[LOGO] [LETTERHEAD]
January 23, 1998
Xxxxxx Oil Properties
0000 Xxxx Xxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Re: North Powder Prospect
Sheridan County, Wyoming
Powder River County, Montana
Gentlemen:
High Plains Associates, Inc., and Xxxxx X. Xxxxxx, III, and Xxxxxxx X. Xxxxxx,
husband and wife, (hereinafter referred to as HPAI et al) has expressed a
desire to purchase an option to purchase 100% interest in the above described
"North Powder Prospect" from Xxxxxxx Xxxxxx individually and dba Xxxxxx Oil
Properties (collectively Xxxxxx). This letter is to set forth the terms under
which Xxxxxx will sell the option to HPAI et al.
The leases described on Exhibit A are Federal Leases currently owned by
Xxxxxxx Xxxxxx lying within Montana. The leases described in Exhibit B are
Fee Leases owned by Xxxxxx Oil Properties. The leases described in Exhibit C
are Federal Leases in Wyoming owned by Xxxxxxx Xxxxxxxxx, as agent for
Xxxxxxx Xxxxxx. The leases identified in these exhibits constitute the
entire "North Powder Prospect".
OPTION TO PURCHASE TERMS:
1. HPAI et al will tender to Xxxxxx, by wire transfer, the sum of $125,000.00
on or before 2:00 PM, February 22, 1998. With the execution of this
document, the aforementioned $125,000.00 becomes a firm obligation and
debt owed to Xxxxxxx Xxxxxx as consideration for the option,
notwithstanding the fact that it is not due to be paid until February 20,
1998. The $125,000.00 will be wired to 1(st) Bank of Colorado, 00000 Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, ABA number 000000000, for further
credit to 1(st) Bank Denver, account of Xxxxxx Oil Properties, account
number 5025003857.
2. By tendering said $125,000.00 to Xxxxxx, HPAI et al will then own an
option to purchase North Powder Prospect under the following terms. HPAI
et al will have the option to elect to purchase the North Powder Prospect
leases until 10:00 AM, Mountain Standard Time, March 7, 1998 with the
final closing set for 10:00 AM, Mountain Standard time, May 20, 1998, in
HPAI et al's office at the above address. The $125,000.00 as consideration
is to be credited towards the final purchase price. Said $125,000.00 is
non-refundable.
3. HPAI et al will notify Xxxxxx, at the above address, of its election to
purchase in writing by certified letter, courier to the above address or
via fax to (000) 000-0000 on or before 10:00 AM, Mountain Standard Time,
March 7, 1998. Once the election to purchase is made HPAI et al becomes
liable for the purchase price and must complete the transaction.
Xxxxxx Oil Properties
January 22, 1998
Page Two
4. Time is of the essence for all times and dates described above.
If HPAI et al makes the election to purchase North Powder Prospect in
compliance with the above described terms, the purchase will be made under
the following terms.
END OF OPTION TERMS
PURCHASE TERMS:
1. HPAI et al will purchase an undivided 100% interest in the prospect leases
described in Exhibits A, B and C. Assignments will be made to High Plains
Associates, Inc., 0000 Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000.
2. HPAI et al shall pay $35.00 per net acre received (all depths) for all
leasehold delivered by Xxxxxx and his agent, Xxxxxxx X. Xxxxxxxxx, from
Exhibits A, B and C, subject to the provisions listed below.
3. Title to the coal bed methane gas beneath the fee leases described in
Exhibit B is clouded by virtue of the ruling of the Tenth Circuit Court of
Appeals ruling in the SOUTHERN UTE INDIAN TRIBE VS. AMOCO case. HPAI et al
shall pay $5.00 per net acre received for all fee leasehold received from
Xxxxxx listed on Exhibit B. HPAI et al will tender an additional $30.00
per net fee leasehold mineral acre received within thirty (30) days of
receiving notice of a ruling from the Tenth Circuit Court of Appeals in
which the court has ruled that title to the coal bed methane gas lies with
the owners of the gas estate and not with the owners of the coal estate or
in any other manner issues a ruling that allows the owner of these leases
to produce coal bed methane gas from the lands subject to these leases and
enjoy the benefits and rewards of said production. If the Tenth Circuit
Court of Appeals fails to rule in this manner, HPAI et al will tender an
additional $30.00 per net fee leasehold mineral acre received within
thirty (30) days of receiving notice of a ruling from the United States
Supreme Court in which the court has ruled that title to the coal bed
methane gas lies with the owners of the gas estate and not with the owners
of the coal estate or if the Supreme Court or other Federal agency in any
other manner issues a ruling that allows the owner of these leases to
produce coal bed methane gas from the lands subject to these leases and
enjoy the benefits and reward of said production. The additional $30.00
consideration will be due on any fee lease which has a minimum of two
years primary term remaining at the time of the ruling.
4. Xxxxxx will arrange for Xxxxxxx X. Xxxxxxxxx to execute any requested
assignment documents to HPAI et al and present those documents to HPAI et
al at closing.
5. Xxxxxx will deliver an 82.00% NRI on all federal leasehold (Exhibits A and
C) purchased by HPAI et xx. Xxxxxx will deliver an 82.00% NRI on all fee
leases (Exhibit B) purchased by HPAI et al.
6. During the period commencing on the date of this agreement and ending ten
(10) days prior to Closing (the "Review Period"), at HPAI et al's expense
and with the full cooperation and assistance of Xxxxxx, HPAI et al, its
employees, agents and contractors shall have the right to inspect all of
Xxxxxx'x lease files and title reports concerning the subject leases.
Xxxxxx Oil Properties
January 22, 1998
Page Three
During the Review Period, HPAI et al may give Xxxxxx written notice of
the leasehold interests included in the sale which have ownership title
defects. A title defect letter, if any, shall be submitted no later than
ten (10) days prior to closing. If the defect cannot be or is not cured
by Xxxxxx before Closing, HPAI et al shall have the right to delete those
leases from the sale. Nonetheless, should HPAI et al proceed with the
purchase of those leases after having identified ownership title
defect(s) or ownership title failure(s), Xxxxxx shall, in good faith, use
reasonable efforts after Closing to assist HPAI et al in curing the
defect(s).
7. The assignment forms attached hereto as Exhibit D will be utilized as the
conveyance documents together with the required federal assignment forms.
8. Closing is set for 10:00 AM, Mountain Standard time, May 20, 1998 at
HPAI's office. Full payment will be tendered at closing. Payment may be
made by certified check or wire transfer.
Full payment will be for net acre received at closing. Payment for any
federal leases not issued at the time of closing will be made at the time
of assignment to HPAI.
9. Failure of any party to insist in any one or more instances upon strict
performance of any of the terms or conditions of this agreement will not
be construed as a waiver or a relinquishment of any right granted
hereunder or of the future performance of any such term, covenant or
condition, but the obligations of the parties with respect thereto will
continue in full force and effect.
10. Time is of the essence for all times and dates described above.
END OF PURCHASE TERMS
NON-COMPETE PROVISIONS:
Upon execution of this letter, Xxxxxx, its business associates, employees,
agents, brokers or other parties retained by Xxxxxx, agrees that for a period
of one (1) year after January 21, 1998, it will not lease or purchase, or
"acquire", in any sense of the word, for its own account and/or for the
account of anyone else, any interest of any kind whatsoever without obtaining
the written approval of HPAI et al, within the following lands:
Wyoming:
--------
T52N through T58N, and
R74W through R77W, inclusive
Montana:
--------
T9S, R45E through R49E, and
T8S, R46E through R48E, and
T7S, R46E through R48E, inclusive
Xxxxxx Oil Properties
January 22, 1998
Page Four
Should HPAI et al not elect to purchase the entire North Powder Prospect on
March 7, 1998, then this non-compete provision shall expire at that time.
In the event litigation is required to enforce any provision of this
contract, the losing party shall reimburse the prevailing party for all costs
incurred in the preparation for and litigation of or other resolution of the
dispute. Interest on any sums which are not paid on the due date will accrue
at the rate of 18% per annum, compounded daily.
This agreement shall be binding on and inure to the benefit of the heirs,
successors and assigns of all parties hereto.
This agreement and the exhibits hereto contain the entire agreement between
the parties with respect to the matters thereto and supersedes all prior
arrangements or understandings with respect thereto.
Facsimile signatures shall be considered as original, and binding, by all
parties to this agreement.
Sincerely,
HIGH PLAINS ASSOCIATES, INC.
/s/ Xxxxx X. Xxxxxx, III /s/ Xxxxx X. Xxxxxx, III
--------------------------------- -------------------------------------
Xxxxx X. Xxxxxx, III Xxxxx X. Xxxxxx, XXX, individually
President
/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx, wife of
Xxxxx X. Xxxxxx, XXX
AGREED TO AND ACCEPTED THIS 23(rd) DAY OF JANUARY, 1998.
XXXXXX OIL PROPERTIES
By: /s/ Xxxxxxx Xxxxxx /s/ Xxxxxxx Xxxxxx
----------------------------- -----------------------------------
Xxxxxxx Xxxxxx Xxxxxxx Xxxxxx, individually
