exv10wxviiiy



 







Exhibit 10(viii)




PARTICIPATION AGREEMENT




     This Participation Agreement (this “Agreement”) is entered into effective as of August 1, 2005
(the “Effective Date”), by and between North Finn LLC, a Wyoming limited liability company (“North
Finn”), with a mailing address of 950 Stafford, Casper, Wyoming 82609-3205, and American Oil & Gas,
Inc., a Nevada corporation (“AOG”), with a mailing address of 1050 – 17th Street, Suite
1850, Denver, Colorado 80265. North Finn and AOG may be referred to individually herein as a
“Party” and collectively as the “Parties”.



RECITALS




     A. North Finn and AOG own oil and gas working interests (25% and 75%, respectively) in the
Project Lands defined below.



     B. AOG has agreed to fund 60% of North Finn’s share of the costs to develop the Project Lands
and may earn or acquire additional working interests therein by drilling oil and gas wells thereon
subject to the terms and conditions of this Agreement.



     NOW THEREFORE, the Parties agree as follows:



ARTICLE 1

PROJECT LANDS




     The lands in which AOG may earn or acquire additional working interests pursuant to this
Agreement (herein referred to collectively as the “Project Lands”) shall be the lands included in
the Projects described on Exhibit “A” attached hereto.



ARTICLE 2

CONSIDERATION




     Promptly following the Parties’ execution of this Agreement, AOG shall pay North Finn, via
federal funds transfer to an account designated by North Finn, Five Hundred Thirty-Five Thousand
Dollars ($535,000.00) as cash consideration for North Finn entering into this Agreement. Such
payment shall be non-refundable in all circumstances.



ARTICLE 3

PROJECT COSTS




     During the Term of this Agreement (as defined in Article 4), AOG shall pay for ninety percent
(90%) of all of the costs and expenses pertaining to the Project Lands (collectively, the “Project
Costs”) (i.e., the costs attributable to its 75% working interest in the Project Lands and 60% of
the costs attributable to North Finn’s 25% working interest in



 









 




the Project Lands, proportionately reduced if the Parties own less than 100% of the leasehold
mineral interest in the Project Lands), including, but not limited to, lease bonuses, delay
rentals, royalties, overriding royalties, geophysical and geological costs, engineering costs,
permitting costs, lease acquisition costs and the costs to drill Test Wells referred to in Article
5.




ARTICLE 4

TERM OF THE AGREEMENT




     This Agreement shall have a term of seven (7) years, commencing on the Effective Date and
terminating July 31, 2012 (the “Term”).



ARTICLE 5

TEST WELLS




     During the Term of this Agreement, AOG shall have the right, but not the obligation, to drill
test wells (each, a “Test Well”) at lawful locations of AOG’s choice on the Project Lands. Such
Test Wells shall be drilled pursuant to the Operating Agreement referred to in Article 10 hereof.
For each Test Well AOG drills hereunder in which North Finn participates, AOG shall pay for ninety
percent (90%) of the Parties’ share of the costs to drill such Test Well, including, without
limitation, the costs to acquire any additional acreage needed to drill such Test Well, costs for
title examination and curative, surface damage payments, site preparation, permitting fees,
insurance, drilling, testing, casing, logging, completing, recompleting, reworking, storing,
sidetracking, plugging back, making production ready for market and all other Project Costs
associated with such Test Well or the production of hydrocarbons therefrom. If North Finn elects
to non-consent such proposed operation under the Operating Agreement, AOG shall pay one hundred
percent (100%) of the Parties’ share of the costs to drill such Test Well and shall earn one
hundred percent (100%) of North Finn’s interest in the drillsite spacing unit and in the offset
locations referred to in Article 6 hereof.



ARTICLE 6

EARNING




     Subject to Article 5 hereof, for each Test Well AOG drills on the Project Lands, AOG will earn
sixty percent (60%) of North Finn’s working interest (i.e., 60% of 25%, proportionately reduced) in
the drillsite spacing unit established for such Test Well (or, if there is no drillsite spacing
unit established, in the 640 acre governmental section in which such Test Well is drilled) and in
the proceeds of production from such Test Well and sixty percent (60%) of North Finn’s working
interest in the drillsite spacing units offsetting such Test Well, i.e., in the contiguous
drillsite spacing units to the north, south, east and west of the drillsite spacing unit in which
such Test Well was drilled.



 









 





ARTICLE 7

RIGHT TO SHARE IN PROCEEDS




     During the Term of the Agreement, AOG shall be entitled to receive ninety percent (90%) and
North Finn shall be entitled to receive ten percent (10%) of the proceeds from the sale of any of
the Subject Lands or of any well or facility located on the Subject Lands.



ARTICLE 8

NORTH FINN OPTION




     During the Term of this Agreement, North Finn shall have the option (the “North Finn Option”)
to exchange sixty percent (60%) of North Finn’s interest in the Project Lands in which AOG has not
yet earned an interest under this Agreement for 2,900,000 shares of AOG’s $.001 Par Value Common
Stock (“Common Stock”). North Finn may exercise such North Finn Option at any time during such
Term. The date on which such exchange or the exchange referred to in Article 7 hereof occurs is
herein referred to as the Share Exchange Date. If North Finn wishes to exercise such North Finn
Option, it shall provide AOG with written notice of such exercise, and the proposed Share Exchange
Date, which shall not be less than thirty (30) days after the notice date. If North Finn exercises
its option prior to the fifth anniversary of the Effective Date, the shares of AOG’s Common Stock
acquired by North Finn under this Article 8 shall not be registered under the federal securities
laws and certificates representing such shares may contain such legends and transfer restrictions
as AOG shall deem reasonably necessary or appropriate; provided, however, that notwithstanding the
foregoing, if there is a change in control of the ownership or the management of AOG or if there is
a sale of substantially all of the common assets of AOG, AOG shall cause the shares of AOG’s Common
Stock held by North Finn to be registered under federal and state securities laws. If North Finn
exercises its option on or after the fifth anniversary of the Effective Date but before the end of
the Term of this Agreement, AOG shall cause the shares of AOG’s Common Stock acquired by North Finn
through such exercise to be registered under the federal and state securities laws.



ARTICLE 9

AOG OPTION




     During the period commencing on the fifth anniversary of the Effective Date and terminating at
the end of the Term, AOG shall have the option (the “AOG Option”) to exchange 2,900,000 shares of
AOG’s Common Stock for sixty percent (60%) of North Finn’s interest in the Project Lands in which
AOG has not yet earned an interest hereunder. AOG may exercise such AOG Option by providing North
Finn with written notice of such exercise and the proposed Share Exchange Date, which shall not be
less than thirty (30) days from the notice date. The shares of AOG’s Common Stock delivered to
North Finn under this Article 9 shall be registered under the federal and state securities laws.



ARTICLE 10

NO ENCUMBRANCES




     Any interests conveyed by North Finn under Articles 8 or 9 of this Agreement shall be conveyed
free of any claims, liens or encumbrances created by, through or under North Finn.



 









 





ARTICLE 11

OPERATING AGREEMENT




     11.1 Operating Agreement. The rights and obligations of the Parties in the Project
Lands shall be governed by an operating agreement (the “Operating Agreement”) mutually agreed to by
the Parties. Such Operating Agreement shall be effective as of the Effective Date irrespective of
the date or dates it is executed by the Parties. If North Finn and AOG enter into an operating
agreement between themselves and/or with any third party covering drilling and operations on the
Project Lands, or on other lands and leases which are pooled, unitized, or spaced with the Project
Lands, then such other operating agreement shall supersede the Operating Agreement as to the rights
and obligations of the Parties with respect to such drilling and operations. During the term of
such other operating agreement, the Operating Agreement shall continue to govern the rights and
obligations of the Parties as to the balance of the Project Lands. At such time, if ever, that
such other operating agreement shall terminate, or any portion of the Project Lands is released
therefrom, then the Operating Agreement shall again become effective as to such Project Lands, it
being the intent of the Parties that there shall never be a time when any portion of the Project
Lands earned by AOG hereunder is not subject to an Operating Agreement between North Finn and AOG.



     11.2 Resignation. If North Finn is the Operator under an Operating Agreement
covering the Project Lands, it agrees to resign as Operator upon receipt of a written request from
AOG if (i) AOG sells its interest in the Project Lands covered by such Operating Agreement and/or
sells substantially all of its assets, or (ii) AOG is acquired by a third party.



ARTICLE 12

RIGHT TO PARTICIPATE




     During the period commencing on the Effective Date and terminating on January 1, 2007, if
either Party identifies an opportunity to participate in an oil and gas development project not
connected with the Project Lands, it shall provide the other Party with a notice thereof, together
with reasonably detailed information concerning such project, and such other Party shall have the
option, but not the obligation, exercisable within thirty (30) days of the date it receives such
notice, to elect to participate in such project together with the notifying Party, in which case,
the participating working interests shall be AOG ninety percent (90%) and North Finn ten percent
(10%).



ARTICLE 13

DISPUTE RESOLUTION




     Any dispute arising out of or relating to this Agreement shall be resolved by binding
arbitration conducted in Denver, Colorado by the Denver office of the American Arbitration
Association (“AAA”). The Parties agree to submit any such dispute to arbitration within thirty
(30) days following the date of the notice that a Party has elected to arbitrate the dispute. The
arbitration shall be conducted in accordance with the AAA’s Commercial Arbitration Rules (the
“Rules”) effective at the time of the dispute. The arbitration shall be heard and decided in
writing by a single arbitrator to be appointed by the



 









 




AAA. Judgment upon the award may be entered in any court having jurisdiction. This arbitration
provision shall survive the termination of this Agreement.




ARTICLE 14

MISCELLANEOUS




     14.01 Press Releases and Public Announcements. Neither Party shall issue any press
release or make any public announcement relating to the subject matter of this Agreement without
the prior approval of the other Party, which approval shall not be unreasonably withheld; provided,
however, that either Party may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its publicly traded securities (in
which case, the disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).



     14.02 Entire Agreement. This Agreement constitutes the entire agreement between the
Parties concerning the subject matter referred to herein and supersedes and replaces any prior
understandings, agreements, or representations by or between the Parties, written or oral, to the
extent they are related in any way to such subject matter.



     14.03 Succession. This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns.



     14.04 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but which together shall constitute one and the same
instrument.



     14.05 Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this Agreement.



     14.06 Governing Law. This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of Colorado without giving effect to any choice or conflict of
law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of Colorado.



     14.07 Further Assurances. Each of the Parties agrees to execute, acknowledge, and
deliver to the other Party such further instruments, and take such other actions, as may be
reasonably requested in order to more effectively assure to said other Party all of the respective
properties, rights, titles, interests, estates, and privileges intended to be assigned, delivered,
or inuring to the benefit of such Party in consummation of the transactions contemplated hereby.



     14.08 Notices. All notices, requests, demands, claims and other communications
hereunder will be in writing. Any notice given by facsimile transmittal shall be deemed given upon
confirmation of transmission of the facsimile, provided that any attachments referenced in the
notice are also sent via facsimile at the same time. A Party giving notice by facsimile
transmittal also shall send a hard copy of the notice and any attachments referenced



 









 




therein promptly by regular mail unless a different type of mailing is required by this
Agreement. Any notice, request, demand, claim or other communication hereunder shall be deemed
duly given if it is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:




	 	 	 	 	 
	 

	 	IF TO NORTH FINN:
	 	IF TO AOG:
	 
	 	 	 	 
	 

	 	North Finn, LLC
	 	American Oil & Gas, Inc.
	 

	 	950 Stafford
	 	1050 – 17th Street, Suite 1850
	 

	 	Casper, WY 82609
	 	Denver, CO 80265
	 

	 	Attn: Wayne Neumiller
	 	Attn: Andrew Calerich
	 
	 	 	 	 
	 

	 	Telephone:   (307) 237-7854
	 	Telephone:   (303) 991-0173
	 

	 	Facsimile      (307) 237-7628
	 	Facsimile:     (303) 595-0709
	 

	 	e-mail: wneumiller@wyoming.com
	 	e-mail: andyc@americanog.com





Either Party may send any notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Either Party may change the
address to which notices, requests, demands, claims, or other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.




     14.09 Relation of Parties. It is not the intention of the Parties to create any
partnership, or association, and neither this Agreement nor the operations contemplated hereunder
shall be construed or considered as creating any such legal relationship. The liabilities of the
Parties shall be several, and not joint or collective, and the provisions hereof and shall not in
any way change, alter, amend, or affect the substantive rights and obligations of the Parties
otherwise contained in this Agreement.



     14.10 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation and in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other jurisdiction.



     14.11 No Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the Parties and their respective successors and permitted
assigns.



 









 





     IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the Effective
Date.



	 	 	 	 	 
	NORTH FINN, LLC	 	 
	 
	 	 	 	 
	By:

	 	/s/ Wayne Neumiller
	 	 
	 	 	 
	 

	 	Wayne Neumiller	 	 
	 

	 	Manager	 	 
	 
	 	 	 	 
	AMERICAN OIL & GAS, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Andrew Calerich	 	 
	 	 	 
	 

	 	   Andrew Calerich	 	 
	 

	 	   President and Chief Financial Officer