PURCHASE AND SALE AGREEMENT
Exhibit 10.2
This
Purchase and Sale Agreement (“Agreement”)
is
made on May 30th,
2006
and shall become effective 45 days hence forth (the “Effective
Date”)
and is
made by and between, W.A. Xxxxxx (“Xxxxxx”)
and
Quest Oil Corporation, a Nevada corporation, (“Quest”)
and is
ratified by Xxxxx X. Xxxxxxx (“CLS”),
Xxxxx
Xxx Xxxxxx (formerly Xxxxx Xxx Xxxxxxx and hereinafter, “NAS”),
Xxxxxxx Xxxxx Xxxxxxx (“MJS”)
and
Xxxxxxx Xxxxxxxx (“DR”).
(CLS,
NSA, MJS and DR are collectively referred to herein as “Xxxxxxx”).
I.
The
Lease
WHEREAS,
on July 15, 2004, Xxxxxxx entered into an oil and gas lease with Xxxxxx (the
“2004
Xxxxxxx Lease”),
thereby leasing to Xxxxxx, oil, gas and water rights (“OGWR”)
underlying property (which shall be referred to herein as the “Xxxxxxx
Property”
and
which shall be described more completely in (i) the 2004 Xxxxxxx Lease (a copy
of which is attached hereto and incorporated herein as “Exhibit
A”),
and
(ii) the last paragraph of this Section 1).
WHEREAS,
the 2004 Xxxxxxx Lease provides for (i) a one year term (the “Term”),
and
(ii) for the Term to be extended should there be any production (to
“Produce”
or
“Production”)
of oil
or gas or water (“OGW”)
in the
subject property.
WHEREAS,
since the execution of the 2004 Xxxxxxx Lease there has been Production of
OGW;
and such Production of OGW has been evidenced by an Affidavit of Production
(attached hereto as “Exhibit
B”
and
hereinafter referred to as the “Affidavit”).
WHEREAS,
as a result of the aforesaid Production, the 2004 Xxxxxxx Lease and the
assignments related thereto, are in full force and effect and are legally valid
and shall remain so long as there is production of OGW.
WHEREAS,
in order to legally confirm and ratify the legal validity and current
effectiveness of the rights underlying the 2004 Xxxxxxx Lease as well as the
current interests of Xxxxxx and Xxxxxxx in the same, Xxxxxxx has executed the
attached Ratification Agreement (attached hereto as “Exhibit
C”
and
hereinafter referred to as the “Ratification”).
WHEREAS,
on June 29, 2005, Xxxxxx executed an agreement (a copy of which is attached
hereto as “Exhibit
D”)
that
assigned a 75% Net Revenue Interest (hereinafter referred to as “NRI”
the
definition of which is contained in the 2004 Xxxxxxx Lease) in the OGWR to
the
Xxxxxxx Property to Milestone Energy Capital LLC (“Milestone”).
As a
result of the Exhibit D agreement, Xxxxxxx retained a 12.5% royalty interest
(hereinafter referred to as “RI”
and
the
definition of which is contained in the 2004 Xxxxxxx Lease) and Xxxxxx retained
a 12.5% NRI in the OGWR in the Xxxxxxx Property.
WHEREAS,
on February 27, 2006 and May 17, 2006, Milestone executed agreements (copies
of
which are attached hereto as “Exhibit
E”
and
“Exhibit
F”
respectively) with Xxxxxx which conveyed all of Milestone’s interest in the OGWR
in the Xxxxxxx Property to Xxxxxx.
WHEREAS,
as of the date of this Assignment of Lease, with respect to ownership of the
OGWR in the Xxxxxxx Property, Xxxxxxx owns a 12.5% RI, and Xxxxxx owns a 100%
working interest and an 87.5% NRI.
WHEREAS,
the 2004 Xxxxxxx Lease which is the subject of this Assignment of Lease and
which is related to the Xxxxxxx Property is duly recorded in Book 50 of Leases
at Page 505, Office of Register of Deeds of Greenwood County,
Kansas.
II.
Terms
and Conditions
NOW
THEREFORE, in consideration of the following, and other good and valuable
consideration, receipt of which is hereby acknowledged, Xxxxxx agrees to sell,
assign, transfer, and convey to Quest, subject to the terms of the consulting
agreement, all (100%) of Xxxxxx'x right, title, and interest in the 2004 Xxxxxxx
Lease, the interests underlying the documents in Exhibits D, E and F and the
real property covered by the 2004 Xxxxxxx Lease, on the terms and conditions
set
forth below.
A. Consideration.
1. Consulting
Agreement with W.A. Xxxxxx.
Quest
shall enter into a consulting agreement with W.A. Xxxxxx (attached as
“Exhibit
G”).
2. Restricted
Common Shares.
(a)
500,000 restricted common shares of Quest; and (b) 700,000 restricted common
shares of Quest (“Balance
Shares”).
On a
pro-rata basis, the Balance Shares shall be adjusted down should Quest not
recover in gross revenues (net of bonuses and royalties to Xxxxxx and Xxxxxxx),
within 18 months of the closing date, 110% of the sum of: (a) $68,000; (b)
$300,000; and (c) the actual cash spent on the Minimum Commitment (as defined
below).
3. Minimum
Commitment.
Within
45 days from the Effective Date, Quest agrees to commence a work-over program
of
the 20 existing xxxxx on the Xxxxxxx Property requiring a capital investment
of
not less than $80,000 (the “Minimum
Commitment”).
B. Due
Diligence.
Quest
shall have 45 days from the date of execution of this Assignment of Lease to
conduct due diligence.
C. Costs.
All
parties shall bear their own costs and fees.
III.
Quest
to Perform 2004 Xxxxxxx Lease
Quest
accepts, on the terms and conditions specified in this instrument, this Purchase
and Sale Agreement and agrees to fully perform all of the terms and conditions
of the 2004 Xxxxxxx Lease.
IV.
Indemnity
Agreement
All
signatures to this Agreement agree to indemnify and hold each other free and
harmless from all claims, liability, loss, damage, or expense resulting from
Quest's performance of the 2004 Xxxxxxx Lease, Quest's occupation of any part
of
the real property covered by the 2004 Xxxxxxx Lease, or the exploration for,
or
extraction by Quest under the 2004 Xxxxxxx Lease of, any oil, gas, or other
hydrocarbon substances.
V.
Modification
and Extension of 2004 Xxxxxxx Lease
Quest
shall have the right to obtain from Lessor under the 2004 Xxxxxxx Lease, or
Lessor's successor in interest as Lessor under the 2004 Xxxxxxx Lease, any
modifications or extensions of the 2004 Xxxxxxx Lease Quest may
desire.
VI.
Work-Over
Program
Within
45
days from the Effective Date, Quest must begin a work-over program of the twenty
existing xxxxx located on the land covered by the 2004 Xxxxxxx
Lease.
VII.
Default
Clause
Should
Quest fail to commence work-over operations on the Xxxxxxx Property within
one
year after the date of this Agreement, or should Quest fail or default in the
performance of the 2004 Xxxxxxx Lease or this instrument, then Xxxxxx may,
at
Xxxxxx’x option, either declare Quest’s rights under the 2004 Xxxxxxx Lease and
this instrument forfeited and resume Xxxxxx'x status as Lessee under the 2004
Xxxxxxx Lease or bring appropriate action in law or equity either to enforce
this instrument or to recover appropriate damages.
VIII.
Access
to Xxxxx
Xxxxxx
shall have access to any well on the Xxxxxxx Property and shall have the
privilege of witnessing all tests and operations conducted on or in connection
with any such well. On written request of Xxxxxx, Quest agrees to furnish Xxxxxx
with copies of logs and reports obtained or prepared in connection with any
well
drilled on the land covered by the 2004 Xxxxxxx Lease.
IX.
Xxxxxxx
and Xxxxxx Warranties
Xxxxxxx
and Xxxxxx make the following warranties with respect to the land covered by
the
2004 Xxxxxxx Lease:
(a)
The rights and interest conveyed to Quest by this instrument are free and clear
of all liens, charges, and encumbrances;
(b)
Xxxxxx has the right to make the transfer and conveyance effectuated by this
instrument;
(c)
No default or defaults now exist or have been declared under the 2004 Xxxxxxx
Lease; and
(d)
The 2004 Xxxxxxx Lease is now in good standing and in full force and
effect.
X.
Manner
of Payments to Xxxxxx
All
moneys payable under this Agreement by Quest to Xxxxxx shall be deemed duly
paid
when a check for them payable to the order of Xxxxxx is deposited in the United
States mail, first-class postage prepaid, addressed to Xxxxxx at the following
address:
W.A.
Xxxxxx
x/x
Xxxx
Xxxxx, Xxx.
000
Xxxxx
Xxxxxxxxxx Xxxxxx
X.X.
Xxx
0
Xxxxx,
Xxxxxx 00000
Xxxxxx
may from time to time change depositories for the purpose of this paragraph
by
giving written notice of the change and the name and address of the new
depository to Quest in the manner prescribed by Paragraph 11 of this instrument.
XI.
Notices
All
notices or other communications required or permitted by this instrument, the
2004 Xxxxxxx Lease, or by law to be served on or given to either party to this
Agreement, Xxxxxx or Quest, by the other party shall be in writing and shall
be
deemed duly served when personally delivered to the party to whom it is directed
or when deposited in the United States mail, first-class postage prepaid,
addressed to Xxxxxx at:
W.A.
Xxxxxx
c/o
Xxxx
Xxxxx, Esq.
000
Xxxxx
Xxxxxxxxxx Xxxxxx
X.X.
Xxx
0
Xxxxx,
Xxxxxx 00000
or
to
Quest at:
Quest
Oil
Corporation
000
0xx
Xxxxxx,
Xxxxx 000
Xxxxxxxxx,
XX 00000
With
a
copy to:
Stull
& Wood, LLC
0000
Xxxx
0xx
Xxxxxx
Xxxxx,
Xxxxxx 00000
Either
party, Xxxxxx or Quest, may change its address for the purpose of this paragraph
by giving written notice of that change to the other party in the manner
provided in this paragraph.
XII.
Arbitration,
Venue and Attorneys Fees
A. Arbitration.
Any
controversy or claim arising out of or relating to this Agreement the breach
hereof, except as stated below, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then in effect. The decision of the arbitrator shall, except for mistakes of
law, be final and binding upon the parties hereto, and judgment upon the award
rendered by the arbitrator, which shall, in the case of damages, be limited
to
actual damages proven in the arbitration, may be entered in any court having
jurisdiction thereof.
There
shall be a single arbitrator who shall be an existing or former judge of a
court
of record within the United States or an attorney in good standing admitted
to
practice for a period of at least ten (10) years within the United States.
No
arbitration shall involve parties other than the parties hereto and their
respective successors and assigns or be in any respect binding with respect
to
any such other parties.
B. Venue.
Any
court or arbitral panel hearing a matter arising out of this Agreement shall
take place in the county of San Diego, State of California.
C. Procedure.
The
parties to any arbitration arising hereunder shall have the right to take
depositions and to obtain discovery regarding the subject matter of the
arbitration and to use and exercise all of the same rights, remedies and
procedures, and be subject to all of the same duties, liabilities, and
obligations in the arbitration with respect to the subject matter thereof,
as if
the subject matter of the arbitration were pending in a civil action before
a
court of highest jurisdiction in the state where the arbitration is held. The
arbitrator shall have the power to enforce said discovery by imposition of
same
terms, conditions, consequences, liabilities, sanctions and penalties as can
be
or maybe imposed in like circumstances in a civil action by a court of highest
jurisdiction of the state in which the arbitration is held, except the power
to
order the arrest or imprisonment of a person.
D. Attorneys
Fees.
If any
party commences an action, either arbitration or court proceedings, against
any
other party arising out of or in connection with this Agreement, the prevailing
party or parties shall be entitled from the losing party or parties, both
attorney’s fees and costs of the arbitration and/or suit as part of the judgment
rendered.
XIII.
Binding
on Heirs
All
of
the terms and provisions of this instrument shall inure to the benefit of and
shall be binding on the heirs, executors, administrators, representatives,
successors, and assigns of each of the parties to this agreement.
XIV.
Sole
and Only Agreement
This
instrument constitutes the sole and only agreement between the parties
respecting the 2004 Xxxxxxx Lease or the assignment of the 2004 Xxxxxxx Lease
by
Xxxxxx to Quest, and correctly sets forth the obligations of Xxxxxx and Quest
to
each other as of its date. Any agreements or representations respecting the
2004
Xxxxxxx Lease or its assignment to Quest not expressly set forth in this
instrument are null and void.
XV.
Modification
This
Agreement may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
XVI.
Governing
Law
This
Agreement, including the Exhibits contained and incorporated herein, shall
be
governed by the laws of the State of Kansas.
XVII.
Counterparts
This
Agreement may be executed in several counterparts, each of which is an original
but all of which shall constitute one and the same instrument.
SO
AGREED:
SELLER:
W.A.
Xxxxxx
/s/
W.A.
Xxxxxx
____________________________
PURCHASER:
Quest
Oil
Corporation
a
Nevada
Corporation
/s/
Xxxxxx X. Xxxxx
____________________________________
By:
Xxxxxx X. Xxxxxx
Its:
Chief Financial Officer
