EXHIBIT 10.1
OPTION AGREEMENT
(OPTION TO ACQUIRE OIL AND GAS LEASES IN XXXXX COUNTY, NEW MEXICO)
XXXXXX CREEK ENERGY CORP., (herein called "XXXXXX") or its nominee, a Nevada
Registered Corporation with it business offices located at 0000 Xxxxxx Xxxxx,
Xxxxx 000, Xxxxxx, Xxxxx, XXX 00000
(PARTY of the First Part)
AND
WESTROCK LAND CORP., (herein called "WESTROCK"), a Texas Registered Corporation
with its registered offices located at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx, XXX 00000 ;
(PARTY of the Second Part)
WHEREAS:
X. Xxxxxx or its nominee. and/or its affiliates (in combination called
"XXXXXX") desires to acquire a One Hundred (100%) percent Working Interest
in approximately 7,763 Net Acres in 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") from Westrock.
B. This Option Agreement (the "AGREEMENT") is binding on both Parties as
provided herein.
X. Xxxxxx 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 7,763 Net Acres (sometimes also referred to as net mineral
acres herein called "NET ACRES") comprising the Acquired Properties.
E. The Acquired Properties encompasses approximately 5,746 Net Acres (herein
called the "A PORTION LEASES") with an 81.5% net revenue interest (herein
called "NRI") and approximately 2,017 Net Acres (herein called the "B
PORTION LEASES") with a 78.5% NRI.
F. Westrock has disclosed and Xxxxxx acknowledges that it understands that on
the approximately 2,017 Net Acres forming the B Portion Leases, Westrock
has an option until June 23, 2009 to exercise a FIVE (5) YEAR LEASE for ONE
HUNDRED (USD$100) DOLLARS per Net Acres.
G. For more particularity the Acquired Properties are set out and located in
the Map attached hereto as Schedule "A", which the Parties acknowledge, is
sufficiently particular for the purposes of this Agreement.
The Parties hereby acknowledge, promise and agree, for good and valuable
consideration the sufficiency of which is mutually acknowledged by the Parties
hereto, to the following:
1. INTERPRETATION.
THE RECITALS - are formally relied upon by the Parties as an integral part
of the body of this Agreement.
THE HEADINGS - The division of this Agreement into Articles, Sections and
Subsections and the insertion of headings is for reference only and does
not affect the construction or interpretation of this Agreement. References
herein to Articles and Sections are to Articles and Sections of this
Agreement.
INTENDED MEANING - The terms "this Agreement", "hereof", "hereunder" and
similar expressions refer to this Agreement and not to any particular
Article, Section or other portion hereof, unless expressly stated to apply
to a particular Article, Section or other portion hereof and this includes
any agreement, schedule or instrument which is supplemental or ancillary
hereto, unless something in the subject matter or the context is
inconsistent therewith.
GENDER, NUMBER ENTITY - In this Agreement, words importing the singular
number include the plural and vice versa; words importing the masculine,
feminine or neuter genders includes the masculine, feminine and neuter
genders; and words importing persons will include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations; where such importing is reasonably consistent with language,
meaning, character and context herein.
CURRENCY - In this Agreement all references to currency are in United
States Dollars (USD$) unless expressly stated to the contrary herein.
2. PURCHASE PRICE. Xxxxxx agrees to pay Westrock FIFTY (USD$50.00) DOLLARS per
Net Acre. The total purchase price (the "PURCHASE PRICE") for the Acquired
Property is calculated as [(7,763 Net Acres) X (USD$50.00/Net Acres) =
THREE HUNDRED AND EIGHTY-EIGHT THOUSAND ONE HUNDRED AND FIFTY DOLLARS
(USD$388,150) DOLLARS.
3. OPTION PERIOD. Westrock hereby grants Xxxxxx the time period between the
date of execution of this Agreement and November 20, 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 Xxxxxx 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 Xxxxxx'x
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 Xxxxxx 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 21, 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 21, 2008.
7. CONFIRMING DUE DILIGENCE. Xxxxxx will conduct due diligence (herein called
"Due Diligence") to confirm the title, ownership and area comprising the
Acquired Property, together with any other matters Xxxxxx xxxxx material to
its decision to exercise the Option and purchase the Acquired Property. Due
Diligence will include, but is not limited to, the following:
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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 Xxxxxx 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 78.5% N.R.I. in at least 2,018 Net Acres and at least an
81.5% N.R.I in at least 5,745 Net Acres comprising the Acquired
Properties, then Xxxxxx will be deemed to have established that there
is a "MARKETABLE TITLE DEFICIENCY" in the Acquired Properties.
7.3 If Xxxxxx can establish with documented evidence there is a Marketable
Title Deficiency in the Acquired Properties; then, at its discretion,
Xxxxxx may terminate this Agreement by providing written notice of the same
to Westrock.
7.4 If at any time during the Option Period, Xxxxxx 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 Xxxxxx 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
Xxxxxx 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 Xxxxxx 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 Xxxxxx 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 Xxxxxx 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 Xxxxxx on
or before the expiration of the Thirty Day Reply Period.
7.4.5 If Westrock replies to the Xxxxxx 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 Xxxxxx documented evidence
establishing a Marketable Title Deficiency in the Acquired Properties,
then:
7.4.5.1 Xxxxxx 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 Xxxxxx, but the Parties do not agree
to reinstated the Agreement, accordingly the Deposit will be retained
by Westrock.
7.4.5.3 Xxxxxx 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
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Deposit. Under these circumstances, Westrock and Xxxxxx 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 Xxxxxx 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 Xxxxxx'x 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 Xxxxxx, 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 Xxxxxx 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. Xxxxxx 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 Xxxxxx 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
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 Xxxxxx. 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.
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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 is this Option
Agreement;
AGREED TO AND ACCEPTED THIS 31ST DAY OF OCTOBER, 2008
XXXXXX CREEK ENERGY CORP.
By: _________________________________
Xxxxx Xxxxxx, President
WESTROCK LAND CORP.
By: ________________________________
Xxxx Xxxxxx, President
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