Exhibit 10.6
FIRST AMENDMENT TO
OPTION TO ACQUIRE
LEASES
Cook Inlet CBM
Project
This First Amendment to Option to Acquire Leases
(this “Agreement”), effective as of this 20th day of
April, 2005 (the “Effective Date”), is by and between
GeoPetro Resources Company (“GeoPetro”) and Pioneer Oil
Company, Inc. (“Pioneer”). This Agreement completely
supersedes and replaces in its entirety that Option to Acquire
Leases Cook Inlet CBM Project previously executed by GeoPetro and
Pioneer. The term “GeoPetro” shall also include any
participant(s) of GeoPetro who desire to acquire interest in the
Subject Interests. Subject to the terms hereof, GeoPetro is
prepared to acquire Pioneer’s one hundred percent (100%)
working interest in the State of Alaska oil and gas leases to be
issued to Pioneer in the Cook Inlet Alaskan CBM Project (the
“Subject Interests”) which are set forth on Exhibit A
attached hereto, and which cover approximately one hundred sixteen
thousand eight hundred six and twenty-nine hundredths (116,806.29)
acres. GeoPetro may, in its sole discretion, assign this Agreement
and all of its the rights and obligations hereunder to a
wholly-owned entity and to various third party participants. Any
such assignee shall acquire its interest in the Subject Interests
subject to the terms and provisions of this Agreement, and shall
expressly assume its proportionate share of the rights and
obligations of GeoPetro hereunder.
GeoPetro shall acquire Pioneer’s undivided
one hundred percent (100%) working interest in and to the Subject
Interests, in accordance with the following terms and
conditions:
1.
Initial
Diligence; Deposit . GeoPetro has performed its
preliminary due diligence. Contemporaneously with the execution of
this Agreement, GeoPetro shall deposit into the law firm Trust
Account of outside counsel designated by Pioneer the amount of One
Hundred Thousand U.S. Dollars (USD$100,000.00) (the
“Deposit”).
2.
Option Period;
Additional Review . GeoPetro has elected to
proceed with a detailed title and technical review of the Subject
Interests. For and in consideration of the Deposit, GeoPetro shall
have until 5:00 p.m. Central Daylight Time Wednesday, August 17,
2005 (the “Option Period”) to perform a detailed title
and technical review of the information relating to the Subject
Interests. Subject only to the following sentence, the Deposit is
the non-refundable property of Pioneer. Notwithstanding the
foregoing, if at any time Pioneer is unable to deliver legal and
beneficial title to the Subject Interests, the Deposit payment held
by Pioneer’s counsel shall be refunded promptly to GeoPetro
without offset or deduction.
3.
Exclusivity
. For and in
consideration of the Deposit, and throughout the term of this
Agreement, Pioneer agrees that:
(i)
Pioneer shall
not market the Subject Interests to any other party, and
shall not seek, solicit, accept, or entertain any third
party inquiries or offers with respect to the Subject
Interests;
(ii)
Pioneer shall
reasonably cooperate with GeoPetro to assist in the title and
technical diligence effort; and
(iii)
GeoPetro shall
have the exclusive right to acquire the Subject Interests, pursuant
to the terms and conditions contained herein.
4.
Access to
Data .
Throughout the term of this Agreement, Pioneer shall make available
to GeoPetro all records, files, computer records, tapes, surveys,
maps, data, and interpretations in its possession or to which it
has access that relate to the Subject Interests, whether in
written, film, microfiche, digital, electronic or other format,
including, but not limited to:
(i)
lease data,
division orders, contract and land files and title records,
including abstracts of title, title opinions, certificates of
title, title curative, title reports, and title policies, as well
as all documentation from any regulatory authorities relating to
the acquisition of the Subject Interests by Pioneer;
(ii)
subject to third
party confidentiality and use restrictions, copies of seismic and
other geological and geophysical data, including data, logs, cores,
tapes, files, maps, records and interpretations;
(iii)
copies of
operations, production, engineering and environmental
records;
(iv)
copies of
facility and well records; and
(v)
copies of any
other files in the possession or control of Pioneer, which relate
to the Subject Interests.
5.
Closing;
Escrow Account; Initial Cash Payment . If GeoPetro elects to
close the transaction contemplated herein (the
“Closing”), the Closing shall occur at a mutually
acceptable location on or before 5:00 p.m. Central Daylight Time
Wednesday, August 17, 2005, unless extended by the mutual agreement
of GeoPetro and Pioneer. At the Closing GeoPetro shall pay by wire
transfer in immediately available funds to an escrow account
established with the Houston, Texas office of either Wells Fargo
Bank, National Association or JPMorgan Chase Bank, a New York State
bank, as determined by GeoPetro and Pioneer (the “Escrow
Account”), the Initial Cash Payment of One Million One
Hundred Sixty-eight Thousand Sixty-two and 90/100s U.S. Dollars
(USD$1,168,062.90) less the One Hundred Thousand U.S.
Dollars (USD$100,000.00) Deposit previously tendered by GeoPetro
under Paragraph 1 above. The Initial Cash Payment is subject to
upward or downward adjustment, as applicable, under Paragraph 7(i)
below. The parties acknowledge that the oil and gas leases
comprising the Subject Interests are pending issuance to Pioneer
from the State of Alaska. If within ninety (90) days from the end
of the Option Period Pioneer has not received the Subject
Interests, GeoPetro may, in its sole discretion, either (i) require
the escrow agent under the Escrow Account to tender to GeoPetro the
entire Initial Cash Payment of One Million Sixty-eight Thousand
Sixty-two and 90/100s U.S. Dollars (USD$1,068,062.90), and Pioneer
(or its outside counsel, as applicable) to tender to GeoPetro the
entire One Hundred Thousand U.S. Dollars (USD$100,000.00) payment
previously paid by GeoPetro under Paragraph 1 above,
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without deduction
or offset, and terminate this Agreement, or (ii) extend this
Agreement, (a) on a month-to-month basis, up to one (1) year from
the date ninety (90) days after the end of the Option Period or (b
) until Pioneer has received and assigned the Subject Interests to
GeoPetro, whichever is earlier. If this Agreement is still in force
as provided by the preceding sentence, the Initial Cash Payment, as
adjusted in accordance with Paragraph 7(i) below, shall be
disbursed to Pioneer from the Escrow Account upon the occurrence of
the following: (i) Pioneer receives the oil and gas leases
comprising the Subject Interests from the State of Alaska, (ii)
GeoPetro reasonably approves title to the Subject Interests, and
(iii) Pioneer delivers to GeoPetro assignments of the Subject
Interests on the form Assignments of Interests in Oil and Gas
Leases promulgated by the Department of Natural Resources, Division
of Oil and Gas of the State of Alaska and bearing special warranty
of title by, through, or under Pioneer, but not otherwise, of
Pioneer’s one hundred percent (100%) leasehold interest in
and to the Subject Interests. GeoPetro shall approve or reject
title to the Subject Interests under 5(ii) above within thirty (30)
days of receipt of notice from Pioneer that it has received the oil
and gas leases comprising the Subject Interests from the State of
Alaska and is prepared to deliver assignments of same to
GeoPetro.
6.
Termination at
End of Option Period . If GeoPetro does not pay
into the Escrow Account the Initial Cash Payment on or before the
end of the Option Period hereof and GeoPetro and Pioneer have not
agreed to an extension, then Pioneer shall retain the One Hundred
Thousand U.S. Dollars (USD$100,000.00) held by Pioneer’s
counsel, this Agreement shall ipso facto terminate, and
Pioneer and GeoPetro shall have no further obligations
hereunder.
7.
Total Purchase
Price; Adjustment . The total consideration for
GeoPetro to acquire from Pioneer an undivided one hundred percent
(100%) interest in and to the Subject Leases is Two Million Three
Hundred Thirty-six Thousand One Hundred Twenty-five and 80/100s
U.S. Dollars (USD$2,336,125.80) (the “Total Purchase
Price”), subject to upward or downward adjustment, as
applicable, based upon the actual number of acres comprising the
Subject Interests, and to the conditions and limitations
hereinafter set forth. The Total Purchase Price shall be payable as
follows:
(i)
The Initial Cash
Payment (or such other adjusted amount as is determined by
multiplying the total number of acres comprising the Subject
Interests by Ten U.S. Dollars (USD$10.00)) shall be payable into
the Escrow Account at Closing (less the One Hundred Thousand U.S.
Dollars (USD$100,000.00) Deposit under Paragraph 1 above);
and
(ii)
The Second Cash
Payment of One Million One Hundred Sixty-eight Thousand Sixty-two
and 90/100s U.S. Dollars (USD$1,168,062.90) (or such other adjusted
amount as is determined by multiplying the total number of acres
comprising the Subject Interests by Ten U.S. Dollars (USD$10.00))
shall be payable to Pioneer upon the satisfaction of the conditions
stated in Paragraph 11 below.
8.
Assignments;
Reserved ORI . At Closing, GeoPetro shall
receive assignments of the Subject Interests on the form
Assignments of Interests in Oil and Gas Leases
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promulgated by
the Department of Natural Resources, Division of Oil and Gas of the
State of Alaska and bearing special warranty of title by, through,
or under Pioneer, but not otherwise, of all of Pioneer’s one
hundred percent (100%) leasehold interest in and to the Subject
Interests referred to in Exhibit A attached hereto. In the
assignments, Pioneer shall reserve an overriding royalty interest
equal to the difference between nineteen percent (19%) and existing
lease burdens. Each of the oil and gas leases comprising the
Subject Interests that Pioneer delivers to GeoPetro hereunder shall
have a net revenue interest of eighty-one percent (81%). The
assignments shall specifically provide that GeoPetro, and any
successors thereof, shall be subject to all of the terms and
provisions of this Agreement, and shall expressly assume all of the
benefits and obligations hereunder.
9.
Work Program;
Force Majeure . After Closing GeoPetro will
commence a minimum work program of Two Million Five Hundred
Thousand U.S. Dollars (USD$2,500,000.00) consisting of, but not
limited to, a multiple test well drilling program (the “Work
Program”). The initiation, timing, and completion of the Work
Program shall be subject to customary events of Force
Majeure.
(i)
If either party
hereto is unable, wholly or in part, by an event of Force Majeure
to carry out its obligations under this Agreement, other than to
make payments due hereunder, it is agreed that upon such party
giving notice and full particulars of such Force Majeure event in
writing or by facsimile to the other party as soon as possible
after the occurrence of the cause relied on, then the obligations
of the party giving such notice, as far as they are affected by
such event of Force Majeure, shall be suspended from the
commencement of and during the continuance of any inability so
caused but for no longer period, and such cause shall as far as
possible be remedied with all reasonable dispatch.
(ii)
The term
“Force Majeure,” as used herein, shall mean an act of
God, act of the public enemy, war, blockade, public riot,
lightning, fire, storm, flood, earthquake, volcanic eruption,
explosion, and any other causes of the kind enumerated.
“Force Majeure” shall also include permitting and
governmental delays provided that GeoPetro has acted with
reasonable diligence and dispatch to comply with governmental
requirements with respect to the Work Program.
10.
Notices
. All notices and
other communications required or desired to be given hereunder must
be in writing and sent (properly addressed as set forth below) by:
(a) U.S. mail with all postage and other charges fully prepaid, (b)
hand delivery, or (c) e-mail or electronic facsimile transmission.
A notice will be deemed effective on the date on which such notice
is received by the addressee, if by mail or hand delivery, or on
the date sent, if by e-mail or facsimile (as evidenced by
telephonic or fax machine confirmation of receipt or return
confirming e-mail from the recipient); provided, however, if such
date is not a Business Day, the date of receipt will be on the next
date that is a Business Day. As used herein, “Business
Day” means any day other than a Saturday, Sunday, or legal
holiday in the State of Texas, and on which banks are open for
business in Houston, Texas. Either Party may change its address by
notifying the other Party in writing of such address
change.
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If to GeoPetro:
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GeoPetro Resources Company
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One Maritime Plaza, Suite 700
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San Francisco, CA 94111
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Attn: Mr. Stuart J. Doshi
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Telephone (415) 398-8186
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Facsimile: (415) 398-9227
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E-mail: sdoshi@geopetro.com
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If to Pioneer:
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Pioneer Oil Company, Inc.
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RR 4, Box 142 B
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Lawrenceville, IL 62439
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Attn.: Mr. Donald E. Jones Jr.
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Telephone (618) 943-5314
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Facsimile: (618) 943-5523
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E-mail: donjones@pioneeroil.net
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11.
Completion of
Work Program . Subject only to events of
Force Majeure, GeoPetro shall complete the Work Program on or
before three (3) years from the date that Pioneer executes,
acknowledges, and delivers to GeoPetro legally-sufficient
assignments of the Subject Interests. On or before three (3) years
from the date that Pioneer executes, acknowledges, and delivers to
GeoPetro legally-sufficient assignments of the Subject Interests,
GeoPetro shall elect, in its sole discretion, (i) to forfeit its
entire interest in the Subject Interests, in which event Pioneer
shall retain as its sole property all monies and other
consideration paid to it by GeoPetro or any third party under this
Agreement, or (ii) to tender to Pioneer the Second Cash Payment,
being remaining balance of the Total Purchase Price (calculated by
multiplying the total number of acres comprising the Subject
Interests by Ten U.S. Dollars (USD$10.00))as specified in Paragraph
7(ii) above. If an election is made not to pay to Pioneer
the Second Cash Payment, being the remaining balance of the Total
Purchase Price, then GeoPetro will promptly reassign all of its
right, title, and interest in and to the Subject Interests by
assignments of the Subject Interests on the form Assignments of
Interests in Oil and Gas Leases promulgated by the Department of
Natural Resources, Division of Oil and Gas of the State of Alaska
and bearing special warranty of title by, through, or under
GeoPetro, but not otherwise, to Pioneer, and all of the interest of
GeoPetro hereunder shall ipso facto terminate.
12.
Delay
Rentals . GeoPetro agrees that from
and after Closing and throughout the term hereof until such time as
GeoPetro either (i) forfeits its entire interest in the Subject
Interests, or (ii) remits the Second Cash Payment, being the
remaining balance of the Total Purchase Price to Pioneer, GeoPetro
shall use its reasonable commercial efforts to maintain the Subject
Interests during their primary term through the timely payment of
delay rentals as such payments become due. All such delay rentals
shall be tendered at least sixty (60) days before such payments are
due, and proof o
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