Exhibit 10.1
OPTION AGREEMENT
(OPTION TO ACQUIRE OIL AND GAS LEASES IN ONSHORE GULF COAST)
AMERICAN EXPLORATION CORP., (herein called "AMERICAN") or its nominee, a Nevada
Registered Corporation with it business offices located at 0000 00 Xxxxxx X.X.,
Xxxxx 000, Xxxxxxx, Xxxxxxx, X0X 0X0
(PARTY of the First Part)
AND
WESTROCK LAND CORP., (herein called "WESTROCK"), a Texas Registered Corporation
with it business offices located at 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx,
XXX 00000; Ph (000) 000-0000; Fax (000) 000-0000;
(PARTY of the Second Part)
WHEREAS:
A. American or its nominee. and/or its affiliates (in combination called
"AMERICAN") desires to acquire a seventy-five (75%) NET REVENUE INTEREST in
approximately 5,000 net acres in oil and gas leases (herein called the
"LEASES") in the lands located in the onshore Gulf Coast region of the
United States, (hereinafter referred to as the "ACQUIRED PROPERTIES") from
Westrock.
B. This Option Agreement (the "AGREEMENT") is binding on both Parties as
provided herein.
C. American has utilized information provided by Westrock for purposes of
entering in to this Agreement.
D. This Agreement is based on the representation by Westrock that it owns all
rights to all depths pursuant to the Leases comprising a total of
approximately 5,000 net acres (sometimes also referred to as net mineral
acres herein called "NET ACRES") comprising the Acquired Properties.
E. Westrock has disclosed and American acknowledges that it understands that a
well must be "SPUDDED" (that is the commence of drilling) on the Acquired
Properties no later than May 31, 2009.
F. For more particularity the Acquired Properties are set out and located in
the Map attached hereto as Schedule "A", which the Parties acknowledge is
sufficiently particular for the purposes of this Agreement.
The Parties hereby acknowledge, promise and agree, for good and valuable
consideration the sufficiency of which is mutually acknowledged by the Parties
hereto, to the following:
1. INTERPRETATION.
THE RECITALS - are formally relied upon by the Parties as an integral part
of the body of this Agreement.
THE HEADINGS - The division of this Agreement into Articles, Sections and
Subsections and the insertion of headings is for reference only and does
not affect the construction or interpretation of this Agreement. References
herein to Articles and Sections are to Articles and Sections of this
Agreement.
INTENDED MEANING - The terms "this Agreement", "hereof", "hereunder" and
similar expressions refer to this Agreement and not to any particular
Article, Section or other portion hereof, unless expressly stated to apply
to a particular Article, Section or other portion hereof and this includes
any agreement, schedule or instrument which is supplemental or ancillary
hereto, unless something in the subject matter or the context is
inconsistent therewith.
GENDER, NUMBER ENTITY - In this Agreement, words importing the singular
number include the plural and vice versa; words importing the masculine,
feminine or neuter genders includes the masculine, feminine and neuter
genders; and words importing persons will include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations; where such importing is reasonably consistent with language,
meaning, character and context herein.
CURRENCY - In this Agreement all references to currency are in United
States Dollars (USD$) unless expressly stated to the contrary herein.
2. PAYMENT OF DEPOSIT AND PURCHASE PRICE. American agrees to pay Westrock SIX
HUNDRED AND TWENTY-FIVE (USD$625.00) DOLLARS per Net Acre. The total
purchase price (the "PURCHASE PRICE") for the Acquired Property is
calculated as [(5,000 Net Acres) X (USD$625.00/Net Acres) = THREE MILLION
ONE HUNDRED AND TWENTY-FIVE THOUSAND (USD$3,125,000) DOLLARS. American
agrees to pay a 25% deposit (the "DEPOSIT") of SEVEN HUNDRED AND EIGHTY-ONE
THOUSAND TWO HUNDRED AND FIFTY (USD$781,250) DOLLARS to secure the option
(the "OPTION") to purchase the Acquired Property pursuant to this
Agreement. The Deposit will be non-refundable, subject to the exceptions
under Article 7 where American provides documented proof of a deficiency in
the Net Acres comprising the Acquired Properties (herein called a
"MARKETABLE TITLE DEFICIENCY") or where any defects or objections to the
Lease Documents in relations exceeds ten (10) percent of the Acquired
Property. The balance of the Purchase Price will be TWO MILLION THREE
HUNDRED AND FORTY-THREE THOUSAND SEVEN HUNDRED AND SEVENTY-FIVE
(USD$2,343,750) DOLLARS, which is due and payable on or before expiration
of the time for completion of due diligence (the "DUE DILIGENCE") by
American. The appropriate assignments will be prepared and executed in
regard to the Leases.
3. OPTION PERIOD. Westrock hereby grants American the time period between the
date of execution of this Agreement and November 17, 2008 to complete its
due diligence (herein called the "OPTION PERIOD").
4. ASSIGNMENT. At the date and time of Closing, Westrock will convey the
Acquired Properties to American by a mutually acceptable assignment and
xxxx of sale, which will include a special warranty of title, whereby
Westrock expressly limits its obligation to defending and saving harmless
American's right, title and interest in and to the Acquired Properties
solely and exclusively against any third party claim made, through or under
Westrock, but not otherwise.
5. LIENS AND ENCUMBRANCES. The Acquired Properties will be transferred from
Westrock to American free and clear of all liens, mortgages, rights,
assignments or reassignment, reversionary rights, calls on production,
preferential rights, consents to assign, taxes (other than those for the
current year), obligations (including delinquent operating expenses),
claims, suits, or any other encumbrances.
6. EFFECTIVE DATE OF CLOSING. The effective date of the conveyance of the
Acquired Properties will be at 12:30 P.M. (PST) on November 17, 2008 (the
"EFFECTIVE CLOSING DATE"). Parties will use their best efforts to complete
the transactions contemplated in this Agreement and thereby "close" on or
before November 17, 2008.
7. CONFIRMING DUE DILIGENCE. American will conduct due diligence (herein
called "Due Diligence") to confirm the title, ownership and area comprising
the Acquired Property, together with any other matters American deems
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material to its decision to exercise the Option and purchase the Acquired
Property. Due Diligence will include, but is not limited to, the following:
7.1 Confirmation of the marketability of title (including verification of the
"held by production" or "HBP" Leases, as being in full force and effect).
7.2 If American provides documentary evidence to Westrock during the Option
Period, in support of its reasonable opinion that Westrock does not own
marketable title to:
7.2.1 At least a 75% NRI in at least 5,000 Net Acres comprising the
Acquired Properties, then American will be deemed to have
established that there is a "MARKETABLE TITLE DEFICIENCY" in the
Acquired Properties.
7.3 If American can establish with documented evidence there is a Marketable
Title Deficiency in the Acquired Properties; then, at its discretion,
American may terminate this Agreement by providing written notice of the
same to Westrock.
7.4 If at any time during the Option Period, American provides documented
evidence of a Marketable Title Deficiency in the Acquired Properties to
Westrock accompanied by written notice, to Westrock, of its intention not
to exercise the Option on that basis, then:
7.4.1 Neither Party will have any further duties, obligations or
liability to the other under this Agreement; subject to the right
of Westrock to dispute the claim of American regarding the
documented evidence of Marketable Title Deficiency as provided in
this Sub-section 7.4.
7.4.2 Where Westrock disputes the documented evidence delivered to it by
American regarding the alleged Marketable Title Deficiency,
Westrock will have Thirty (30) days (the "THIRTY DAY REPLY
PERIOD") from the date of receipt of the documents, allegedly
establishing the Marketable Title Deficiency, to provide American
with documented title evidence refuting the alleged Marketable
Title Deficiency.
7.4.3 Where Westrock fails to deliver such documented title evidence
establishing it has good marketable Title to the Acquired
Properties as it represents herein within the Thirty Day Reply
Period, it will be deemed to have accepted the American documented
evidence establishing a Marketable Title Deficiency in the
Acquired Properties.
7.4.4 Where either Westrock accepts the documented evidence delivered to
it by American regarding the Marketable Title Deficiency as
accurate or fails to respond within Thirty Day Reply Period, the
Agreement is deemed to be terminated and the Deposit will be
returned to American on or before the expiration of the Thirty Day
Reply Period.
7.4.5 If Westrock replies to the American deficiency related
documentation by providing documented evidence establishing it has
good marketable Title to the Acquired Properties within Thirty Day
Reply Period, it will be deem to have rejected the American
documented evidence establishing a Marketable Title Deficiency in
the Acquired Properties, then:
7.4.5.1 American may accept the further documented evidence of Westrock
establishing good Marketable Title; reinstate the Agreement and
readjusted the Closing Date accordingly.
7.4.5.2 The further documented evidence of Westrock establishing good
Marketable Title is accepted by American, but the Parties do not
agree to reinstated the Agreement, accordingly the Deposit will be
retained by Westrock.
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7.4.5.3 American rejects the further documented evidence provided by
Westrock allegedly establishing good Marketable Title; the Parties
do not reinstate the Agreement and accordingly Westrock will not
retain the Deposit. Under these circumstances, Westrock and
American will agree on a third party (see definition below of a
"THIRD PARTY" below) to hold the Deposit in escrow and each side
will agree to submit the matter to a single independent arbitrator
under the American Arbitration Association Guidelines. The
Arbitration will be commenced within sixty (60) days of America
giving written notice of its rejection. The Arbitration
proceedings will be commenced within the legal jurisdiction for
hearing matters under this Agreement, unless the parties mutually
agree to another jurisdiction for the arbitration of this matter.
7.4.6 Nothing in this Agreement will require the Parties to dispute any
other issue or matter under this Agreement by any particular form
of dispute resolution, including arbitration. The Parties have
expressly agreed to arbitration as the appropriate alternative
dispute resolution mechanism for the determination of which Party
is entitled to the Deposit under this Sub-section 7.4. In this
Agreement, the term "THIRD PARTY" means and includes any person or
entity, which is not a Party or its agent, representative,
employee, assign or affiliate.
7.5 The Due Diligence will further include a review of all Lease documents,
lease agreements (including lease expirations, surface access restrictions
and drilling commitments, if any), unit agreements, and other contracts
applicable to the Acquired Properties.
7.6 American's obligations hereunder will be subject to its reasonable approval
of the Lease documents, lease agreements and other material agreements (in
combination generally referred to as the "LEASE DOCUMENTS") affecting the
Acquired Properties. Provided however, the Deposit will be non-refundable;
except where during the Option Period American, delivers to Westrock
documented evidence establishing that any defects or enforceability issues
are found in a material amount of the Lease Documents. They Parties agree
that where at any time over ten (10%) percent of the Acquired Properties
are affected by the Lease Documents which are objected to by American that
would constitute "A MATERIAL AMOUNT OF THE LEASE DOCUMENTS" as that term is
used by the Parties in this Agreement.
7.7 Other acts of Due Diligence appropriate to the transaction as mutually
agreed between the Parties.
8. COOPERATION AND EXCLUSIVITY. American and Westrock will cooperate in good
faith and proceed expeditiously in the preparation of all documents
necessary to consummate the transaction contemplated by this Agreement.
Westrock agrees that after execution of this Agreement and for so long as
it is in effect; it will not directly or indirectly solicit or entertain
any other offer to acquire the Acquire Properties or enter into any
discussions, negotiations or agreement that provides for the acquisition of
the Acquired Properties with any third party.
9. ACCESS TO DATA. Westrock agrees to provide American reasonable access in
Westrock's office to the books and records of Westrock pertaining to the
Acquired Properties promptly after execution of this Agreement.
10. CONFIDENTIALITY. It is understood and agreed that the contents of this
Agreement, all Lease Documents or related data, test results, sample
analysis, and similar information, whether in documented or electronic
formats, which are delivered and exchanged by and between the Parties, will
deemed to be confidential information ("CONFIDENTIAL INFORMATION"). All
Confidential Information as defined herein including documents marked or
described as confidential will remain confidential between Parties and not
disclosed to Third Parties except with the express written permission of
the disclosing party to the receiving party of such Confidential
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Information. A receiving party may disclose Confidential Information to a
Third Party under this Agreement where such Third Party has a confidential
relationship with Westrock or American. Provided further that any
disclosure of Confidential Information by a Party to a Third Party must be
limited to only instances where there is a need for such Third Party to
know and that Third Party has agreed is bound by this confidentiality
obligation.
11. PUBLIC ANNOUNCEMENTS. Any public announcement of the proposed transaction
by either party shall be approved in advance by the other party.
12. NOTICES. All notices regarding this Agreement will be in writing to the
addresses of the Parties as they appear at the beginning of this Agreement
or to the addresses their respective legal advisors where disclosed by the
Parties to each other in writing.
12.1 All notices will be in written or electronic form and deemed delivered as
follows:
12.1.1 Three days after posting by prepaid registered mail
12.1.2 On the date of receipt by facsimile transmission, proof of receipt
will be the fax confirmation printout received as the sender's fax
transmission sheet.
12.1.3 On the date of receipt of an email by the recipient
12.1.4 On the date of delivery by hand or courier.
12.2 All notices given in written or electronic form are delivered according to
the terms and conditions for notice under this Agreement when sent to the
Addresses set out at the head of this Agreement.
13. COUNTERPARTS; ELECTRONICALLY AND FACSIMILE TRANSMISSION OF EXECUTED COPIES.
The Parties deem each duly executed counterpart to be an original and all
of which form the same document.
13.1 Each duly executed counterpart in combination with the other counterparts
constitutes a duly executed Agreement.
13.2 The duly executed counterparts of this Agreement may be facsimile copies or
electronically duplicated copies and a facsimile or electronically scanned
copy of the signed in counterparts is sufficient to constitute a binding
contract.
13.3 Where a Party expressly insists on the delivery of an originally executed
copy of a Counterpart the other Party's compliance with this requirement is
in addition to, but in no way derogates from the valid, enforceable and
binding effect of this Agreement. The Agreement is valid, enforceable and
binding immediately upon delivery of a duly signed counterpart of this
Agreement by facsimile or electronic delivery pursuant to Sub-sections 13.1
and 13.2 hereof.
14. GOVERNING LAW AND JURISDICTION. Unless the Parties agree to the contrary in
writing, this Agreement is subject to the laws of the State of Texas and
the jurisdiction of any court, arbitrator other tribunal competent to hear
matters in dispute under this Agreement. The Parties each promise and agree
to attorn to the jurisdiction of Texas as a form convenience to hear
matters and disputes hereunder. The Parties may only commence proceeding
hereunder in another jurisdiction upon mutual written agreement.
15. EXPENSES. Each Party will pay its own expenses and costs incidental to the
negotiation and completion of the transaction, and related Closing matters
including legal and accounting fees.
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Both parties agree to the terms and provisions set forth in this Option
Agreement;
AGREED TO AND ACCEPTED THIS ____ DAY OF OCTOBER, 2008
AMERICAN EXPLORATION CORP.
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Xxxxx Xxxxxxx, CEO
WESTROCK LAND CORP.
By: /s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx, President
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