Re: Farmin Proposal and Letter Agreement Twp - 48 Rge - 13 -W5M NW 1/4 Section 25, SE 1/4 Section 36, SW 1/4 Section 36 and the P&NG "Area of Interest" contained in the "Confidentiality Agreement".

Re:

Farmin Proposal and Letter Agreement Twp - 48 Rge - 13 -W5M NW ¼ Section 25, SE ¼ Section 36, SW ¼ Section 36 and the P&NG “Area of Interest” contained in the “Confidentiality Agreement”.

1.1

In this Agreement, the definitions provided by the 1997 CAPL Farmout and Royalty Procedure (the “ Farmout and Royalty Procedure ”), Article 1.01, will apply; however, unless inconsistent therewith or unless the context otherwise requires, specific terms will have the meanings set forth below:

(a)

“1097885 Alberta Ltd.” means 1097885 Alberta Ltd., the “Farmor” under this Agreement; Frontier Energy Resources Corp. means the “Farmee” under this Agreement;

(b)

“CAPL” means the Canadian Association of Petroleum Landmen;

(c)

“Contract Depth” means a depth sufficient to penetrate at least 20 meters below the base of the Nisku Formation, or 3300 meters subsurface, whichever occurs first;

(d)

“Farmin Lands” means those lands described in Schedule “A, Part 1” hereto; and

(e)

“Well” means a well drilled on the Farmin Lands.

1.2

The following Schedules are attached to and deemed to form part of this Agreement:

(a)

Schedule “A, Part 1” - describes the Title documents and Farmout P&NG Leases and “Part 2” describes the “P&NG Area of Interest”;

(b)

Schedule “B, Part 1” - 1997 CAPL Farmout and Royalty Procedure (Elections and Amendments) for all Farmor Lease holdings and “Part 2” - 1997 CAPL Farmout and Royalty Procedure (Elections and Amendments) for all Farmor “P&NG Area of Interest” non-lease holdings that the Farmee may farmout from Other P&NG Lease holders.

(c)

Schedule “C” - All technical information (drilling, seismic, geological, farm-in agreements on Confidential Agreement Lands, etc.) to be supplied by Frontier to 1097885 Alberta Ltd. pursuant to the Farmout and Royalty Procedure.

2.3

The farmee shall have the option to drill additional wells on previously unearned lands on a rolling option basis to earn the same as the first farmin Test Well. The farmee may elect to drill additional wells within 90 days of rig release of the first farmin Test Well. It shall spud the option well within 45 days of its election to do so, subject to surface access, all regulatory approvals and rig availability. Failure to elect within the time frame will cancel the Farmees right to earn any further interest.

3.1

Provided Frontier has fulfilled its obligations under Section 2 of this Agreement, Frontier will, subject to Article 3.00 of the Farmout and Royalty Procedure, have earned 90% Working Interest and Angels Exploration Fund Inc. shall have earned a 10% net carried interest of 1097885 Alberta Ltd.’s working interest in the Farmin Lands, identified in Schedule “A” Part 1. In exchange for the above, 1097885 Alberta Ltd. shall retain a 15% Gross Overriding Royalty (GORR) with a right of conversion of the GORR in part or in whole at a rate of 1% GORR to 3% Working Interest (WI) on all Farmed-out Lease formations (Example: 15% GORR converted would be 45% WI), if so elected by 1097885 Alberta Ltd. An election can take place on 30 days written notice, after payout, as described in Article 6.00 of the Farmout and Royalty Procedure shown in Schedule “B”, Part 1:.

3.2

In the event Frontier/Angels farms-in on P&NG Lease rights not held by 1097885 Alberta Ltd. within the “Confidential Agreement Lands” as identified in Schedule “B, Part 2”, Frontier/Angels will assign to 1097885 Alberta Ltd. a GORR convertible to a working interest. An election can take place on 30 days written notice, after payout, as described in Article 6.00 of the Farmout and Royalty Procedure shown in Schedule “B, Part 2: The GORR/WI is to be determined as follows:

4.1

Frontier may, during the course of drilling the First Test Well or the Second Test Well, abandon it and within 30 days of the time of such abandonment, commence and thereafter diligently and continuously carry on the drilling of a Substitute Well at a location mutually agreed to by all parties on the Farmin Lands to Contract Depth and either complete, cap or abandon the Substitute Well. In such event, the earning provisions as set forth herein will apply to the Substitute Well with the same force and effect.

5.

Assignment

5.1

Frontier will have the right to contract with an industry partner to share its obligations hereunder; however, unless a written amendment to this Agreement is executed by all involved parties, no such arrangements will reduce or otherwise affect Frontier’s obligations hereunder. Upon earning an interest in the Farmin Lands, the 1993 CAPL Assignment Procedure will apply.

6.

Operator

6.1

Frontier has the absolute discretion in appointing the operator (the “ Operator ”) of all drilling programs conducted pursuant to this Agreement, and Well operations will be performed in accordance with the 1990 CAPL Operating Procedures.

  7.

Title

7.1

1097885 Alberta Ltd. represents and warrants and Frontier has verified to its satisfaction and agrees that:

(a)

1097885 Alberta Ltd. has acqu