EXCLUSIVE OPTION TO PURCHASE
This
Exclusive Option to Purchase is made and entered into by and between Ameriwest
Energy Corp, (“Ameriwest”), and Hot Springs Resources, LTD., (“Hot Springs
Resources”) on the 19th day of March, 2008 (hereinafter the “Execution Date”).
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, Ameriwest and Hot Springs Resources, agree
to
the following definitions, terms and conditions:
Section
1.
Definitions
1.1 “Assets”
are defined as all of Hot Springs Resources’ right, title and interest in and to
hydrocarbon substances, the tangibles and the miscellaneous interests insofar
as
and to the extent they pertain to the Xxxxx Ranch Unit (Exhibit A) leases Held
By Production, leases Held By Unit and adjacent leases (Exhibit B), Natrona
County, Wyoming, including:
(a) any
and
all xxxxx, well bores, and casing;
(b) any
and
all leases, leaseholds, contracts and agreements;
(c) any
and
all hydrocarbon substances produced after the Closing;
(d) any
and
all records, books, documents, licenses, reports and data; and
(e) any
and
all tangible depreciable property and assets, including pumping units, pumps,
buildings, lines, tanks, treaters, and all other equipment used in the
production of hydrocarbon substances at the Xxxxx Ranch Unit.
As
part
of the Assets to be conveyed to Ameriwest at Closing, Hot Springs Resources
shall convey not less than a Working Interest of 95% at a 79.9% Net Revenue
Interest in the Exhibit “A” acreage (inside Xxxxx Ranch Unit), a Working
Interest of 100% at an 82% Net Revenue Interest in the Exhibit “B” adjacent
leases (outside the Xxxxx Ranch Unit), and all of Hot Springs Resources’
interest, that being 100%, in and to any leasehold attached to or Held By Unit,
other formations and hydrocarbon substances.
“Assets”
shall exclude, and Ameriwest shall not be purchasing or assuming, any
liabilities of Hot Springs Resources whether related to the Assets or
otherwise.
1.2 “Field
Development Commitments” are defined as Ameriwest’s written agreement to: (a)
commit to invest a. minimum or $200,000.00 toward a work-over program and
initiate, within 30 days after Closing, said program for the purposes of
evaluating and re-establishing water flood production in the Xxxxx Ranch Unit;
and (b) commit to drill or cause to be drilled within three years after Closing
a Pennsylvanian Tensleep test well within the Xxxxx Ranch Unit or adjacent
lands
conveyed as part of the Assets subject to (i) economic conditions, governmental
regulation and restrictions being favorable, in the sole opinion of Ameriwest,
(ii) additional geological and geophysical information (whether developed by
Ameriwest or acquired from third-parties) merit, in the sole opinion of
Ameriwest, such a test well, and (iii) drilling rigs, equipment and
infrastructure are available and prove cost effective for Ameriwest, in the
sole
opinion of Ameriwest.
1.3 “Option
Fee” is defined as $100,000.00, payable in two $50,000.00 installments and shall
be credited against the Purchase Price if Closing occurs. The first installment
of the Option Fee shall be paid by Ameriwest to Hot Springs Resources within
5
business days from the Execution Date. The second installment of the Option
Fee
shall he paid by Ameriwest to Hot Springs Resources on the 60th
calendar
day after the Execution Date. Except in the event of breach by Hot Springs
Resources or as otherwise specifically stated in this Agreement, the Option
Fee
installments shall be non-refundable. To ensure that Hot Springs Resources
can
provide good and merchantable title for the Assets, Hot Springs Resources agrees
to utilize the Option Fee to pay off and remove prior to Closing any voluntary
or involuntary liens, encumbrances or accounts payable affecting the
Assets.
1.4 “Option
Period” is defined as that period which commences on the Execution Date and ends
at 5:00 Mountain Daylight Time on the 120th calendar day after the Execution
Date.
1.5 “Option
Extension” is defined a Ameriwest’s option to extend the Option Period for 60
additional calendar days, in consideration of Ameriwest’s payment to Hot Springs
Resources in the amount of $100,000.00. Further, Ameriwest is granted the option
to extend the Option Period for 2 additional 30 calendar day periods, in
consideration of Ameriwest’s payment to Hot Springs Resources the sum of
$100,000.00 for each additional 30 calendar day period. The parties agree that
one-half (1/2) of all fees paid by Ameriwest pursuant to this paragraph to
secure any Option Extension shall he credited against the Purchase Price at
the
time of Closing.
1.6 “Purchase
Price” is comprised of the following:
a. For
the
Exhibit “A” acreage inside the Xxxxx Ranch Unit at the Working and Net Revenue
interests stated in Section 1.1 above, Ameriwest will pay the sum of
$2,280,000.00;
b. For
the
Exhibit “B” acreage outside the Xxxxx Ranch Unit at the Working and Net Revenue
Interests stated in Section 1.1 above, including acreage HBU (Held By Unit)
and
HBP (Held By Production), Ameriwest will pay the sum of
$2,000,000.00;
c. Ameriwest
or its designee will transfer or issue 200,000 shares of common stock in
Ameriwest to Xxxxxx Xxxxxx, and 200,000 shares of common stack to Xxxx Xxxxxx
for a total of 400,000 shares.
1.7 “Closing”
is defined as Ameriwest’s purchase of the Assets and payment of the remaining
Purchase Price, which shall occur within 45 days after the timely exercise
of
Ameriwest’s option granted hereunder.
1.8 Ameriwest
will have 45 days from the date it notifies Hot Springs Resources in writing
of
its intention to exercise its option within which to conduct its due diligence
on title and environmental related matters. Within said 45 day period, Ameriwest
may terminate its obligation to purchase the Subject Property by written
notification to Hot Springs Resources, if it identifies material title or
environmental defects. Hot Springs Resources represents that it is not aware
of
any title defects associated with the Assets or Subject Property and does not
believe there are any environmental defects with respect to the Assets or the
Subject Property, outside of those customarily associated with normal oil field
activities, which have been previously disclosed to Ameriwest and are
represented by Hot Springs Resources to be non-material and minor. If Ameriwest
terminates its option to purchase because of any material title or environmental
defect, one half (1/2) of all Option Fee installments (including all payments
made for any extension periods) shall be forfeited and retained by Hot Springs
Resources and all remaining monies paid by Ameriwest will be immediately
returned to Ameriwest.
Section
2.
Grant
of Option.
2.1
Subject
to the terms of this Agreement, Hot Springs Resources hereby grants to Ameriwest
and/or its assigns during the Option Period and any Option Extension the sole
and exclusive option to purchase the Assets for payment of the Purchase Price
and execution by Ameriwest of a written agreement to perform Field Development
Commitments.
Section
3.
Exercise
of Option.
3.1 If
Ameriwest elects to exercise its option to purchase the Assets, Ameriwest shall
provide written notice of its intent to Hot Springs Resources prior to the
expiration of the Option Period or any Option Extension.
Section
4.
Maintenance
Assets and Prohibition on Transfers.
4.1 Hot
Springs Resources agrees, during the Option Period and until Closing: (a) to
maintain and preserve the Assets in at least as good condition as exists as
of
the Execution Date; (b) to fully comply with all requirements and demands of
regulatory agencies pertaining to the Assets; (c) to promptly inform Ameriwest
of any regulatory action, notices or demands affecting the Assets; (d) to keep
the Unit properly bonded; (e) to keep all leases affecting any of the Assets
in
good standing; and (f) not to transfer any interest in any well, well bore,
casing, lease, leasehold, mineral interest, royalty, contract, or other
agreement related to the Assets.
Section
5.
Condition
of Title at Closing.
5.1 At
Closing, Hot Springs Resources agrees: (a) to provide good and merchantable
title, free and clear of any and any voluntary or involuntary liens or
encumbrances related to or affecting the Assets; (b) to provide a xxxx of sale
for the personal property associated with, or used in the production of, the
Assets; and (c) to provide recordable assignments for the leasehold and to
execute any such documents deemed necessary by Ameriwest to convey good and
merchantable title to Ameriwest or its Assignee.
Section
6.
Post
Closing Agreements.
6.1 In
the
event Closing occurs, Hot Springs Resources will hold a five (5) percent working
interest in the Exhibit “A” acreage inside the Xxxxx Ranch Unit. However, the
parties agree that if Closing occurs prior to January 1, 2009, then Hot Springs
Resources will not be responsible for its participating five (5) percent working
interest costs and expenses, including workover, engineering and maintenance
costs incurred within the Exhibit “A” acreage inside the Xxxxx Ranch Unit
conveyed under this Agreement from the date of Closing until January 1, 2009.
On
and after January 1, 2009, Hot Springs Resources will be responsible for its
full share of its proportionate share of all costs and expenses arising from
its
five (5) percent working interest.
6.2 In
the
event Closing occurs, and subject to the. terms set forth in this section,
Hot
Springs Resources shall, for a period of three (3) years from the Closing Date,
have an option to participate in any well drilled by Ameriwest located within
the Exhibit “B” acreage at up to a fifty (50) percent working interest.
Ameriwest agrees, during the three (3) year period, to give written notice
to
Hot Springs Resources of its intent to drill a well within the Exhibit “B”
acreage, and Hot Springs Resources will have sixty (60) calendar days after
the
date of the Ameriwest notice to make written election that it will participate
and the amount of its intended participation. Upon executing appropriate
confidentiality and non-disclosure agreements prepared by Ameriwest, Hot Springs
Resources will be entitled to receive information and studies pertaining to
the
proposed well. Hot Springs Resources agrees to provide, upon request, Ameriwest
with financial and other relevant information to evaluate the financial and
business condition of Hot Springs Resources. Notwithstanding the foregoing,
Ameriwest shall, at all times and regardless of the participation percentage
of
Hot Springs Resources, have the sole and final decision making authority as
to
all components and aspects of drilling and development, including the
determination as to whether drilling will occur.
6.3 In
the
event Closing occurs, and subject to the terms set forth in this section, Hot
Springs Resources shall, for a period of three (3) years from the Closing Date,
have an option to participate in the purchase of new acreage immediately
adjacent to the Exhibit “B” acreage at up to fifty (50) percent of the
acquisition cost. Ameriwest agrees, during the three (3) year period, to give
written notice to Hot Springs Resources of its intent to acquire new acreage
immediately adjacent to the Exhibit “B” acreage, and Hot Springs Resources will
have sixty (60) calendar days after the date of the Ameriwest notice to make
written election that it will participate in the acquisition cost and the amount
of its intended participation. Upon executing appropriate confidentiality and
non-disclosure agreements prepared by Ameriwest, Hot Springs Resources will
be
entitled to receive information and studies pertaining to the acreage proposed
to be acquired. Hot Springs Resources agrees to provide, upon request, Ameriwest
with financial and other relevant information to evaluate the financial and
business condition of Hot Springs Resources. Notwithstanding the foregoing,
Ameriwest shall, at all times and regardless of the participation percentage
of
Hot Springs Resources, have the sole and final decision making authority as
to
whether the acquisition will be made. Hot Springs Resources and its partners
and
agents shall not, during the three (3) year period, compete with Ameriwest
in
any manner in regard to new acreage or mineral interests immediately adjacent
to
the Exhibit “B” acreage outside the Xxxxx Ranch Unit, and shall refer all
relevant information pertaining to new acreage or mineral interest prospects
that are immediately adjacent to the Exhibit “B” acreage to
Ameriwest.
Section
7.
Miscellaneous.
7.1 Hot
Springs Resources and Ameriwest agree to keep this Agreement confidential and
not disclose the terms of this Agreement to any third party, except to the
extent necessary for Ameriwest to comply with any of its disclosure
requirements.
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7.2
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Any
notices to be given hereunder shall he sent to the
following:
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Hot
Springs Resources: Xxxxxx
Xxxxxx, President
Xxxx
Xxxxxx, Partner
Hot
Springs Resources, LTD.
000
Xxxxx
Xxxxxxx Xxxxxx
Xxxxxx,
XX 00000
Ameriwest: Xxxxxx
X.
Xxxxxxxx, President
000
Xxxx
0xx Xxxxxx Xxxxx 000
Xxxxxx,
XX 00000
7.3 This
Agreement and its terms shall not he modified or terminated except by a written
agreement duly executed by the parties.
7.4 Ameriwest
may assign any or all of its interest under this Agreement, but shall provide
written notice to Hot Springs Resources of any assignment.
7.5 Hot
Springs Resources may assign any or all of its interest under this Agreement,
but shall provide written notice to Ameriwest of any assignment.
7.6 This
Agreement shall he governed by and construed under the laws of the State of
Wyoming.
7.7 The
parties acknowledge that Xxxxxx X. Xxxxxxxx holds an ownership interest related
to the Assets and hereby state that full disclosure of said interest has been
made to the parties.
DATED
AND
EFFECTIVE ON THE DATE FIRST SHOWN ABOVE.
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HOT
SPRINGS RESOURCES, LTD:
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By:
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_________________________________
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By:
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_________________________________
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Xxxxxx
Xxxxxx, President
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Xxxxxx
X. Xxxxxxxx, President & CEO
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By:
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_________________________________
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By:
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_________________________________
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Xxxx
Xxxxxx, Partner
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Xxx
X. Xxxxxxxxxx, Director
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