SCHEDULE A

 

(a)

“Contract Depth” means the lesser of a depth sufficient to fully penetrate the Dunvegan formation or down to and including 775 metres subsurface;

 

(c)

“Farmee” means Buckeye, as to 80% of Luxor’s Pre-Farmout Rights;

 

(e)

“Mutual Interest Lands” means any interest in any single parcel of petroleum and natural gas rights where over 50% of that parcel, by surface area, is within one (1) mile of the Farmout Lands;

 

(f)

“Operating Procedure” means the standard form 2007 CAPL Operating Procedure, along with the standard form 1996 PASC Accounting Procedure annexed as Exhibit “I” thereto, which by this reference is incorporated into this Agreement subject to the elections and amendments that are attached as Schedule “C”;

 

(h)

“Pre-Farmout Rights” mean the 100% interest of Luxor in the Farmout Lands;

 

(i)

“ROFR Lands” shall mean the Part II Lands and the Part III Lands as identified on Schedule “A” attached hereto.

 

(a)

Schedule “A”, which describes the Title Documents, the Farmout Lands, the ROFR Lands, Luxor’s Pre-Farmout Rights and the Encumbrances;

 

(b)

Schedule “B”, which specifies the elections and amendments to the Farmout & Royalty Procedure;

(c)

Schedule “C”, which specifies the elections and amendments to the Operating Procedure;

 

(d)

Schedule “D”, which specifies the types of drilling information required to be supplied by the Participant to the Farmee pursuant to the Farmout & Royalty Procedure;

 

(e)

Schedule “E”, which is the Authority for Expenditure detailing the estimate of costs to drill and case (or abandon) the Test Well (“the Test Well Drilling AFE”).

3.

(a)  

Luxor, as Participant, is appointed the initial Operator under this Agreement, and the Farmout & Royalty Procedure shall be deemed to be amended so as to give effect to this provision;

 

4.

(a)  

On behalf of Farmee and Participant, Participant, between the period commencing on May 26, 2011 (or sooner if practicable) and ending on July 15, 2011, (subject to reasonable surface access, rig availability and regulatory approval), will Spud the Test Well at a location in 1-35-75-8-W6M on the Farmout Lands;

Farmee

80%

Participant

20%

 

subject to the Operating Procedure, except that the provisions of Clause 9.03 of the Operating Procedure will be deemed not to apply during the period prior to earning. For clarity, in the event that Farmee elects not to participate in the setting of casing in the Test Well if proposed by Participant, Farmee will be deemed to have forfeited its right to earn an interest in the Farmout Lands on which the non-participation election applies, and Farmee will have no further rights with respect to that Test Well or the Farmout Lands on which such Test Well was drilled; and the costs relating to the setting of production casing (less the costs relating to the abandonment of the Test Well if it was not cased) would be to the credit of Farmee.

Farmee

56%

Farmor

24%

 

(e)

Upon Farmee earning an interest in the Farmout Lands as set forth in subclause 4(d), the Test Well and the Farmout Lands will be operated pursuant to the Operating Procedure.

5.

(a)

For a period of one (1) year following the rig release date of the Test Well drilled

pursuant to Clause 4 hereof (“the Option Period”), Farmee will have a right of first

refusal to elect to farmin and participate with Farmor in the drilling of a test well that

may be proposed by Luxor on the Part II Lands identified on Schedule “A” attached hereto;

(b)

In the event that Luxor proposes to drill a test well on the Part II Lands (“the Part II

Lands Test Well”) during the Option Period, Farmor shall notify Farmee in writing

providing the details of such test well (such notification will include the same

requirements as if the Part II Lands Test Well was being proposed as an Independent Operation pursuant to the Operating Procedure). Within thirty (30) days of receipt of such notification, Farmee shall elect in writing to Luxor whether or not Farmee elects to farmin and participate in the Part II Lands Test Well. A non-response to Luxor’s notification shall be deemed an election not to farmin on the Part II Lands, and any further right to participate in the Part II Lands Test Well, and to earn an interest in the Part II Lands, will terminate.

 

(c)

In the event that Farmee elects to exercise its right of first refusal to farmin and participate in the Part II Lands Test Well, the terms of earning and the conduct of operations during the earning period will be the same, mutatis mutandis, as set forth in Clause 4 hereof. The term “Farmout Lands” shall be substituted with “Part II Lands”, and the term “Test Well” shall be substituted with “Part II Lands Test Well”, as applicable. For clarity, Farmee will have the right to participate in the Part II Lands Test Well as to 80% of Luxor’s Pre-Farmout Rights to earn 56% of the interest of Luxor after drilling, completing (or abandoning), equipping and tie-in (if required) of the Part II Lands Test Well.

 

(d)

Similarly, Farmee will have a right of first refusal on the Part III Lands on the same terms and conditions as set forth in subclauses 5(a), 5(b) and 5(c) above, if and when proposed by Luxor during the Option Period. For clarity, the election of Farmee to exercise its right of first refusal with respect to the Part III Lands may be exercised whether or not Farmee is, or was offered, or elects or elected, to exercise its right of first refusal with respect to the Part II Lands.

6.

 

7.

 

(a)

for claims disclosed by an audit, two (2) years after the time this Agreement permitted that audit to be performed; or

 

(b)

for all other claims, four (4) years.

 

(b)

With respect to the ROFR Lands, Article 8.00 of the Farmout & Royalty

Procedure will be in effect for a period of one (1) year from the rig release date of the Part II Lands Test Well, only if proposed pursuant to Clause 5, and only if Farmee elects to exercise its right of first refusal to farmin and participate in the Part II Lands Test Well. For clarity, the provisions of Article 8.00 of the Farmout & Royalty Procedure will not be in effect during the period prior to Farmee’s election to participate in the Part II Lands Test Well.

 

The parties further agree there will be no area of mutual interest with respect to the Part III Lands, and therefore Clause 8.00 of the Farmout & Royalty Procedure will be deemed to be amended accordingly.

9.

 

(a)

In the event that the provisions of this Agreement conflict with any of the provisions of the Schedules attached hereto, the provisions of this Agreement shall prevail;

 

(b)

In the event that the provisions of this Agreement conflict with any of the terms or

provisions of a Title Document or the Regulations, such provision of the Title Document

or the Regulations shall prevail;

(c)

This Agreement shall be interpreted in accordance with the laws of the Province of

Alberta and the parties hereto irrevocably attorn to the exclusive jurisdiction of the

Courts of the Province of Alberta;

(d)

This Agreement shall be legally binding on the parties hereto and shall enure to the

benefit of their respective successors and assigns;

(e)

Each of the Parties represents and warrants that it now has or is entitled to have full right,

full power and absolute authority to enter into this Agreement;

(f)

Each Party entitled to information obtained hereunder or pursuant to this Agreement may

use such information and its interpretations for its sole benefit only;

(g)

This Agreement may be executed in as many counterparts as necessary, and when all

counterparts are taken together, this Agreement shall be deemed to constitute one

Agreement.

 

 

 

 

Wally Pollock, President

Tel: 403 ###-###-####

Fax: 403 ###-###-####

Email: ***@***

 

 

 

 

 

Per:_/s/ Pol Brisset______________________

 

Title: _President________________________

 

 

Alberta Crown P&NG Lease No. 0510030702

Expiry: 2015 03 24

75-8-W6M: S & NE 35

PNG to base Bluesky-Bullhead

 

100%

 

Crown SS Royalty

 

 

Alberta Crown P&NG Lease No. 0509080476

Expiry: 2014 08 19

78-7-W6M: N 32

All P&NG

 

78-7-W6M: Lsds 1, 2, 3, 4 of Sec 32

P&NG below base Doe Creek

 

78-7-W6M: Lsds 5, 6, 7, 8 of Sec 32

P&NG below base Peace River

 

100%

 

Crown SS Royalty

 

 

1.  

Effective Date (Subclause 1.01(f)) – May 12, 2011

2.

Payout (Subclause 1.01(t), if Article 6.00 applies)  Not Applicable

 

Alternate A - ___

4.  

Article 4.00 (Option Wells) will ____ /will not __­X __ apply.

5.  

Article 5.00 (Overriding Royalty) will _____/will not __ X__ apply.

6.  

Quantification of Overriding Royalty (Subclause 5.01A, if applicable)  Not Applicable

-  

If Alternate 1 applies, _____%

-  

If Alternate 2 applies, ­­­­ ________, min. _____, max. _____

-  

If Alternate 1 applies, ______%

-  

If Alternate 2 applies, ____% in (I) and ____ in (ii)

7.  

Permitted Deduction (Subclause 5.04B, if applicable) – Alternate ______  Not Applicable

8.  

Article 6.00 (Conversion of Overriding Royalty) – will _____/will not ___­___ apply  Not Applicable

·  

If Article 6.00 applies, conversion to _____ of working Interest in Subclause 6.04A.

9.

Article 8.00 (Area of Mutual Interest) – will __X__ will not _____ apply (amended as per Clause 8(b) of the Head Agreement)

·  

If applies, reimbursement of $____________.

Clause 1.01 – Market Price Definition, optional sentence:

Will Apply

Will Not Apply

 

Clause 1.01 – Production Facility, optional Paragraph (f):

Will  Apply

Will Not  Apply

Estimated cost less than $     , if applies

 

Subclause 3.11C – Required Insurance:

Alternate (a) (b)

 

Subclause 10.02G – Receiving Party May Not Defer Response:

Will  Apply

Will Not  Apply

Total vertical depth less than       metres subsurface, if applies

 

Subclause 10.04A – Operator for Independent Operation:

 

Alternate (a)  (b)

 

Paragraph 10.07A(e) - Penalty Where Independent Well Results in Production:

Development Well: 300%

Exploratory Well: 500%

 

Subclause 10.10A – Definition of Title Preserving Well:

 

180 days

Article 21.00 – Dispute Resolution:

Will  Apply

Will Not  Apply

 

Paragraph 21.03(j) – Arbitration Proceedings – optional Paragraph for unresolved audit exceptions:

Will  Apply

Will Not  Apply2

Estimated total adjustment of less than $25,000.00, if applies

 

Clause 22.02 – Addresses For Service:

Luxor Oil and Gas Ltd.

300, 840 – 6 Avenue S.W.

Calgary, AB  T2P 3E1

Attention:  Land Manager

Fax: 403 ###-###-####

 

Buckeye Oil & Gas Canada, Inc.

300, 840 – 6 Ave SW

Calgary, AB  T2P 3E5

Attention:  President

Fax: 403 ###-###-####

Clause 24.01 – Right to Dispose:

Alternate (A)  (B)

If Alternate B, the date at which ROFR expires is      

 

Paragraph 24.02(f) – Exception for all Earning Agreements:

Will  Apply

Will Not  Apply