Exhibit 10.1
OPTION AGREEMENT
This Option Agreement ("Agreement") dated September 14, 2006, by and
between Siberian Energy Group Inc., a Nevada corporation ("Siberian") and Key
Brokerage, Inc. ("Key Brokerage"), a Delaware corporation, the "Parties."
PROJECT DESCRIPTION
Key Brokerage is the sole owner of LLC "Kondaneftegaz" ("Kondaneftegaz"),
which is located in the Khanty-Mansiysk district of western Siberia and which
was created in 2004 for the purpose of oil and gas exploration and production in
the region. Kondaneftegaz has applied for 10 oil and gas licenses in the
Khanty-Mansiysk district, which will be proposed for distribution by the Russian
government through a tender or auction in 2006-2007.
W I T N E S S E T H:
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WHEREAS, the Parties have contemplated entering into a transaction, whereby
Siberian would agree to purchase a 75% share of the capital of Kondaneftegaz, at
terms to be determined by the Parties at a later date (the "Transaction");
WHEREAS, Key Brokerage desires to enter into this agreement to provide
Siberian with the excusive right to enter into the Transaction with Key
Brokerage; and
WHEREAS, Siberian desires to enter into this Agreement for the exclusive
right to enter into the Transaction with Key Brokerage and to provide Siberian
with sufficient time to conduct Due Diligence (as described below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, and considerations herein contained, the parties hereto agree as
follows:
1. GRANT OF EXCLUSIVE OPTION.
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Key Brokerage agrees to grant Siberian the exclusive option to
enter into the Transaction with Key Brokerage for sixty (60) days (the
"Option" and the "Option Period") after the date of this Agreement
first written above (the "Agreement Date").
Key Brokerage further agrees not to enter into any other
negotiations, contracts or agreements, oral or written, express or
implied, with any other party regarding the Transaction during the
Option Period, without the express written consent of Siberian.
2. RIGHT TO CONDUCT DUE DILIGENCE.
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Key Brokerage agrees to provide Siberian with the Option to give
Siberian sufficient time to conduct legal, technical and geological
due diligence (the "Due Diligence") on Key Brokerage and the
Transaction. Key Brokerage further agrees to provide Siberian with
assistance, documents and access to all of Kondaneftegaz's properties
to help Siberian conduct the Due Diligence for the Option Period,
including but not limited to access to financial records and source
financial data, business contracts and legal documentation since the
inception of Kondaneftegaz in May 2004.
3. CONSIDERATION FOR OPTION.
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In consideration for granting the Option, Siberian agrees to
grant Key Brokerage 250,000 warrants to purchase shares of Siberian's
common stock at an exercise price of $2.20 per share (the "Warrants"),
exercisable for a period of two (2) years from the date of this
Agreement (the "Warrants"), as evidenced by the Warrant Agreement
attached hereto as Exhibit A.
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4. EXTENSION OF OPTION PERIOD.
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The Parties agree that the Option Period may be extended by
Siberian for an additional ninety (90) days, provided that Siberian
gives Key Brokerage written notice of its intent to extend to the
Option period at least fifteen (15) days prior to the end of the
Option Period, which fifteen day period may be waived by Key Brokerage
(the "Extension").
5. CONSIDERATION FOR EXTENSION.
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If the Extension is exercised, Siberian agrees to grant Key
Brokerage additional Warrants in consideration for such Extension.
Siberian agrees that these additional Warrants will be on the same
terms and have the same rights as the Warrants described above under
Item 3, however such additional Warrants will be exercisable for two
(2) years from the beginning date of the Extension, and such
additional Warrants will be evidenced by the Warrant Agreement
attached hereto as Exhibit A (except for the difference in the time
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period such Warrants are exercisable for).
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6. DAMAGES.
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Key Brokerage agrees that Siberian will be damaged if the terms
of this Agreement and/or the Option is breached and/or if Key
Brokerage negotiates, contracts or enters into any agreement with any
other parties regarding the Transaction (each a "Breach," unless
consent is provided by Siberian in writing to such negotiation,
contract or agreement as provided in Item 1, above). Key Brokerage
agrees to pay Siberian as liquidated damages in connection with any
Breach of the Option or the breach of any term of this Agreement
$100,000, payable immediately and Key Brokerage additionally agrees to
return any Warrants previously issued to Key Brokerage to Siberian for
cancellation ("Damages"). Key Brokerage agrees that the Damages are
not a penalty for such breach, but that such Damages are a good faith
estimate by the Parties of the actual damages, which Siberian would
suffer in the event of a breach. Furthermore, Key Brokerage agrees
that such Damages are reasonable.
7. TERMINATION OF THE AGREEMENT.
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This agreement may be terminated only with the mutual consent in
writing of both parties.
The parties understand that at the end of the Option Period or at
any time prior to that the end of the Option Period, Siberian will
inform the parties involved in the transaction whether it is
interested in the purchase of Kondaneftegaz and will either submit an
offer for purchase or will withdraw from the project without
explaining the reasons of such withdrawal.
8. MISCELLANEOUS.
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(a) Assignment. All of the terms, provisions and conditions of
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this Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
(b) Applicable Law. This Agreement shall be construed in
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accordance with and governed by the laws of the State of New
York, excluding any provision which would require the use of the
laws of any other jurisdiction.
(c) Entire Agreement, Amendments and Waivers. This Agreement
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constitutes the entire agreement of the parties hereto and
expressly supersedes all prior and contemporaneous understandings
and commitments, whether written or oral, with respect to the
subject matter hereof. No variations, modifications, changes or
extensions of this Agreement or any other terms hereof shall be
binding upon any party hereto unless set forth in a document duly
executed by such party or an authorized agent or such party.
(d) Waiver. No failure on the part of any party to enforce any
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provisions of this Agreement will act as a waiver of the right to
enforce that provision.
(e) Section Headings. Section headings are for convenience only
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and shall not define or limit the provisions of this Agreement.
(f) Effect of Facsimile and Photocopied Signatures. This
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Agreement may be executed in several counterparts, each of which
is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any
of the other counterparts. A copy of this Agreement signed by one
party and faxed to another party shall be deemed to have been
executed and delivered by the signing party as though an
original. A photocopy of this Agreement shall be effective as an
original for all purposes.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
SIBERIAN ENERGY GROUP INC.
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/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx,
Chief Executive Officer
KEY BROKERAGE, INC.
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/s/ Xxxxxxxx Kolbassov
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Xxxxxxxx Kolbassov
President
