EXHIBIT 10.1
OPTION AGREEMENT
(OPTION TO ACQUIRE OIL AND GAS LEASES IN XXXXX COUNTY, NEW MEXICO)
FORMCAP CORPORATION, (herein called "FORMCAP") or its nominee, a Nevada
Registered Corporation with its business offices located at 00 Xxxx Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxx, Xxxxxx, XXX, 00000; Xxxxxx Xxxxxxx, President ;
Email:xx@xxxxxxxxxxxx.xxx
(PARTY of the First Part)
AND
XXXXXX CREEK ENERGY CORP., (herein called "XXXXXX"), a Nevada Registered
Corporation with its business offices located at 0000 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, Xxxxx, XXX 00000; Ph (000) 000-0000; Fax (000) 000-0000; c/o Xxxxx
Xxxxxx Ph: (000) 000-0000; Fax: (000) 000-0000; Email: xx@xxxxx.xxx
(PARTY of the Second Part)
WHEREAS:
A. Formcap or its nominee and/or its affiliates desires to acquire from
Xxxxxx, a FIFTY (50%) PERCENT WORKING Interest (40.75% Net Revenue
Interest) in approximately 13,000 Net Acres of oil and gas leases (herein
called the "LEASES") in the lands located in Xxxxx County, in the State of
New Mexico, (hereinafter referred to as the "ACQUIRED PROPERTIES"), a legal
description is attached as Appendix "A" to this agreement..
B. This Option Agreement (the "AGREEMENT") is binding on both Parties as
provided herein.
C. Formcap has utilized information provided by Xxxxxx for purposes of
entering into this Agreement.
D. This Agreement is based on the representation by Xxxxxx that it owns all
rights to all depths pursuant to the Leases comprising a total of
approximately 13,000 Net Acres (sometimes also referred to as net mineral
acres herein called "NET ACRES") comprising the Acquired Properties, a copy
of such Lease(s) to be furnished to FormCap.
E The Acquired Properties encompass approximately 13,000 Net Acres with an
81.5% Net Revenue Interest (herein called "NRI")
The Parties hereby acknowledge, promise and agree for good and valuable
consideration 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. Formcap agrees to pay Xxxxxx a ONE
HUNDRED THOUSAND (USD$100,000) DOLLARS Initial Payment within five (5)
business days from the completion of its Due Diligence. The balance of
funds for the initial well will be advanced by FormCap to Xxxxxx within
five (5) business days from the receipt of a mutually agreed upon "Approval
for Expenditure" ("AFE"). With the clear understanding that the balance of
funds for the initial well to be received by Xxxxxx no later than September
8, 2009. These Initial Payment(s) will go towards the total consideration
paid by FormCap to Xxxxxx to acquire a 50% Working Interest (40.75% Net
Revenue Interest) in the Acquired Properties, which will include the cost
of drilling and completing two xxxxx at a total estimated cost of
approximately USD$650,000 per well (USD$1.3 million in total).
It is clearly understood that the drilling and completion costs are
estimates and any additional costs, or reduction in costs, to drill and
complete the first two xxxxx will be the sole responsibility of Formcap.
Formcap will be responsible for providing 100% of the drilling and
completion costs of the first two xxxxx to acquire the 50% Working Interest
in the Acquired Properties. It is agreed that the location of the initial
two xxxxx will be mutually determined by the parties.
Formcap will provide the Dry Hole and Completion costs, estimated at
USD$650,000 to Xxxxxx in advance of drilling the first well. Upon drilling
and completion of the first well Xxxxxx will assign to Formcap a 25%
Working Interest (20.375% Net Revenue Interest) in the Acquired Properties.
Upon receipt by Xxxxxx from FormCap of the funding to be received in
advance of drilling the second well, estimated at USD$650,000 to drill and
complete and upon completion of the second well, Xxxxxx will assign an
additional 25% Working Interest (20.375% Net Revenue Interest) for a total
of 50% Working Interest (40.75% Net Revenue Interest)in the Acquired
Properties to Formcap. Costs associated with the drilling of all subsequent
xxxxx will be shared on an equal basis between Xxxxxx and Formcap. Prior to
drilling of the first well a standard well operating agreement will be
entered into by Xxxxxx and Formcap. The appropriate assignments will be
prepared, executed and recorded in regard to the Leases.
3. OPTION PERIOD. Xxxxxx hereby grants Formcap the time period between the
date of execution of this Agreement and August 15, 2009 to complete its due
diligence (herein called the "OPTION PERIOD").
4. ASSIGNMENT. At the date, time and receipt of drilling funds and completion
of each well, Xxxxxx will convey the earned interest in the Acquired
Properties to Formcap by a mutually acceptable assignment and xxxx of sale,
which will include a special warranty of title, whereby Xxxxxx expressly
limits its obligation to defending and saving harmless Formcap's right,
title and interest in and to the Acquired Properties solely and exclusively
against any third party which is claiming by, through or under Xxxxxx, but
not otherwise.
2
5. LIENS AND ENCUMBRANCES. The interest(s) earned by Formcap in the Acquired
Properties will be transferred from Xxxxxx to Formcap 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. Parties will use their best efforts to complete
the transactions contemplated in this Agreement and thereby "close" on or
before August 15, 2009.
7. CONFIRMING DUE DILIGENCE. Formcap will conduct due diligence (herein called
"Due Diligence") to confirm the title, ownership and area comprising the
Acquired Property, together with any other matters Formcap deems 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 Confirmation that Xxxxxx holds at least an 81.5% NRI in at least
13,000 Net Acres;
7.3 If Formcap can establish with documented evidence there is a
Marketable Title Deficiency in the Acquired Properties; then, at its
discretion, Formcap may terminate this Agreement by providing written
notice of the same to Xxxxxx. Neither Party will have any further
duties, obligations or liability to the other under this Agreement
regarding the documented evidence of Marketable Title Deficiency.
7.4 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.
In addition, all records, contracts and consultants, and any and all
relevant information required by FormCap to complete a thorough Due
Diligence of the prospect including a technical review of the
locations of the first two well.
7.5 Other acts of Due Diligence appropriate to the transaction as mutually
agreed between the Parties.
8. COOPERATION AND EXCLUSIVITY. Formcap and Xxxxxx will cooperate in good
faith and proceed expeditiously in the preparation of all documents
necessary to consummate the transaction contemplated by this Agreement.
Xxxxxx 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. Xxxxxx agrees to provide Formcap reasonable access in
Xxxxxx'x office to the books and records of Xxxxxx 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
3
Information. A receiving party may disclose Confidential Information to a
Third Party under this Agreement where such Third Party has a confidential
relationship with Xxxxxx or Formcap. 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.
4
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.
Both parties agree to the terms and provisions set forth is this Option
Agreement;
AGREED TO AND ACCEPTED THIS 8TH DAY OF JULY, 2009.
FORMCAP CORPORATION
By: _________________________________
Xxxxxx Xxxxxxx, President
XXXXXX CREEK ENERGY CORP.
By: ________________________________
Xxxxx Xxxxxx, President
5
