EXHIBIT 10.1
OPTION AGREEMENT
(OPTION TO ACQUIRE OIL AND GAS LEASES IN JEFFERSON COUNTY, MISSISSIPPI)
AMERICAN EXPLORATION CORP., (herein called "AMERICAN") or its nominee, a Nevada
Registered Corporation with it business offices located at 1915 27 Avenue N.E.,
Suite 110, Calgary, Alberta, T2E 7E4
(PARTY of the First Part)
AND
WESTROCK LAND CORP., (herein called "WESTROCK"), a Texas Registered Corporation
with it business offices located at 5050 Quorum Drive, Suite 700, Dallas, Texas,
USA 75254; Ph (214) 722-6497; Fax (214) 722-6499;
(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 lands onshore in the Gulf Coast of Mexico
(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.
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
within five business days from the date of the signing of this Option
Agreement (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
bill 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
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American 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 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
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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
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 is this Option
Agreement;
AGREED TO AND ACCEPTED THIS ____ DAY OF OCTOBER, 2008
AMERICAN EXPLORATION CORP.
By: _________________________________
Steve Harding, CEO
WESTROCK LAND CORP.
By: ________________________________
Gary Powers, President
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