Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Red Sky Resources Inc. - Exhibit 10.1

 EXHIBIT 10.3 

 AGREEMENT AND PLAN OF MERGER 

                THIS
  AGREEMENT AND PLAN OF MERGER (the “Merger Agreement”) is entered
  into on the 6th of December, 2004 by Pacific Petroleum Inc., a Delaware corporation
  (“Pacific Petroleum”) and Red Sky Resources Inc., a Nevada corporation
  (“Red Sky”). 

 PRELIMINARY STATEMENTS 

                Red
  Sky is a wholly owned subsidiary of Pacific Petroleum.

                The
  Boards of Directors of Red Sky and Pacific Petroleum deem it desirable
  and in the best interests of their respective shareholders that Pacific Petroleum
  be merged with and into Red Sky (the “Merger”) on the terms and
  conditions of this Agreement. 

                The
  Boards of Directors of Red Sky and Pacific Petroleum, by resolutions duly adopted,
  have approved and adopted this Agreement.

                The
  shareholders of Pacific Petroleum have approved the merger. 

                It
  is intended that the Merger be completed pursuant to Section 253 of the Delaware
  General Corporation Law and Article 92A.190 of the Nevada Revised Statutes.

                It
  is intended that the Merger will qualify as a reorganization within the meaning
  of Section 368 of the Internal Revenue Code of 1986, as amended, and the rules
  and regulations promulgated thereunder 

                NOW
  THEREFORE the parties do hereby adopt the plan of reorganization encompassed
  by this Merger Agreement and do hereby agree that Pacific Petroleum shall merge
  with and into Red Sky on the following terms, conditions and other provisions:

 STATEMENT OF TERMS 

 SECTION 1 

  THE MERGER 

                1.1               
  The Merger. Pacific Petroleum will be merged with and into Red Sky in
  accordance with this Agreement, the Certificate of Merger substantially in the
  form of Exhibit A attached to this Agreement (the “Certificate
  of Merger”), and the applicable provisions of the Delaware General Corporation
  Law (the “Delaware Law”) and the Articles of Merger substantially
  in the form of Exhibit B attached to this Agreement (the “Articles of
  Merger”) and the Nevada Revised Statutes (the “Nevada Law”).
  Following the Merger, Red Sky will continue as the surviving corporation (the
  “Surviving Corporation”) and the separate existence of Pacific Petroleum
  will cease, except insofar as it may be continued by the Delaware Law and the
  Nevada Law. 

                1.2               
  Effective Time of the Merger. The Merger will be effective at the time
  (the “Effective Time”) of the later of (i) the filing of the Certificate
  of Merger with the Secretary of State of the State of Delaware, and (ii)
  the filing of the Articles of Merger with the Secretary of State of the State
  of Nevada, which filings are to be completed as soon as practicable following
  the execution of this Agreement. 

                1.3               
  Effect of the Merger. The Merger will have the effects set forth in the
  Delaware Law, including section 259 of the Delaware Law, and Section 92A.250
  of the Nevada Law. Without limiting the generality of the foregoing, and subject
  thereto, at the Effective Time all the property, rights, privileges, powers
  and franchises of Red Sky and Pacific Petroleum will vest in 

 Surviving Corporation without further act or deed, and all
  debts, liabilities and duties of Red Sky and Pacific Petroleum will become the
  debts, liabilities and duties of the Surviving Corporation.

                1.4               
  Articles of Incorporation; Bylaws. 

                                     (a)
                 The
  articles of incorporation of Red Sky in effect immediately prior to the Effective
  Time will continue unchanged and will be the articles of incorporation of the
  Surviving Corporation until thereafter amended in accordance with the terms
  thereof and in accordance with applicable law. 

                                     (b)
                 At
  the Effective Time, the by-laws of Red Sky in effect immediately prior to the
  Effective Time, will be the by-laws of the Surviving Corporation until thereafter
  amended in accordance with the terms thereof and in accordance with applicable
  law. 

                1.5               
  Directors. The directors of Red Sky immediately prior to the Effective
  Time will be the directors and officers, respectively, of the Surviving Corporation
  after the Effective Time. The directors will hold office until their successors
  are duly elected, appointed or qualified or until their earlier death, resignation
  or removal in accordance with certificate of incorporation and bylaws of the
  Surviving Corporation.

                1.6               
  Officers. The officers of Red Sky immediately prior to the Effective
  Time will be the directors of the Surviving Corporation after the Effective
  Time. The officers will hold office until their successors are duly elected,
  appointed or qualified or until their earlier death, resignation or removal
  in accordance with articles of incorporation and bylaws of the Surviving Corporation.

                1.7               
  Taking of Necessary Action. If after the Effective Time any further action
  is necessary to carry out the purposes of this Agreement or to vest the Surviving
  Corporation with full title to all assets, rights, approvals, immunities and
  franchises of either Red Sky or Pacific Petroleum, and the officers and directors,
  or the former officers and directors, as the case may be, of Red Sky and Pacific
  Petroleum and the Surviving Corporation will take all such necessary action.

 SECTION 2 

  MERGER CONSIDERATION 

                2.1               
  Merger Consideration.

                                     (a)
                 
  Conversion of Pacific Petroleum Common Stock. Each share of Pacific Petroleum
  common stock, par value $0.0001 per share (“Pacific Petroleum Common
  Stock”) issued and outstanding immediately prior to the Effective Time
  will, by virtue of the Merger and without any action on the part of the holder
  thereof, be converted into one share of common stock of Red Sky (each a share
  of “Red Sky Common Stock”). 

                                     (b)
                 
  Conversion of Red Sky Common Stock. Each share of Red Sky common stock
  par value $0.0001 per share (“Red Sky Common Stock”) issued
  and outstanding immediately prior to the Effective Time will, by virtue of the
  Merger and without any action on the part of the holder thereof, be cancelled
  and returned to the status of authorized but unissued shares. 

 2 

                2.2               
  Conversion Procedure. After the Effective Time, each holder of Pacific
  Petroleum Common Stock will be entitled to exchange his, her, or its certificate
  representing such Pacific Petroleum Common Stock (“Pacific Petroleum Stock
  Certificate”) for a certificate representing the number of shares of Red
  Sky Common Stock into which the number of shares of Pacific Petroleum Stock
  previously represented by such certificate surrendered have been converted pursuant
  to Section 2.1(a) of this Agreement. Each holder of Pacific Petroleum Common
  Stock may exchange his, her or its Pacific Petroleum Stock Certificate by delivering
  it to the Surviving Corporation duly endorsed in blank (or accompanied by duly
  executed stock powers duly endorsed in blank), in each case in proper form for
  transfer, with signatures guaranteed, and, if applicable, with all stock transfer
  and any other required documentary stamps affixed thereto and with appropriate
  instructions to allow the transfer agent to issue certificates for the Red Sky
  Common Stock to the holder thereof. Until surrendered as contemplated by this
  Section 2.2, each Pacific Petroleum Stock Certificate will be deemed at any
  time after the Effective Time to represent only the right to receive Red Sky
  Common Stock certificates representing the number of whole shares of Red Sky
  Common Stock into which the shares of Pacific Petroleum Common Stock formerly
  represented by such certificate have been converted. Upon receipt of such duly
  endorsed Pacific Petroleum Stock Certificates, the Surviving Corporation will
  cause the issuance of the number of shares of Red Sky Common Stock as converted
  pursuant to Section 2.1(a) of this Agreement.

                2.3               
  No Fractional Shares. No fractional shares of Red Sky Common Stock will
  be issued as a result of the Merger. In lieu of any such fractional shares,
  each holder of Pacific Petroleum Common Stock who would otherwise have been
  entitled to receive a fraction of a share of Red Sky Common Stock in the Merger
  will be rounded up to the next nearest whole number of shares of Red Sky Common
  Stock. 

                2.4               
  No Further Ownership Rights in Pacific Petroleum Stock. The promise to
  exchange the Pacific Petroleum Common Stock for shares of Red Sky Common Stock
  in accordance with the terms of this Section 2 will be deemed to have been given
  in full satisfaction of all rights pertaining to the Pacific Petroleum Common
  Stock, and there will be no further registration of transfers on the stock transfer
  books of Pacific Petroleum of the shares of Pacific Petroleum Common Stock that
  were outstanding immediately prior to the Effective Time. From and after the
  Effective Time, the holders of Pacific Petroleum Common Stock outstanding immediately
  prior to the Effective Time will cease to have any rights with respect to such
  Pacific Petroleum Common Stock, except as otherwise provided in this Agreement
  or by law. 

                2.5               
  Distributions with Respect to Unsurrendered Pacific Petroleum Stock.
  No dividends or other distributions with a record date after the Effective Time
  will be paid to the holder of any unsurrendered Pacific Petroleum Stock Certificate
  until the surrender of such Pacific Petroleum Stock Certificate in accordance
  with Section 2.2(a) of this Agreement. Following surrender of any such Pacific
  Petroleum Stock Certificate, the Surviving Corporation will pay to the holder
  of the Red Sky Common Stock certificate issued in exchange the Pacific Petroleum
  Stock Certificate, without interest, (i) at the time of such surrender, the
  amount of dividends or other distributions with a record date after the Effective
  Time previously paid with respect to such Red Sky Common Stock, which such holder
  is entitled pursuant to Section 2.1(a) of this Agreement, and (ii) at the appropriate
  payment date, the amount of dividends or other distributions with a record date
  after the Effective Time but prior to such surrender and with a payment date
  subsequent to such surrender, payable with respect to such Red Sky Common Stock.

                2.6               
  Lost, Stolen or Destroyed Certificates. If any certificate representing
  Pacific Petroleum Common Stock has been lost, stolen or destroyed, upon the
  making of an affidavit of that fact by the person claiming such certificate
  or agreement to be lost, stolen or destroyed and, if required by the Surviving
  Corporation, the posting by such person of a bond in such reasonable amount
  as the Surviving Corporation may direct as indemnity against any claim that
  may be made against it with respect to such certificate, the Surviving Corporation
  will cause to be issued 

 3 

 in exchange for such lost, stolen or destroyed certificate,
  the applicable Red Sky Common Stock deliverable in respect thereof, pursuant
  to Section 2.1 of this Agreement. 

 SECTION 3 

  MISCELLANEOUS PROVISIONS 

                3.1               
  Further Assurances. Each of the parties hereto will cooperate with the
  others and execute and deliver to the other parties hereto such other instruments
  and documents and take such other actions as may be reasonably requested from
  time to time by any other party hereto as necessary to carry out, evidence,
  and confirm the intended purposes of this Agreement. 

                3.2               
  Amendment. This Agreement may not be amended except by an instrument
  in writing signed by each of the parties. 

                3.3               
  Abandonment. At any time before the Effective Date, this Merger Agreement
  may be terminated and the Merger abandoned by either the board of directors
  of Pacific Petroleum or Red Sky, or both, notwithstanding any prior approval
  of the Merger by the shareholders of Pacific Petroleum. 

                3.4               
  Governing Law. This Agreement will be governed by and construed in accordance
  with the laws of the State of Nevada. 

                3.5               
  Counterparts. This Agreement may be executed in one or more counterparts,
  all of which will be considered one and the same agreement and will become effective
  when one or more counterparts have been signed by each of the parties and delivered
  to the other parties, it being understood that all parties need not sign the
  same counterpart. 

                3.6               
  Fax Execution. This Agreement may be executed by delivery of executed
  signature pages by fax and such fax execution will be effective for all purposes.

                3.7               
  Schedules and Exhibits. The schedules and exhibits are attached to this
  Agreement and incorporated herein. 

                IN
  WITNESS WHEREOF, this Agreement and Plan of Merger, having first been duly approved
  by the board of directors of Pacific Petroleum and Red Sky, is hereby executed
  on behalf of each corporation. 

	 PACIFIC PETROLEUM INC.  	 
	 a Delaware Corporation  	 
	  	 
	  	 
	 /s/ D. Barry Lee  	 
	 D. Barry Lee, Chief Executive Officer  	 
	  	 
	  	 
	  	 
	  	 
	 RED SKY RESOURCES INC.  	 
	 a Nevada Corporation  	 
	  	 
	  	 
	 /s/ D. Barry Lee  	 
	 D. Barry Lee, Chief Executive Officer  	 

 4EX 10.1 - Agreement dated January 10, 2005 with Netco Energy Inc.

EX 10.1 

  

Nation Energy Inc.

1100, 609 West Hastings St.

Vancouver, BC

V6B 4W4

January 10, 2005

Netco Energy Inc.

1100, 609 West Hastings St.

Vancouver, BC

V6B 4W4

Attention:       Chris Schultze

Re:        Farmin Agreement

              Sections 10 & 15; Twp 59, Rge 2 W6M

              Boltan Area, Alberta

THIS FARMIN AGREEMENT made as of the 10th day of January, 2005.

AMONG:

NATION ENERGY INC., a body corporate having an office in the City of Vancouver, in the Province of British Columbia,

(hereinafter referred to as "Nation" or "Farmor")

 - and -

NETCO ENERGY INC., a body corporate having an office in the City of Vancouver, in the Province of British Columbia,

(hereinafter referred to as "Netco" or "Farmee")

WHEREAS Nation entered into a Participation Agreement with Olympia Energy Inc. ("Olympia") dated the 21th day of November, 2001, a copy of which is attached hereto as Schedule "A" (hereinafter called the "Participation Agreement") wherein Nation earned certain working interests in lands, as designated in the Participation Agreement; and

WHEREAS Netco has agreed to participate with Nation as to certain interests earned by Nation under its Participation Agreement with Olympia, as if it were a party thereto and to earn an interest in the Farmout Lands pursuant to the earning terms provided hereunder; and

WHEREAS the parties desire to provide for a manner in which participation and operations will be conducted on the lands to be earned under this agreement.

NOW THEREFORE this Agreement witnesses that, in consideration of the mutual covenants and agreements herein contained and subject to the terms and conditions hereinafter set out, the parties (“Parties”) hereto agree, as follows:

1.         DEFINITIONS

In this Agreement, including the recitals, unless the context otherwise requires, the definitions referred to in the Participation Agreement shall apply hereto. In addition to such definitions in the Participation Agreement, the following expressions shall have the respective meanings herein assigned to them, namely:

(a)   "the Farmout Lands", means the lands more particularly set forth and described in Schedule "B" attached hereto.

(b)   "the Title Documents", means those document(s) of title more particularly set forth and described in Schedule "B" of the Farmin Agreement attached hereto.

(c)   "Operator", means Olympia Energy Inc. or its designated successors.

(d)   "Operating Procedure", means the 1997 Farmout & Royalty Procedure which elections are attached to the Farmin Agreement.

(e)   "Party", means a person, firm or corporation which is bound by this Agreement or the Participation Agreement.

(f)    "Test Well", means the well to spud at 14-10-59-2 W5M.

2.           INTERPRETATION

Wherever the singular or masculine or neuter is used herein, the same shall be construed as meaning plural or feminine or body politic or corporate and vice versa as the context requires.

3.         WARRANTY OF TITLE

Nation warrants no better title to the Farmout Lands than has been conveyed to it pursuant to the terms of the Participation Agreement.     If the interests of any party in the Farmout Lands is now or hereafter shall become encumbered by any royalty, production payment or other charges of a similar nature, other than the encumbrances set out in Schedule "B" hereto, such additional royalty, production payment or other charges shall be charged to and paid entirely by the party whose interest is or becomes thus encumbered.

4.         HELD IN TRUST

Nation agrees that it shall hold and stand possessed of the interest of the Farmee ("Participating Interests") in and to the Farmout Lands and the Title Documents, and Nation shall hold such Participating Interests in trust for and on behalf of the Participant.

Nation covenants that it will not sell, assign, transfer, convey, encumber or surrender the Title Documents or Farmout Lands, insofar as they affect or relate to the Participating Interests held in trust hereunder for the Farmee, except upon written instructions of the Farmee.

Nation will use its best efforts to transfer to Netco the Participating Interests that it is entitled to hereunder, to the extent legally possible, when requested to do so in writing and Nation further agrees to execute any additional documents required to effect such transfer.

5.         COMMITMENT

Farmee acknowledges that it has reviewed and is familiar with the Participation Agreement attached hereto respecting the Farmout Lands and agrees to abide by all the terms, conditions and obligations contained therein as though it were a party thereto.  Farmee shall assume the following share of earning obligations with respect to all terms and conditions of the Participation Agreement and Farmout Lands:

Netco - an undivided 15.0% working interest in drilling and completion costs attributable to test well.

6.           EARNING

Providing Farmee has participated with Nation pursuant to the terms of the Participation Agreement and has fulfilled its obligations with respect to Clause 5 hereof, then Farmee shall have earned the following interest in the Farmout Lands:

In the Test Well Spacing Unit:

	Before Payout of Drill & Completion Costs

	15%;

	 	 
	After Payout of Drill & Completion Costs

	9%; and

	 	 
	In the balance of the Farmout Lands:

	9%.

7.           ASSIGNMENT

Netco shall not, prior to earning its interests hereunder, assign this Agreement in whole or in part without the written consent of Nation, consent not to be unreasonably withheld. Notwithstanding any such assignment by Netco, Nation may look to Netco for full performance of any duties and obligations required to be carried out by Netco under this Agreement.

Upon and after earning under this Agreement Netco shall be entitled to transfer, sell, assign, convey or set over unto any person, firm or corporation all or any part of its interests in the Farmout Lands and/or the Title Documents, but no such transfer, sale, assignment, conveyance or setting over shall operate to relieve Netco from any of its obligations hereunder unless the party to which such interest is conveyed shall, to the extent of the interest conveyed, assume and agree with Nation to perform and be bound by all the terms of this Agreement and, upon doing so, Netco shall thereupon be released from all obligations thereafter accruing hereunder with respect to the interest so conveyed.

8.           ENCUMBRANCES

To the knowledge of Nation, the Farmout Lands are currently unencumbered, save for Crown Lessor Royalties and the gross overriding royalties provided for in Schedule “B” attached, and Nation warrants and represents no better title to the Farmout Lands than as provided for in the Participation Agreement.  Nation represents and warrants that the Farmout Lands are free and clear of any encumbrances, whatsoever, created by, through or under Nation.

9.           FARMOUT AND PARTICIPATION ACKNOWLEDGEMENT

Netco agrees to be bound by all of the terms of the Participation Agreement, mutatis mutandis, as to the Participating Interest.

Upon the Netco having earned the Participating Interests from Nation, all subsequent operations on the Farmout Lands shall be governed pursuant to the terms of the Participation Agreement.

10.         OPERATIONS

All operations as between Nation and Netco during the interest earning phase and all subsequent joint operations shall be governed by the terms of this Agreement, the Participation Agreement, and the Farmout & Royalty Procedure attached thereto. Whenever there is a conflict between this Agreement and any Title Document, the terms and provisions of the Title Document shall prevail.

Notwithstanding any notice provisions in the Participation Agreement and/or the Farmout & Royalty Procedure attached thereto, failure by Netco to fulfill its obligations during the interest earning phase of this Agreement, including, but not limited to, the advancement of funds under Cash Call provisions in the manner and schedule requested by the Operator shall constitute a default under this Agreement, with Netco being deemed to have failed to earn the interest provided hereunder and its right to earn such interest shall thereafter be at an end.

11.       ABANDONMENT

Nation shall give immediate notice to Participant when the Earning Well has reached contract depth and the logs and tests preliminary to casing have been run. If the Operator elects to plug or abandon the well, Netco shall have deemed to make the same election as Nation.  If any Party elects to abandon the well, the Party wishing to complete the well shall proceed with such attempt and shall be entitled to acquire the interest of the non-participating Party in the well and associated spacing unit subject to the terms of this Agreement and the Farmin Agreement.  The completing Party shall be responsible to the non-participating Party for the reimbursement for the estimated salvageable material and equipment placed in the well prior to the completion attempt. If the well is successfully completed for the production of petroleum substances, the non-participating Party shall assign to the completing Party all of its right, title and interest in and to the zone(s) so completed in the Test Well spacing unit. If the completion of the well as a producer is unsuccessful it shall be abandoned for the joint account but the non-participating Party shall not be liable for any extra costs of the abandonment incurred by reason of the completion attempt.

12.       INDEMNIFICATION

Netco shall indemnify and save harmless Nation from and against all actions, suits, costs, claims and demands whatsoever by any third party arising out of or resulting from any act or omission of Netco, or its agents or employees, in respect to the operations proposed hereunder.

13.       LIABILITY

Netco shall be liable for its Participating Interest share, as set forth in clause 5 hereof, of any costs arising from damages, suits, demands, claims, etc. made against Nation or the Operator and resulting from operations hereunder except where such damages, suits or claims are the direct result of gross negligence and wilful misconduct by Nation or the Operator, in which case Nation or the Operator (as applicable) shall be solely liable for such action.

14.       CONFIDENTIAL INFORMATION

All information acquired by the Parties hereto as a result of any operations on the Farmout Lands shall be considered confidential and for their sole and exclusive use and benefit. Such information shall not be divulged to any party not a party hereto unless the Parties first agree in writing to the dissemination of such data and information.

15.       INSURANCE

In respect of the operations conducted hereunder Netco shall pay for its proportionate share of any Insurance Provisions.

16.       NOTICES

Addresses for Notices shall be as follows:

Nation Energy Inc.

1100, 609 West Hastings St.

Vancouver, BC

V6B 4W4

Fax: (604) 688-4712

Netco Energy Inc.

1100, 609 West Hastings St.

Vancouver, BC

V6B 4W4

Fax: (604) 688-4712

17.       EFFECTIVE DATE

The effective date of this Agreement shall be deemed to be as of the date above.

18.       MISCELLANEOUS

(a)   Each of the Parties hereto shall, from time to time and at all times hereafter, do such further acts and things and execute and deliver all such further deeds and documents as shall be reasonably required in order to fully perform and carry out the terms of this Agreement.

(b)   This Agreement shall enure to the benefit of and shall bind the Parties hereto and their respective successors and assigns.

(c)   This Agreement shall be for all purposes construed and interpreted according to the laws of the Province of Alberta and the laws of Canada applicable therein; and the courts having jurisdiction with respect to matters relating to this Agreement shall be the courts of said Province; and the Parties expressly attorn to the non-exclusive jurisdiction of the Courts of the Province of Alberta in all matters relating to this Agreement.

(d)   This Agreement supersedes all other agreements, documents, writings and verbal understandings amount the Parties relating to the Farmout Lands.

(e)   The liability of the Parties hereto shall be separate and not joint or collective, and each party shall be responsible only for its obligations as set out herein. It is not the purpose of this Agreement to create any partnership or joint venture relationship and neither this Agreement nor the operations hereunder shall be construed or considered as creating any such relationship.

(f)     Time shall be of the essence of this Agreement.

IN WITNESS WHEREOF the parties hereto have executed and delivered these presents as of the day and year first above written.

	NATION ENERGY INC.                                        

 

	NETCO ENERGY INC.

 

	Per:

	“John Hislop”

	Per:

	“Chris Schultze”

	 

 

	John Hislop

President 

 

	 

	Chris Schultze

President

 

SCHEDULE "A" attached to and forming part of a Farmin Agreement dated January 10, 2005 among NATION ENERGY INC., as Farmor and NETCO ENERGY INC. as Farmee:

 

PARTICIPATION AGREEMENT 

SMOKY AREA, ALBERTA

THIS AGREEMENT made as of the 21st day of November, 2001.

AMONG:

OLYMPIA ENERGY INC., a body corporate having an office in the City of Calgary, in the Province of Alberta,

(hereinafter referred to as "Olympia")

OF THE FIRST PART

- and -

NATION ENERGY INC., a body corporate having an office in the City of Vancouver, in the Province of British Columbia,

(hereinafter referred to as "Nation" or "Participant")

OF THE SECOND PART

WHEREAS Olympia Energy Inc. entered into a Farmin Agreement with AEC Oil & Gas ("AEC") dated the 4th day of October, 2001 a Farmin Agreement with Renata Resources Inc. ("Renata") dated the 10th day of October, 2001, and a Pooling and Participation Agreement with Birchill Resource Limited and Norglen Energy Corporation dated the 22nd day of October 2001 copies of which are attached hereto as Schedule "A" (hereinafter called the "Farmin Agreement") wherein AEC and Renata, (collectively "Farmor") gave Olympia the right to earn an interest in certain lands; and

WHEREAS Participant has agreed to participate with Olympia in the Farmin Agreement as if it were a party thereto and to earn an interest in the Farmout Lands pursuant to the earning terms provided hereunder; and

WHEREAS the parties desire to provide for a manner in which participation and operations will be conducted on the lands to be earned under the Farmin Agreement.

NOW THEREFORE this Agreement witnesseth that in consideration of the mutual covenants and agreements herein contained and subject to the terms and conditions hereinafter set out, the parties hereto agree as follows:

1.         DEFINITIONS

In this Agreement, including the recitals, unless the context otherwise requires, the definitions contained in the Farmin Agreement shall apply hereto. In addition to such definitions in the Farmin Agreement, the following expressions shall have the respective meanings herein assigned to them, namely:

(a)    "the Farmout Lands", means the lands defined in the Farmin Agreement.

(b)    "the Title Documents", means those document(s) of title more particularly set forth and described in Schedule "A" of the Farmin Agreement attached hereto.

 (c)    "Operator", means Olympia Energy Inc.

(d)    "Operating Procedure", means the 1997 Farmout & Royalty Procedure which elections are attached to the Farmin Agreement.

(e)    "Party", means a person, firm or corporation which is bound by this Agreement or the Farmin Agreement.

2.         INTERPRETATION

Whenever the singular or masculine or neuter is used herein, the same shall be construed as meaning plural or feminine or body politic or corporate and vice versa as the context requires.

3.         WARRANTY OF TITLE

Olympia warrants no better title to the Farmout Lands than has been conveyed to it pursuant to the terms of the Farmin Agreement.

If the interests of any party in the Farmout Lands is now or hereafter shall become encumbered by any royalty, production payment or other charges of a similar nature, other than the encumbrances set out in Schedule "A" hereto, such additional royalty, production payment or other charges shall be charged to and paid entirely by the party whose interest is or becomes thus encumbered.

4.         HELD IN TRUST

Olympia agrees that it shall hold and stand possessed of the interest of the Participant ("Participating Interests") in and to the Farmout Lands and the Title Documents, and Olympia shall hold such Participating Interests in trust for and on behalf of the Participant.

Olympia covenants and agrees that it will not sell, assign, transfer, convey, encumber or surrender the Title Documents or Farmout Lands insofar as affects or relates to the Participating Interests held in trust hereunder for Participant, except upon written instructions of Participant.

Olympia agrees that it will use its best efforts to transfer to Participant the Participating Interests that it is entitled to hereunder, to the extent legally possible, when requested to do so in writing and Olympia further agrees to execute any additional documents required to effect such transfer.

5.         COMMITMENT

Participant acknowledges that it has reviewed and is familiar with the Farmin Agreement attached hereto and agrees to abide by all the terms, conditions and obligations contained therein as though it were a party thereto. Participant shall assume the following share of earning obligations with respect to all terms and conditions of the Farmin Agreement:

Nation - an undivided 25.0% working interest

6.         EARNING

Providing Participant has participated with Olympia pursuant to the terms of the Farmin Agreement and has fulfilled its obligations with respect to Clause 5 hereof, then Participant shall have earned the following interest in the Farmout Lands: 

In the Test Well Spacing Unit:

	Before Payout of Drill & Completion Costs

	25%

	 	 
	After Payout of Drill & Completion Costs

	5%

	 	 
	In the balance of the Farmout Lands:

	15%

 

 

7.         AREA OF MUTUAL INTEREST

An area of mutual interest (AMI) shall be established to comprise all lands within one mile of the Farmout Lands and shall terminate one year after rig release of the Test Well drilled hereunder or one year from termination of this Agreement, whichever is the shorter. The interest of the Parties hereto in the AMI shall be:

	Olympia et al

	85.00%

	Nation

	15.00%

8.         ASSIGNMENT

Participant shall not, prior to earning its interests hereunder, assign this Agreement in whole or in part without the written consent of Olympia, consent not to be unreasonably withheld. Notwithstanding any such assignment by Participant, Olympia may look to Participant for full performance of any duties and obligations required to be carried out by Participant under this Agreement.

Upon and after earning under this Agreement the Participant shall be entitled to transfer, sell, assign, convey or set over unto any person, firm or corporation all or any part of its interests in the Farmout Lands and/or the Title Documents, but no such transfer, sale, assignment, conveyance or setting over shall operate to relieve such Participant from any of its obligations hereunder unless the party to which such interest is conveyed shall, to the extent of the interest conveyed, assume and agree with Olympia to perform and be bound by all the terms of this Agreement and upon doing so the Participant shall thereupon be released from all obligations thereafter accruing hereunder with respect to the interest so conveyed.

9.         ENCUMBRANCES

The Lands are currently unencumbered save for Crown Lessor Royalties and the gross overriding royalty provided for in the Farmin Agreement, and Olympia warrants and represents no better title to the Lands than as provided for in the Farmin Agreement.

10.       FARMOUT AND PARTICIPATION ACKNOWLEDGEMENT

The Participant agrees to be bound by all of the terms of the Farmin Agreement, mutatis mutandis, as to their Participating Interest.

Upon the parties having earned their interests, all subsequent operations on the Farmout Lands shall be governed pursuant to the terms of the Farmin Agreement.

11.       OPERATIONS

All operations as between Olympia and Participant during the interest earning phase of the Farmin Agreement and all subsequent joint operations shall be governed by the terms of this Agreement, the Farmin Agreement, and the Farmout & Royalty Procedure attached thereto. Whenever there is a conflict between this Agreement and any Title Document, the terms and provisions of the Title Document shall prevail.

Notwithstanding any notice provisions in the Farmin Agreement and/or the Farmout & Royalty Procedure attached thereto, failure by Participant to fulfil its obligations during the interest earning phase of this Agreement, including, but not limited to, the advancement of funds under Cash Call provisions in the manner and schedule requested by the Operator shall constitute a default under this Agreement, with Participant being deemed to have failed to earn the interest provided hereunder and its right to earn such interest shall thereafter be at an end.

12.       ABANDONMENT

Olympia shall give immediate notice to Participant when the Earning Well has reached contract depth and the logs and tests preliminary to casing have been run. If Olympia elects to plug or abandon the well, Participant shall have a period of twenty-four (24) hours after receipt of notice of such election where there is a drilling rig on location, or in all other cases, 15 days following receipt of said notice to elect to takeover and complete the well and in the event Participant fails to reply to said notice in the time period provided herein Participant will have deemed to make the same election as Olympia. It shall be understood that if any Party elects to abandon the well, the Party wishing to complete the well shall proceed with such attempt and shall be entitled to acquire the interest of the non-participating Party in the well and associated spacing unit subject to the terms of this Agreement and the Farmin Agreement. The completing Party shall be responsible to the non-participating Party for the reimbursement for the estimated salvageable material and equipment placed in the well prior to the completion attempt. If the well is successfully completed for the production of petroleum substances, the non-participating Party shall assign to the completing Party all of its right, title and interest in and to the zone(s) so completed in the Test Well spacing unit. If the completion of the well as a producer is unsuccessful it shall be abandoned for the joint account but the non-participating Party shall not be liable for any extra costs of the abandonment incurred by reason of the completion attempt.

13.       INDEMNIFICATION

The Participant shall indemnify and save harmless Olympia from and against all actions, suits, costs, claims and demands whatsoever by any third party arising out of or resulting from any act or omission of the Participant, or its agents or employees, in respect to the operations proposed hereunder.

14.       LIABILITY

The Participant shall be liable for its Participating Interest share, as set forth in clause 5 hereof, of any costs arising from damages, suits, demands, claims, etc. made against Olympia and resulting from operations hereunder except where such damages, suits or claims are the direct result of gross negligence and wilful misconduct by Olympia in which case Olympia shall be solely liable for such action.

15.       CONFIDENTIAL INFORMATION

All information acquired by the Parties hereto as a result of any operations on the Farmout Lands shall be considered confidential and for their sole and exclusive use and benefit. Such information shall not be divulged to any party not a party hereto unless the Parties first agree in writing to the dissemination of such data and information.

16.       INSURANCE

In respect of the operations conducted hereunder the Participant shall pay for its proportionate share of any Insurance Provisions.

17.       NOTICES

Addresses for Notices shall be as follows:

Olympia Energy Inc.

2100, 500 - 4th Avenue S.W.

Calgary, Alberta T2P 2V6

Fax: (403)265-2726

Nation Energy Inc.

1320, 925 W. Georgia Street

Vancouver, British Columbia V6C 3L2

Fax: (604) 682-5564

18.       EFFECTIVE DATE

The effective date of this Agreement shall be deemed to be as of the effective date of the Farmin Agreement.

19.       MISCELLANEOUS

(a)   Each of the Parties hereto shall, from time to time and at all times hereafter, do such further acts and things and execute and deliver all such further deeds and documents as shall be reasonably required in order to fully perform and carry out the terms of this Agreement.

(b)   This Agreement shall enure to the benefit of and shall bind the Parties hereto and their respective successors and assigns.

(c)   The Parties hereto agree that this Agreement shall be for all purposes construed and interpreted according to the laws of the Province of Alberta and that the courts having jurisdiction with respect to matters relating to this Agreement shall be the courts of said Province, to the jurisdiction of which courts the Parties by their execution of this Agreement do hereby submit.

(d)   This Agreement supersedes all other agreements, documents, writings and verbal understandings amount the Parties relating to the Farmout Lands.

(e)   The liability of the Parties hereto shall be separate and not joint or collective, and each party shall be responsible only for its obligations as set out herein. It is not the purpose of this Agreement to create any partnership or joint venture relationship and neither this Agreement nor the operations hereunder shall be construed or considered as creating any such relationship.

(f)     Time shall be of the essence of this Agreement.

IN WITNESS WHEREOF the parties hereto have executed and delivered these presents as of the day and year first above written.

	OLYMPIA ENERGY INC.

 

	NATION ENERGY INC.

 

	Per:

	"Andy Kirby"        

	Per:

	"Donald A. Sharpe"   

	 

 

	A.T. (Andy) Kirby

Land Manager 

 

	 

	D. Sharpe

President

 

SCHEDULE "A" TO A PARTICIPATION AGREEMENT DATED NOVEMBER 21, 2001

BETWEEN OLYMPIA ENERGY INC. AND NATION ENERGY INC. INCORPORATED BY REFERENCE AND COMPRISING:

	
  Farmin Proposal dated October 4, 2001 between
      AEC OIL & GAS, as Farmor and OLYMPIA ENERGY INC., as Farmee, as amended";

	
    Farmin Proposal dated October 10, 2001 between
        RENATA RESOURCES INC., as Farmor and OLYMPIA ENERGY INC., as Farmee,
        as amended";

  
	
    Pooling
        and Participation Agreement dated October 22, 2001 among OLYMPIA ENERGY
        INC., BIRCHILL RESOURCES LIMITED and NORGLEN ENERGY CORPORATION, as amended”.

  

SCHEDULE "B" attached to and forming part of a Farmin Agreement dated January 10, 2005 among NATION ENERGY INC., as Farmor and NETCO ENERGY INC. as Farmee:

	
    LANDS

 

	
  RIGHTS

	
  NATION WORKING INTEREST

	
  ENCUMBRANCES

 

	
   

  P&NG
    License No. 

  5497110012

 

Twp 59 Rge 2 W6M 

Sections 10 &15

	
   

  All P&NG
      Rights 

  Below base Cardium

   

	
   

  15%

	
   

  Lessor Royalty

  

NCGOR of 10% payable to Encana Oil & Gas Partnership on 48.75% of production

NCGOR of 10% payable 50% to Birchill Resources Ltd. and 50% to Rosetta Exploration Inc. on 26.25% of production

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}]]