Exhibit 10.1
PARTICIPATION AND
EXCLUSIVITY AGREEMENT
This
PARTICIPATION AND EXCLUSIVITY AGREEMENT (the “
Agreement ”)
is made among Amerpro Industries US Ltd. (the “
Participant
”), a wholly owned subsidiary of Amerpro Industries,
Inc. (the “ Parent ”),
Gulf Western Petroleum Corporation (“ GWPC ”) and
Caskids Operating Company (“ Operator ”)
and is effective June 10, 2008 (the “ Effective Date
”). Participant and GWPC are each a “
Party
” and collectively “ Parties
”. In addition to granting an exclusive
option to Participant to participate in drilling on the Lease,
this Agreement sets forth the terms, conditions, and
consideration of Participant for its evaluation of: (a)
GWPC’s interests in and to that certain oil, gas and
mineral lease (the “ Lease ”)
covering certain lands (the “ Prospect Area
”) located in Wharton County, Texas, as described on the
attached Exhibit “A”; (b) the Lease; and (c) title
to the Prospect Area, and its subsequent participation in the
drilling and completion of certain oil and/or gas wells upon
the Prospect Area.
Subject
to the terms and conditions set forth herein, GWPC hereby
grants to Participant the exclusive right to conduct due
diligence and to elect to participate in drilling
opportunities on the Lease. This exclusive right
shall be in effect from the Effective Date until 5 pm August
1, 2008 (the “ Exclusivity Period
”).
Upon
Closing, this Agreement shall govern the drilling and
development of the Anderson No. 1, Anderson No. 2, Anderson
No. 3 and Anderson No. 4 wells (each a “ Prospect Well
” and collectively, the “ Prospect Wells
”) within the Prospect Area.
ARTICLE 1
EXCLUSIVITY PERIOD AND DUE DILIGENCE
Payment of Deposit
1.1
Subject to the terms and provisions
of this Agreement, Participant shall deliver to GWPC a deposit
subject to the following terms and conditions (the
“ Deposit
”). Upon execution of this Agreement,
Participant shall pay to GWPC the amount of one
hundred thousand dollars ($100,000) and this shall be referred
to as the “Initial Deposit”. Before
Closing (as defined below), Participant shall use best efforts
to attempt to pay to GWPC an additional payment in
the amount of one hundred fifty thousand dollars ($150,000)
and this additional payment shall be referred to as the
“Additional Deposit” and together with the Initial
Deposit shall be referred to as the
“Deposit”. Each such payment shall be
by wire transfer to an account nominated by GWPC or otherwise
in immediately available funds. In the
event the Additional Deposit is not paid prior to
Closing, this Agreement shall not terminate and the
amount of the Prospect Generation Fee shall not be reduced by
the amount of the Additional Deposit..
Right to Conduct Due Diligence
1.2
Subject to the timely receipt of the
entire Deposit, during the Exclusivity Period, GWPC hereby
grants to Participant the exclusive right to conduct due
diligence as to GWPC’s title in and to the Lease and
Prospect Area and the sufficiency of the terms and conditions
of the Lease and to elect to participate in drilling
opportunities on the Lease.
Access to Records
1.3
During the Exclusivity Period,
GWPC will provide and make available to the Participant, upon
request, all of its records relating to the Lease and the
Prospect Area, inclusive of all oil and gas leasehold
documentation, all title information including title opinions
or landman runsheets, and, subject to any applicable licensing
restrictions, all geophysical data as reasonably requested by
Participant in order to assist Participant in the performance
of its due diligence on the Lease and the Prospect
Area. Participant shall also have access during
normal business hours to all such information at GWPC’s
office in Houston, Texas. Participant understands
and agrees that all such records and other information
provided pursuant to this Agreement are material non-public
information (“ Confidential
Information ”) and are being disclosed to
Participant in strict confidence and shall not be copied or
distributed to any third parties without the prior written
consent of GWPC. Notwithstanding anything to the
contrary in this Agreement, such duty of confidentiality shall
survive the termination of this Agreement for a period of
three (3) years.
NI-51-101
1.4
Participant acknowledges that it has
received, reviewed and analyzed the National Instrument 51-101
Evaluation “Oil and Natural Gas Reserves Oakcrest
Prospect, Wharton County Texas”, dated September 1,
2007, as prepared by MHA Petroleum Consultants for GWPC (the
“ NI
51-101 ”).
Defects
1.5
By written notice(s) delivered
to GWPC by July 1, 2008, (each a “ Defect Notice
”) Participant may notify GWPC of the existence of any
matter that it reasonably believes constitutes a
Defect. With the exception of the Special and
Limited Warranty (as defined herein), Participant hereby
waives any Defects not addressed in timely delivered Defect
Notices. A “ Defect ”
includes:
(a) failure
of GWPC to have good and defensible title in and to 95.75%
working interest, with royalty burdens totalling no greater
than 28.0% in the Lease without reduction, suspension or
termination of such interest throughout the productive life of
the Lease, it being understood and acknowledged that the
outstanding 4.25% working interest is a carried working
interest held by Caskids in the amount of 3.50% and Ben
Carter, an individual, in the amount of 0.75%;
(b) failure
of GWPC to own such interests in the Lease free and clear of
any liens or encumbrances, other than those liens described on
the attached Exhibit “C” in favor of Metage Funds
Limited and NCIM Limited (the “ Permitted
Encumbrances ”);
(c) failure
of the Lease to cover 100% of the mineral rights as to oil and
gas in the lands and depths described therein, free and clear
of any liens or encumbrances, without reduction, suspension or
termination throughout the productive life of the Lease;
and
(d) failure
of the Lease, and subsequent conveyances, to grant to GWPC the
exclusive right to operate for, explore, drill and produce
100% of the oil and gas on the Prospect
Area.
Right to Cure Defects
1.6
GWPC shall have the right to cure any
Defect prior to Closing. In the event GWPC is
unable to cure any Defect prior to Closing, Participant shall
have the right to terminate this Agreement.
Pre-Closing Obligations of GWPC Regarding the Lease
1.7
During the Exclusivity
Period, GWPC shall (except as otherwise provided in this
Agreement):
(a) maintain
and keep the Lease in full force and effect; and
(b) pay
timely any costs and expenses incurred in connection with the
Lease.
Refraining from Certain Actions
1.8
During the Exclusivity
Period, GWPC shall refrain from taking any of the following
actions without the prior consent of Participant (which
consent shall not be unreasonably withheld):
(a) sell,
assign, lien or encumber any interest in the Lease or Prospect
Area;
(b)
voluntarily waive or release any material rights with respect
to any Lease or voluntarily permit the Lease to lapse or
expire;
(c)
enter into any contract requiring expenditure or for the sale
or other disposition, or any call or option for such purchase,
of hydrocarbons to be produced from the Lease;
(d)
supplement, modify or amend in any material respect the
Lease;
(e) commence
any drilling, reworking, completion or similar operations on
the Lease; or
(f)
commit to do any of the foregoing.
ARTICLE 2
CLOSING
Conditions to GWPC’s Obligations to Close
2.1
GWPC’s obligation to close is subject
to the waiver by GWPC or satisfaction of the following
conditions at or before Closing:
(a) the
representations and warranties of Participant and Parent
contained herein shall be true and correct in all material
respects at the Closing as though made at and as of the
Closing;
(b) participant
shall have performed and satisfied in all material respects
the obligations, covenants and agreements required hereunder
to be performed and satisfied by Participant at or before the
Closing; and
(c) no
suit, action or other proceeding by a governmental authority
or other third person shall be pending or threatened that
seeks substantial damages from GWPC in connection with, or
seeks to restrain, enjoin or otherwise prohibit the
consummation of, the transactions contemplated by this
Agreement.
Conditions to Participant’s Obligations to Close
2.2
Participant’s obligation to
close is subject to the waiver by Participant or satisfaction
of the following conditions at or before Closing:
(a) the
representations and warranties of GWPC contained herein shall
be true and correct in all material respects at the Closing as
though made at and as of the Closing;
(b) GWPC
shall have performed and satisfied in all material respects
the obligations, covenants and agreements required hereunder
to be performed and satisfied by GWPC at or before the
Closing;
(c) no
suit, action or other proceeding by a governmental authority
or other third person shall be pending or threatened that
seeks substantial damages from Participant in connection with,
or seeks to restrain, enjoin or otherwise prohibit the
consummation of, the transactions contemplated by this
Agreement;
(d) all
Defects which are the subject of timely Defect Notices have
been cured to Participant’s reasonable satisfaction,
exercised in good faith, or waived by Participant in
writing;
(e) all
liens (excluding the Permitted Encumbrances) covering or
affecting the Lease have been released or at
Participant’s sole discretion, subordinated to the
rights of Participant herein; and
(f)
all consents to assign affecting the Lease or the transfer of
interests to Participant as contemplated herein, or to
otherwise enter into this Agreement, shall have been
obtained.
Closing
2.3
The Closing shall be held
at 10:00 a.m. in the registered offices of the GWPC on August
1, 2008, or at such other date or time, or in such other
location, as GWPC and Participant may mutually agree in
writing (the “ Closing
”). Each Party’s obligations at Closing
are each a condition precedent to the other’s
obligations at Closing and each shall be deemed to have
occurred simultaneously.
ARTICLE 3
PROSPECT GENERATION FEE
Payment of Fees
3.1
At Closing, Participant shall
pay to GWPC by wire transfer or other immediately available
funds the amount of one million two hundred thousand dollars
($1,200,000) (the “ Prospect Generation
Fee ”), less the amount of Deposit paid by
Participant (which sum is referred to as the “Closing
Amount” in consideration of GWPC’s geological and
geophysical interpretations, seismic data, leasehold and data
acquisition costs and administrative expenses relative to the
Prospect Area and the right to participate in the Prospect
Wells.
3.2
At Closing, the Releases (as defined below)
and the Closing Amount shall be delivered to an escrow agent
agreed upon by Participant and GWPC. The escrow agent shall
hold such items in escrow until the Option Fee has been
received by Metage Funds Limited and NCIM Limited. Upon
delivery of the Option Fee, Participant and GWPC shall
instruct the escrow agent to deliver the Releases to
Participant and the Closing Amount to GWPC. Any fees or
expenses charged by the escrow agent shall be borne equally by
Participant and GWPC.
ARTICLE 4
TERMINATION
Right of Early Termination
4.1
This Agreement may be terminated at any
time at or before Closing by notice given at or before the
Closing:
(a) by
mutual written consent of GWPC and Participant;
(b) by
GWPC if any of the conditions in Section 2.1 has been neither
waived by GWPC nor satisfied by the time of the
Closing;
(c) by
Participant if any of the conditions in Section 2.2 has been
neither waived by Participant nor satisfied by the time of the
Closing; or
(d) by
Participant in its sole discretion.
Effect of Termination
4.2
If this Agreement is terminated
pursuant to Section 4.1, this Agreement shall become void and
of no further force or effect except as set forth
herein. Participant and Parent agree that neither
Participant, Parent nor any of either of their affiliates,
representatives or agents shall, for a period of one year from
the date of such termination, acquire, directly or indirectly,
any interest in and to the Lease or any acreage covered
thereby, including without limitation any replacement lease,
lease renewal, top lease, option, purchase agreement or other
arrangement. In the event Participant or Parent or
any of either of their affiliates, representatives or agents
should acquire such an interest in contravention of this
Section 4.2, the interest so acquired shall, at GWPC’s
option be conveyed to GWPC free and clear of any liens and
encumbrances and at no cost to GWPC. Further, but
without limiting the foregoing, in the event this Agreement is
terminated pursuant to Section 4.1, the Parties agree that
if:
(a) GWPC
terminates this Agreement in accordance with Section 4.1(b) or
Participant terminates this Agreement in accordance with
Section 4.1(d) (provided that the provisions of Section
4.1(a), and 4.1(c) are inapplicable), GWPC shall accept the
Deposit (with all interest accrued thereon) as liquidated
damages and as its sole and exclusive legal and equitable
remedy for Participant’s failure to perform and neither
Party shall have any further liability or obligation to the
other. The Parties acknowledge and stipulate that,
by executing this Agreement, GWPC loses substantial investment
opportunity to market the Lease to third persons during the
Exclusivity Period; that damages for Participant’s
failure to satisfy the conditions in Article 3 (as well as the
value of GWPC’s investment opportunities without this
Agreement) are difficult or incapable of accurate estimation
and that the Deposit (with all interest accrued thereon) is a
reasonable forecast of just compensation for any harm that
might be caused by Participant’s breach; or
(b) the
Parties jointly terminate this Agreement under Section 4.1(a),
or Participant terminates this Agreement in accordance with
Section 4.1(c), then the Deposit (with all interest accrued
thereon) shall be refunded to Participant and neither Party
shall have any further liability or obligation to the
other.
ARTICLE 5
TITLE OPINION
Delivery of Title
5.1
Prior to the issuance of the AFE for
the Initial Well, GWPC hereby agrees to have or cause to have
the title for the drill site for the Initial Well examined by
an oil and gas