EX-10.1
FARMOUT AGREEMENT
FARMOUT AGREEMENT
THIS FARMOUT AGREEMENT ("Agreement") is made and entered into as of
December 6, 2004 by and between: ParaFin Corporation. a Nevada
Corporation ("ParaFln"), with offices at 27127 Calle Arroyo, Suite
1923, San Juan Capistrano, California 92675, and Guarani Exploration
and Development Corporation ("Guarani"), with offices at Av. Del
Yacht 21, Lambare, Paraguay (ParaFin and Guarani are hereafter
referred to as "Party" and, collectively "Parties").
RECITALS
WHEREAS, Guarani has filed an application for an exploration and
exploitation license ("License") regarding hydrocarbons in the Alto
Parana Block, Alto Parana Province, Paraguay ("Alto Parana Block" or
"Block") with the Government of Paraguay, and under the terms and
conditions set forth in the Hydrocarbon Law 779 of 12 December 1995
by the Government of Paraguay ("Law"), shall be committed to the
exploration of said Block, and;
WHEREAS, such Block consists of 5,786,000 acres (2,342,000 hectares)
exclusive of the restricted areas in such Block, and;
WHEREAS, ParaFin desires to earn an 80% interest In the Alto Parana
Block and the License associated therewith. and Guarani agrees to
assign 80% of its interest therein upon the conditions hereinafter
described.
WITNESSTH
NOW THEREFORE for Ten ($10) Dollars and other good and valuable
consideration, the Parties agree as follows: .
1. Within 30 days following Guarani's receipt of the resolution
signed by the Ministry of Public Works and Communications
("Resolution") awarding such License to Guarani, ParaFin will deposit
the sum of $150,000 USD into Guarani's account in a bank to be
designated by Guarani. On or before 60 days following Guarani's
receipt of the Resolution, ParaFin will deposit an additional
$350,000 (total of $500,000 USD) to Guarani's account.
2. Para Fin shall, in addition, timely pay 100% of all costs
associated with the acquisition of new seismic, the interpretation of
such new and existing seismic, drilling, completing and equipping to
the tanks (or abandonment) of the first two wells described in
Section 3 below (collectively "Work Program") drilled by Guarani on
the Block pursuant to the License.
3. Prior to the date stipulated in the License for completing
the initial drilling obligations recited therein, ParaFin shall
finance the Work Program, limited however, to:
A. financing the acquisition of new seismic data and processing all
seismic as may be necessary, in Guarani's opinion. to properly locate
the drill sites, plus financing the drilling and completing to the
tanks (or abandonment) of two test wells on the Block to a depth
sufficient to penetrate the Permian and Carboniferous Formations, and
B. commencing such financing after ParaFin advises Guarani in writing
that Guarani may start the Work Program. Such notification must be
given Guarani on or before 140 days following the date of the Decree.
In the event such notice it not timely provided to Guarani by
ParaFin, this Agreement shall cease without any further rights or
obligations by either Party with respect thereto and Guarani may
retain the $500.000 previously paid to Guarani as liquidated damages.
The cost associated with the Work Program (the acquisition of new
seiamic, all interpretations conducted on the seismic. plus the
drilling of the two wells into such formations) are estimated to not
exceed $3.5 million USD, which amount shall be in addition to the
$500,000 paid pursuant to Section 1 above. After the said two wells
have been drilled. completed (or abandoned) and the funds associated
therewith, have been paid by ParaFin, Para Fin shall have earned the
following:
1) An 80% working interest in the Block which interest shall be
assigned to ParaFin as soon as possible. and;
2) The right to recover all monies paid by ParaFin pursuant hereto,
from 95% of the net production from the first two producing wells
drilled pursuant hereto after deducting royalties and taxes.
4. After earning 80% working interest in the Block as described
in Section 3 above, ParaFin shall pay 80% of all development and
operations costs with respect to the Block performed pursuant to a
Joint Operating Agreement ("JOA") based upon the International Joint
Operating Agreement promulgated by the Association of International
Petroleum Negotiators to be executed by the Parties which shall
provide that:
A. Guarani shalt be the operator of the said Work Program, and;
B. As operator, Guarani shall consult with ParaFin from time to time
regarding further development on the Block. Nevertheless, Guarani
shall have the final authority with regard to the Work Program and
ParaFin shall be obligated to pay the costs thereof, and;
C. A sole risk provi8ion shall be included for all operations and
the Block other than those associated with the Work Program and the
operations contemplated in paragraph 6 below. The sole risk penalty
shall be 300%.
5. From the execution of this Agreement and thereafter, Guarani
shall supply ParaFin all well information on a current dally basis
and copies of geological, geophysical and engineering studies and
shall not deny ParaFin access to the Block or to data pertaining to
the joint operation at any time.
6. Should the parties agree to drill an exploration well to test
the deeper Devonian and Silurian Formations in the Block, ParaFin
will pay 100% of the costs of the first well; Guarani will be the
operator. Should the well be productive, the costs of subsequent
drilling into either of these formations, plus development, operating
and related costs shall be shared pro rata by the Parties with
ParaFin owning 80% of the working Interest and Guarani owning 20%.
Parafin shall have the right to recover an monies expended in the
drilling of this exploration well from well production from the Block
as set forth in the provisions of the Joint Operating Agreement.
7. Miscellaneous:
A. Amendment. This Agreement may be amended or modified at any time,
but only by an instrument in writing executed by the Parties hereto.
B. Entire Agreement. This Agreement contains the entire understanding
between ParaFin and Guarani relating to the subjects addressed in
this document. This Agreement supersedes any and all prior
agreements, arrangements, or understandings (written or oral) between
the Parties. No understandings, statements. promises, or inducements
contrary to the terms of this Agreement exist. No representations.
warranties, covenants, or conditions, express or implied, have been
made by any Party.
C. Waiver. Any failure of any Party to this Agreement to comply with
any of its obligations, agreements, or conditions hereunder may be
waived in writing by the Party to whom such compliance is owed. The
failure of any Party to enforce at any time any of the provisions of
this Agreement shall in no way be construed to be a waiver of any
such provision or a waiver of the right of such Party thereafter to
enforce each and every such provision. No waiver of any breach of or
non-compliance with this Agreement shall be held to be a waiver of
any other or subsequent breach or non-compliance.
D. Headings and Captions. The Section and subsection headings in
this Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
E. Governing Law. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of Texas,
regardless of its law on conflict of laws. Any dispute arising out of
this Agreement shall be brought in a court of competent jurisdiction
in Houston, Texas. The Parties expressly consent to the personal
jurisdiction of the above-identified courts. The Parties agree to
exclude and waive any statute, law or treaty which allows or requires
any dispute to be decided in another forum or by rules of decision
other than as provided in this Agreement.
F. Binding Effect. This Agreement is binding on the Perties and
inures to the benefit of of the Parties, their respective heirs,
administrators, executors, successors, and assigns.
G. Attorneys Fees. If any action at law or in equity, including an
action for decleratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing Party shall be entitled
to recover reasonable attorney's fees, court costs, end other costs
incurred in proeeeding with the action from the other Party. Should
either Party be represented by in-house counsel, all Parties agree
that such Party may recover attorney's fees incurred by that in-house
counsel in an amount equal to that attorney's normal fees for similar
matters, or, should that attorney not normally charge a fee, by the
prevailing rate charged by attorneys with similar background in that
legal community.
H. Severability. In the event that anyone or more of the provisions
contained in this Agreement shall for any reason be held to be
invalid, illegal. or unenforceable in any respect, such invalidity,
illegality or un-enforceability shall not affect any other provisions
of this Agreement. Instead, this Agreement shall be construed as if
it never contained any such invalid, illegal or unenforceable
provisions.
G. Mutual Cooperation. The Parties shall cooperate with each other
to achieve the purpose of this Agreement, and shall execute such
other documents and take such other actions as may be necessary or
convenient to effect the transactions described herein.
J. Counterparts. A facsimile, telecopy, or other reproduction of
this Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Such
executed copy may be delivered by facsimile or similar instantaneous
electronic transmission. Such execution and delivery shall be
considered valid for all purposes.
K. No Third Party Beneficiary. Nothing in this Agreement, expressed
or implied, is intended to confer upon any person, other than the
Parties hereto and their successors, any rights or remedies under or
by reason of this Agreement, unless this Agreement specifically
states such intent.
L. Notices. Any notice or advice permitted or required to be given
by any Party to another Party shall be in writing and sent by
personal delivery, by courier service, certified mail, telex,
telegram, or facsimile or similar instantaneous electronic
transmission, and addressed to such Parties as designated below;
provided, however, that any notice sent by facsimile shall be
followed by a confirmation copy sent by some other means authorized
above within twenty- four (24) hours after transmission of the
facsimile or similar instantaneous electronic transmission.
"Receipt" for the purposes of this Agreement with respect to written
notice delivered hereunder shall be actual delivery of the notice to
the address of the party to be notified as specified in accordance
with their Agreement. The address, telephone, telex, facsimile or
similar instantaneous electronic transmission numbers of each of the
Parties specified hereunder may be changed for any and all purposes
of this Farmout Agreement by ten (10) days advance written
notification to the other Parties from the Party changing its
address, phone, telex, facsimile numbers or similar instantaneous
electronic transmission.
a. If given to ParaFin:
ParaFin Corporation
27127 Calle Arroyo, Suite 1923
San Juan Capistrano, California 92675
With A Copy To:
S.B. Fowlds
2765 Skilift Place
West Vancouver, B.C.
Canada,V7S 2T6
Fax: (604) 925-0538
E-Mail: sid@etcap.com
b. If to be given to Guarani:
Guarani Exploration and Developmente Corporation
Av. Del Av. Del Yacht 21
Lambare, Paraguay
Attn: Richard W. Kent Ferreira
Fax: (595-21) 302-031
E-Mail: rkent@telesurf.com.py
With a copy to:
Charles M. Gail
3131 De Soto Blvd.
Coral Gables. FL 33134
Telephone: (305) 443-7379
M. Time is of the Essence. Time is of the essence of this Agreement
and of each and every provision hereof.
IN WITNESS WHEREOF, each Party has caused this Agreement to be
executed on his or its behalf by its duly authorized officers as of
December 6, 2004
ParaFin Corporation
By: /s/ Sidney B. Fowlds
Sidney B. Fowlds, President
Guarani Exploration and Development Corporation
By: /s/ Richard Kent
Richard Kent, President