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.
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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
2
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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 co
