Document:

Exhibit 10.1

 

THIRD AMENDED PURCHASE OPTION AGREEMENT

 

This
Third Amended Purchase Option Agreement dated effective June 30, 2008 is
between Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.(successor
in interest to Rock Energy Partners, LP), Santa Maria Pacific, LLC, Gitte-Ten,
LLC d/b/a Phoenix Energy, LLC, NW Casmalia Properties, LLC, and Orcutt
Properties, LLC.

 

R E C I T A L S:

 

WHEREAS, Rock Energy Partners, LP, Santa Maria Pacific, LLC,
Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC, and Orcutt
Properties, LLC. entered into the Base Agreement, dated as of December 1,
2007 (which was subsequently amended by the Amendment to Base Agreement dated February 15,
2008 executed by Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC and Orcutt Properties, LLC and Second Amendment to Base Agreement
dated as of March 25, 2008 executed by Rock Energy Resources, Inc.
f/k/a Hanover Gold Company, Inc., Santa Maria Pacific, LLC, Gitte-Ten,
LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC and Orcutt Properties,
LLC) (“Base Agreement”);

 

WHEREAS, the Base Agreement provided for entry into the
Purchase Option Agreement between REP, Santa Maria Pacific, LLC, Gitte-Ten,
LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC, and Orcutt Properties,
LLC dated December 14, 2007;

 

WHEREAS, Rock Energy Partners, LP assigned to Hanover Gold
Company, Inc. (i) all rights under the Transaction Documents, (ii) the
Initial Orcutt Interests, and (iii) the Second Orcutt Interests.  By virtue of the assignments, Hanover Gold
Company, Inc. became the sole owner of said rights and interests;

 

WHEREAS, subsequent to the assignments referenced above,
Hanover Gold Company, Inc. changed its name to Rock Energy Resources, Inc.;

 

WHEREAS, the Purchase Option Agreement was subsequently
amended by the Amendment to Purchase Option Agreement dated February 15,
2008 executed by Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC and Orcutt Properties, LLC and Second Amendment to Purchase Option
Agreement dated as of March 25, 2008 between Rock Energy Resources, Inc.
f/k/a Hanover Gold Company, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW
Casmalia Properties, LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC;

 

WHEREAS, as of March 31, 2008, Gitte-Ten, LLC and
Phoenix Energy, LLC merged with Gitte-Ten, LLC being the surviving company; and

 

WHEREAS, the Parties desire to further amend the Purchase
Option Agreement as set forth herein.

 

 

NOW, THEREFORE, in good and valuable consideration, the
parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

The
definitions of the terms contained in the Base Agreement are incorporated
herein.  All terms defined in the Base
Agreement will have the same meaning when employed in this Agreement.  The following additional terms as used in
this Agreement shall have the meanings indicated below unless the context
otherwise requires:

 

1.1           “Base
Agreement” shall mean the Base Agreement dated December 1, 2007
executed by RER and the SMP Parties, together with all exhibits and schedules
attached thereto and referenced therein, which was subsequently amended by the
Amendment to Base Agreement dated February 15, 2008 executed by Rock
Energy Resources, Inc. f/k/a Hanover Gold Company, Inc., Santa Maria
Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC
and Orcutt Properties, LLC and Second Amendment to Base Agreement dated as of March 25,
2008 executed by Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC and Orcutt Properties, LLC, and any and all properly executed
amendments thereto that expressly provide that they are to supplement, amend or
revise said Base Agreement.

 

1.2           “Business Day” shall mean a day other
than a Saturday, a Sunday, or any federal holiday.

 

1.3           “Closing”
shall mean the occurrence of the events necessary to consummate a sale to RER
pursuant to this Agreement.

 

1.4           “Closing
Date” shall mean the date specified as such in each notice of intent to
exercise an option described in Article III and Article IV of this
Agreement.

 

1.5           “Consent
Leases” shall mean the Leases described in Exhibit A.

 

1.6           “Default”
shall mean the occurrence of any conditions, events or acts which would
constitute an Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of Default.

 

1.7           “Development/Earn
in Agreement” shall mean the agreement dated December 14, 2007 between
Rock Energy Partners, LP, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia
Properties, LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC, which was
subsequently amended by the Amended Development Agreement dated February 15,
2008 between Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC and Orcutt Properties, LLC and the Second Amended Development
Agreement dated as of March 25, 2008 between Rock Energy Resources, Inc.
f/k/a Hanover Gold Company, Inc., Santa Maria Pacific, 

 

2

 

LLC,
Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC, and Orcutt
Properties, LLC.

 

1.8           “Event of
Default”  shall mean the occurrence of
any conditions, events or acts described in Section 8.1.

 

1.9           “NW
Casmalia Option A Interests” shall mean (i) a 5.0% BPO Working
Interest and a 4.5% APO Working Interest in the NW Casmalia Leases, and (ii) a
5.0% BPO Working Interest and a 4.5% APO Working Interest in the NW Casmalia
Property Rights.

 

1.10         “NW
Casmalia Option B Interests” shall mean (i) a 5.0% BPO Working
Interest and a 4.5% APO Working Interest in the NW Casmalia Leases, and (ii) a
5.0% BPO Working Interest and a 4.5% APO Working Interest in the NW Casmalia
Property Rights.

 

1.11         “Option A”
shall mean the option granted pursuant to Article III of this Agreement
which is subject to the terms and conditions of this Agreement.

 

1.12         “Option A Exercise
Period” shall mean the period from the Closing Date with respect to the
Development/Earn In Agreement Option II until the earlier of (i) 3:00 p.m.,
Pacific Standard Time, on October 31, 2008, or (ii) occurrence of an
Event of Default.

 

1.13         “Option A
Interests” shall mean the Orcutt GTL Option A Interests, Orcutt OPL Option
A Interests, Orcutt PEL Option A Interests and NW Casmalia Option A Interests.

 

1.14         “Option B”
shall mean the option granted pursuant to Article IV of this Agreement
which is subject to the terms and conditions of this Agreement.

 

1.15         “Option B Exercise
Period” shall mean from the Closing Date with respect to Option A until the
earlier of (i) 3:00 p.m., Pacific Standard Time, on January 5,
2009, or (ii) occurrence of an Event of Default.

 

1.16         “Option B
Interests” shall mean the Orcutt GTL Option B Interests, Orcutt OPL Option
B Interests, Orcutt PEL Option B Interests and NW Casmalia Option B Interests.

 

1.17         “Orcutt GTL Option
A Interests” shall mean (i) a 5.4455% BPO Working Interest and a 4.99009%
APO Working Interest in the Orcutt GTL Leases, other than the Shell Lease, and (ii) a
5.0% BPO Working Interest and a 4.5% APO Working Interest in the Orcutt GTL
Property Rights, all of which are subject to and burdened by the GTL Adjustment
ORRI.

 

1.18         “Orcutt GTL Option
B Interests” shall mean (i) a 5.4455% BPO Working Interest and a 4.99009%
APO Working Interest in the Orcutt GTL Leases, other than the Shell Lease, and (ii) a
5.0% BPO Working Interest and a 4.5% APO Working Interest in the Orcutt GTL
Property Rights, all of which are subject to and burdened by the GTL Adjustment
ORRI.

 

3

 

1.19         “Orcutt
OPL Option A Interests” shall mean (i) a 5.0% BPO Working Interest and
a 4.5% APO Working Interest in the Orcutt OPL Leases, and (ii) a 5.0% BPO
Working Interest and a 4.5% APO Working Interest in the Orcutt OPL Property
Rights.

 

1.20         “Orcutt
OPL Option B Interests” shall mean (i) a 5.0% BPO Working Interest and
a 4.5% APO Working Interest in the Orcutt OPL Leases, and (ii) a 5.0% BPO
Working Interest and a 4.5% APO Working Interest in the Orcutt OPL Property
Rights.

 

1.21         “Orcutt
PEL Option A Interests” shall mean (i) a 5.0% BPO Working Interest and
a 4.5% APO Working Interest in the Orcutt PEL Leases, and (ii) a 5.0% BPO
Working Interest and a 4.5% APO Working Interest in the Orcutt PEL Property
Rights.

 

1.22         “Orcutt
PEL Option B Interests” shall mean (i) a 5.0% BPO Working Interest and
a 4.5% APO Working Interest in the Orcutt PEL Leases, and (ii) a 5.0% BPO
Working Interest and a 4.5% APO Working Interest in the Orcutt PEL Property
Rights.

 

1.23         “RER Reaffirmation
and Release” shall mean the instrument in the form of Exhibit B.

 

1.24         “SMP Parties
Reaffirmation and Release” shall mean the instrument in the form of Exhibit C.

 

ARTICLE II

 

Option Price

 

2.1           As the purchase price for
Option A and Option B, RER has previously delivered to SMP, as agent for itself
and the remaining SMP Parties, RER’s check in the amount of ONE HUNDRED AND
NO/100 Dollars (U.S. $100.00) (the “Independent Consideration”), which is in
addition to and independent of any other consideration provided hereunder.  The Independent Consideration is
non-refundable and shall be retained by Seller under all circumstances.

 

2.2           The SMP Parties acknowledge
their prior receipt of the Independent Consideration and acknowledge the
sufficiency of the Independent Consideration as the purchase price for Option A
and Option B to solely support this Agreement.

 

ARTICLE III

 

Option A

 

3.1           Grant of Option.  Subject to the strict adherence to the terms
and conditions contained in this Agreement, the SMP Parties hereby grant to RER
the option to acquire an assignment of the (i) Orcutt GTL Option A
Interests, (ii) Orcutt PEL Option A Interests, (iii) Orcutt OPL
Option A Interests and (iv) NW Casmalia Option A Interests (excluding the
Consent Leases if consent to assign is not obtained), prior to expiration of
the Option A Exercise Period.

 

4

 

3.2           Notice of
Intent to Exercise.  RER must
deliver to the SMP Parties written notice by RER of its intent to exercise
Option A.  The notice must be signed by RER
and delivered to the SMP Parties no later than three (3) Business Days
prior to the earlier of (i) the Closing Date, and (ii) expiration of
the Option A Exercise Period.  The notice
must specify a Closing Date that is prior to expiration of the Option A
Exercise Period.  Delivery of such notice
is a pre-condition to exercise of Option A.

 

3.3           Closing.  A Closing will be scheduled for the Closing Date
specified in the notice of intent to exercise pursuant to Section 3.2.

 

3.4           Exercise of
Option.  To exercise the option granted
pursuant to this Article, RER must at the Closing deliver to the SMP Parties
the following:

 

a.             by transfer of
immediately available funds to an account designated by the SMP Parties, the
sum of Twelve Million Five Hundred Thousand and 00/100 Dollars ($12,500,000.00)
on or before the Closing Date; and

 

b.             a duly executed
RER Reaffirmation and Release.

 

Provided
that RER timely satisfies its requirements to exercise Option A the SMP Parties
shall at the Closing deliver to RER the following:

 

a.             an assignment
of the Orcutt GTL Option A Interests duly executed by GTL or its assignee;

 

b.             an assignment
of the Orcutt PEL Option A Interests duly executed by PEL or its assignee;

 

c.             an assignment
of the Orcutt OPL Option A Interests duly executed by OPL or its assignee;

 

d.             an assignment
of the NW Casmalia Option A Interests (excluding the Consent Leases if consent
to assign is not obtained prior to Closing) duly executed by NWCP or its
assignee; and

 

e.             a duly executed
SMP Parties Reaffirmation and Release dated as of the Closing Date.

 

3.5           Effect of
Failure to Timely Exercise Option A.  As provided in Article VIII, failure to
timely satisfy all of its requirements to exercise Option A shall constitute an
Event of Default.

 

3.6           Effective Date
of Assignment.  The Effective
Date of the assignments of the (i) Orcutt GTL Option A Interests, (ii) Orcutt
PEL Option A Interests, (iii) Orcutt OPL Option A Interests, and (iv) NW
Casmalia Option A Interests, shall be November 1, 2008.

 

5

 

ARTICLE IV

 

Option B

 

4.1           Grant of Option.  Subject to the strict adherence to the terms
and conditions contained in this Agreement, the SMP Parties hereby grant to RER
the option to acquire an assignment of the (i) Orcutt GTL Option B
Interests, (ii) Orcutt PEL Option B Interests, (iii) Orcutt OPL
Option B Interests, and (iv) NW Casmalia Option B Interests (excluding the
Consent Leases if consent to assign is not obtained), prior to expiration of
the Option B Exercise Period.

 

4.2           Notice of Intent to Exercise.  RER must deliver to the SMP Parties written
notice by RER of its intent to exercise Option B.  The notice must be signed by RER and
delivered to the SMP Parties no later than three (3) Business Days prior
to the earlier of (i) the intended Closing Date, and (ii) expiration
of the Option B Exercise Period.  The
notice must specify a Closing Date that is prior to expiration of the Option B
Exercise Period.  Delivery of such notice
is a pre-condition to exercise of Option B.

 

4.3           Closing.  A Closing will be scheduled for the Closing Date
specified in the notice of intent to exercise pursuant to Section 4.2.

 

4.4           Exercise of
Option.  To exercise the option granted
pursuant to this Article, RER must at the Closing deliver to the SMP Parties
the following:

 

a.                                       by transfer of
immediately available funds to an account designated by the SMP Parties, the
sum of Thirteen Million and 00/100 Dollars ($13,000,000.00) on or before the
Closing Date; and

 

b.                                      the duly
executed RER Reaffirmation and Release.

 

Provided
that RER timely satisfies its requirements to exercise Option B, the SMP
Parties shall at the Closing deliver to RER the following:

 

a.                                       an assignment
of the Orcutt GTL Option B Interests duly executed by GTL or its assignee;

 

b.                                      an assignment
of the Orcutt PEL Option B Interests duly executed by PEL or its assignee;

 

c.                                       an assignment
of the Orcutt OPL Option B Interests duly executed by OPL or its assignee;

 

d.                                      an assignment
of the NW Casmalia Option B Interests (excluding the Consent Leases if consent
to assign is not obtained prior to Closing) duly executed by NWCP or its
assignee; and

 

e.                                       a duly executed
SMP Parties Reaffirmation and Release

 

6

 

4.5           Effective Date of Assignment. The effective
date of the assignments of the (i) Orcutt GTL Option B Interests, (ii) Orcutt
PEL Option B Interests, (iii) Orcutt OPL Option B Interest, and (iv) NW
Casmalia Option B Interests, shall be January 1, 2009.

 

ARTICLE V

 

Access to Information and
Due Diligence

 

5.1           Record Review.  To allow RER (i) to confirm the SMP
Parties’ title, and (ii) to conduct additional due diligence with respect
to the Orcutt Property and the NW Casmalia Property (following the exercise of
Option A), the SMP Parties shall prior to expiration of the Option B Exercise
Period, give RER access during normal business hours to all contract land and
lease and operational records; to the extent such data and records are in the
SMP Parties’ possession and relate to the property.  The Confidentiality Agreement will continue
in force and effect.

 

5.2           Physical
Inspection.  The SMP
Parties (upon delivery by RER of its paid up insurance policy covering
liability for the matters listed below) will permit RER, at its sole risk and
expense, to conduct reasonable inspections of the Orcutt Property and the NW
Casmalia Property at times approved by the SMP Parties.  RER shall repair any damage to the properties
resulting from its inspection and shall indemnify, defend and hold the SMP
Parties harmless from and against any and all Claims arising from RER
inspecting and observing the properties, including, without limitation, (a) Claims
for personal injuries to or death of employees of RER, its contractors, agents,
consultants and representatives, and damage to the property of RER or others
acting on behalf of RER, regardless of whether such Claims arise out of or
result in whole or in part, from the condition of the properties or the SMP
Parties’ (or its employees’, agents’, contractors’, successors’ or assigns’)
sole or concurrent negligence, strict liability or fault, and (b) Claims
for personal injuries to or death of employees of the SMP Parties or third
parties, and damage to the property of the SMP Parties or third parties, to the
extent caused by the negligence, gross negligence or willful misconduct of RER.

 

5.3           Non-Extension.  The Option A Exercise Period and the Option B
Exercise Period will not be extended for any reason including RER’s inability
to conduct additional inspections and review so long as such inability is not
the result, directly or indirectly, of the failure by the SMP Parties to
perform their obligations under this Agreement.

 

7

 

ARTICLE VI

 

Treatment of Option
Exercise Payments

 

Each
option exercise payment shall be the cash purchase price for the acquired
interest.  The option exercise payments
provided for in this Agreement shall be the property of the SMP Parties upon
receipt.  RER shall have no right to or
interest in any option exercise payment. 
The restriction on application of funds contained in the
Development/Earn in Agreement is not applicable to the option exercise payments
made hereunder.

 

ARTICLE VII

 

Incorporation of Base
Agreement

Representations, Disclaimers, Warranties and Indemnities

 

RER and the SMP Parties
ratify, confirm and adopt with respect to the Option A Interests and the Option
B Interests  all statements, terms,
provisions, covenants, representations, disclaimers, warranties and indemnities
made in the Base Agreement with the same force and effect as if set out in this
Agreement in full.

 

ARTICLE VIII

 

Defaults

 

8.1           Events of Default.  The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder.

 

8.1.1        The failure of RER to timely satisfy the
requirements to exercise any of the following options:  (i) Development/Earn In Agreement Option IV
within the period specified in the Development/Earn in Agreement as extended by
the Extension Option Agreement, (ii) Option A, or (iii) Option B;

 

8.1.2        The failure, refusal or neglect of RER to properly
observe, perform or comply with any covenant, agreement or obligation contained
in this Agreement, the Base Agreement or Operating Agreements and the
continuation of such failure, refusal or neglect for fifteen (15) days after
written notice thereof has been given to RER by an SMP Party.

 

8.1.3        Any representation, warranty or statement made by RER
in this Agreement or the Base Agreement shall prove to have been incorrect in
any material respect when made or deemed to have been made and is not cured by RER
within ten (10) days after written notice thereof has been given to RER by
an SMP Party.

 

8.1.4        The filing or commencement by RER of a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or 

 

8

 

seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, or RER
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debt as they become due, or shall take any
corporate action to authorize any of the foregoing.

 

9.1.5        The filing or commencement of an involuntary case or
other proceeding against RER seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of ninety (90) days; or an
order for relief shall be entered against RER under the federal bankruptcy laws
as now or hereafter in effect.

 

8.2           Termination
Consequences.  Upon the
occurrence of an Event of Default hereunder all options granted pursuant to
this Agreement as to which a Closing has not occurred shall terminate.

 

ARTICLE IX

 

Notices

 

Article XII of the Base
Agreement is incorporated herein and made applicable hereto.

 

ARTICLE X

 

Miscellaneous

 

10.1         Incorporation.  Article XIII of the Base Agreement is
incorporated herein and made applicable hereto.

 

10.2         Non-Exclusion.  The express incorporation of specific
provisions of the Base Agreement herein shall not limit the extent to which
this Agreement and the assignments made hereunder are controlled by the Base Agreement.

 

10.3         Lease Exclusion Payment.  In the event that consents to assignment of
interests in the Consent Leases are not obtained prior to a Closing, NWCP shall
within seven (7) days of the Closing with respect to each option pay to RER
the sum of Nine Hundred Sixty-Three and 33/100 Dollars ($963.33).

 

IN WITNESS WHEREOF, the authorized representatives
of the parties executing this Agreement on the dates stated below.

 

9

 

	
   

  	
   

  	
  ROCK ENERGY RESOURCES,
  INC. F/K/A

  HANOVER GOLD COMPANY, INC. (successor

  in interest to Rock Energy Partners, LP)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SANTA
  MARIA PACIFIC, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GITTE-TEN, LLC D/B/A PHOENIX ENERGY,

  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NW CASMALIA PROPERTIES,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ORCUTT PROPERTIES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
								

 

10Exhibit 10.3

 

EXTENSION OPTION AGREEMENT

 

This Extension Option Agreement, dated effective as of April 14,
2008, is between Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC, and Orcutt Properties, LLC (“Agreement”).

 

R E C I T A L S:

 

WHEREAS, Rock Energy
Partners, LP, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties,
LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC. entered into the Base
Agreement, dated as of December 1, 2007 (which was subsequently amended by
the Amendment to Base Agreement dated February 15, 2008 executed by Rock
Energy Resources, Inc. f/k/a Hanover Gold Company, Inc., Santa Maria
Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC
and Orcutt Properties, LLC and Second Amendment to Base Agreement dated as of March 25,
2008 executed by Rock Energy Resources, Inc. f/k/a Hanover Gold Company, Inc.,
Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix
Energy, LLC and Orcutt Properties, LLC) (“Base Agreement”);

 

WHEREAS, the Base
Agreement provided for entry into the Development/Earn-in Agreement between
Rock Energy Partners, LP, Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia
Properties, LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC, dated as of December 14,
2007 (which was subsequently amended by the Amended Development Agreement dated
February 15, 2008 between Rock Energy Resources, Inc. f/k/a Hanover
Gold Company, Inc., Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia
Properties, LLC, Phoenix Energy, LLC and Orcutt Properties, LLC and the Second
Amended Development Agreement dated as of March 25, 2008 between Rock
Energy Resources, Inc. f/k/a Hanover Gold Company, Inc., Santa Maria
Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC,
and Orcutt Properties, LLC) (“Development Agreement”);

 

WHEREAS, RER has
requested that the SMP Parties extend the Option IV Exercise Period set forth
in the Development Agreement; and

 

WHEREAS, the Parties
desire to further amend the Development Agreement as set forth herein.

 

NOW, THEREFORE, in good and valuable
consideration, the parties agree as follows:

 

 

ARTICLE I

 

DEFINITIONS

 

The definitions
of the terms contained in the Development Agreement are incorporated
herein.  The following additional terms
as used in this Agreement shall have the meanings indicated below unless the
context otherwise requires:

 

1.1           “Default” shall mean the occurrence
of any conditions, events or acts which would constitute an Event of Default or
which with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.

 

1.2           “Development Agreement” shall mean
the Development/Earn-In Agreement between Rock Energy Partners, LP, Santa Maria
Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC,
and Orcutt Properties, LLC., dated as of December 14, 2007, together with
all exhibits and schedules attached thereto and referenced therein and any and
all properly executed amendments thereto that expressly provide that they are
to supplement, amend or revise the Development Agreement (including the Amended
Development Agreement dated February 15, 2008 between Rock Energy
Resources, Inc. f/k/a Hanover Gold Company, Inc., Santa Maria
Pacific, LLC, Gitte-Ten, LLC, NW Casmalia Properties, LLC, Phoenix Energy, LLC
and Orcutt Properties, LLC and the Second Amended Development Agreement, dated as
of March 25, 2008, between Rock Energy Resources, Inc. f/k/a Hanover
Gold Company, Inc., Santa Maria Pacific, LLC, Gitte-Ten, LLC, NW Casmalia
Properties, LLC, Phoenix Energy, LLC, and Orcutt Properties, LLC).

 

1.3           “Extension Options” shall mean
Extension Option One, Extension Option Two, Extension Option Three, Extension
Option Four and/or Extension Option Five.

 

1.4           “Extension Option One” shall mean the
option granted pursuant to Article III of this Agreement which is subject
to the terms and conditions of this Agreement.

 

1.5           “Extension Option Payments” shall
mean the option payments to be made by RER pursuant Articles III, IV, V, VI and
VII to exercise Extension Option One, Extension Option Two, Extension Option
Three, Extension Option Four and Extension Option Five.

 

1.6           “Extension Option Two” shall mean the
option granted pursuant to Article IV of this Agreement which is subject
to the terms and conditions of this Agreement.

 

1.7           “Extension Option Three” shall mean
shall mean the option granted pursuant to Article V of this Agreement
which is subject to the terms and conditions of this Agreement.

 

1.8           “Extension Option Four” shall mean
shall mean the option granted pursuant to Article VI of this Agreement
which is subject to the terms and conditions of this Agreement.

 

1.9           “Extension Option Five” shall mean
shall mean the option granted pursuant to Article VII of this Agreement
which is subject to the terms and conditions of this Agreement.

 

2

 

1.10         “Event of Default” shall mean the occurrence of any
conditions, events or acts described in Section 9.1.

 

1.11         “RER Reaffirmation and Release” shall
mean the instrument in the form of Exhibit A.

 

1.12         “SMP Parties Reaffirmation and Release”
shall mean the instrument in the form of Exhibit B.

 

Any terms defined in other provisions of this Agreement shall have the
meanings set out therein unless the context requires otherwise.

 

ARTICLE II

 

Option
Price

 

2.1           Contemporaneously with
the execution of this Agreement, as the purchase price for the Extension Option,
RER has delivered to SMP, as agent for itself and the remaining SMP Parties, RER’s
check in the amount of ONE HUNDRED AND NO/100 Dollars (U.S. $100.00) (the “Independent
Consideration”), which is in addition to and independent of any other
consideration provided hereunder.  The
Independent Consideration is non-refundable and shall be retained by Seller
under all circumstances.

 

2.2           The SMP Parties
acknowledge the receipt of the Independent Consideration and acknowledge the
sufficiency of the Independent Consideration as the purchase price for Extension
Option and to solely support this Agreement.

 

ARTICLE III

 

Extension Option
One

 

3.1           Grant
of Option.  Subject to the strict
adherence to the terms and conditions contained in this Agreement, the SMP
Parties hereby grant to RER the option to extend the Option IV Exercise Period
until the earlier of (i) 3:00 p.m. Pacific Standard Time on April 30,
2008, or (ii) occurrence of an Event of Default.

 

3.2           Notice of Intent to Exercise.  RER must deliver to the SMP Parties written
notice by RER of its intent to exercise Extension Option One.  The notice must be signed by RER and
delivered to the SMP Parties.

 

3.3           Exercise of Option.  To exercise the option granted pursuant to
this Article, RER must deliver to the SMP Parties the following prior to 3:00 p.m.
Pacific Standard Time on April 17, 2008:

 

3

 

a.             by transfer of immediately available funds
to an account designated by the SMP Parties, the sum of Five Hundred Thousand
and 00/100 Dollars ($500,000.00); and

 

b.             a duly executed RER Reaffirmation and
Release.

 

Provided that RER timely satisfies its requirements to exercise Extension
Option One, the Option IV Exercise Period shall be extended to 3:00 p.m.
Pacific Standard Time on April 30, 2008. 
RER agrees that Thirty Thousand and 00/100 Dollars ($30,000.00) of the
Five Hundred Thousand and 00/100 Dollars ($500,000.00) payment shall be
retained by the SMP Parties and applied against legal fees and expenses
incurred in connection with the Transaction Documents.  The remaining Four Hundred Seventy Thousand
and 00/100 Dollars ($470,000.00) shall be applied as described in Article VIII.

 

ARTICLE IV

 

Extension
Option Two

 

4.1           Grant
of Option.  Subject to the strict
adherence to the terms and conditions contained in this Agreement, the SMP
Parties hereby grant to RER the option to extend the Option IV Exercise Period
until the earlier of (i) 3:00 p.m. Pacific Standard Time on May 15,
2008, or (ii) occurrence of an Event of Default.

 

4.2           Notice of Intent to Exercise.  RER must deliver to the SMP Parties written
notice by RER of its intent to exercise Extension Option Two.  The notice must be signed by RER and
delivered to the SMP Parties.

 

4.3           Exercise of Option.  To exercise the option granted pursuant to
this Article, RER must deliver to the SMP Parties the following prior to 3:00 p.m.
Pacific Standard Time on May 1, 2008:

 

a.             by transfer of immediately available funds
to an account designated by the SMP Parties, the sum of Five Hundred Thousand
and 00/100 Dollars ($500,000.00); and

 

b.             a duly executed RER Reaffirmation and
Release.

 

Provided that RER timely satisfies its requirements to exercise
Extension Option Two, the Option IV Exercise Period shall be extended to 3:00 p.m.
Pacific Standard Time on May 15, 2008.

 

4

 

ARTICLE V

 

Extension
Option Three

 

5.1           Grant
of Option.  Subject to the strict
adherence to the terms and conditions contained in this Agreement, the SMP
Parties hereby grant to RER the option to extend the Option IV Exercise Period
until the earlier of (i) 3:00 p.m. Pacific Standard Time on June 2,
2008, or (ii) occurrence of an Event of Default.

 

5.2           Notice of Intent to Exercise.  RER must deliver to the SMP Parties written
notice by RER of its intent to exercise Extension Option Three.  The notice must be signed by RER and
delivered to the SMP Parties.

 

5.3           Exercise of Option.  To exercise the option granted pursuant to
this Article, RER must deliver to the SMP Parties the following prior to 3:00 p.m.
Pacific Standard Time on May 15, 2008:

 

a.             by transfer of immediately available funds
to an account designated by the SMP Parties, the sum of Five Hundred Thousand
and 00/100 Dollars ($500,000.00); and

 

b.             a duly executed RER Reaffirmation and
Release.

 

Provided that RER timely satisfies its requirements to exercise
Extension Option Three, the Option IV Exercise Period shall be extended to 3:00 p.m.
Pacific Standard Time on June 2, 2008.

 

ARTICLE VI

 

Extension
Option Four

 

6.1           Grant
of Option.  Subject to the strict
adherence to the terms and conditions contained in this Agreement, the SMP
Parties hereby grant to RER the option to extend the Option IV Exercise Period
until the earlier of (i) 3:00 p.m. Pacific Standard Time on June 16,
2008, or (ii) occurrence of an Event of Default.

 

6.2           Notice of Intent to Exercise.  RER must deliver to the SMP Parties written
notice by RER of its intent to exercise Extension Option Four.  The notice must be signed by RER and
delivered to the SMP Parties.

 

6.3           Exercise of Option.  To exercise the option granted pursuant to
this Article, RER must deliver to the SMP Parties the following prior to 3:00 p.m.
Pacific Standard Time on June 2, 2008:

 

a.             by transfer of immediately available funds
to an account designated by the SMP Parties, the sum of Five Hundred Thousand
and 00/100 Dollars ($500,000.00); and

 

5

 

b.             a duly executed RER Reaffirmation and
Release.

 

Provided that RER timely satisfies its requirements to exercise
Extension Option Four, the Option IV Exercise Period shall be extended to 3:00 p.m.
Pacific Standard Time on June 16, 2008.

 

ARTICLE VII

 

Extension
Option Five

 

7.1           Grant
of Option.  Subject to the strict
adherence to the terms and conditions contained in this Agreement, the SMP
Parties hereby grant to RER the option to extend the Option IV Exercise Period
until the earlier of (i) 3:00 p.m. Pacific Standard Time on June 30,
2008, or (ii) occurrence of an Event of Default.

 

7.2           Notice of Intent to Exercise.  RER must deliver to the SMP Parties written
notice by RER of its intent to exercise Extension Option Five.  The notice must be signed by RER and
delivered to the SMP Parties.

 

7.3           Exercise of Option.  To exercise the option granted pursuant to
this Article, RER must deliver to the SMP Parties the following prior to 3:00 p.m.
Pacific Standard Time on June 15, 2008:

 

a.             by transfer of immediately available funds
to an account designated by the SMP Parties, the sum of Five Hundred Thousand
and 00/100 Dollars ($500,000.00); and

 

b.             a duly executed RER Reaffirmation and
Release.

 

Provided that RER timely satisfies its requirements to exercise
Extension Option Five, the Option IV Exercise Period shall be extended to 3:00 p.m.
Pacific Standard Time on June 30, 2008.

 

ARTICLE VIII

 

Application
of Payments

 

8.1           Ownership
of Funds.  The Extension Option Payments
provided for in this Agreement shall be the property of the SMP Parties
immediately upon receipt.  RER shall have
no right to or interest in any Extension Option Payment.

 

8.2           Application of Extension Option Payments.  If and only if RER satisfies the requirements
to exercise Option IV within the Option IV Exercise Period (as same is extended
pursuant to this Agreement), the Extension Option Payments (excluding Thirty
Thousand and 

 

6

 

00/100 Dollars ($30,000.00) paid in connection with Extension Option
One) shall be applied as a credit against the Seven Million Three Hundred
Ninety-Nine Thousand Eight Hundred 00/100 Dollars ($7,399,800.00) payment
required to be made by RER to exercise Option IV.  In the event that RER fails to satisfy the
requirements to exercise Option IV within the Option IV Exercise Period (as
same is extended pursuant to this Agreement) (i) the SMP Parties shall
retain all Extension Option Payments, (ii) RER shall have no right to
receive any portion of the Extension Option Payments or any credit or economic
benefit for or on account of the Extension Option Payments, and (iii) all
options under this Agreement and the Development Agreement shall terminate.

 

ARTICLE IX

 

Defaults

 

9.1           Events
of Default.  The occurrence of any
one or more of the following events shall constitute an Event of Default
hereunder.

 

9.1.1        The failure, refusal or
neglect of RER to properly observe, perform or comply with any covenant,
agreement or obligation contained in the Transaction Documents and the
continuation of such failure, refusal or neglect for fifteen (15) days after written
notice thereof has been given to RER by an SMP Party.

 

9.1.2        Any representation,
warranty or statement made by RER in this Agreement, the Development Agreement
or the Base Agreement by RER shall prove to have been incorrect in any material
respect when made or deemed to have been made and is not cured by RER within
ten (10) days after written notice thereof has been given to RER by an SMP
Party.

 

9.1.3        The filing or commencement
by RER of a voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect, or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or RER shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debt as they become due, or shall take any corporate
action to authorize any of the foregoing.

 

9.1.4        The filing or commencement
of an involuntary case or other proceeding against RER seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for
a period of ninety (90) days; or an order for relief shall be entered against RER
under the federal bankruptcy laws as now or hereafter in effect.

 

7

 

9.2           Termination Consequences.  Upon the occurrence of an Event of Default
hereunder all options granted pursuant to this Agreement shall terminate.

 

ARTICLE X

 

Notices

 

Article XII
of the Base Agreement is incorporated herein and made applicable hereto.

 

ARTICLE XI

 

Miscellaneous

 

11.1         Article XIII of the Base Agreement is
incorporated herein and made applicable hereto.

 

11.2         Non-Exclusion.  The express incorporation of specific
provisions of the Base Agreement herein shall not limit the extent to which this
Agreement, the Development Agreement and the assignments made hereunder are
controlled by the Base Agreement.

 

IN WITNESS WHEREOF, the
authorized representatives of the parties have executed this Extension Option Agreement
as of the date first set out above.

 

	
   

  	
  ROCK ENERGY
  RESOURCES, INC. F/K/A

  
	
   

  	
  HANOVER GOLD
  COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Rocky V. Emery, Chairman and Chief

  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SANTA MARIA
  PACIFIC, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  David Pratt,
  Manager

  
	
   

  	
   

  
	
   

  	
  GITTE-TEN, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  David Pratt,
  Manager

  

 

8

 

	
   

  	
  NW CASMALIA
  PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  David Pratt, Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PHOENIX
  ENERGY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  David Pratt, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ORCUTT
  PROPERTIES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  David Pratt, Manager

  

 

9

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