EXHIBIT 10.1
LEASE OPTION AND ACQUISITION AGREEMENT BETWEEN DOLPHIN ENERGY
CORPORATION AND QUANECO, L.L.C.
LEASE OPTION AND ACQUISITION AGREEMENT
THIS LEASE OPTION AND ACQUISITION AGREEMENT (this "Agreement") is made and
entered into by and between QUANECO, L.L.C., an Oklahoma limited liability
company ("Quaneco"), and DOLPHIN ENERGY CORPORATION, a Nevada Corporation
("Dolphin");
WITNESSETH:
WHEREAS, Quaneco owns working and net revenue interests in certain oil
and gas leases and any production therefrom, all of such interests (real and
personal) and associated acreage being more particularly described on Annex "A"
annexed hereto and being referred to hereinafter as the "Properties"; and
WHEREAS, Quaneco wishes to grant and sell to Dolphin, and Dolphin
wishes to accept and purchase from Quaneco an option to acquire, up to one half
(1/2) of Quaneco's interest in the Properties and assume it's proportionate
share of Quaneco's liabilities, obligations and responsibilities with respect to
the Properties;
NOW, THEREFORE, in consideration of the mutual covenants and premises
set forth herein, the parties hereto agree as follows:
1. GRANT OF OPTION. Quaneco hereby agrees to sell and grant to Dolphin,
and Dolphin hereby agrees to accept and purchase from Quaneco, an option to
acquire up to fifty percent (50%) of Quaneco's right, title and interest in and
to the Properties subject to the terms and provisions hereof and of the leases,
assignments, and conveyances whereby Quaneco received title to the Properties.
2. PAYMENT OF INITIAL CONSIDERATION. In consideration of the granting of
the option by Quaneco to Dolphin, Dolphin will make the following cash payments
to Quaneco during calendar 2003:
(a) Within the earlier of (i) thirty (30) days of the date of the
execution of this Agreement or (ii) September 1, 2003, Dolphin will pay Quaneco
the sum of $450,000.00
(b) Within the earlier of sixty (i) (60) days of the date of this
Agreement or (ii) October 1, 2003, Dolphin will pay Quaneco an additional
$550,000.00.
3. DRILLING PROGRAM AND OBLIGATIONS. Dolphin will participate in a
drilling progrm to develop the Properties for gas production from coal seams as
follows:
(a) Dolphin will pay its proportionate share of the costs in the
drilling of eight (8) xxxxx to be drilled in a concentrated eighty (80) acre
pattern and to be commenced on or about the later in time of (i) September 15,
2003 or (ii) the date when the State and/or federal permits for the drilling of
the xxxxx are issued. Dolphin will pay its proportionate share of the costs for
the 8 xxxxx to Quaneco within ten (10) days of the receipt of the AFE's for the
xxxxx.
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(b) Once Quaneco has determined further development is warranted,
the operator will commence the drilling of up to twenty-four (24) additional
xxxxx, and Dolphin will pay twenty- five percent (25%) of the costs of drilling
such 24 xxxxx. Dolphin will pay its proportionate share of the costs for the 24
xxxxx within 10 days of the receipt of the AFE for each well.
(c) If after the first 32 xxxxx are completed and evaluated,
Quaneco determines that further drilling is justified, the operator will drill
and additional thirty-two (32) xxxxx for which Dolphin will pay twenty-five
percent (25%) of the costs of drilling such xxxxx. Dolphin will pay its
proportionate share of the costs for the 32 xxxxx within 10 days of receipt of
the AFE for each well.
(d) If after completion of the first sixty-four (64) xxxxx, Quaneco
decides to go forward with the drilling program, the operator will commence the
drilling of up to sixty-four (64) additional xxxxx, and Dolphin will agree to
pay twenty-five percent (25%) of the costs of drilling such 64 xxxxx. Dolphin
will pay its proportionate share of the costs of the 64 xxxxx within 10 days of
receipt of the AFE for each well.
(e) The working interests earned by Dolphin in the drilling program
referenced above by payment in full of its proportionate share of the costs of
the xxxxx, will remain Dolphin's without respect to whether Dolphin ultimately
exercises its option to acquire any more of Quaneco's interests in the
Properties.
4. ADDITIONAL PAYMENTS AND ASSIGNMENTS.
(a) On the earlier in time of (i) April 15, 2003 or (ii) thirty
(30) days after the date on which the actual drilling of the group of
twenty-four (24) xxxxx as provided for in 3(b) has been commenced, Dolphin will
pay Quaneco an additional $625,000.00.
(b) On or before April 15, 2004, Dolphin will pay Quaneco
$1,687,500.00. Upon receipt of this payment in full, Quaneco will assign to
Dolphin an undivided 25% working interest in one-half (1/2) of the Properties.
(A net acreage position of 26,500 acres). This assignment will grant Dolphin on
undivided 12.5% working interest in 8/8ths of the Properties.
(c) Dolphin shall pay the remaining balance ($3,312,500.00) in 2
equal payments as follows:
September 1, 2004, $1,656,250.00
December 1, 2004, $1,656,250.00
Upon receipt of each payment described above, Quaneco will
assign to Dolphin an undivided 12.5% working interest in one-half of the
Properties for an additional total of 26,500 acres. Those two (2) assignments
will grant Dolphin an additional 12.5% working interest in 8/8ths of the
Properties.
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(d) Dolphin will have the option throughout the term of this
arrangement to prepay the amounts provided for in 4(a), 4(b) and 4(c) above and
receive the appropriate assignment of an undivided working interest from Quaneco
in the Properties.
(e) As the assignments are made under this Article 4., Dolphin will
be included as a partner, to the extent of its interest in the Properties, under
the operating agreement annexed hereto as Annex B.
5. FURTHER COOPERATION ON SUBSEQUENT DOCUMENTS. Dolphin and Quaneco agree
to cooperate at all times from and after the date hereof with respect to the
supplying of any information which may at anytime be requested by the other
regarding any of the matters described in this Agreement, and each agrees to
execute such further deeds, mortgages, bills of sale, assignments, transfer
orders, releases or other documents as may be reasonably requested for the
purpose of giving effect to, evidencing or giving notice of the transactions
described herein.
6. REPRESENTATIONS OF QUNECO. Quaneco represents and warrants to Dolphin
that:
(a) Quaneco has all necessary power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Quaneco have been duly
and effectively authorized by all necessary action on the part of Quaneco and
this Agreement constitutes a valid and binding obligation of Quaneco enforceable
against Quaneco in accordance with its terms.
(b) Any consent, approval or other permission required to be made
or obtained by Quaneco for the execution and delivery of this Agreement and the
performance by Quaneco of its obligations hereunder, including without
limitation, Quaneco's assignment of the interests hereunder has been obtained.
(c) Quaneco can and will deliver good title to the transferred
interests in Properties free and clear of all liens, security interests, charges
and encumbrances arising by, through or under Quaneco. Quaneco will deliver to
Dolphin not less than an eighty percent (80%) net revenue interest in the
Properties. The interests in the Properties are otherwise conveyed to Dolphin
without warranty or recourse. Quaneco's warranty given in this paragraph does
not extend to or cover any defect of title, lien, security interests, charge or
encumbrance resulting from any event or occurrence other than (i) Quaneco's
sale, mortgage, or assignment of interest in the Properties of such magnitude
that Quaneco's interest in the Properties is insufficient to enable Quaneco to
assign or convey title to the Properties to Dolphin or (ii) claims for money or
taxes due from Quaneco that result in a lien on the interest in the Properties.
(d) To the knowledge of Quaneco there are no legal actions liens or
claims of any kind now existing or threatened with respect to any of the
Properties except as set forth in Annex C hereto.
(e) The xxxxx drilled as part of the above referenced drilling
program will be drilled
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and operated in compliance with all applicable laws, rules and regulations and
in accord with standard industry practice.
7. REPRESENTATIONS OF DOLPHIN. Dolphin represents and warrants to Quaneco
that:
(a) Dolphin has all necessary power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Dolphin have been duly
and effectively authorized by all necessary action on the part of Dolphin, and
this Agreement constitutes a valid and binding obligation of Dolphin enforceable
against Dolphin in accordance with its terms.
(b) Any consent, approval or other permission required to be made
or obtained by Dolphin for the execution and delivery of this Agreement and the
performance by Dolphin of its obligations hereunder has been obtained.
(c) There is no broker, finder or financial advisor involved in
this transaction on behalf of Dolphin.
8. QUANECO'S CONDITIONS OF ASSIGNMENT. Quaneco's obligations herein to
assign working interests in the Properties to Dolphin is subject to and
conditional upon the performance and fulfillment of the following each time an
assignment is made:
(a) Dolphin shall have complied with all covenants and agreements,
including required payments, herein agreed to be performed.
(b) All representations and warranties of Dolphin set forth herein
shall be true and correct at each assignment with the same effect as if made
again at such time.
(c) The foregoing conditions are for the benefit of Quaneco and
may, without prejudice to any of the rights of Quaneco hereunder be waived in
writing, in whole or in part, at any time.
9. DOLPHIN'S CONDITIONS OF PAYMENT. Dolphin's obligations herein to make
payments to and accept assignments from Quaneco shall be subject to the
following:
(a) Quaneco shall have complied with all covenants and agreements
herein agreed to be performed by it:
(b) All representations and warranties set forth herein shall be
true and correct at each closing with the same effect as if made again at such
time.
(c) The foregoing conditions shall be for the benefit of Dolphin
and may, without prejudice to any of the rights of Dolphin hereunder, be waived
in writing, in whole or in part at any time.
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10. NONPAYMENT BY DOLPHIN. If at any time Dolphin fails to make any
payment provided for in this Agreement, Quaneco may terminate this Agreement and
retain all monies paid to it herein, and neither Dolphin nor Quaneco will have
any further obligations hereunder.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their heirs, legal
representatives, successors and assigns.
12. SURVIVAL OF REPRESENTATIVE. The representations, warranties, covenants
and agreements of the parties contained in this Agreement shall survive the
execution hereof.
13. MODIFICATION AND WAIVER. No supplement, modification, waiver or
termination of this Agreement or any provisions hereof shall be binding unless
executed in writing by the parties to be bound thereby. No waiver of any of the
provisions of this Agreement shall constitute a waiver of any other provision
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
14. SEVERABILITY OF PROVISIONS. To the extent permitted by law, a holding
by any court that any provision in this Agreement is invalid, illegal, or
unenforceable in any respect shall not affect any other provision, and this
Agreement shall be constructed as if the invalid, illegal, or unenforceable
provision had never been a part of this Agreement.
15. NO LIMITATION OF REMEDIES. Nothing in this Agreement shall be
constructed to limit any legal or equitable remedies of the parties.
16. EXPENSES. Except as otherwise provided in this Agreement, all fees,
costs, and expenses incurred in negotiating this Agreement or completing the
transactions described in this Agreement shall be paid by the party incurring
the fee, cost, or expenses.
17. PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the entire
understanding among the parties hereto and supersedes any prior negotiations,
discussions, agreements, and understandings among the parties with respect to
the subject matter of this Agreement.
18. COUNTERPARTS AND FACSIMILES. This Agreement may be executed in
counterparts. Each of the counterparts shall be deemed an original instrument,
but all of the counterparts together shall constitute one and the same
instrument. Further, facsimiles of signed original copies of this Agreement
shall be deemed and treated as original signed copies.
19. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Montana.
20. NOTICE. Unless otherwise provided herein, any notice, tender or
delivery to be given hereunder by one party to another may be effected as
appropriate by (i) personal delivery, (ii) registered mail, (iii) facsimile
transmission or (iv) overnight delivery to the party being notified at the
address or facsimile number stated below or such other number or address as has
been previously supplied in writing to the party giving such notice:
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Dolphin Energy Corporation
0000 Xxxxxxxx Xxx Xxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Quaneco, L.L.C.
c/o Quantum Energy, L.L.C.
00000 Xxxxxxx Xx. #000
Xxxxxxxxxx Xxxxx, Xx 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx
21. TERM. The term of this Agreement shall commence on the date of signing
set forth below and continue through the last assignment made by Quaneco to
Dolphin, provided that Dolphin's option to acquire working interests from
Dolphin has not terminated earlier as provided herein.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of (although not necessarily thereon) the 5th day of AUGUST, 2003.
DOLPHIN ENERGY CORPORATION QUANECO, L.L.C.
By: /S/ XXXX XXXXXX By: /S/ XXXXXXXX XXXXXXXXXX
-------------------------------- -------------------------------
Name: XXXX XXXXXX Name: XXXXXXXX XXXXXXXXXX
---------------------------- -----------------------------
Title: CHAIRMAN & PRESIDENT Title: MANAGING MEMBER
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Lease Option and Acquisition Agreement
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