PARTICIPATION AGREEMENT
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A Production Specialties Company ("Production") has entered into a farm out
agreement dated January 1, 2001 with Greka AIM Inc., Nahama Natural Gas, and
Xxxxxx Xxxxxx ("Farmors") and Production has further farmed out to Brothers Oil
and Gas Inc. ("Brothers") a portion of Production's interest by agreement dated
March 19,2001 and Brothers further farmed a portion of this interest to
Andromeda Investments Ltd.(Andromeda").
B Andromeda offers to Micron Enviro Systmes Inc. ("Micron") the option to
participate in a 5% working interest as set out in Exhibit A and subject to the
following terms and conditions:
1) Payment of 5,00,000 common shares on or before 12:00 noon on Aug. 7,
2001. This payment funds the estimated dryhole cost of the initial
test well on Block A as well as all land and 3-D selsmic costs to
date estimated at $2,000,000 US.
2) Micron earns:
a) Initial test well Block A, Micron pays 100% of initial test
well to earn 37% net revenue interest until payout of intial
well. After payout farmors back into as to 25% working
interest. Subsequent development xxxxx will be drilled
earning Micron 28.125% net revenues interst.
b) Ininital test well Block B, Micron has option to participate
by paying 50% working interest to earn 18.75% net revenue
before and after payout. Subsequent development xxxxx to be
drilled on the same basis.
C All parties agree
1) To execute a mutually satisfactory 1982 AAPL Form 610 operating
agreement naming Production or its nominee as operator. This
agreement will contain "custom of the trade" provisions.
2) To execute such other agreements as are deemed resonable and
necessary to implement the intent of these aagreements.
D Optionees represent:
1)They have recieved adaquate information on which to base their
participation.
2)They agree that in the event of any failure to pay their full share
of the inital test well payment and or any drilling cost overruns,
Andromeda may, at its option, cancel these agreements and retain
funds advanced as liquidated damages.
All net revenue interest caloulations based on 20% landowner royalty
and 5% override to Brothers and Production. If land owner royalty
is higher or lower net revenue will be adjusted accordingly.
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Exhibit A
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Lessors: Greka AM Nahama Energy, Xxxxxx Xxxxxx
Acreage: 8000 acres+ located in Fresno County, California
Micron: have full access to 3D seismic, conventional seismic, and other geogical
data upon which to carry out due diligence.
Farm out terms (100%) interst
a) Non refundable depost on signing agreements: $ 50,000 US
b) Payment for completion of satisfactoy due dilligence: $ 300,000 US
c) Estimated dry hole and lease payment due on or about $ 991,200 US
March: ------------
$1,341,200 US
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Production Specialties or Nominee to be operator of this prospect:
Initial Test Well#1 (pool A)
a) Optionees pay 100% working interest to earn 74% net revenue interest before
payout. After payout, Greka et al back in for a 25% working interest and
related net revenue interest.
b) On subsequent xxxxx, in Pool A, drilling and earning will be on a heads up
(75%) working interest Optionees/25% working interest Greka et al.) Optionees
will earn 28.125% net revenue interest before and after payout.
Intial Test Well #2 (Poool B)
a) 180 days after the completion of a successful test well on Pool A, a second
test well will be spudded with Optionees having a 50% working interest and
Greka et al a 50% working interest.
b) All subsequent xxxxx on this pool will also be a 50/50 heads up basis
OPTIONOR
/s/ (unintelligible) May 29, 2001
Xxxxx Lunited - Director
Andrometla investments Limited
Xxxxxxxxxx Xxxxxx
Xxxxxxxxx
0 Xxxx Xxxxx
Xxxx Xxx Road
Grand Caymen, Caymen Islands
OPTIONEE
/s/ (unintelligible) May 29, 2001
Rod Hope- President
Micron Enviro Systems inc.
0000 Xxxxx Xxxxx Xxxx
Xxx Xxxxx, xxxxxx
00000
