SHORCO
THE SHORELINE COMPANIES, INC.
=============================
8360 East Hinsdale Avenue
Englewood, CO 80112
303-779-3661 Fax: 978-428-0529
E-Mail: _____________
COLORADO WYOMING RESERVE COMPANY
1801 Broadway Ste. #600
Denver, CO 80202
Attn: Mr. Kim Fuerst, President
Re: Lightning Draw/Paradox Basin Exploration Project
San Juan County, Utah
Gentlemen:
This Letter of Intent (LOI) when executed by the parties hereto shall serve as
an intent by The Shoreline Companies, Inc. (Shorco) to participate for up to a
Ten Percent (10%) working interest in the captioned exploration project. The
area and lands are described on Exhibit "A" attached hereto and made a part
hereof, with participation subject to the following terms and conditions:
GENERAL TERMS
I. Colorado Wyoming Reserve Company (CWYR) shall contribute its entire
leasehold and seismic option ownership in the Exhibit "A" lands (The
Lands). These Lands among others, shall also establish an Area of
Mutual Interest (AMI) between Shorco and CWYR and the term shall run
ten (10) years.
II. The term of this LOI shall be for 120 days from April 30, 2000.
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o PAGE 2 May 10, 2000
III. CWYR shall not be obligated to purchase any additional leases or
seismic options in the Lands, but CWYR shall be obligated to
maintain all leases and seismic options currently in effect,
which shall include delay rentals and seismic option renewals
during the full term of this LOI. Should the parties hereto
jointly determine not to pay certain rentals or renew certain
seismic options, CWYR will not have defaulted under this
provision. Should any leases or seismic options be
unintentionally or intentionally lost, CWYR shall have the
opportunity to reinstate any lost acreage therein. If CWYR is in
default of this provision, this LOI may be void able at the sole
discretion of Shorco.
IV. ST Oil Company and Edwards Energy Corporation (ST) have entered in to
An Option Agreement with CWYR to purchase up to a 20% working
interest in the project area. This agreement is conditioned upon
a proposed business combination and financing arrangement. The
Option agreement runs concurrent with this LOI. If ST is
unsuccessful with this effort as set out in the Option Agreement,
it is unlikely that they will exercise this option. If ST does
not exercise this option, Shorco reserves the right herein to
decline any participation under this LOI.
OBLIGATIONS AND RIGHTS EARNED UNDER THE LOI
I. In the event ST exercises it' rights as described in Paragraph IV
above, Shorco shall commit to tender twenty percent (20%) of the
funds subject to paragraph to permit, acquire, process and
interpret a 26 to 38 square mile three dimensional (3-D) seismic
survey (The Survey) on a previously designated program on the
subject Lands. Estimated cost to acquire 100% of said survey is
$1,000,000. It is agreed that a maximum of $1,000,000 will be
budgeted for this survey, but a tolerance of ten percent (10%)
will allowed if the actual Survey is more. In the event the
survey can be acquired for less than this amount, Shorco will
only be obligated for their proportionate share of the actual
survey.
II. Upon the conditions set forth above, Shorco will earn an assignment
of ten percent (10%) Member Interest in the entire subject Lands
and project area. CWYR will assign these rights with an eighty
percent (80%) net revenue interest, except on the lease known as
the Tiger/Legacy lease located in T.31S.-R.23E. wherein CWYR will
assign a seventy nine percent (79%) net revenue interest. In the
event that CWYR owns less than an entire undivided interest in
any lease, Shorco's interest will be proportionately reduced.
III. Shorco shall have the right to form any legal entity subsidiary,
partnership,
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o PAGE 3 May 10, 2000
LLC, etc. to effect this transaction. Said Entity shall be acceptable
to and not impede any of the advantages created by the formation of
the Special Purpose Entity as set out below in Paragraph I, Formal
Agreement.
IV. Shorco shall have the right to employ at their expense, independent
Consultants to review all data and information, and shall have
reasonable access to all files relative to the Paradox Basin and Area
of Mutual Interest therein, which is in the possession of CWYR.
V. Shorco shall have the right to void this LOI without penalty, at any
time, prior to ST exercising its Option as set out herein.
FORMAL AGREEMENT
I. During the LOI period, the parties hereto agree to create a tax
favorable, Special Purpose Entity to prosecute and manage the
Project. Said entity will be assigned a 100% working interest of
which Shorco will be assigned their proportionate share of the
Membership Interest as set out in Paragraph II, Obligations
above. Upon demand by the Special Purpose Entity, all funds will
be forwarded to, and managed by this entity on an on going and as
needed basis. Non-payment under any call, shall result in the
forfeiture of any interest not paid for under said call resulting
a proportionate reduction of Shorco's interest. The procedure for
handling call demands, shall be set out in detail in the Special
Purpose Entity Agreement. A manager of this entity will be named
at this time.
II. This Agreement shall also be subject to that certain Memorandum dated
April 30, 2000, which is attached as Exhibit "B" to the ST Option
Agreement, and shall set out the directive on how CWYR and Shorco
will proceed with the Special Purpose Entity and prosecute the
Survey.
If the foregoing terms and conditions are acceptable, please sign in the
space provided below, forwarding the enclosed extra copy to our offices
within five (5) Days hereof.
Sincerely,
/s/ F. ROBERT TIDDENS
F. Robert Tiddens, President
Agreed to and accepted this day, May 10, 2000,
/s/ KIM M. FUERST
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Kim M. Fuerst, President
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