This agreement is made on June 26, 2012 between the following parties
(Letter Agreement):
1. Liberty Petroleum Corporation ARBN 086 194 443
Suite 540, 10851 North Black Canyon Highway, Phoenix, Arizona,
85029 USA (Liberty), and
2. Discovery Energy Corp., of Suite 1700, One Riverway Drive,
Houston, Texas, 77056 USA (Discovery).
Whereas:
A. Liberty is the successful applicant for the Petroleum Exploration License
(PEL) 512 in the State of South Australia (designated as C02009-A) (the
"License");
B. The Parties entered into a Letter of Intent dated September 12, 2011 as
amended by i) First Amendment to Letter Agreement effective November 4,
2011 and ii) Second Amendment to Letter Agreement effective November
15, 2011 and as amended and restated in the First Amended and Restated
Document dated December 1, 2011 (the "LOI");
C. The Parties have entered into an Option to Purchase and Sale and
Purchase Agreement on January 31, 2012 (the "Option Deed");
D. The Parties have entered into a Novation Deed effective May 15, 2012
(the "Novation Deed"), which is intended to supersede the Option Deed;
E. The Novation Deed provides for a cash payment of $US 250,000 to be
deposited into escrow upon satisfaction of certain conditions precedent,
such amount to be paid to Liberty eventually upon the issuance of the
License in the name of Discovery or its designee;
F. Liberty has requested that Discovery make an advance deposit of the
$US 250,000 described in the preceding recital, which advance deposit
will represent the complete fulfillment of Discovery obligations to
remit cash to Liberty in connection with the LOI, the Option Deed or
the Novation Deed;
Now it is agreed as follows:
1. Discovery will, within one business day of the execution of this Letter
Agreement, advance to Liberty by wire transfer the sum of two hundred
fifty thousand dollars (US$250,000).
2. The terms of the Novation Deed are hereby amended such that
a. Discovery is no longer required to remit any further cash to Liberty
in connection with the LOI, the Option Deed, the Novation Deed, or
the issuance of the License to Discovery; and
b. The "Promissory Notes" in the Novation Deed shall mean the two
documents of indebtedness being delivered by the Purchaser to the
Seller the forms of which are attached as Annexures B and C to this
Letter Agreement, rather than Annexures Band C to the Novation Deed,
the principal amount of the nine-month promissory note being reduced
from $250,000 to $150,000;
3. liberty acknowledges:
a. That the advance provided herein shall be credited against the
payment due pursuant to the Novation Deed; and
b. That the advance provided herein will be refunded within 30 business
days if the Minister does not issue the license to Discovery on or
before the "End Date," as defined in the Novation Deed.
4. THE LAWS OF THE STATE OF TEXAS GOVERN THIS LETTER AGREEMENT AND EACH
PARTY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THAT
STATE AND THOSE COURTS EMPOWERED TO APPEALS THEREFROM IN CONNECTION WITH
ALL MATTERS CONCERNING THIS LETTER AGREEMENT.
Executed by the Parties as an agreement:
By
Liberty Petroleum Corporation
_______________________________
Lane Franks, President
By
Discovery Energy Corp.
_______________________________
Keith J. McKenzie, Chief Executive Officer
Annexure B -Six-Month Promissory Note
$500,000.00 July , 2012
The undersigned, Discovery Energy Corp., a Nevada corporation f/k/a "Santos
Resource Corp." (hereinafter called "Maker"), whose address for purposes hereof
is One Riverway Drive, Suite 1700, Houston, Texas, 77056 USA, for value
received, without grace, in the manner, on the dates and in the amounts herein
stipulated, promises to pay to Liberty Petroleum Corporation, an Arizona
corporation (hereinafter called "Payee"), at Payee's principal place of business
located at 10851 North Black Canyon Highway, Suite 540, Phoenix, Arizona, 85029
USA, or at such other place as Payee may hereafter designate, the sum of FIVE
HUNDRED THOUSAND DOLLARS ($500,000.00), in lawful money of the United States of
America, with interest at the rate herein specified.
The unpaid principal amount from time to time outstanding hereunder shall
bear interest from and after the date hereof until such amount is paid in full
at a rate per annum equal the lesser of:
(a) the arithmetic mean during the applicable interest period
of one month term London Interbank Offer Rates (LIBOR rates) for US$ as
published on the first business day of each month by the Financial Times
of London and referred to as the Interbank Fixing Rate, plus an additional
3% per annum (such aggregate rate being hereafter referred to as the
"Varying Rate"); or
(b) the maximum rate of interest, if any, permitted to be charged of
the Maker by applicable state or federal law (the "Maximum Rate").
Notwithstanding the foregoing, if at any time the Varying Rate exceeds the
Maximum Rate, the rate of interest chargeable on this Note shall be
limited to the Maximum Rate, but any subsequent reductions in the Varying
Rate shall not reduce the rate of interest chargeable on this Note below the
Maximum Rate until the total amount of interest accrued on this Note equals the
amount of interest which would have accrued if the Varying Rate had at all times
been in effect.
Interest on this Note shall be computed on the basis of a 365-day (or 366-
day, as the case may be) year for the actual number of days elapsed.
The unpaid principal balance of this Note with all accrued but
unpaid interest thereon shall be due and payable in full on or before , 201 ,
six months after the date of this Note. Prepayment of this Note shall be without
penalty and may be made at any time and from time to time for all or any part of
the unpaid principal and accrued interest payable hereunder with all such
prepayments to be applied first to the accrued interest and then to the
principal in the inverse order of due date. If, within 60, 90, or 120 days
after the date of this Note, Maker makes aggregate prepayments of this Note
equally or exceeding the amount indicated on Schedule "A" hereto immediately
below the related number of days (together with all unpaid interest that has
theretofore become due on this Note), then Maker shall owe no fu amounts on
this Note, and the difference between the original principal amount of this Note
and the aggregate prepayments shall be deemed a prepayment discount.
If this Note is not paid at maturity and said Note is placed in the hands of
an attorney for collection or if collection by suit or through the probate
court, bankruptcy court, or by any other legal or judicial proceeding is
sought, Maker agrees to pay all expenses incurred, including reasonable
attorneys' fees, all of which shall become a part of the principal hereof.
Maker and each and all other liable parties expressly and specifically, (i)
severally waive grace, presentment for payment, demand for payment, notice of
intent to accelerate and notice of acceleration, notice of dishonor, protest and
notice of protest, notice of nonpayment, and any and all other notices, the
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor, (ii) severally agree to any substitution, subordination,
exchange or release of any security held for the payment of this Note or any
other obligation to Payee and release of any party primarily or secondarily
liable hereon, (iii) severally agree that Payee shall not be required first to
institute suit or exhaust Payee's remedies hereon against Maker or other parties
liable hereon or to enforce Payee's rights against them or any security herefor
in order to enforce payment of this Note by any of them, and (iv) severally
agree to any extension or postponement of time of payment of this Note and to
any other indulgence with respect hereto without notice thereof to any of them.
The invalidity, or unenforceability in particular circumstances, of any
provision of this Note shall not extend beyond such provision or such
circumstances and no other provision of this Note shall be affected thereby.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.
No provisions of this Note or any instrument securing payment hereof or
otherwise relating to the debt evidenced hereby shall require the payment or
permit the collection, application or receipt of interest in excess of the
maximum permitted by applicable state or federal law (it being the express
intention of Maker and Payee that this Note and the debt evidenced hereby be
subject to the benefits of federal law to the extent that same permits a rate
of interest in excess of that otherwise permitted by state law). If any
excess of interest in such respect is herein or in any such other instrument
provided for, or shall be adjudicated to be so provided for herein or in any
such instrument, the provisions of this paragraph shall govern, and neither
Maker nor any endorsers of this Note nor their respective heirs, personal
representatives, successors or assigns shall be obligated to pay the amount of
such interest to the extent it is in excess of the amount permitted by
applicable law. It is expressly stipulated and agreed to be the intent of Maker
and holder to comply at all times with the usury and other laws relating to this
Note and the other instruments securing payment hereof now or hereafter in
effect, and any subsequent revisions, repeals, or judicial interpretations
thereof, to the extent that any of the same are applicable hereto or to the
other instruments securing payment hereof. In the event the Payee or other
holder hereof ever receives, collects or applies as interest any such excess,
such amount which would be excessive interest shall be applied to the reduction
of the unpaid principal balance of this Note, and, if upon such application the
principal balance of this Note is paid in full, any remaining excess shall be
forthwith paid to Maker and the provisions of this Note and the other
instruments securing payment hereof shall immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder. In determining whether or not the interest
paid or payable under any specific contingency exceeds the maximum interest
allowed to be charged by applicable law, Maker and the Payee or other holder
hereof shall, to the maximum extent permitted under applicable law, amortize,
prorate, allocate and spread the total amount of interest throughout the entire
term of this Note so that the amount or rate of interest charged for any and all
periods of time during the term of this Note is to the greatest extent possible
less than the maximum amount or rate of interest allowed to be charged by law
during the relevant period of time. Notwithstanding any of the foregoing, if at
any time applicable laws shall be changed so as to permit a higher rate or
amount of interest to be charged than that permitted prior to such change, then
unless prohibited by law, references in this Note to "applicable law" for
purposes of determining the maximum interest or rate of interest which can be
charged shall be deemed to refer to such applicable laws as so amended to allow
the greater amount or rate of interest.
DISCOVERY ENERGY CORP.,
a Nevada corporation f/kla "Santos Resource
Corp."
By:
--------------------------------
Name:------ --------------------
Title:--------------------------
Repayment Calculation Table-Schedule "A"
Promissory Note $500,000 (Six Month)
Instrument Date:July_, 2012 60 Days 90 Days 120 Days At Maturity
Base Note Amount Owed $400,000 $425,000 $450,000 $500,000
With Estimated Interest Charges* $401,621 $427,297 $453,042 $504,736
*London Libor Rate 0.24% (One Month) *Plus Fixed Interest Rate 3% Per Annum
ANNEXURE C - NINE-MONTH PROMISSORY NOTE
$150,000.00 JULY , 2012
The undersigned, Discovery Energy Corp., a Nevada corporation f/k/a "Santos
Resource Corp." (hereinafter called "Maker"), whose address for purposes hereof
is One Riverway Drive, Suite 1700, Houston, Texas, 77056 USA, for value
received, without grace, in the manner, on the dates and in the amounts herein
stipulated, promises to pay to Liberty Petroleum Corporation, an Arizona
corporation (hereinafter called "Payee"), at Payee's principal place of business
located at 10851 North Black Canyon Highway, Suite 540, Phoenix, Arizona, 85029
USA, or at such other place as Payee may hereafter designate, the sum of ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00), in lawful money of the United
States of America, with interest at the rate herein specified.
The unpaid principal amount from time to time outstanding hereunder shall
bear interest from and after the date hereof until such amount is paid in full
at a rate per annum equal the lesser of:
(a) the arithmetic mean during the applicable interest period of one
month term London Interbank Offer Rates (LIBOR rates) for US$
as published on the first business day of each month by the
Financial Times of London and referred to as the Interbank Fixing
Rate, plus an additional 3% per annum (such aggregate rate being
hereafter referred to as the "Varying Rate"); or
(b) the maximum rate of interest, if any, permitted to be charged
of the Maker by applicable state or federal law (the
"Maximum Rate").
Notwithstanding the foregoing, if at any time the Varying Rate exceeds the
Maximum Rate, the rate of interest chargeable on this Note shall be limited to
the Maximum Rate, but any subsequent reductions in the Varying Rate shall not
reduce the rate of interest chargeable on this Note below the Maximum Rate until
the total amount of interest accrued on this Note equals the amount of interest
which would have accrued if the Varying Rate had at all times been in effect.
Interest on this Note shall be computed on the basis of a 365-day (or
366-day, as the case may be) year for the actual number of days elapsed.
The unpaid principal balance of this Note with all accrued but unpaid
interest thereon shall be due and payable in full on or before
_____________________ ____, 201_, nine months after the date of this Note.
Prepayment of this Note shall be without penalty and may be made at any time and
from time to time for all or any part of the unpaid principal and accrued
interest payable hereunder with all such prepayments to be applied first to the
accrued interest and then to the principal in the inverse order of due date. If,
within 60, 90, or 120 days after the date of this Note, Maker makes aggregate
prepayments of this Note equally or exceeding the amount indicated on Schedule
"A" hereto immediately below the related number of days (together with all
unpaid interest that has theretofore become due on this Note), then Maker shall
owe no further amounts on this Note, and the difference between the original
principal amount of this Note and the aggregate prepayments shall be deemed a
prepayment discount.
If this Note is not paid at maturity and said Note is placed in the hands
of an attorney for collection or if collection by suit or through the probate
court, bankruptcy court, or by any other legal or judicial proceeding is sought,
Maker agrees to pay all expenses incurred, including reasonable attorneys' fees,
all of which shall become a part of the principal hereof.
Maker and each and all other liable parties expressly and specifically, (i)
severally waive grace, presentment for payment, demand for payment, notice of
intent to accelerate and notice of acceleration, notice of dishonor, protest and
notice of protest, notice of nonpayment, and any and all other notices, the
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor, (ii) severally agree to any substitution, subordination,
exchange or release of any security held for the payment of this Note or any
other obligation to Payee and release of any party primarily or secondarily
liable hereon, (iii) severally agree that Payee shall not be required first to
institute suit or exhaust Payee's remedies hereon against Maker or other
parties liable hereon or to enforce Payee's rights against them or any
security herefor in order to enforce payment of this Note by any of them, and
(iv) severally agree to any extension or postponement of time of payment of this
Note and to any other indulgence with respect hereto without notice thereof to
any of them.
The invalidity, or unenforceability in particular circumstances, of any
provision of this Note shall not extend beyond such provision or such
circumstances and no other provision of this Note shall be affected thereby.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
No provisions of this Note or any instrument securing payment hereof or
otherwise relating to the debt evidenced hereby shall require the payment or
permit the collection, application or receipt of interest in excess of the
maximum permitted by applicable state or federal law (it being the express
intention of Maker and Payee that this Note and the debt evidenced hereby be
subject to the benefits of federal law to the extent that same permits a rate of
interest in excess of that otherwise permitted by state law). If any excess of
interest in such respect is herein or in any such other instrument provided for,
or shall be adjudicated to be so provided for herein or in any such instrument,
the provisions of this paragraph shall govern, and neither Maker nor any
endorsers of this Note nor their respective heirs, personal representatives,
successors or assigns shall be obligated to pay the amount of such interest to
the extent it is in excess of the amount permitted by applicable law. It is
expressly stipulated and agreed to be the intent of Maker and holder to comply
at all times with the usury and other laws relating to this Note and the other
instruments securing payment hereof now or hereafter in effect, and any
subsequent revisions, repeals, or judicial interpretations thereof, to the
extent that any of the same are applicable hereto or to the other instruments
securing payment hereof. In the event the Payee or other holder hereof ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note, and, if upon such application the principal
balance of this Note is paid in full, any remaining excess shall be forthwith
paid to Maker and the provisions of this Note and the other instruments securing
payment hereof shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of Execution
of any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum interest allowed to be charged by
applicable law, Maker and the Payee or other holder hereof shall, to the maximum
extent permitted under applicable law; amortize, prorate, allocate and spread
the total amount of interest throughout the entire term of this Note so that the
amount or rate of interest charged for any and all periods of time during the
term of this Note is to the greatest extent possible less than the maximum
amount or rate of interest allowed to be charged by law during the relevant
period of time. Notwithstanding any of the foregoing, if at any time applicable
laws shall be changed so as to permit a higher rate or amount of interest to be
charged than that permitted prior to such change, then unless prohibited by law,
references in this Note to "applicable law" for purposes of determining the
maximum interest or rate of interest which can be charged shall be deemed to
refer to such applicable laws as so amended to allow the greater amount or rate
of interest.
DISCOVERY ENERGY CORP.,
a Nevada corporation f/k/a "Santos
Resource Corp."
By:________________________________
Name:______________________________
Title:_______________________________
Repayment Calculation Table- Schedule "A"
PROMISSORY NOTE $150,000 (NINE MONTH)
Instrument Date: July _., 2012 60 Days 90 Days 120 Days At Maturity
Base Note Amount Owed $100,000 $112,500 $125,000 $150,000
With Estimated Interest Charges* $100,486 $113,189 $125,912 $152,032
*London Ubor Rate 0.24% {One Month} *Plus Fixed Interest Rate 3% Per Annum