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EXHIBIT 10.12
CONSULTING SERVICES AND OPTIONS AGREEMENT
Between:
STRATEGIC AMERICAN OIL CORPORATION
And:
KYLE COMBEST
Strategic American Oil Corporation
Suite 320, 1111 West Hastings Street, Vancouver,
British Columbia, V6E 2J3
CONSULTING SERVICES AND OPTION
AGREEMENT
THIS CONSULTING SERVICES AND OPTION AGREEMENT is
made and dated for reference effective as at August 01, 2006 (the
"Effective Date") as fully executed on this 2LL day of August, 2006
(the "Execution Date").
BETWEEN:
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STRATEGIC AMERICAN OIL CORPORATION , a company
incorporated under the laws of the State of Nevada, U.S.A., and
having an executive office and an address for notice and
delivery
located at Suite 320, 1111 West Hastings Street, Vancouver,
British Columbia, V6E 2J3
(the "Company");
OF THE FIRST PART
AND:
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KYLE COMBEST , having an address for notice and
delivery
located at P.O. Box 827, San Angelo, TX 76902 (325) 655-4302
(the "Consultant");
OF THE SECOND PART
WHEREAS:
(A) The
Company is a non-reporting company incorporated under the laws of
the State of Nevada, U.S.A.;
(B) The
Consultant has experience in and specializes in providing reporting
and non-reporting companies with valuable geological consulting
services;
(C) The
Company is involved in the principal business of acquiring,
exploring and developing various oil and gas property interests of
merit (collectively, the "Business"), and the Company is hereby
desirous of retaining the Consultant, and the Consultant is hereby
desirous of accepting such position, in order to provide such
geological consulting services to the Company and to any of its
subsidiaries in order to further the various Business interests of
the Company (collectively, the "General Consulting Services");
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(D) Since
the introduction of the Parties hereto the Parties hereby
acknowledge and agree that there have been various discussions,
negotiations, understandings and agreements between them relating
to the terms and conditions of the General Consulting Services and,
correspondingly, that it is their intention by the terms and
conditions of this agreement (the "Agreement") to hereby replace,
in their entirety, all such prior discussions, negotiations,
understandings and agreements with respect to the General
Consulting Services; and
(E) The
Parties hereto have agreed to enter into this Agreement which
replaces, in its entirety, all such prior discussions,
negotiations, understandings and agreements, and, furthermore,
which necessarily clarifies their respective duties and obligations
with respect to the within General Consulting Services to be
provided hereunder, all in accordance with the terms and conditions
of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH
that, in consideration of the mutual covenants and provisos herein
contained, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
DEFINITIONS, INTERPRETATION AND SCHEDULE
Definitions
1.1 For
all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following
words and phrases shall have the following meanings:
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(a)
"Agreement" means this Consulting Services and Option Agreement as
from time to time supplemented or amended by one or more agreements
entered into pursuant to the applicable provisions hereof, together
with any Schedules attached hereto;
(b)
"Arbitration Rules" means the American Arbitration Association
Rules, as amended from time to time, as set forth in Article "8"
hereinbelow;
(c)
"Board of Directors" means the Board of Directors of the Company as
duly constituted from time to time;
(d)
"Bonus Option", "Bonus Option Price" and "Bonus Option Share" have
the meanings ascribed to them in section "4.2" hereinbelow;
(e)
"Business" has the meaning ascribed to it in recital "C."
hereinabove. (0 "business day" means any day during which Chartered
Banks are open for business in Portland, Texas, U.S.A.;
(f)
"Business day" means any day during which Chartered Banks are open
for business in Portland, Texas, U.S.A.;
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(g)
"Cancellation of the Residual Bonus Option" has the meaning
ascribed to it in section "3.3" hereinbelow;
(h)
"Company" means Strategic American Oil Corporation, a company
incorporated under the laws of the State of Nevada, U.S.A., or any
successor company, however formed, whether as a result of merger,
amalgamation or other action;
(i)
"Company's Non-Renewal Notice" has the meaning ascribed to it in
section "3.2" hereinbelow
(j)
"Consultant" means Kyle Combest;
(k)
"Effective Date" has the meaning ascribed to it on the front page
of this Agreement;
(l)
"Effective Termination Date" has the meaning ascribed to it in each
of sections "3.3", "3.4", "3.5" and "5.6" hereinbelow;
(m)
"Execution Date" has the meaning ascribed to it on the front page
of this Agreement;
(n)
"Expenses" has the meaning ascribed to it in section "4.3"
hereinbelow;
(o)
"Fee" has the meaning ascribed to it in section "4.1"
hereinbelow;
(p)
"General Consulting Services" has the meaning ascribed to it in
section "2.1" hereinbelow; the initial particulars of which being
set forth in Schedule "A" which is attached hereto;
(q)
"Indemnified Party" has the meaning ascribed to it in section "6.1"
hereinbelow;
(r)
"Initial Term" has the meaning ascribed to it in section "3.1"
hereinbelow;
(s)
"Notice of Termination" has the meaning ascribed to it in each of
sections "3.3", "3.4", "3.5" and "5.6" hereinbelow;
(t)
"Parties" or "Party" means, individually and collectively, the
Company, and/or the Consultant hereto, as the context so requires,
together with each of their respective successors and permitted
assigns as the context so requires;
(u)
"Property" has the meaning ascribed to it in section "5.7"
hereinbelow;
(v)
"Registration Effective Date", "Registration Statement", "Rule
144", "SEC" and "Securities Act" have the meanings ascribed to them
in section "4.2" hereinbelow;
(w)
"Regulatory Approval" means the acceptance for filing, if required,
of the transactions contemplated by this Agreement by the
Regulatory Authorities;
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(x)
"Regulatory Authorities" and "Regulatory Authority" means, either
singularly or collectively as the context so requires, such
regulatory agencies who have jurisdiction over the affairs of
either of the Company and/or the Consultant and including, without
limitation, and where applicable, any and all regulatory
authorities from whom any such authorization, approval or other
action is required to be obtained or to be made in connection with
the transactions contemplated by this Agreement;
(y)
"Return of the Residual Bonus Option" has the meaning ascribed to
it in section "3.3" hereinbelow; and
(z)
"subsidiary" means any company or companies of which more than 50%
of the outstanding shares carrying votes at all times (provided
that the 'ownership of such shares confers the right at all times
to elect at least a majority of the directors of such company or
companies) are for the time being owned by or held for that company
and/or any other company in like relation to that company and
includes any company in like relation to the subsidiary.
Interpretation
1.2 For
the purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
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(a) the words
"herein", "hereof' and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
Article, section or other subdivision of this Agreement;
(b) any reference to
an entity shall include and shall be deemed to be a reference to
any entity that is a permitted successor to such entity; and
(c) words in the
singular include the plural and words in the masculine gender
include the feminine and neuter genders, and vice versa.
Schedule
1.3 For
the purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following
shall represent the Schedule which is attached to this Agreement
and which forms a material part hereof:
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Schedule
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Description
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Schedule Description
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Schedule "A": General Consulting Services.
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ARTICLE 2
GENERAL SERVICES AND DUTIES OF THE CONSULTANT
General Consulting Services
2.1 During
the Initial Term (as hereinafter determined) and during the
continuance of this Agreement the Company hereby agrees to retain
the Consultant as a consultant of the Company, or to and on behalf
of any of the Company's respective subsidiaries, as the ease may be
and as may be determined by the Board of Directors, from time to
time, and in its sole and absolute discretion, and the Consultant
hereby agrees to accept such position in order to provide such
geological consulting services as may be determined by the Board of
Directors, from time to time, and in its sole and absolute
discretion, in order to develop the various Business interests of
the Company during the continuance of this Agreement (collectively,
the "General Consulting Services"); it being initially acknowledged
and agreed by each of the Parties hereto that the Consultant's
initial and required General Consulting Services under the terms
and conditions of this Agreement are particularly described in
Schedule "A" which is attached hereto and which forms a material
part hereof and it being further acknowledged and agreed by each of
the Parties hereto that the Consultant shall commit and provide to
the Company the General Consulting Services on a reasonably
sufficient basis during the continuance of this Agreement for which
the Company, as more particularly set forth hereinbelow, hereby
agrees to provide to the order and direction of the Consultant each
of the proposed compensation amounts as set forth in Article "4"
hereinbelow.
In this regard it is hereby acknowledged and agreed
that the Consultant shall be entitled to communicate with and shall
rely upon the immediate advice, direction and instructions of the
President of the Company, or upon the advice or instructions of
such other director or officer of the Company as the President of
the Company shall, from time to time, designate in times of the
President's absence, in order to initiate, coordinate and implement
the General Consulting Services as contemplated herein subject, at
all times, to the final direction and supervision of the Board of
Directors.
Additional duties respecting the General
Consulting Services
2.2 Without
in any manner limiting the generality of the General Consulting
Services to be provided as set forth in section "2.1" hereinabove,
it is hereby also acknowledged and agreed that Consultant will,
during the continuance of this Agreement, devote a reasonably
sufficient portion of the Consultant's consulting time to the
General Consulting Services of the Consultant as may be determined
and required by the Board of Directors for the performance of said
General Consulting Services faithfully, diligently, to the best of
the Consultant's abilities and in the best interests of the
Company.
Adherence to rules and policies
2.3 The
Consultant hereby acknowledges and agrees to abide by the
reasonable rules, regulations, instructions, personnel practices
and policies of the Company and any changes therein which may be
adopted from time to time by the same as such rules, regulations,
instructions, personnel practices and policies maybe reasonably
applied to the Consultant as a consultant of the Company.
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ARTICLE 3
EFFECTIVENESS, INITIAL TERM, RENEWAL AND TERMINATION
Effectiveness and Initial Term of the Agreement
3.1 This
Agreement becomes effective on the Effective Date hereinabove,
however, is subject, at all times, to the Company's prior receipt,
if required, of Regulatory Approval from each of the Regulatory
Authorities to the terms and conditions of and the transactions
contemplated by this Agreement. The initial term of this Agreement
is for a period commencing on the Effective Date hereof and ending
at the close of business (Portland, Texas, U.S.A., time) 18 months
from the Effective Date hereof (the "Initial Term").
Renewal by the Company after the Initial
Term
3.2 Subject
at all times to sections "3.3", "3.4", "3.5" and "5.6" hereinbelow,
this Agreement shall renew automatically if not specifically
terminated in accordance with the following provisions. The Company
agrees to notify the Consultant in writing at least 30 calendar
days prior to the end of the Initial Term of its intent not to
renew this Agreement (the "Company 's Non-Renewal Notice"). Should
the Company fail to provide a Company's Non-Renewal Notice this
Agreement shall automatically renew on a month-to-month term
renewal basis after the Initial Term until otherwise specifically
renewed in writing by each of the Parties hereto for the next
one-month term of renewal or, otherwise, terminated upon delivery
by the Company of a corresponding and follow-up 30 calendar day
Company's Non-Renewal Notice in connection with and within 30
calendar days prior to the end of any such one-month term renewal
period. Any such renewal on a one-month basis shall be on the same
terms and conditions contained herein unless modified and agreed to
in writing by the Parties in advance.
Termination without cause by the Consultant and
Cancellation of the Residual Bonus Option
3.3 Notwithstanding
any other provision of this Agreement, this Agreement may be
terminated by the Consultant at any time after the Effective Date
and during the Initial Term and during the continuance of this
Agreement upon the Consultant's delivery to the Company of prior
written notice of its intention to do so (the "Notice of
Termination" herein) at least 30 calendar days prior to the
effective date of any such termination (the end of such 30-day
period from such Notice of Termination being the "Effective
Termination Date" herein). In any such event the Consultant's
ongoing obligation to provide the General Consulting Services will
continue until the Effective Termination Date and, subject to the
following, the Company's ongoing obligation to provide and to pay
to the Consultant all of the amounts otherwise payable to the
Consultant under Article "4" hereinbelow will continue until the
Effective Termination Date. in this regard it is hereby
acknowledged and agreed by the Parties hereto that, as the Bonus
Option (as hereinafter determined) consideration, which is to be
provided by the Company to the Consultant in accordance with
section "4.2" hereinbelow, is being provided in advance and on the
premise that the Consultant will provide the General Consulting
Services for the entire Initial Term hereof, should the Effective
Termination Date hereunder be prior to the end of the initial Term,
the Consultant shall then be deemed, with its Notice of
Termination, to have thereby cancelled its then right to acquire
any remaining Bonus Option Shares (as hereinafter determined) under
its then remaining Bonus Option outstanding on the date of its
Notice of Termination (the "Cancellation of the Residual Bonus
Option").
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Termination without cause by the Company
3.4 Notwithstanding
any other provision of this Agreement, this Agreement may be
terminated by the Company at any time after the Effective Date and
during the Initial Term and during the continuance of this
Agreement upon the Company's delivery to the Consultant of prior
written notice of its intention to do so (the "Notice of
Termination" herein) at least 30 calendar days prior to the
effective date of any such termination (the end of such 30-day
period from such Notice of Termination being the "Effective
Termination Date" herein), in any such event the Consultant's
ongoing obligation to provide the General Consulting Services will
immediately cease upon the date of the Notice of Termination,
however, the Company shall continue to be obligated to provide and
to pay to the Consultant all of the amounts otherwise payable to
the Consultant under Article "4" hereinbelow until the Effective
Termination Date and including, without limitation, the
Consultant's then right to exercise any vested portion of the Bonus
Option for Bonus Option Shares (each as hereinafter determined)
outstanding under section "4.2" hereinbelow until the Effective
Termination Date.
Termination for cause by any Party and
Cancellation of the Residual Bonus Option pending
determination
3.5 Notwithstanding
any other provision of this Agreement, this Agreement may be
terminated by any of the Parties hereto at any time upon written
notice to the other Party of such Party's intention to do so (the
"Notice of Termination" herein) at least 10 calendar days prior to
the effective date of any such termination (the end of such
five-day period from such Notice of Termination being the
"Effective Termination Date" herein), and damages sought, if:
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(a) the other Party
fails to cure a material breach of any provision of this Agreement
within 10 calendar days from its receipt of written notice from
said Party (unless such material breach cannot be reasonably cured
within said 10 calendar days and the other Party is actively
pursuing to cure said material breach);
(b) the other Party
is wilfully non-compliant in the performance of its respective
duties under this Agreement within five calendar days from its
receipt of written notice from said Party (unless such wilful
non-compliance cannot be reasonably corrected within said 10
calendar days and the other Party is actively pursuing to cure said
wilful non-compliance);
(c) the other Party
commits fraud or serious neglect or misconduct in the discharge of
its respective duties hereunder or under the law; or
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In any such event the Consultant's ongoing
obligation to provide the General Consulting Services will continue
only until the Effective Termination Date and, subject to the
following, the Company's ongoing obligation to provide and to pay
to the Consultant all of the amounts otherwise payable to the
Consultant under Article "4" hereinbelow will continue until the
Effective Termination Date. In this regard it is hereby
acknowledged and agreed by the Parties hereto that, unless
otherwise agreed to or finally determined by arbitration in
accordance with Article "8" hereinbelow, should the Effective
Termination Date hereunder be prior to the end of the Initial Term,
the Cancellation of the Residual Bonus Option shall then be deemed
to have occurred on the Effective Termination Date in the manner as
set forth in section "3.3" hereinabove.
Effect of Termination
3.6 Terms
of this Agreement relating to accounting, payments,
confidentiality, accountability for damages or claims and all other
matters reasonably extending beyond the terms of this Agreement and
to the benefit of the Parties hereto or for the protection of the
Business interests of the Company shall survive the termination of
this Agreement, and any matter of interpretation thereto shall be
given a wide latitude in this regard. In addition, and without
limiting the foregoing, each of sections "3.3", "3.4", "3.5"
hereinabove and section "5.6" hereinbelow shall survive the
termination of this Agreement.
ARTICLE 4
COMPENSATION OF THE CONSULTANT
Daily Fee
4.1 It
is hereby acknowledged and agreed that the Consultant shall render
the General Consulting Services as defined hereinabove, on a daily
and on an as- when-needed basis as requested in writing by the
Company prior to and at any time during the Initial Term and during
the continuance of this Agreement, and shall thus be compensated on
a daily (per diem) basis from the Execution Date of this Agreement
to the termination of the same by way of the payment by the Company
to the Consultant, or to the further order or direction of the
Consultant as the Consultant may determine, in the Consultant's
sole and absolute discretion, and advise the Company of prior to
such payment, of the daily (per diem) fee of U.S. $400.00 per day
for the General Consulting Services having been provided hereunder
(the daily "Fee" and the totality of any Fee for any month during
the Initial Term and during the continuance of this Agreement
being, collectively, also the Fee herein). Such daily aggregate Fee
during each month will be due and payable by the Company to the
Consultant, or to the further order or direction of the Consultant
as the Consultant may determine, in the Consultant's sole and
absolute discretion, and advise the Company of prior to any such
Fee payment, on the final business day of each month during the
Initial Term and during the continuance of this Agreement during
which any such General Consulting Services were provided by the
Consultant as requested by the Company in advance in writing.
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Bonus Option to acquire Bonus Option
Shares
4.2 It
is hereby acknowledged and agreed that, as an inducement to the
Consultant to enter into and consummate this Agreement, upon the
Effective Date of this Agreement the Company will grant to the
Consultant, or to the further order or direction of the Consultant
as the Consultant may determine, in the Consultant's sole and
absolute discretion, and advise the Company of prior to such grant,
a one-time signing bonus option (collectively, the "Bonus Option")
to acquire up to an aggregate of 250,000 restricted common shares
from the treasury of the Company (each a '<Bonus Option Share"),
at a Bonus Option exercise price of U.S. $0.35 per Bonus Option
Share (the "Bonus Option Price" per Bonus Option Share), and for a
period of up to ten years from the Effective Date of this
Agreement, all in the following manner:
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(a) the Consultant
shall have immediate right upon the Effective Date hereof to
exercise up to an aggregate of 100,000 of the Bonus Option for up
to an equivalent number of Bonus Option Shares at the Bonus Option
Price; and
(b) the Consultant
shall have the further right to exercise up to an aggregate of a
further 50,000 of the Bonus Option for up to an equivalent number
of Bonus Option Shares at the Bonus Option Price on or after 5:00
p.m. (Portland, Texas, U.S.A., time) on each of the following dates
during the Initial Term and during the continuance of this
Agreement:
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(i) an initial
50,000 of such Bonus Option Shares on or after the date which is
six months from the Effective Date hereof;
(ii) a
further 50,000 of such Bonus Option Shares on or after the date
which is 12 months from the Effective Date hereof; and
(iii) the final
50,000 of such Bonus Option Shares on or after the date which is 18
months from the Effective Date hereof.
In this regard the Consultant hereby acknowledges
and agrees that the Company makes no representations as to any
resale or other restriction affecting the Bonus Option and the
Bonus Option Shares underlying the exercise of the same and that it
is presently contemplated that the Bonus Option will be issued by
the Company to the Consultant in reliance upon the registration and
prospectus exemptions contained in certain sections of the United
States Securities Act of 1933 (the "Securities Act") which will
impose a trading restriction in the United States on the Bonus
Option and on the Bonus Option Shares underlying the exercise of
the same for a period of up to 24 months from the date of issuance
of the Bonus Option and the date of issuance of the Bonus Option
Shares upon exercise. In addition, the Consultant hereby also
acknowledges and agrees that the within obligation of the Company
to issue the Bonus Option will be subject to the Company being
satisfied that an exemption from applicable registration and
prospectus requirements is available under the Securities Act and
all applicable securities laws, in respect of each of the
Consultant and the Bonus Option, and the Company shall be relieved
of any obligation whatsoever to issue any Bonus Option in respect
of the Consultant where the Company reasonably determines that a
suitable exemption is not available to it.
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The Consultant hereby also acknowledges and
understands that neither the sale of the Bonus Option or any Bonus
Option Shares underlying the exercise of the same which the
Consultant is acquiring, nor any of the Bonus Option or the Bonus
Option Shares themselves, have been registered under the Securities
Act or any state securities laws, and, furthermore, that the Bonus
Option and any Bonus Option Shares underlying the exercise of the
same must be held indefinitely unless subsequently registered under
the Securities Act or an exemption from such registration is
available. The
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