borrower of Holder's written request for conversion (the date of giving such notice of conversion being a "CONVERSION DATE"), the Borrower shall issue and deliver to the Holder within two business days from the Conversion Date that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Fixed Conversion Price as of the Conversion Date. In the event of any conversions of outstanding principal amount under this Note in part pursuant to this Article III, such conversions shall be deemed to constitute conversions of outstanding principal amount applying to the Principal Amount for the Maturity Date in chronological order.

 

(b) Subject to adjustment as provided in Section 3.1(c) below, the Conversion Price.

 

(c) The Conversion Price and number and kind of shares or other securities to be issued upon conversion, determined pursuant to Section 3.1(a) and 3.1(b), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

(i) Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other corporation (excepting the transaction in process whereby the Borrower will down stream certain operating assets to its consolidated and wholly owned subsidiary), this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the number of shares of Common Stock the Holder could have acquired immediately prior to such consolidation, merger, sale or conveyance based on the Fixed Conversion Price or the Conversion Price, as the case may be, as of the closing date thereof. It is agreed that the discount on conversion will be 30% off the bid price of common shares traded on the OTC BB. It is also agreed that the minimum price shall be fourteen cents($0.14) per share. The foregoing provision shall apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.

 

(ii) Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the number of shares of Common Stock into which the Note would have been convertible immediately prior to such reclassification or other change at the Fixed Conversion Price or the Conversion Price, as the case may be, as of the effective date for such reclassification or change.

 

(iii) Stock Splits and Combinations. If the shares of Borrower’s Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, the Holder of this Note shall not be prejudiced thereby.

 

	 
	
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(d) During the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note, and shall issue all such conversion shares to the order of an escrow holder designated by Holder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. The Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for escrowed shares of Common Stock that shall be due to Holder upon any conversion of all or any portion of this Note.

 

3.2 METHOD OF CONVERSION. This Note may be converted by the Holder in whole or in part as described in Section 3.1(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

 

3.3 FURTHER STOCK ISSUANCES. Borrower covenants and agrees that, for so long as any amounts remain due hereunder, it shall not, without Holder’s prior written consent (which shall not be unreasonably withheld), make any material change in its authorized or issued shares of any class, declare or pay any dividend or other distribution, or issue, encumber, purchase or otherwise acquire any of its shares of any class.

 

ARTICLE IV 

EVENT OF DEFAULT

 

The occurrence of any of the following events is an Event of Default ("EVENT OF DEFAULT"):

 

4.1 FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES. The Borrower fails to pay any installment of principal, interest or other fees when due and such failure continues for a period of fifteen (15) days after the due date.

 

4.2 BREACH OF COVENANT. The Borrower breaches any material covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of thirty (30) days after written notice to the Borrower from the Holder.

 

4.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any material representation or warranty of the Borrower made herein, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith is false or misleading and can not be cured for a period of thirty (30) days after written notice thereof is received by the Borrower from the Holder.

 

4.4 RECEIVER OR TRUSTEE. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed.

 

4.5 JUDGMENTS. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its property or other assets for more than $50,000, and remains unvacated, unbonded or unstayed for a period of thirty (30) days.

 

	 
	
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4.6 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Borrower.

 

4.7 STOP TRADE. An SEC stop trade order or trading suspension of the Common Stock for 5 consecutive days or 5 days during a period of 10 consecutive days, excluding in all cases a suspension of all market trading.

 

4.8 FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE. The Borrower's failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note.

 

If an Event of Default occurs and is continuing, the Holder may make all sums of principal, interest and other fees then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand, presentment or notice, or grace period, all of which hereby are expressly waived.

 

ARTICLE V 

MISCELLANEOUS

 

5.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

5.2 NOTICES. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Borrower at the address as set forth on the signature page of this Note, and to the Holder at the address set forth on the first page of this Note for Holder, or at such other address as the Borrower or the Holder may designate by ten days’ advance written notice to the other party hereto.

 

5.3 AMENDMENT PROVISION. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

	 
	
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5.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder.

 

5.5 GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Minnesota or in the federal courts located in the state of Minnesota; provided, however that the Holder may choose to waive this provision and bring an action outside the state of Minnesota. The Borrower agrees to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party their reasonable attorney's fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note.

 

5.6 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

 

5.7 CONSTRUCTION. Each party acknowledges that they participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor one party against the other.

 

5.8 SIGNED FACSIMILE. A signed copy of this document sent by facsimile shall be as valid as the original.

 

	 
	
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name effective as of this 1st day of December, 2015.

 

BARREL ENERGY INC,

A Nevada Corporation

 

By: /s/ Jurgen Wolf

 

Name: Jurgen Wolf 

Title: Director

 

	 
	
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NOTICE OF CONVERSION

 

(To be executed by the Holder on or before September 15, 2015, to convert all or any portion of the Note)

 

The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by BARREL ENERGY INC, on ___________, 2015, into Shares of Common Stock of BARREL ENERGY INC (the "Company"), according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion:_____________________________________________________________

 

Shares To Be Delivered:_________________________________________________________

 

Signature:______________________________________________________________________

 

Print Name:_____________________________________________________________________

 

Address:________________________________________________________________________

 

________________________________________________________________________________

 

 

7EXHIBIT 10.5

 

FAMOUT AND PARTICIPATION AGREEMENT

BISON AREA, ALBERTA

 

THIS AGREEMENT made as of the 26th day of November, 2003

 

BETWEEN:

 

INVASION ENERGY INC.,

a body corporate, having an office at the City of

Calgary, in th Province of Alberta

(hereinafter referred to as "Farmar" or "Participant" or "Invasion")

 

OF THE FIRST PART

 

-and -

 

ELM ENERGY MANAGEMENT LTD.

a body corporate, having an office at the City of Calgary,

in the Province of Alberta

(hereinafter referred to as "Elm" or "Farmee')

 

-and -

 

OF THE SECOND PART

 

WHEREAS  Invasion is the holder of certain interests in the lands more particularly described in Schedule "A" under the heading "Farmout Lands"; and "Option Lands" and

 

WHEREAS Elm has agreed to farm in on a portion of Invasion's interest in the Farmout Lands and Invasion has agreed to participate for a portion of its interest in the Earning Well; and

 

WHEREAS the Parties wish to provide for the formal maintenance, exploration, operation, and development of the Farmout Lands, from and after the Effective Date, subject to the terms and conditions contained in this Agreement for the mutual benefit of the Parties hereto.

 

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises, and the mutual covenants contained herein and the benefits to be derived herefrom, the Parties agree as follows:

 

1. Interpretation

 

1.1 Definitions

 

Unless the context otherwise requires, each capitalized term used in this Head Agreement (including the recitals and this Clause) will have the meaning given to it in the Farmout & Royalty Procedure  attached  hereto as Schedule "B", and in addition, the following terms shall have the respective meanings hereby assigned to them, namely:

 

	 
	

	

 

Farmout and Participation Agreement, Page 2

 

	 	
(a)

	
"Assignment Procedure" means the 1993 CAPL Assignment Procedure (incorporated by reference), which will supercede Article 2404 of the Operating Procedure

	 	
 

	 
	 	
(b)

	
"Contract Depth" means a depth down to and including the lessor of 30 meters into the Muskeg formation or 1494 meters;

	 	
 

	 
	 	
(c)

	
"Farmee" means Elm;

	 	
 

	 
	 	
(d)

	
"Farmor" means Invasion;

	 	
 

	 
	 	
(e)

	
"Option Lands" means the lands described in Schedule "A";

	 	
 

	 
	 	
(f)

	
"Participant" means Invasion;

	 	
 

	 
	 	
(g)

	
"Petroleum Substances" means all petroleum, natural gas and all fluids and substances produced in association therewith, which may be produced from the Farmout Lands in accordance with such terms and conditions as may be from time to time prescribed by the relevant governmental bodies;

 

1.2 Schedules

 

The following Schedules are attached hereto and made part of  this Agreement:

 

	 	
(a)

	
Schedule "A", which describes the Farmout Lands, the Option Lands, Title Documents, and Encumbrances;

	 	
 

	 
	 	
(b)

	
Schedule "8", which is the 1997 CAPL Farmout & Royalty Procedure;

	 	
 

	 
	 	
(c)

	
Schedule "C", which is the 1990 CAPL Operating Procedure which includes the 1996 PASC Accounting Procedure attached as Exhibit "I"; and

	 	
 

	 
	 	
(d)

	
Schedule "D''. which is the Well Data Requirement Sheet.

 

2. Earning Well

 

	 	
(a)

	
Subject to surface accessibility and rig availability, Invasion on behalf of the Farmee and Participant shall drill the Earning Well at a location in 10-15-95-15W5 on the Farmout Lands, and shall drill such well diligently and continuously in accordance with Article 3.00 of the Farmout and Royalty Procedure:

	 	
 

	 
	 	
(b)

	
Costs of drilling, completing and capping or abandoning the Earning Well shall be shared in the following percentages:

 

	
Invasion

	 	15.0	
%

	
Elm

	 	 	
85.0

	
%

 

	 
	

	

 

Farmout and Participation Agreement, Page 3

 

3. Earning

 

Subject to Article 3.00 of the Farmout and Royalty Procedure, the Farmee shall earn 85% of the Farmor's working interest in all rights in the Farmout Lands, subject to a before payout overriding royalty of twelve percent (12%) on 85% of all proceeds therefrom, convertible to 40% of the Farmee's participating interest in the Earning Well spacing unit, and, in the balance of the Farmout Lands, 60% of the Farmor's 85% interest.

 

For greater clarity, the interests of the parties in the Farmout Lands after earning shall be:

 

	
 

	
 

	
Drill Spacing Unit

	
 

	
 

	
 

	
 

	
 BPO

	
 

	
APO

	
 

	
Balance of lands

	
Invasion

 

	
 

	
15% WI plus

12% GOR on 85% prod

	
 

	
49.0% WI

	
 

	
49.0% WI

	
Elm

	
 

	
85% WI subject to 12% GOR

	
 

	
51.0% WI

	
 

	
51.0% WI

 

4. Option Wells

 

The Farmee shall have the option to drill additional wells at mutually agreed locations on the Option Lands to earn the same amount of lands under the same earning terms as the Earning Well. In the  event time does not allow additional wells to be drilled in the 03/04 winter drilling season,  Invasion will extend such option to the following winter drilling season.

 

5. Test Well Tie-In

 

Invasion agrees to tie in all wells capable of production, into its existing gathering facilities and shall bear all tie in costs 100%. Invasion agrees to process and transport all gas belonging to the Farmee using its facilities under the January 1, 2004 Processing and Transportation Agreement between Invasion and Elm.

 

6. Cash Call

 

Invasion shall be allowed to cash call the Farmee for its proportionate share of the estimated AFE costs associated with drilling the Earning Well.

 

7. Operating Procedure

 

Invasion will be the initial Operator under the Farmout & Royalty Procedure and Operating Procedure and hereby accepts such  appointment.

 

	 
	

	

 

Farmout and Participation Agreement. Page 4

 

8. Area of Mutual Interest

 

There shall be a one mile area of mutual interest surrounding the Farmout and Option Lands. Such AMI shall be in effect for 1 year from the date of this agreement and the Farmor and Farmee shall be eligible to participate therein as to 49'% and 51% respectively.

 

9. Maintenance of Leases

 

Invasion shall pay all rentals, taxes,  Lessor royalties, overriding royalties and all payments arising out of or burdens on the Title Documents in accordance with the interests as set forth in Clause 3 hereof. The Farmee agrees to reimburse the Farmor for its share of all lease rentals from the Effective date until it has completed its earning hereunder, or has elected not to drill any further Option Wells, whichever is the latter.

 

10. Address for Service

 

The address for each of the Parties for service of notices shall be as follows:

 

	
 

	
 Invasion Enery Inc.

	
 

	
 Elm Energy Management Ltd.

	
 

	
 2500, 645 - 7th Avenue S.W.

	
 

	
 200, 118 - 81 Avenue S.W.

	
 

	
 Calgary, AB T2P 4G8

	
 

	
 Calgary, Alberta T2P 1B3

 

11. Assignment

 

The Assignment Procedure will be deemed to apply as if it had been included as a schedule to this Agreement.  Notwithstanding Clause 2.02 of the Assignment Procedure, no provision of the Assignment Procedure shall be construed so as to make th   assignee responsible for any obligation or liability which had arisen or accrued prior to the   ransfer Date (as defined in the Assignment Procedure).

 

12. Encumbrance of Interest

 

If the interest of any Party in the Farmout Lands is now on hereinafter shall become encumbered by any royalty, excess royalty, production payment, carried interest or other charge of a similar nature, other than the encumbrances as set forth on Schedule "A", such additional encumbrance, royalty, interest payment or charge shall be charged to, and paid entirely by, the Party whose interest is or becomes thus encumbered. Any such encumbrance hereinafter made or granted by a Party shall be expressly made subject to the rights of the other Parties hereunder . In no event shall a Party acquiring an interest in such lands by virtue of the operation of any provision of the body of this agreement or of the Operating procedure (except for Article XXIV of the Operating Procedure, where applicable) ever be required to assume any part of such interest, royalty, payment or charge.

 

	 
	

	

 

Farmout and Participation Agreement, Page 5

 

13. Goods and Services Tax (GST)

 

	 	
(a)

	
Effective as of the Effective Date, the parties to this Agreement hereby elect jointly to have the Operator or any successor to the initial Operator, account for GST in the course of any joint venture activity attributable to the electing participants and parties to this Agreement pursuant to subsection 273(1) of the Excise Tax Act.

	 	
 

	 
	 	
(b)

	
For the purposes of Subsection 273(1) of the Excise Tax Act, this Operating Agreement covers any marketing arrangements between the perator and the other parties, wherein the Operator agrees to market product n behalf of such other parties.

 

14. Limitation Act

 

The two-year period for seeking a remedial order under section 3(1)(a) of the Limitations Act, R.S.A. 2000 c. L-12, as amended, for any claim (as defined in that Act) arising in connection with this agreement is extended to:

 

	 	
(a)

	
for claims disclosed by an audit, two years after the time this agreement permitted that audit to be performed; or

	 	
 

	 
	 	
(b)

	
for all other claims, four years.

 

15. ELM Partners and Beneficial Interests

 

The Operator acknowledges that ELM Energy Management Ltd. ("ELM") may have other partners, including Qwest Energy Corp. limited partnerships (the "ELM Partners") that will have a beneficial interest in certain wells and associated lands. However, the Operator is only required to look to ELM for performance of any duties and obligations required to be carried out under the Agreement prior to ELM earning its interest hereunder and prior to the appropriate Notices of Assignment  being affected. At the request of ELM, the Operator agrees to use its reasonable efforts to assign and novate the ELM Partners into the lands, interests and applicable agreements.

 

Operations

 

The Operator confirms that the operations will be performed in accordance with the Operating Procedure and if applicable the Farmout and Royalty Procedure. The Operator agrees to issue supplemental AFE's in accordance with the Operating Procedure and to keep ELM appraised of operations and costs in a timely manner.

 

Materials

 

The operator shall provide ELM with copies of geological, geophysical and engineering data, information and materials. ELM shall pay the reproduction cost of materials beyond information and data provided in the normal course of operations.

 

	 
	

	

 

Farmout and Participation Agreement, Page 6

 

Press Releases

 

Any Press Release related to ELM's participation shall contain a reference specifically to ELM and shall include the following:

 

"ELM Energy Management ltd. is the drilling program manager for Qwest Energy Inc. limited partnerships and certain Qwest limited partnerships have certain beneficial interests with ELM in these properties."

 

Offer to Purchase

 

At the request of ELM, the Operator or any affiliate of The Operator ("Operator") shall extend an Offer to Purchase the interest of ELM Energy Management Ltd. and "the ELM Partners" earned interest hereunder. The amount of the offer extended will be at Operator's sole discretion and ELM Energy Management Ltd. is under no obligation to dispose of its interest. In the event ELM Energy Management Ltd. and the ELM Partners wish to accept Operator's Offer to Purchase, a sale agreement shall be prepared containing industry standard provisions for oiland gas property or corporate transactions. It is acknowledged that ELM Energy Management Ltd. and the ELM Partners may elect to sell some but not all of the applicable interest.

 

[If clause 2401 8 from the CAPL Operating Procedure is in effect t e following shall apply. If the Operator extends an offer and it is rejected by ELM, Clause 2401 A shall apply provided that the sale price exceeds the previous offer by the Operator.]

 

Qwest Energy Corp. limited partnerships, ("Qwest LPs") have a requirement that the Operator will make an offer after 24 months of the limited partnerships final closing of the offering of that limited partnership, to purchase the shares of the subsidiary companies of Qwest LPs containing the interest in wells and associated lands after the 24 month period. The offer shall be at Operator's sole determination of the fair market value of the interests. The Qwest LP's shall be under no obligation to accept the said offer.

 

IN WITNESS WHEREOF the Parties have executed and delivered this Agreement as of the date first written above.

 

	INVASION ENERGY INC.				
	 	 	 	 	 
	/s/ Larry Braun	 	 		 
	Name: Larry Braun	 	 		 
	Title: President, Land	 	 		 

 

 

	ELM ENERGY MANAGEMENT LTD.				
	 	 	 	 	 
	/s/ Neal Gledhill	 	 		 
	Name: Neal Gledhill	 	 		 
	Title: President	 	 		 

 

 

This is the Execution page of a Farmout and Participation Agreement dated the 26th day of November, 2003, between Invasion Energy Inc. and Elm Energy Management Ltd.

 

	 
	

	

 

Farmout and Participation Agreement, Page 7

 

Schedule "A" '

 

Attached to and made part of a Farmout and Participation Agreement dated the 26th day of November, 2003 between Invasion Energy Inc. and Elm Energy, Management Ltd.

 

Farmout Lands:

 

	
Legal DescriQtion

	
 

	
Invasion I nterest

	
 

	
Title Documents

	
 

	
Encumbrances

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Secs 11,13,14-95-15W5

	
 

	
100.00%

	
 

	
CR 124394A

	
 

	
Crown

	
PNG to base Gilwood

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Sec. 15-95-15W5

	
 

	
100.00%

	
 

	
CR 0503120270

	
 

	
Crown

	
AII PNG

	
 

	
 

	
 

	
 

	
 

	
 

 

Otion Lands:

 

	
Legal DescriQtion

	 	
Invasion I nterest

	 	
Title Documents

	 	
Encumbrances

	 	 	 	 	 	 	 
	
Secs. 29,31,32-95-15W5

	 	
100.00%

	 	
CR 5400030049

	 	
Crown

	
Sec 36-95-16W5

	 	 	 	 	 	 
	
All PNG excl NG Bluesky Gething in S29

						
	 	 	 	 	 	 	 
	
Secs 5,6,7-96-15W5

	 	
100.00%

	 	
CR 5499070027

	 	
Crown

	
Secs 1,11,12-96-16W5

	 	 	 	 	 	 

 

	 
	

	

  

Schedule "B"

 

Attached to and made part of a Farmout and Participation Agreement dated the 26th day of
November, 2003 between Invasion Energy Inc. and Elm Energy Management Ltd.

 

Farmout & Royalty Procedure Elections and Amendments

 

1. Effective Date (Subclause 1.01(f)): November 26, 2003

 

2. Payout  (Subclause  1.01(t)): Alternate A

    Alternate B

 

If Alternate B applies:     m3 of equivalent production and         years.

 

3. Incorporation of Clauses from 1990 CAPL Operating Procedure (Clause 1.02)

 

4.  Article 4.00 (Option Wells) will _ü_ / will not       apply.

 

5. Article  5.00  (Overriding Royalty)  will _ü_ / will not       apply.

 

6. Quantification of Overriding Royalty (Subclause 5.01A, if applicable).

 

	
 

	
(a)  Crude Oil 

	
 

	
Alternate 1

	
 

	
 

	
 

	
lf Alternate 1 applies, 12%

	
 

	
 

	
 

	
If Alternate 2 applies,       min      %, max      %

	
 

	
 

	
 

	
 

	
 

	
(b) Other Substances

	
 

	
Alternate 1

	
 

	
 

	
 

	
If Alternate 1 applies, 12%

	
 

	
 

	
 

	
If Alternate 2 applies,      % in (i) and      % in (ii)

 

 

 

7. Permitted Deductions (Subclause 5.04B, if applicable)

 

Alternate 1 only      

Alternate 2 only      

Alternates 1 and 2      

If Alternate 2 applies, 50% of Market Price.

 

8. Article 6.00 (conversion of Overriding Royalty)   will   ü / will not       apply.

 

9. If Article 6.00 applies, conversion to 34% Working Interest in Subclause 6.04A.

 

10. Article.8.00 (Area of Mutual Interest) will   ü /will not       apply.

 

11. Reimbursement of Land Maintenance Costs (Clause 11.02) will       will not  üapply. If applicable, reimbursement of $      .

 

	 
	

	

 

Schedule "C"

 

Attached to and made part of a Farmout and Participation Agreement dated the 26th day of

November, 2003 between Invasion Energy Inc. and Elm Energy Management Ltd.

 

1990 CAPL OPERATING AGREEMENT

 

	
I. Insurance (Clause 311)

	
 

	
Alternate B

	
II. Marketing Fee (Clause 604)

	
 

	
Alternate B(a) $.12 per barrel, (b) $.02 per Mcf, (c) N/A, (d) N/A

	
III. Casing Point Election (Clause 903)

	
 

	
Alternate.A

	
IV.  Penalty for Independent Operations (Clause 1007)

	
 

	
Development walls 300%

		
 

	
Exploratory wells 500%

	
V.  Title Preserving Well (Clause 1010)

	
 

	
180 days

	
VI.  Disposition of Interests (Clause 2401)

	
 

	
Al!ernate A

	
VII.  Recognition Upon Assignment (Clause 2404)

	
 

	
Alternate Delete

 

1998 PASC ACCOUNTI NG PROCEDURE

 

I. Operating Advance (Clause 105) Proportionate share of 10 %

 

II. Approvals (Clause 110)  2 or more parties totaling 75%

 

III. Expenditure Limits (Clause 112) (a) $25,000  (c) $25,000

 

IV. Employee Benefits (Clause 202(b))  25%

 

V. Housing (Clause 213(b)) Shall be chargeable

 

V.   Warehouse Handling (Clause 216)  5%

 

VI. Allocation Options Delete

 

VI. Overhead Rates (Clause 302)

 

(a) For each Exploration Project:

(1) 5% first  $50.000.00

(2) 3% of next  $100,000.00

(3) 1% of cost over $160,000

 

(b) For each DrillingWell:

(1) 3% of first $ 50,000.00

(2) 2% of next $ 100,000.00

(3) 1% of coat over $150,000

 

(c) For each initial construction:

(1) 5% of first $50,000.00

(2) 3% of next $100,000.00

(3) 1% of cost over $150.000

 

(d) For each Construction Project:

Flat          % 

 

OR

 

(1) 5% first $50,000.00

(2) 3% of next $100,000.00

(3) 1% of cost over $150,000

 

(d)  For Operation and Maintenance:

(1) 10% of the cost; and

(2) $150.00 per month for producing well per month; or

(3)            flat rate per monlh for producing, lnjection and water source operations

The rates In Subclauses (e)(2) and (e)(3) wlll       /will not   X   be adjusted as of the first day of July each year.

 

Vii. Dispositions (Clause 406)

$25,000.00 for requiring approval.

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