PARTICIPATION AGREEMENT
Exhibit 10.1
THIS AGREEMENT made, executed and
concluded this 28th day of
March, 2008 by
and between Capital City
Petroleum, Inc., whose address is 0000 Xxxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxx
00000, hereinafter
called “CCPET” and The Opportunity Fund, LLC whose address is 0000 Xxxxxx Xxxx,
Xxxxx 000-X, Xxxxxxxx, XX, 00000, hereinafter called “Purchaser”.
WHEREAS, CCPET is the owner of the oil
and gas leasehold estate in and to the following well(s) (hereinafter called the
“Well(s)”) - See Exhibit A attached.
WHEREAS, Purchaser desires to purchase
a participation interest (“Participation Interest”) in the Well(s) and related
leasehold estate held by CCPET for the production of oil and gas.
NOW, THEREFORE, in consideration of the
sum of One Dollar ($1.00) in hand paid, and the covenants, stipulations and
agreements herein contained, the parties hereto have agreed as
follows:
1. CCPET
hereby agrees to sell and Purchaser hereby agrees to purchase the Participation
Interest in an undivided 75% of the working
interest in and to the Well(s). Neither the participation interest
nor the working interest in the Well(s) shall be taxed as a
partnership. The Participation Interest acquired by Purchaser shall
be subject to the landowner’s royalty interest and any overriding royalty
interests, but the working interest participated in by Purchaser shall be equal
to not less than 75% of all oil and gas produced and saved. CCPET shall serve as
the nominee owner of the underlying working interests being participated in by
the Purchaser and no assignments of the underlying working interests will be
made.
2. Purchaser
shall pay to CCPET upon execution of this Participation Agreement the sum total
of $750,000,
for the Participation Interest.
3. Distributions
will be paid quarterly. CCPET will be paid a 1% annual management fee
based upon contributed capital, which will be deducted from quarterly
distributions (0.25% per quarter) in arrears to cover administrative costs
incurred by CCPET.
4. Purchaser
shall have the right to put (sell back) the Participation Interest to CCPET
after twelve (12) months or prior to the end of the fourteenth (14) month from
the execution of this Participation Agreement for 100% of the Purchaser’s
contributed capital.
5. CCPET
will further guarantee to the Purchaser distributions totaling twelve (12%)
percent on contributed capital for the first twelve (12) months of the
Participation Agreement.
6. Should
Purchaser desire to sell all or any part of its Participation Interest or
otherwise arising from this Agreement to a buyer not affiliated with CCPET, it
shall promptly give written notice to CCPET, with full information concerning
its proposed disposition. CCPET shall then have an optional right of
first refusal to acquire the Participation Interest upon the same terms, which
right must be exercised by CCPET within sixty (60) days after receipt of the
notice from Purchaser. Upon any involuntary disposition by Purchaser,
CCPET shall have the optional right to purchase any such
Participation. Interest for the then fair market value of the
Participation Interest; CCPET must exercise its right within sixty (60) days
after receiving actual notice of the proposed involuntary
disposition.
7. CCPET
shall keep complete records of all expenses relating to the services covered by
this Agreement. Records shall be available for inspection by
Purchaser at the CCPET’s office by appointment at any reasonable
time.
8. The
parties hereto agree that they are not partners. CCPET shall provide timely tax
information to Purchaser without additional charge.
9. Representations
and Warranties of the Purchaser. Purchaser hereby represents and
warrant as follows: Purchaser is engaged in the business of oil and
gas exploration; is an "Accredited Investor" as defined by Rule 502 of
Regulation D promulgated by the SEC; understands that oil and gas
investments involve risk; and is acquiring the Participation Interest for the
purpose of long term investment for its own account, and with no present intent
of reselling, redistributing or otherwise transferring the Participation
Interest.
10. Arbitration
of Disputes. All controversies or disputes of any kind arising out of or
relating to this Agreement, now or in the future, shall be settled by
arbitration. Without limiting the foregoing, this paragraph specifically applies
to (1) transactions entered into or services provided prior, on, or subsequent
to the date of this Agreement; and (2) the construction, performance, or alleged
breach of this Agreement, or any other agreement entered into between the CCPET
and the Purchaser at any time, including the issue of whether the dispute is
subject to arbitration. Such arbitration shall be conducted in accordance with
the Securities Arbitration Rules of the American Arbitration Association as such
rules are amended from time to time, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
parties understand and agree that: (i) arbitration is final and binding on
the parties; (ii) the parties are waiving their right to seek remedies in
court, including the right to jury trial; (iii) pre-arbitration discovery
is generally more limited than and different from court proceedings;
(iv) the arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited, and (v) that the business
and operations of the Company involve interstate commerce and any dispute
regarding the enforcement of this arbitration agreement, including any motion to
compel arbitration or any defense to the arbitrability of this provision, shall
be interpreted pursuant to the provisions of the Federal Arbitration Act,
9 U.S.C. Section 1, et seq.
11. This
Agreement shall be interpreted under the laws of the State of Ohio and shall be
binding upon the parties hereto, their heirs, personal representatives,
successors and assigns, and shall inure to the benefit thereof.
WITNESS the due execution hereof the
day and year first above written.
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Capital
City Petroleum, Inc
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The
Opportunity Fund, LL
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(CCPET)
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(Purchaser)
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By:
/s/ Xxxxxxx X.
Xxxxxxxx
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By:
/s/ Xxxxxx Xxxxx
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Xxxxxxx
X. Xxxxxxxx, CEO
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Xxxxxx
Xxxxx - Manager
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FED
TAX ID: 00-0000000
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FED
TAX ID: 00-0000000
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