OPTION AGREEMENT FOR
THE PURCHASE OIL AND GAS LEASES
THIS AGREEMENT ("Agreement") is by and between GulfWest Energy Inc.
("GulfWest"), a Texas corporation, whose address is ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; Setex Oil & Gas Company ("Setex"), a
Texas corporation, whose address is ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇. ▇. ▇▇▇▇▇▇▇ Investments L.L.C. ("Addison"), a Texas
limited liability company, whose address is ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇;
WITNESSETH:
WHEREAS, GulfWest and Summit Investment Group-Texas L.L.C. ("Summit")
entered into an OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT
AGREEMENT, dated December 17, 2001, as amended (hereinafter referred to as the
"Lease Bank Agreement") pursuant to which GulfWest and Summit acquired certain
oil and gas leases (hereinafter referred to as the "Leases") in order to develop
and exploit oil and gas properties in the Iola Field, ▇▇▇▇▇▇ County, Texas,
Village ▇▇▇▇▇ Field, ▇▇▇▇▇▇ County, Texas and Cold Springs Field, San Jacinto
County, Texas; and
WHEREAS, pursuant to the Lease Bank Agreement, Summit was to recoup and
recover certain funds advanced to GulfWest covering the acquisition costs of the
Leases (such funds being hereinafter referred to as "Advanced Funds"); and
WHEREAS, Addison has agreed to pay Summit on behalf of GulfWest the
non-recouped and outstanding Advanced Funds; and
WHEREAS, as consideration for Addison's payment to Summit of the
non-recouped and outstanding Advanced Funds, GulfWest desires that Addison take
title to the Leases from Summit; and
WHEREAS, by instrument of conveyance effective March 1, 2004, Addison
acquired the Leases from Summit and GulfWest has agreed to convey to Addison
certain wellbores located on lands covered by the Leases; and
WHEREAS, for the consideration herein set forth, Addison desires to grant
GulfWest the option to purchase such oil and gas leases and wellbores from
Addison;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
below set forth, GulfWest and Addison agree as follows:
Article I
Option To Purchase Oil and Gas Leases
Addison hereby grants to GulfWest an Option To Purchase ("Option") the
Leases acquired from Summit Investment Group Texas L.L.C. pursuant to an
instrument of assignment and conveyance, effective March 1, 2004, covering those
certain oil and gas leases situated in the Iola Field, ▇▇▇▇▇▇ County, Texas and
which are more fully described on Exhibit "A" attached hereto. This Option shall
also extend and apply to those wellbores conveyed by GulfWest to Addison and
which are listed on the attached Exhibit "B".
Article II
Term of Option
The Option may be exercised by GulfWest on or before one hundred eighty
(180) days from the date of this Agreement. The option period may be extended by
the mutual consent of Addison and GulfWest.
Article III
Consideration
The consideration to be paid by GulfWest for this Agreement shall be as
follows:
(1) Upon execution of this Agreement, GulfWest will make and tender to Addison
a promissory note in the original principal amount of Six Hundred Thousand
Dollars ($600,000.00) bearing interest at the rate of prime plus two
percent (2%), hereinafter referred to as the "Option Note". The applicable
prime rate shall be Wall Street Journal Prime Rate as published in the Wall
Street Journal.
(2) GulfWest shall be responsible for maintaining the Leases by paying, at its
sole cost and expense, all lease bonuses, delay rental payments or other
lease payments required to maintain and/or replace the Leases, as required,
for the economic development of oil and gas production in the ▇▇▇▇ Field
Prospect.
(3) GulfWest's operating company subsidiary, Setex Oil & Gas Company ("Setex")
is currently recognized by the Railroad Commission of Texas ("Commission")
as operator of the ▇▇▇▇▇ transferred to Addison by GulfWest. Setex assumes
full operational responsibility such ▇▇▇▇▇ including the obligation to plug
and abandon such ▇▇▇▇▇ as may be required by the Commission.
Article IV
Option Redemption
A. In the event, GulfWest elects to exercise this Option it will give ten
(10) days prior written notice to Addison. The Option shall be exercised by
GulfWest by paying Addison the sum of One Million Two Hundred Thousand Dollars
($1,200,000.00) plus interest at the prime rate plus two percent (2%)
("Redemption Price"). The prime rate charged hereunder is the Wall Street
Journal Prime Rate as published in The Wall Street Journal. Interest will accrue
for the period commencing with the effective date of this Agreement and
continuing through the date the Redemption Price is paid to Addison.
B. Upon payment of the Redemption Price, Addison and GulfWest shall
consider the Option Note cancelled and paid in full.
Article V
Working Interest Retention Rights
In the event GulfWest elects to exercise this Option, Addison may, at its
sole election, retain up to a twenty five percent (25%) working interest in the
Leases it conveys to GulfWest pursuant hereto.
This Agreement has been executed as of the respective acknowledgment dates
of the signatory parties but is to be effective March 1, 2004.
ADDISON INVESTMENTS, L.L.C.
\S\ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇
Its: President
GULFWEST ENERGY INC. SETEX OIL & GAS COMPANY
\s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ \s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- ----------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President Its: President
Acknowledgments
THE STATE OF TEXAS ▇▇.▇▇.
COUNTY OF HARRIS ▇▇.▇▇.
This instrument was acknowledged before me this 5th day of March 2004 by
▇▇▇▇ ▇. ▇▇▇▇▇, President of Addison Investments L.L.C., a Texas limited
liability company on behalf of said company.
[Personal Seal] \s\ ▇▇▇▇▇ Revia
Notary Public for the State of Texas
THE STATE OF TEXAS ▇▇.▇▇.
COUNTY OF HARRIS ▇▇.▇▇.
This instrument was acknowledged before me this 5th day of March 2004 by
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of GulfWest Energy Inc., a Texas corporation, on
behalf of said company.
[Personal Seal] \s\ ▇▇▇▇▇ Revia
Notary Public for the State of Texas
THE STATE OF TEXAS ▇▇.▇▇.
COUNTY OF HARRIS ▇▇.▇▇.
This instrument was acknowledged before me this ____ day of March 2004 by
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of Setex Oil & Gas Company, a Texas corporation, on
behalf of said company.
[Personal Seal] \s\ ▇▇▇▇▇ Revia
Notary Public for the State of Texas
