OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is granted effective the 31st day
of October, 1997, by and between EUROGAS, INC., a Utah corporation ("EuroGas"),
to BEAVER RIVER RESOURCES, LTD., a closely-held Canadian corporation organized
under the laws of the Province of British Columbia, but having its principal
office in Texas ("Beaver River"), based upon the following:
Recitals
X. Xxxxxx River owns a one-third (33-1/3%) interest in a project known as
the Beaver River Project which is held pursuant to a Petroleum Natural Gas Lease
No. 15667 (the "Lease") issued by the appropriate authorities of British
Columbia.
B. EuroGas has the right to acquire a portion of the Lease indirectly
from another party and wishes to obtain an option to acquire Beaver River's
interest in the Lease pursuant to the terms and conditions set forth herein in
exchange for an initial payment of $300,000.
C. All owners of the Lease are considering entering into an agreement
with Wascana Energy Incorporated, a subsidiary of Canadian Occidental Petroleum
("Wascana"), in substantially the form attached hereto as Exhibit "A" and
incorporated herein by this reference. The project is to be undertaken by
Wascana through three phases, hereinafter referred to as "Phase I," "Phase II,"
and "Phase III." For purposes of this Agreement, the definitions and timing with
respect to Phase I, II, and III are the same as set forth in Exhibit "A"
(sometimes hereinafter referred to as the "Wascana Agreement").
D. The Wascana Agreement will, if completed, turn the Beaver River's
interest in the Lease into a 15% working interest. The option granted hereunder
will allow EuroGas to purchase the interest held in the Lease by Beaver River in
whatever form or percentage (Beaver River's interest in the Lease shall
hereinafter be referred to as the "Beaver River Interest") with the
understanding that protections will be granted to EuroGas preventing impairment
of the Beaver River Interest as set forth in paragraphs 5 and 6 of this
Agreement.
X. Xxxxxx River wishes to grant such an option, subject to the approval
of the shareholders of Beaver River. Beaver River is in the process of
obtaining such approval.
Agreement
NOW, THEREFORE, based on the foregoing recitals and in consideration of the
terms and provisions set forth herein, the mutual benefits to be gained by the
performance thereof, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Incorporation of Recitals. The above-stated recitals are incorporated
herein by reference.
2. Grant of Option. Effective upon the execution of the Wascana
Agreement, Bear River hereby grants to EuroGas an option to acquire all or part
of the Beaver River Interest in the amounts and at the times and for the
consideration as set forth below in exchange for $300,000 (U.S.), which shall be
paid within 15 days after the execution of the Wascana Agreement. If the
Wascana Agreement does not become effective, this Agreement shall be null and
void.
3. Exercise of Option.
(a) On or before 30 days after Wascana notifies Beaver River (and
Beaver River notifies EuroGas) that Wascana has completed Phase I and has
elected either to proceed with Phase II or withdraw, EuroGas may exercise
the option to purchase one quarter of the Beaver River Interest by
delivering notice to Beaver River and within 15 days thereafter, 528,302
shares of restricted EuroGas common stock.
(b) On or before 30 days after Wascana notifies Beaver River (and
Beaver River notifies EuroGas) that Wascana has completed Phase II and has
elected either to proceed with Phase III or withdraw, EuroGas may exercise
the option to purchase one quarter of the Beaver River Interest by
delivering notice to Beaver River and within 15 days thereafter, 528,302
shares of restricted EuroGas common stock.
(c) On or before 30 days after Wascana notifies Beaver River (and
Beaver River notifies EuroGas) that Wascana has completed Phase III and has
elected either to proceed or withdraw from the project, EuroGas may
exercise the option to purchase the remainder of the Beaver River Interest
by delivering notice to Beaver River and within 15 days thereafter,
1,056,603 shares of restricted EuroGas common stock.
4. Share Dilution Protection. The number of shares of EuroGas common
stock to be issued upon the exercise of the option shall automatically be
adjusted to take into account any stock split, stock dividend, consolidation,
reorganization, or other like or similar event.
5. Termination. This Agreement shall terminate as to any unexercised
portion on either of the following two events:
(a) EuroGas fails to exercise any portion of the option set forth in
paragraph 3 if Wascana elects to proceed with the project; or
(b) EuroGas does not exercise any unexercised portion of the option
within 60 days after Wascana notifies Beaver River that it has elected to
withdraw.
6. Securities Restrictions Applicable to EuroGas Shares. The shares of
EuroGas to be delivered to Beaver River upon the exercise of the option
hereunder shall not be registered pursuant to the securities laws and shall bear
the following legend (and such other applicable legends as may be required by
national or governmental securities laws at the time of the delivery):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). NO OFFER OR SALE OF THESE SECURITIES MAY BE
MADE IN THE UNITED STATES OR FOR THE BENEFIT OF A UNITED STATES PERSON
WITHOUT FURTHER REGISTRATION OR OTHER COMPLIANCE WITH THE SECURITIES
ACT."
7. Affirmative Covenants and Representations of Beaver River.
(a) Beaver River is the owner of a one-third (33-1/3%) interest in
the Lease and there is no lien or encumbrance upon the Lease, except for
the royalty and governmental obligations (British Columbia) attaching
thereto.
(b) Beaver River has full corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
(c) Beaver River shall, as promptly as possible but in no event later
than three days, deliver any notice or information received by Beaver River
from Wascana.
(d) Beaver River will use its best efforts to renew the term of the
Lease if the Lease would expire prior to the expiration of this Agreement.
(e) Beaver River shall file a notice of the granting of this
Agreement with the appropriate governmental authority (British Columbia).
8. Beaver River Negative Covenants. Without the written consent of
EuroGas, Bear River will not undertake any of the following:
(a) to sell, assign, exchange, pledge, or otherwise transfer any of
its rights in this Agreement or the Beaver River Interests;
(b) to create or suffer to exist any liens incurred against or other
charge or encumbrance against the Lease;
(c) to make or consent to the amendment or any other modification or
waiver with respect to the Lease or enter into an agreement or admit to
exist any restriction with respect to the Lease;
(d) to consent to any amendment or other modification of the
agreement with Wascana.
9. Affirmative Covenants. EuroGas shall have the following affirmative
Covenants with respect to this Agreement:
(a) To accept the assignment of an interest in the Lease from Beaver
River, subject to the Lease operating agreement and the liability for the
financial requirements, if any, applicable to the interest assigned,
including, but not limited to, rentals, operating costs, legal expenses,
plugging and abandoning costs and expenses from and hereafter the effective
date of the transfer of the interest; and
(b) At all relevant time, EuroGas shall use its best efforts to make
sure that as the issuer of shares it is in compliance with the provisions
allowing for resales under Rule 144 promulgated under the rules and
regulations of the Securities Act.
10. Notification of Receipt of Payment. In the event that any payments
are made to Beaver River by Wascana (or any other participant in the Lease),
Beaver River shall notify EuroGas of receipt of such payments, place the payment
into trust, and deliver such payment to EuroGas (or a part thereof as may be
applicable), if the option or a part thereof is exercised by EuroGas within 30
days after receipt of notice.
11. Notice. Any notice or request required or permitted to be given
hereunder shall be sufficient if in writing and delivered personally, sent by
facsimile transmission, or sent by registered mail, return receipt requested, to
the addresses hereinabove set forth or to any other address designated by either
of the parties hereto by notice similarly given. Such notice shall be deemed to
have been given upon such personal delivery, facsimile transmission, or mailing,
as the case may be, to the addresses set forth below:
If to EuroGas, to: EuroGas, Inc.
000 Xxxx 0000 Xxxxx, #000X
Xxxxxxx, Xxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx, L.L.C.
Eighth Floor, Bank Xxx Xxxxx
00 Xxxx Xxxxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
If to Beaver River, to: Xxxx X. Xxxxxx
Xxxxxx River Resources, Ltd.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxx, Esq.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
12. Validity of Provisions and Severability. If any provision of this
Agreement is, or becomes, or is deemed invalid, illegal, or unenforceable in any
jurisdiction, such provision shall be deemed amended to conform to the
applicable jurisdiction, or if it cannot be so amended without materially
altering the intention of the parties, it will be stricken. However, the
validity, legality, and enforceability of any such provisions shall not in any
way be effected or impaired thereby in any other jurisdiction and the remainder
of this Agreement shall remain in full force and effect.
13. Attorneys' Fees. In the event that any action, suit, arbitration, or
other proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall be entitled to recover all of such party's costs,
including reasonable attorneys' fees, incurred in each and every such action,
suit, arbitration, or other proceeding, including any and all appeals or
petitions therefrom.
14. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties pertaining to the subject matter of this
Agreement. This Agreement supersedes all prior agreements, if any, any
understandings, negotiations, and discussions, whether oral or written. No
supplement, modification, waiver, or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby.
15. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the Province of British Columbia
Canada, except the laws applying to the resale of the securities to be delivered
hereunder which shall be governed by the jurisdiction of resale.
16. Section Headings. Section headings in this Agreement are for
convenience and reference only and should not be deemed to alter or affect the
interpretation of any provisions thereof.
17. Other Documentation. The parties agree to execute such documentation
as may be reasonable and necessary to effectuate the terms and intent of this
Agreement.
18. Facsimile Counterparts. This Agreement may be executed in facsimile
counterparts, which shall then be considered to be originals and binding upon
the parties.
EFFECTIVE as of the date first above written.
EuroGas:
EUROGAS, INC.
By /s/ Xxxx Xxxxxxxxxxxx
Xxxx Xxxxxxxxxxxx, Vice-President
Beaver River:
BEAVER RIVER RESOURCES, LTD.
By /s/ Xxxx X. Xxxxxx
Duly Authorized Officer
