MERGERAGREEMENT AND PLAN OF MERGER BETWEEN MAINLANDRESOURCES, INC. AND AMERICANEXPLORATION CORPORATION DatedMarch 22, 2010 TABLEOF CONTENTS

 

(a)

any multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign;

 

(c)

any quasi-governmental or private body exercising any regulatory, expropriation, or taxing authority under or for the account of any of the foregoing;

(a)  

out of the ordinary course of Business (other than the party’s agreements with its legal counsel and its Fairness Opinion Consultants);

(b)  

involving liability for or payment by American Exploration or Mainland, as the case may be, of more than $10,000 in the aggregate (the party’s agreements with its legal counsel and its Fairness Opinion consultants);

(c)  

of a duration greater than one year ;

(d)  

affecting ownership of, or title to, or any interest in, mineral, resource, real estate or personal property;

(e)  

in respect of or concerning Intangible Property;

(f)  

in respect of or concerning bonuses, incentive compensation, pension, group insurance, employee welfare plans or collective agreements;

(g)  

with employees, officers or insiders; or

(h)  

of the following kinds or descriptions:

(a)  

each American Exploration Share will thereby be cancelled and the holder of such American Exploration Share shall be entitled to be issued the number of Mainland Shares determined by the Exchange Ratio, with any fractions of 0.5 and more in respect of each holder’s aggregate American Exploration Shares rounded off to the nearest whole share (so that no American Exploration Shareholder will receive more than one share in lieu of a fractional share in respect of such American Exploration Shareholder’s entire holdings).  As of the Effective Time, all American Exploration Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate representing any American Exploration Shares shall cease to have any rights with respect thereto, except the right to receive the Mainland Shares to be issued in consideration therefor upon surrender of such certificate, without interest;

(b)  

each American Exploration Share held in the treasury of American Exploration immediately prior to the Effective Time shall be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto;

(c)  

notwithstanding anything in this Agreement to the contrary, if, between the date of this Agreement and the Effective Time, the Exchange Ratio has been agreed upon in writing by American Exploration and Mainland, and thereafter the outstanding Mainland Shares shall have been changed into a different number of shares or a different class by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, or a stock dividend thereon shall have been declared with a record date within such period, the Exchange Ratio shall be correspondingly adjusted;

(d)  

all of the American Exploration Options then outstanding will thereby be disposed of by the holders thereof in consideration for the issue by Mainland of non-transferable stock options (the “Mainland Exchange Options”) to the persons set out in Schedule D hereto, subject to reduction for any American Exploration Options that are exercised or expire prior to Closing.  The number of Mainland Exchange Options issuable shall be determined with reference to the Exchange Ratio, mutatis mutandis.  As of the date of this Agreement, the Exchange Ratio is one Mainland Exchange Share for every four American Exploration Shares.  Accordingly, assuming the Exchange Ratio is the same at the Effective Time, an American Exploration Option to acquire four American Exploration Shares would result in a Mainland Option to acquire one Mainland Share.  The exercise price of each Mainland Exchange Option shall be $1.50.  No fractional Mainland Exchange Options will be issued, and any fractions of 0.5 and more in respect of each holder’s aggregate American Exploration Options shall be rounded off to the nearest whole option (so that no American Exploration Option holder will receive more than one Mainland Exchange Option in lieu of a fractional option in respect of such American Exploration Option holder’s entire holdings);

(e)  

all of the American Exploration Warrants then outstanding will thereby be disposed of by the holders thereof in consideration for the issue by Mainland of non-transferable common stock purchase warrants (the “Mainland Exchange Warrants”) to the persons set out in Schedule D hereto, subject to reduction for any American Exploration Warrants that are exercised or expire prior to Closing.  The number of Mainland Exchange Warrants issuable shall be determined with reference to the Exchange Ratio, mutatis mutandis.  As of the date of this Agreement, the Exchange Ratio is one Mainland Exchange Share for every four American Exploration Shares.  Accordingly, assuming the Exchange Ratio is the same at the Effective time, American Exploration Warrants to acquire four American Exploration Shares would result in a Mainland Warrant to acquire one Mainland Share, and the exercise price of each Mainland Exchange Warrant shall be determined by multiplying the per share exercise price of the corresponding whole American Exploration Warrants by the Exchange Ratio.  No fractional Mainland Exchange Warrants will be issued, and any fractions of 0.5 and more in respect of each holder’s aggregate American Exploration Warrants shall be rounded off to the nearest whole warrant (so that no American Exploration Warrant holder will receive more than one Mainland Exchange Warrant in lieu of a fractional warrant in respect of such American Exploration Warrant holder’s entire holdings); and

(f)  

Mainland will be the Surviving Corporation, and, upon the Effective Time, shall continue in existence and without further transfer shall succeed to and possess all rights, privileges, powers and franchises of Mainland  and all of the assets and property of whatever kind and character of American Exploration shall vest in Mainland as the Surviving Corporation.  Mainland, as the Surviving Corporation, shall also be liable for all of the liabilities and obligations of American Exploration, and any claim or judgment against American Exploration may be enforced against Mainland as the Surviving Corporation.  The articles of incorporation and bylaws of Mainland existing immediately prior to the Effective Time shall be the articles of incorporation and bylaws of Mainland immediately after the Effective Time.

(a)  

convene and hold the American Exploration Meeting for the purpose of considering the American Exploration Merger Resolution (and for any other proper purpose as may be set out in the notice for such meeting); and

(b)  

subject to the satisfaction or waiver of the other conditions herein contained in favor of each party, with the co-operation of Mainland, take such steps as are necessary to give effect to the Merger.

(a)  

subject to the satisfaction or waiver of the other conditions herein contained in favor of each party, with the co-operation of American Exploration, take such steps as are necessary to give effect to the Merger;

(b)  

subject to §2.5, and subject to the satisfaction or waiver of the other conditions herein contained in favor of each party, deliver certificates for Mainland Shares to American Exploration Shareholders in accordance with this Agreement; and

(c)  

subject to the satisfaction or waiver of the other conditions herein contained in favor of each party, deliver agreements or certificates for Mainland Exchange Options and Mainland Exchange Warrants, as appropriate, to American Exploration Option holders and American Exploration Warrant holders, as the case may be, in accordance with this Agreement, against the delivery and surrender of the agreements and certificates representing the corresponding American Exploration Options and American Exploration Warrants.

(b)  

the preparation of any application for any regulatory approvals, other orders, rulings, consents and any other documents, and the taking of any action, deemed by Mainland or American Exploration, acting reasonably, to be necessary to discharge their respective obligations under applicable Laws in connection with the Merger and the other transactions contemplated hereby.

(b)  

Capitalization.  The authorized capital of American Exploration consists of 150,000,000 shares of common stock with a par value of $0.001.  As of the date of this Agreement, there are 59,718,333 American Exploration Shares issued and outstanding.  Except as set out in Schedule E hereto, there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) obligating American Exploration to issue or sell any shares of American Exploration, or ownership interests, securities, or obligations of any kind convertible into or exchangeable for any shares of American Exploration or any other Person, nor is there outstanding any stock appreciation rights, phantom equity, or similar rights, agreements, arrangements or commitments based upon the book value, income, or any other attribute of American Exploration.  All outstanding American Exploration Shares have been duly authorized and are validly issued and outstanding as fully paid and non-assessable shares, free of pre-emptive rights;

 

(i)

There are no outstanding bonds, debentures or other evidences of indebtedness of American Exploration including any which have the right to vote (or that are convertible for or exercisable into securities having the right to vote) with the holders of the American Exploration Shares on any matter. There are no outstanding contractual obligations of American Exploration to repurchase, redeem or otherwise acquire any of its outstanding securities;

(i)  

American Exploration has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by American Exploration and the consummation by American Exploration of the transactions contemplated by this Agreement have been duly authorized by its Board of Directors and no other corporate proceedings on its part are necessary to authorize this Agreement, or the transactions contemplated hereby other than:

(A)  

with respect to finalizing and approving the Joint Proxy Statement and other matters relating thereto; and

(B)  

with respect to the completion of the Merger, the approval of the American Exploration Shareholders;

(ii)  

This Agreement has been duly executed and delivered by American Exploration and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, and other applicable Laws affecting creditors’ rights generally, and to general principles of equity;

(iii)  

The approval of this Agreement, the execution and delivery by American Exploration of this Agreement, and the performance by it of its obligations hereunder, and the completion of the Merger and the transactions contemplated thereby, will not:

(A)  

result in a violation or breach of, require any consent to be obtained under, or give rise to any termination, purchase or sale rights, or payment obligation under any provision of:

(I)  

its articles of incorporation, by-laws or other charter documents, including any unanimous shareholder agreement or any other agreement or understanding relating to ownership of shares or other interests;

(II)  

subject to obtaining any necessary regulatory approvals relating to American Exploration, any Laws, judgment, or decree, except to the extent that the violation or breach of, or failure to obtain any consent under, any Laws, judgment or decree would not, individually or in the aggregate, have a Material Adverse Effect on American Exploration; or

(III)  

subject to obtaining any necessary regulatory approvals relating to American Exploration and the requisite approval of the American Exploration Shareholders, and except as would not, individually or in the aggregate, have a Material Adverse Effect on American Exploration, or on any material contract, agreement, license, franchise, or permit to which it is party or by which it is bound or is subject or is the beneficiary;

(B)  

give rise to any right of termination or acceleration of indebtedness of American Exploration;

(C)  

except as would not, individually or in the aggregate, have a Material Adverse Effect on American Exploration, result in the imposition of any restriction, tax, penalty, Encumbrance, charge, or lien upon any of the Assets, or restrict, hinder, impair, or limit the ability of American Exploration to carry on the Business of American Exploration as and where it is now being carried on;

(D)  

result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director or employee of American Exploration or increase any benefits otherwise payable to any such person or under any American Exploration Plans or result in the acceleration of time of payment or vesting of any such benefits, including the time of exercise of stock options; or

(E)  

result in the acceleration of time of payment or vesting of any such benefits, including the time of exercise of stock options;

(d)  

No Defaults. Subject to obtaining any necessary regulatory approvals relating to American Exploration, American Exploration is not in default under, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default under, any contract (including the Material Contracts), agreement, license or franchise to which it is a party which would, if terminated due to such default, cause a Material Adverse Effect;

(e)  

Absence of Certain Changes or Events. American Exploration has conducted its Business only in the ordinary and regular course of business consistent with past practice and except as otherwise provided in this Agreement, there has not occurred since the date of the most recent balance sheet forming part of the American Exploration Financial Statements:

(ii)  

any damage, destruction, or loss, whether covered by insurance or not, that could reasonably be expected to have a Material Adverse Effect on American Exploration;

(iii)  

any redemption, repurchase or other acquisition of American Exploration Shares by American Exploration or any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to American Exploration Shares;

(iv)  

any material increase in or modification of the compensation payable or to become payable by it to any of its directors or officers, or any grant to any such director or officer of any increase in severance or termination pay;

(v)  

any increase in or modification of any bonus, pension, insurance or benefit arrangement (including the granting of stock options, restricted stock awards or stock appreciation rights) made to, for or with any of its directors or officers;

(vi)  

any acquisition or sale of its property or Assets to a Person not dealing at arm’s length;

(vii)  

any entering into, amendment of, relinquishment, termination or non-renewal by it of any material contract, agreement, license, franchise, lease transaction, commitment or other right or obligation, other than in the ordinary and regular course of business consistent with past practice;

(viii)  

an act whereby American Exploration has engaged or entered into any transaction or made any disbursement or assumed or incurred any liability or obligation or made any commitment to make any expenditure which might materially and adversely affect any of the Assets or the organization, operations, affairs, Business, properties, prospects or financial condition or position of American Exploration;

(ix)  

any resolution to approve a combination or reclassification of any of its outstanding shares;

(x)  

an act whereby American Exploration has purchased or agreed to purchase, or leased or agreed to lease, or acquired or agreed to acquire, any property or asset, other than as required in the usual and ordinary course of the operation of the Business;

(xi)  

an act whereby American Exploration has sold, transferred, disposed of, mortgaged, pledged, charged, or leased any Asset or property, other than as required in the usual and ordinary course of the operation of the Business;

(xii)  

any change in its accounting methods, principles or practices; or

(xiii)  

any agreement or arrangement to take any action which, if taken prior to the date hereof, would have made any representation or warranty set forth in this Agreement materially untrue or incorrect as of the date when made;

(i)  

Except as set forth in the American Exploration SEC Filings, American Exploration is not a party to any written or oral policy, agreement, obligation or understanding providing for severance or termination payments to, or any employment agreement with, any director or officer;

(ii)  

American Exploration is not a party to any collective bargaining agreement nor subject to any application for certification or, to the knowledge of American Exploration, threatened or apparent union-organizing campaigns for employees not covered under a collective bargaining agreement nor are there any current, pending or, to the knowledge of American Exploration, threatened strikes or lockouts at American Exploration that would, individually or in the aggregate, have a Material Adverse Effect on American Exploration;

(iii)  

American Exploration is not subject to any claim for wrongful dismissal, constructive dismissal, or any other tort claim, actual or, to the knowledge of American Exploration, threatened, or any litigation, actual or, to the knowledge of American Exploration, threatened, relating to employment or termination of employment of employees or independent contractors;

(iv)  

American Exploration has operated in all material respects in accordance with all applicable Laws with respect to employment and labour, including, but not limited to, employment and labour standards, occupational health and safety, employment equity, pay equity, workers’ compensation, human rights and labour relations, and there are no current, pending, or, to the knowledge of American Exploration, threatened proceedings before any board or tribunal with respect to any of the above areas;

(g)  

Financial Statements.  The American Exploration Financial Statements have been prepared in accordance with United States generally accepted accounting principles, the requirements of applicable Governmental Entities and applicable securities Laws; such financial statements present fairly, in all material respects, the financial position and results of operations of American Exploration as of the respective dates thereof and for the respective periods covered thereby;

(h)  

Books and Records. The books, records and accounts of American Exploration, in all material respects:

(i)  

have been maintained in accordance with good business practices on a basis consistent with prior years;

(ii)  

are stated in reasonable detail and accurately and fairly reflect the transactions and dispositions of the Assets of American Exploration; and

(iii)  

accurately and fairly reflect the basis for the American Exploration Financial Statements. American Exploration has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances that:

(A)  

transactions are executed in accordance with management’s general or specific authorization; and

(I)  

to permit preparation of financial statements in conformity with US generally accepted accounting principles or any other criteria applicable to such statements; and

(i)  

Litigation, Etc. There is no claim, action, proceeding, or investigation pending or, to the knowledge of American Exploration, threatened against American Exploration before any court or Governmental Entity. Neither American Exploration or its assets or properties is subject to any outstanding judgment, order, writ, injunction, or decree;

(j)  

Environmental. Except for any matters that, individually or in the aggregate, would not have a Material Adverse Effect on American Exploration:

(i)  

all operations of American Exploration have been conducted, and are now in compliance with all Environmental Laws;

(ii)  

American Exploration is in possession of, and in compliance with, all permits, authorizations, certificates, registrations, approvals and consents necessary under Environmental Laws to own, lease and operate its properties and to conduct its business as it is now being conducted or as proposed to be conducted (collectively the “Environmental Permits”); and

(A)  

any Environmental Laws which require or may require any work, repairs, construction, change in business practices or operations, or expenditures, including capital expenditures for facility upgrades, environmental investigation and remediation expenditures, or any other such expenditures;

(B)  

any written demand or written notice with respect to the breach of or liability under any Environmental Laws applicable to American Exploration, including any regulations respecting the use, storage, treatment, transportation or disposition (including disposal or arranging for disposal) of Hazardous Substances;

(C)  

any written demand or written notice with respect to liability, by contract or operation of applicable Laws, under Environmental Laws applicable to American Exploration or any current or former subsidiary or any of its predecessor entities, divisions or any formerly owned, leased or operated properties or Assets of the foregoing, including liability with respect to the presence, release or discharge of Hazardous Substances; or

(D)  

any changes in the terms or conditions of any Environmental Permits or any renewal, modification, revocation, re-issuance, alteration, transfer or amendment of such Environmental Permits, or any review by, or approval of, any Governmental Entity of such Environmental Permits that are required in connection with the execution or delivery of this Agreement, the consummation of the transactions contemplated hereby or the continuation of the Business following such consummation;

(iv)  

American Exploration has not conducted the Business or used any of the Assets or permitted them to be conducted or used, to generate, manufacture, refine, treat, transport, store, handle, dispose of, transfer, produce or process Hazardous Substances, except in compliance with all applicable judgments, decrees, orders, injunctions, rules, statutes and regulations of all courts, arbitrators or Governmental Authorities, including all environmental, health and safety statutes and regulations and, to the best of American Exploration’s knowledge, neither has any lessee or prior owner of any of the Assets or any other Person;

(v)  

American Exploration, the Business and the Assets and the uses to which its assets have been put and the state of maintenance and repair thereof comply in all material respects with all applicable Laws, judgments, decrees, orders, injunctions, rules and regulations of all Governmental Authorities, courts or arbitrators, including all environmental, health and safety statutes and regulations and fire and building codes and standards;

(vi)  

American Exploration has not received any notices of any contravention of, or demands or requests for, repairs or other remedial work with respect to any of its assets under any statutes, bylaws, ordinances, rules or regulations of any Government Authority or arising from the use of any of its assets, or the occupation or use of any premises owned, leased or utilized by American Exploration or relating to the location, size, configuration, state of repairs, design or construction of, or defects in any of these premises;

(vii)  

American Exploration is not subject to any judicial or administrative proceeding alleging the violation of any applicable Environmental Laws, health or safety laws or other statutes and regulations, judgments, decrees, orders, injunctions, or rules;

(viii)  

American Exploration is not the subject of investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a release of any Hazardous Substance into the environment nor has any Hazardous Substance been released into the environment, or disposed of, at, on, or near any property used or previously used by American Exploration as a result of the conduct of the Business or otherwise, except as permitted by the laws or regulations enforced at the relevant time and American Exploration does not have any contingent liability in connection with the release of any Hazardous Substance or contaminant or other substance into the environment; and

(ix)  

American Exploration has not filed any notice under any applicable Environmental Laws, health or safety laws, other statutes or regulations, judgments, decrees, orders or injunctions, indicating past or present treatment, storage, or disposal of a Hazardous Substance or constituent, or other substance into the environment, and, to the best of the knowledge of American Exploration, there are no orders or directions relating to environmental matters requiring any work, repairs or capital expenditures with respect to the Assets or Business;

(i)  

American Exploration has prepared and filed on time with all appropriate Governmental Entities all returns and other documents that it is required to file in respect of any Taxes, or in respect of any other provision in any domestic or foreign federal, provincial, municipal, state, territorial or other taxing statute for all fiscal periods ending prior to the date hereof, and that all such returns and other documents are correct and complete in all material respects;

(ii)  

American Exploration has paid in full and when due all Taxes required to be paid by it on or prior to the date hereof, and will have paid all such Taxes as of the date of Closing;

(iii)  

American Exploration has withheld from each payment made to any of its present or former employees, officers, directors, and any other third party, all amounts required by law and has remitted such withheld amounts within the prescribed time periods to the appropriate Governmental Entity.  American Exploration has remitted all Taxes and employee contributions payable by it in respect of its employees and has remitted such amounts to the appropriate Governmental Entity within the time required under the applicable legislation.  American Exploration has charged, collected and remitted within prescribed time periods all Taxes as required under applicable legislation on any sale, supply or delivery whatsoever made by them;

(iv)  

there are no reassessments of the Taxes of American Exploration that have been issued and are outstanding.  No Governmental Entity has challenged, disputed, or questioned American Exploration in respect of Taxes or of any returns, filings or other reports filed under any taxing statute.  American Exploration is not negotiating any draft assessment or reassessment with any Governmental Entity.  American Exploration is not aware of any contingent liabilities for Taxes or any grounds for an assessment or reassessment including, without limitation, aggressive treatment of income, expenses, credits or other claims for deduction under any return or notice.  American Exploration has not received any indication from a Governmental Entity that an assessment or reassessment is proposed in respect of any Taxes regardless of its merits.  American Exploration has not executed or filed with any Governmental Entity any waiver or agreement extending the time period for assessment, reassessment or collection of any Taxes;

(v)  

no claim has been made by any Governmental Entity in a jurisdiction where American Exploration does not file Tax returns that American Exploration is or may be subject to taxation in that jurisdiction;

(vi)  

American Exploration is not a party to or bound by any Tax-sharing agreement, Tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Governmental Entity).  American Exploration has not been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code.  American Exploration does not have any liability for the Taxes of any other person or entity under Treasury Regulations Section 1.1502-6 (or similar provision of the law of any jurisdiction) as a transferee or successor, by contract or otherwise;

(vii)  

no liens for Taxes exist with respect to any of the Assets of American Exploration;

(viii)  

American Exploration is not and never has been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code;

(ix)  

the non-capital losses of American Exploration were incurred by American Exploration only in carrying on the Business;

(x)  

American Exploration has paid all Taxes imposed on the acquisition of its tangible personal property, and none of its tangible personal property has been transferred at any time on a tax-exempt basis; and

(xi)  

American Exploration has not, prior to the date hereof :

(A)  

discontinued carrying on any business in respect of which non-capital losses were incurred;

(B)  

acquired or had the use of any property from a person with whom it was not dealing at arm’s length;

(C)  

disposed of anything to a person with whom it was not dealing at arm’s length for proceeds less than or greater than the fair market value thereof; or

(D)  

paid any dividends or made any distributions to its shareholders with respect to any of its shares or other ownership interests herein; nor does it have any plans to do any of the foregoing in the future;

(l)  

Compliance with Laws. American Exploration has complied with and is not in violation of any applicable Laws, orders, judgments and decrees other than non-compliance or violations which would not, individually or in the aggregate, have a Material Adverse Effect on American Exploration. Without limiting the generality of the foregoing, all securities of American Exploration (including, all options, rights or other convertible or exchangeable securities) have been issued in compliance, in all material respects, with all applicable securities Laws, and all securities to be issued upon the exercise of any such options, rights and other convertible or exchangeable securities will be issued in compliance with all applicable securities Laws;

(m)  

Intangible Property. All of the Intangible Property of American Exploration is owned by unencumbered good and marketable title. There are no restrictions on the ability of American Exploration to use and exploit all rights in the Intangible Property, and all statements in all applications for registration of the Intangible Property were true and correct as of the date of such applications;

(n)  

Licences, Etc. American Exploration owns, possesses, or has obtained, and is in material compliance with, all permits from any Governmental Entity necessary to conduct its Business as now conducted, or as proposed to be conducted, except for such failure that would individually or in the aggregate not have a Material Adverse Effect on American Exploration;

(o)  

Securities Registration Rights. No holder of securities issued by American Exploration has any right to compel American Exploration to register or otherwise qualify such securities for public sale in Canada or the United States;

(p)  

Reports.  To the best of its knowledge after due inquiry, American Exploration has filed with or furnished to the Securities and Exchange Commission true and complete copies of all forms, reports, schedules, statements and other documents required to be filed or furnished by it, and such documents, at the time filed or furnished:

(i)  

did not contain any misrepresentation (as defined in the applicable securities laws), and

(ii)  

complied in all material respects with the requirements of applicable securities Laws.

(q)  

Assets Used in the Normal Course of Business.  The Assets constitute all of the rights, assets and properties that are usually and ordinarily used or held for use in connection with or otherwise relate to the operation of the Business in the usual and ordinary course of the operation of the Business.  Except for contemplated additions that are not material in the aggregate, all of the Assets include all rights, assets and properties, the use and exercise of which are necessary for the performance of any agreement to which American Exploration is a party, and the conduct of the Business as now conducted and presently proposed by American Exploration to be conducted;

(r)  

Title to the Assets.  American Exploration is the legal and beneficial owner of, and has good and marketable title to, the Assets, free and clear of all Encumbrances (other than those Encumbrances disclosed in the American Exploration SEC Filings or as otherwise disclosed by American Exploration to Mainland in writing);

(s)  

Condition of Assets. All tangible rights, assets and properties comprising the Assets are free from material defect, are in good condition and repair and (where applicable) are in proper working order, having regard to the use and age thereof;

(t)  

Material Contracts. There has not been any breach, default in any term, condition, provision or obligation to be performed under any of the Material Contracts set out in Schedule D hereto, each Material Contract is in good standing, full force and effect, and, with the exception of amendments to the certain Material Contracts described in Schedule D, unamended;

(u)  

Parties to Material Contracts. Each of the Material Contracts contains the entire and only agreement between the parties thereto with respect to the subject matter thereof and identifies therein each person who is a party thereto or is bound thereby, and American Exploration has neither received any notice nor is aware that any other party to any Material Contract intends or wishes to cancel such Material Contract nor is there a dispute between American Exploration and any other party to any Material Contract; and

(v)  

No Other Options or Agreements to Acquire the Business. There is no written, oral, or implied agreement, option, understanding or commitment, or any right or privilege capable of becoming any of the same, for the purchase from American Exploration of the Business or any of the Assets, other than purchase orders or requests accepted by it in the usual and ordinary course of the operation of the Business.

(a)  

(i)  

Mainland has been duly incorporated or formed under the applicable Laws of Nevada, is validly subsisting and has full corporate or legal power and authority to carry on the Business, to perform its obligations hereunder, and to enter into, own, hold, license, and lease its Assets;

(ii)  

Mainland has made all necessary filings under all applicable corporate, securities, and taxation laws or any other laws to which it is subject, and is in good standing in each jurisdiction in which the conduct of its business or the ownership or leasing of its Assets makes that qualification necessary; and

(iii)  

Mainland has no minority interest in any other corporation or entity, which minority interest is material in relation to Mainland;

(b)  

Capitalization of Mainland.  The authorized capital of Mainland consists of 400,000,000 shares of common stock with a par value of $0.0001.  As of the date of this Agreement, there are 80,969,502 Mainland Shares issued and outstanding.  Other than options for 11,500,000 Mainland Shares (2,500,000 of which have not vested and are expected to be cancelled prior to Closing) as at the date of this Agreement, there are no other options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (contingent or otherwise) obligating Mainland to issue or sell any shares or securities or obligations of any kind convertible into or exchangeable for any shares; however, Mainland expects to issue options for up to 1,000,000 additional Mainland Shares prior to Closing. All outstanding Mainland Shares have been duly authorized and are validly issued and outstanding as fully paid and non-assessable shares, free of pre-emptive rights.  There are no outstanding bonds, debentures or other evidences of indebtedness of Mainland having the right to vote (or that are convertible for or exercisable into securities having the right to vote) with the holders of the Mainland Shares on any matter.  There are no outstanding contractual obligations of Mainland to repurchase, redeem or otherwise acquire any of its outstanding securities;

(i)  

Mainland has the requisite corporate power and authority to enter into the Agreement and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement by Mainland and the consummation by Mainland of the transactions contemplated by this Agreement have been duly authorized by its Board of Directors and no other corporate proceedings on its part are necessary to authorize this Agreement or the transactions contemplated hereby other than:

(A)  

with respect to finalizing and approving the Joint Proxy Statement and other matters relating thereto; and

(B)  

with respect to the completion of the Merger, the approval of the Mainland Shareholders;

(ii)  

this Agreement has been duly executed and delivered by Mainland and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other applicable Laws affecting creditors’ rights generally, and to general principles of equity;

(iii)  

the approval of this Agreement, the execution and delivery by Mainland of this Agreement and the performance by it of its obligations hereunder and the completion of the Merger and the transactions contemplated thereby will not:

(A)  

result in a violation or breach of, require any consent to be obtained under, or give rise to any termination, purchase or sale rights, or payment obligation under any provision of:

(I)  

its articles of incorporation, by-laws or other charter documents, including any unanimous shareholder agreement or any other agreement or understanding relating to ownership of shares or other interests or to corporate governance with any party holding an ownership interest in Mainland;

(II)  

subject to obtaining any necessary regulatory approvals relating to Mainland, any Laws, judgment or decree, except to the extent that the violation or breach of, or failure to obtain any consent under, any Laws, judgment or decree would not, individually or in the aggregate, have a Material Adverse Effect on Mainland; or

(III)  

subject to obtaining any necessary regulatory approvals relating to Mainland ,and except as would not, individually or in the aggregate, have a Material Adverse Effect on Mainland, any material contract, agreement, license, franchise, or permit to which it is party or by which it is bound or is subject or is the beneficiary;

(B)  

give rise to any right of termination or acceleration of indebtedness of Mainland, or cause such indebtedness to come due before its stated maturity or cause any available credit of Mainland to cease to be available;

(C)  

except as would not, individually or in the aggregate, have a Material Adverse Effect on Mainland, result in the imposition of any encumbrance, charge or lien upon any of its assets, or restrict, hinder, impair, or limit its ability to carry on its business as and where it is now being carried on; or

(D)  

result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director or employee of Mainland or increase any benefits otherwise payable under any Mainland plans or result in the acceleration of time of payment or vesting of any such benefits, including the time of exercise of stock options.

(d)  

No Defaults. Subject to obtaining any necessary regulatory approvals relating to Mainland, Mainland is not in default under, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default under, any contract (including the Material Contracts), agreement, license or franchise to which it is a party which would, if terminated due to such default, cause a Material Adverse Effect;

(e)  

Absence of Certain Changes or Events.  Since the date of the most recent balance sheet forming part of the Mainland Financial Statements, Mainland has conducted its Business only in the ordinary and regular course of business consistent with practice, and except as otherwise provided in this Agreement, there has not occurred:

(i)  

Reports.  To the best of its knowledge after due inquiry, Mainland has filed with or furnished to the Securities and Exchange Commission true and complete copies of all forms, reports, schedules, statements and other documents required to be filed or furnished by it, and such documents, at the time filed or furnished;

(i)  

did not contain any misrepresentation (as defined in the applicable securities Laws); and

(ii)  

complied in all material respects with the requirements of applicable securities Laws.

(j)  

Mainland Shares.  Mainland Shares to be issued pursuant to the Merger will be duly and validly issued by Mainland on their respective dates of issue as fully paid and non-assessable shares;

(k)  

Compliance with Laws.  Mainland has complied with and is not in violation of any applicable Laws, orders, judgments and decrees other than non-compliance or violations which would not, individually or in the aggregate, have a Material Adverse Effect on Mainland.  Without limiting the generality of the foregoing, all securities of Mainland (including all options, rights or other convertible or exchangeable securities) have been issued in compliance in all material respects with all applicable securities Laws and all securities to be issued upon the exercise of any such options, rights and other convertible or exchangeable securities will be issued in compliance with all applicable securities Laws;

(xii)  

Mainland has prepared and filed on time with all appropriate Governmental Entities all returns and other documents that it is required to file in respect of any Taxes, or in respect of any other provision in any domestic or foreign federal, provincial, municipal, state, territorial or other taxing statute for all fiscal periods ending prior to the date hereof, and that all such returns and other documents are correct and complete in all material respects;

(xiii)  

Mainland has paid in full and when due all Taxes required to be paid by it on or prior to the date hereof, and will have paid all such Taxes as of the date of Closing;

(xiv)  

Mainland has withheld from each payment made to any of its present or former employees, officers, directors, and any other third party, all amounts required by law and has remitted such withheld amounts within the prescribed time periods to the appropriate Governmental Entity.  Mainland has remitted all Taxes and employee contributions payable by it in respect of its employees and has remitted such amounts to the appropriate Governmental Entity within the time required under the applicable legislation.  Mainland has charged, collected and remitted within prescribed time periods all Taxes as required under applicable legislation on any sale, supply or delivery whatsoever made by them;

(xv)  

there are no reassessments of the Taxes of Mainland that have been issued and are outstanding.  No Governmental Entity has challenged, disputed, or questioned Mainland in respect of Taxes or of any returns, filings or other reports filed under any taxing statute.  Mainland is not negotiating any draft assessment or reassessment with any Governmental Entity.  Mainland is not aware of any contingent liabilities for Taxes or any grounds for an assessment or reassessment including, without limitation, aggressive treatment of income, expenses, credits or other claims for deduction under any return or notice.  Mainland has not received any indication from a Governmental Entity that an assessment or reassessment is proposed in respect of any Taxes regardless of its merits.  Mainland has not executed or filed with any Governmental Entity any waiver or agreement extending the time period for assessment, reassessment or collection of any Taxes;

(xvi)  

no claim has been made by any Governmental Entity in a jurisdiction where Mainland does not file Tax returns that Mainland is or may be subject to taxation in that jurisdiction;

(xvii)  

Mainland is not a party to or bound by any Tax-sharing agreement, Tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Governmental Entity).  Mainland has not been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code.  Mainland does not have any liability for the Taxes of any other person or entity under Treasury Regulations Section 1.1502-6 (or similar provision of the law of any jurisdiction) as a transferee or successor, by contract or otherwise;

(xviii)  

no liens for Taxes exist with respect to any of the Assets of Mainland;

(xix)  

Mainland is not and never has been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code;

(xx)  

the non-capital losses of Mainland were incurred by Mainland only in carrying on the Business;

(xxi)  

Mainland has paid all Taxes imposed on the acquisition of its tangible personal property, and none of its tangible personal property has been transferred at any time on a tax-exempt basis; and

(xxii)  

Mainland has not, prior to the date hereof :

(A)  

discontinued carrying on any business in respect of which non-capital losses were incurred;

(B)  

acquired or had the use of any property from a person with whom it was not dealing at arm’s length;

(C)  

disposed of anything to a person with whom it was not dealing at arm’s length for proceeds less than or greater than the fair market value thereof; or

(D)  

paid any dividends or made any distributions to its shareholders with respect to any of its shares or other ownership interests herein; nor does it have any plans to do any of the foregoing in the future;

(p)  

Registration Rights. No holder of securities issued by Mainland has any right to compel Mainland to register or otherwise qualify such securities for public sale in Canada or the United States.

(a)  

Neither the Board of Directors of American Exploration nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, the approval or recommendation by such Board of Directors or such committee of this Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any transaction described in the first sentence of Section 5.2, or (iii) cancel or fail to call or hold the American Exploration Meeting or remove this Agreement and the Merger from consideration at such meeting prior to completion of the vote of the stockholders of American Exploration on this Agreement and the Merger; except in each such case (x) in connection with an unsolicited Takeover Proposal that the Board of Directors of American Exploration determines in good faith constitutes a Superior Proposal and (y) if the Board of Directors of American Exploration determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to avoid breaching its fiduciary duties to the stockholders of American Exploration under applicable Nevada law.

(b)  

As used in this Agreement:  (i) “Superior Proposal” means a bona fide written unsolicited Takeover Proposal (x) to acquire, directly or indirectly, for consideration consisting of cash and/or publicly traded securities, more than fifty percent (50%) of the shares and/or voting power of American Exploration Shares then outstanding or all or substantially all of the assets of American Exploration, (y) otherwise on terms which the Board of Directors of American Exploration decides in its good faith reasonable judgment to be more favorable (taking into account any termination fee and expense reimbursement payable hereunder) to the stockholders of American Exploration than the Merger (including, without limitation, from a financial standpoint) and for which financing, to the extent required, is then committed or which, in the good faith reasonable judgment of the Board of Directors of American Exploration, is reasonably capable of being obtained by such third party and (z) which the Board of Directors of American Exploration determines, in its good faith reasonable judgment, is reasonably likely to be consummated without undue delay; and (ii) “Takeover Proposal” means any written proposal made by any Person (other than Mainland) for a merger, consolidation or other business combination involving American Exploration or any proposal or offer to acquire in any manner, directly or indirectly, an equity interest in, any more than 15% of the voting power of, or a substantial portion of the assets of (other than asset dispositions in the ordinary course of business consistent with past practices), American Exploration, other than the transactions contemplated by this Agreement which proposal may contain customary conditions and qualifications.

 

5.3 

 

(a) American Exploration covenants and agrees that, until the Effective Date or the earlier termination of this Agreement in accordance with Part 7, except (i) with the consent of Mainland to any deviation therefrom, which consent may be withheld by Mainland in its sole discretion; or (ii) with respect to any matter contemplated by this Agreement or the Merger, American Exploration will:

(i)  

carry on its Business in, and only in, the ordinary and regular course in substantially the same manner as heretofore conducted and, to the extent consistent with such Business, use all reasonable efforts to preserve intact its present business organization and keep available the services of its present officers and employees and others having business dealings with it to the end that its goodwill and Business shall be maintained;

(ii)  

except as set out in this Agreement, not commence to undertake a substantial expansion of its Business or an expansion that is out of the ordinary and regular course of Business consistent with prior practice in light of current market and economic conditions;

(iii)  

not split, combine or reclassify any of the outstanding shares of American Exploration nor declare, set aside or pay any dividends on or make any other distributions on or in respect of the outstanding shares of American Exploration;

(v)  

not sell, pledge, encumber, allot, reserve, set aside or issue, authorize or propose the sale, pledge, encumbrance, allotment, reservation, setting aside or issuance of, or purchase or redeem or propose the purchase or redemption of, any shares in its capital stock or any class of securities convertible or exchangeable into, or rights, warrants or options to acquire, any such shares or other convertible or exchangeable securities;

(vi)  

not reorganize, amalgamate or merge American Exploration with any other Person, nor acquire or agree to acquire by amalgamating, merging or consolidating with, purchasing substantially all of the assets of or otherwise, any business of any corporation, partnership, association or other business organization or division thereof, which acquisition would be material to its business or financial condition;

(vii)  

not sell, pledge, encumber, lease or otherwise dispose of any material assets, other than the pending sale of a participation interest in the parties’ jointly operated natural gas properties to Avere Energy, Inc., as contemplated by the Pending Avere Agreements;

(viii)  

not guarantee the payment of material indebtedness or incur material indebtedness for money borrowed or issue or sell any debt securities nor shall American Exploration increase the level of any current indebtedness owed by it;

(ix)  

use commercially reasonable efforts to comply promptly with all requirements which applicable Laws may impose on American Exploration with respect to the transactions contemplated hereby and by the Merger;

(A)  

other than in the usual, ordinary and regular course of Business and consistent with past practice or pursuant to existing employment, pension, supplemental pension, termination, compensation arrangements or policies, enter into or materially modify any employment, severance, collective bargaining or similar agreements, policies or arrangements with, or grant any material bonuses, salary increases, stock options, pension or supplemental pension benefits, profit sharing, retirement allowances, deferred compensation, incentive compensation, severance or termination pay to, or make any loan to, any officers or directors of it; or

(B)  

other than in the usual, ordinary and regular course of Business and consistent with past practice or pursuant to existing employment, pension, supplemental pension, termination, compensation arrangements or policies, in the case of employees who are not officers or directors, take any action with respect to the entering into or modifying of any material employment, severance, collective bargaining or similar agreements, policies or arrangements or with respect to the grant of any material bonuses, salary increases, stock options, pension or supplemental pension benefits, profit sharing, retirement allowances, deferred compensation, incentive compensation, severance or termination pay or any other form of compensation or profit sharing or with respect to any increase of benefits payable;

(xi)  

not, except in the usual, ordinary and regular course of Business and consistent with past practice:

(A)  

satisfy or settle any claims or liabilities prior to the same being due, except such as have been reserved in the American Exploration Financial Statements, which are, individually or in the aggregate, material;

(B)  

grant any waiver, exercise any option or relinquish any contractual rights which are, individually or in the aggregate, material; or

(C)  

enter into any interest rate, currency or commodity swaps, hedges or other similar financial instruments;

(xii)  

not settle or compromise any claim brought by any present, former or purported American Exploration Shareholder in connection with the transactions contemplated by this Agreement or the Merger prior to the Effective Date;

(xiii)  

except in the usual, ordinary and regular course of Business and consistent with past practice or as required by applicable Laws, not enter into or modify in any material respect any contract, agreement, commitment or arrangement, including Material Contracts, which new contract or series of related new contracts or modification to an existing contract or series of related existing contracts which would have a Material Adverse Effect on American Exploration;

(xiv)  

incur or commit to capital expenditures prior to the Effective Date only in the ordinary course consistent with past practice and not, in any event, exceeding $10,000, individually or in the aggregate (other than its agreements with its legal counsel and its Fairness Opinion consultants);

(xv)  

not make any changes to existing accounting practices relating to American Exploration except as required by Law or required by generally accepted accounting principles or make any material tax election inconsistent with past practice; and

(A)  

of any event occurring subsequent to the date of this Agreement that would render any representation or warranty of American Exploration contained in this Agreement (except any such representation or warranty which speaks as of a date prior to the occurrence of such event), if made on or as of the date of such event or the Effective Date, untrue or inaccurate in any material respect;

(C)  

of any material breach by American Exploration of any covenant or agreement contained in this Agreement.

(b)  

American Exploration shall perform all obligations required or desirable to be performed by American Exploration under this Agreement, co-operate with Mainland in connection therewith, and do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated in this Agreement and, without limiting the generality of the foregoing, American Exploration shall:

(i)  

use commercially reasonable efforts to obtain the approval of American Exploration Shareholders to the Merger, subject, however, to the exercise by the Board of Directors of American Exploration of its fiduciary duties as provided herein;

(ii)  

cooperate with Mainland in order to facilitate the due diligence investigations conducted by Mainland with respect to the Merger and the transactions contemplated herein;

(iii)  

apply for and use commercially reasonable efforts to obtain any necessary regulatory approvals relating to American Exploration and, in doing so, to keep Mainland reasonably informed as to the status of the proceedings related to obtaining any necessary regulatory approvals, including, but not limited to, providing Mainland with copies of all related applications and notifications, in draft form, in order for Mainland to provide its reasonable comments;

(iv)  

defend all lawsuits or other legal, regulatory or other proceedings challenging or affecting this Agreement or the consummation of the transactions contemplated hereby;

(v)  

use commercially reasonable efforts to have lifted or rescinded any injunction or restraining order or other order relating to American Exploration which may adversely affect the ability of the parties to consummate the transactions contemplated hereby;

(vi)  

effect all necessary registrations, filings and submissions of information required by Governmental Entities from American Exploration; and

(vii)  

use commercially reasonable efforts to obtain all necessary waivers, consents and approvals required to be obtained by American Exploration from other parties to loan agreements, leases or other contracts including Material Contracts;

(a)  

to perform all obligations required or desirable to be performed by it under this Agreement, to co-operate with American Exploration in connection therewith, and to do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement and, without limiting the generality of the foregoing, to:

(i)  

use commercially reasonable efforts to obtain the approval of Mainland Shareholders to the Merger, subject, however, to the exercise by the Board of Directors of Mainland of its fiduciary duties as provided herein;

(ii)  

use commercially reasonable efforts to have the Registration Statement filed with the Securities and Exchange Commission and declared effective;

(iii)  

cooperate with American Exploration in order to facilitate the due diligence investigations conducted by American Exploration with respect to the Merger and the transactions contemplated herein;

(iv)  

defend all lawsuits or other legal, regulatory or other proceedings challenging or affecting this Agreement or the consummation of the transactions contemplated hereby;

(v)  

apply for and use commercially reasonable efforts to obtain all necessary regulatory approvals relating to Mainland, and, in doing so, to keep American Exploration reasonably informed as to the status of the material proceedings related to obtaining any necessary regulatory approvals, including, but not limited to, providing American Exploration with copies of all related applications and notifications, in draft form, in order for American Exploration to provide its reasonable comments;

(vi)  

use commercially reasonable efforts to have lifted or rescinded any injunction or restraining order or other order relating to American Exploration which may adversely affect the ability of the parties to consummate the transactions contemplated hereby;

(vii)  

use commercially reasonable efforts to have lifted or rescinded any injunction or restraining order or other order relating to Mainland which may adversely affect the ability of the parties to consummate the transactions contemplated hereby;

(viii)  

effect all necessary registrations, filings and submissions of information required by Governmental Entities from Mainland;

(ix)  

cause Mainland to reserve a sufficient number of Mainland Shares for issuance in connection with the Merger upon the completion of the Merger;

(b)  

use commercially reasonable efforts to comply promptly with all requirements which applicable Laws may impose on Mainland with respect to the transactions contemplated hereby and by the Merger;

(c)  

until the Effective Date or the earlier termination of this Agreement in accordance with Part 7, except (1) with the consent of American Exploration to any deviation therefrom, which shall not be unreasonably withheld; or (2) with respect to any matter otherwise provided for by this Agreement or the Merger, Mainland will:

(i)  

carry on its business in, and only in, the ordinary and regular course in substantially the same manner as heretofore conducted and, to the extent consistent with such Business, use all reasonable efforts to preserve intact its present business organization and keep available the services of its present officers and employees and others having business dealings with it to the end that its goodwill and Business shall be maintained;

(ii)  

except as set out in this Agreement, not commence to undertake a substantial expansion of its Business or an expansion that is out of the ordinary and regular course of Business consistent with prior practice in light of current market and economic conditions;

(iii)  

not split, combine or reclassify any of its outstanding shares nor declare, set aside or pay any dividends on or make any other distributions on or in respect of its outstanding shares;

(iv)  

not make any changes to existing accounting practices related to Mainland except as required by Law or required by generally accepted accounting practice or make any material tax election with past practice or make any material election inconsistent with past practices;

(vi)  

other than the grant of stock options by Mainland in the ordinary course, not sell, pledge, encumber, allot, reserve, set aside or issue, authorize or propose the sale, pledge, encumbrance, allotment, reservation, setting aside or issuance of, or purchase or redeem or propose the purchase or redemption of, any shares in its capital stock or of any Subsidiary thereof or any class of securities convertible or exchangeable into, or rights, warrants or options to acquire, any such shares or other convertible or exchangeable securities;

(vii)  

not, whether through its Board of Directors or otherwise, accelerate the vesting of any unvested options;

(viii)  

not reorganize, amalgamate or merge Mainland with any other Person, nor acquire by amalgamating, merging or consolidating with, purchasing a majority of the voting securities or substantially all of the assets of or otherwise any business of any corporation, partnership, association or other business organization or division thereof, which acquisition would be material to its business or financial condition on a consolidated basis;

(ix)  

not sell, pledge, encumber, lease or otherwise dispose of any material assets, except pursuant to that certain purchase agreement by and between Mainland, as seller, and Exco Operating Company, LP, as buyer, dated March 12, 2010, and the pending sale of a participation interest in the parties’ jointly operated natural gas properties to Avere Energy, Inc., as contemplated by the Pending Avere Agreements;

(xi)  

not, except in the usual, ordinary and regular course of Business and consistent with past practice:

(xii)  

not settle or compromise any claim brought by any present, former or purported Mainland Shareholder in connection with the transactions contemplated by this Agreement or the Merger prior to the Effective Date;

(xiii)  

except in the usual, ordinary and regular course of Business and consistent with past practice or as required by applicable Laws, not enter into or modify in any material respect any contract, agreement, commitment or arrangement, including Material Contracts, which new contract or series of related new contracts or modification to an existing contract or series of related existing contracts which would have a Material Adverse Effect on Mainland;

(xiv)  

incur or commit to capital expenditures prior to the Effective Date only in the ordinary course consistent with past practice and not, in any event, exceeding $10,000, individually or in the aggregate (other than its agreements with its legal counsel and its Fairness Opinion Consultants);

(xv)  

not guarantee the payment of material indebtedness or incur material indebtedness for money borrowed or issue or sell any debt securities nor shall Mainland increase the level of any current indebtedness owed by it;

(xvi)  

except in the usual, ordinary and regular course of business and consistent with past practice or as required by applicable Laws, not enter into or modify in any material respect any contract, agreement, commitment or arrangement, including material contracts, which new contract or series of related new contracts or modification to an existing contract or series of related existing contracts which would have a Material Adverse Effect on Mainland;

(xviii)  

use commercially reasonable efforts to comply promptly with all requirements which applicable Laws may impose on Mainland with respect to the transactions contemplated hereby and by the Merger,

(d)  

that on the Effective Date, Mainland will have the requisite corporate power and authority to perform its obligations hereunder and thereunder;

(e)  

subject to the conditions set out herein and the Plan of Merger, to issue on the Effective Date such Mainland Shares, Mainland Exchange Options and Mainland Exchange Warrants as are necessary to effect the Merger; and

(f)  

to cooperate in good faith with American Exploration’s to consummate the Pending Avere Agreements.  Mainland further covenants not to unreasonably withhold consent to the Pending Avere Agreements.

 

5.6 

 

(a) Subject to applicable Laws, upon reasonable notice, each of Mainland and American Exploration shall afford the other’s officers, employees, counsel, accountants and other authorized representatives and advisors (“Representatives”) access, during normal business hours from the date hereof and until the earlier of the Effective Date or the termination of this Agreement, to its properties, books, contracts and records as well as to its management personnel, and, during such period, Mainland and American Exploration shall furnish promptly to the other all information concerning that party’s business, properties and personnel as the other may reasonably request. Nothing in the foregoing shall require a party to disclose information subject to a written confidentiality agreement with third parties or customer-specific or competitively sensitive information relating to areas or projects where a party is in direct competition with the other.

(b)  

Each of Mainland and American Exploration acknowledges that certain information provided to it under §(a) above will be non-public and/or proprietary in nature (the “Information”). Except as permitted below, each of Mainland and American Exploration will keep Information confidential and will not, without the prior written consent of the other, disclose it, in any manner whatsoever, in whole or in part, to any other Person, and will not use it for any purpose other than to evaluate the transactions contemplated by this Agreement. Each of Mainland and American Exploration will make all reasonable, necessary and appropriate efforts to safeguard the Information from disclosure to anyone other than as permitted hereby and to control the copies, extracts or reproductions made of the Information. The Information may be provided to the Representatives of each of Mainland and American Exploration who require access to the same to assist it in proceeding in good faith with the transactions contemplated by this Agreement and whose assistance is required for such purposes, provided that it has first informed such Representatives to whom Information is provided that the Representative has the same obligations, including as to confidentiality, restricted use and otherwise, that it has with respect to such Information. This provision shall not apply to such portions of the Information that:

(i)  

are or become generally available to the public otherwise than as a result of disclosure by a party or its Representatives;

(ii)  

become available to a party on a non-confidential basis from a source other than, directly or indirectly, the other party or its Representatives, provided that such source is not to the knowledge of the first party, upon reasonable inquiry, prohibited from transmitting the Information by a contractual, legal or fiduciary obligation;

(iii)  

were known to a party or were in its possession prior to being disclosed to it by the other party or by someone on its behalf; or

(c)  

The Parties acknowledge that certain Information may be competitively sensitive and that disclosure thereof shall be limited to that which is reasonably necessary for the purpose of preparing submissions or applications in order to obtain any necessary regulatory approvals.

(d)  

The provisions of this §5.6 shall survive the termination of this Agreement.

(a)  

Mainland agrees that all rights to indemnification by American Exploration now existing in favor of each person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time an officer or director of American Exploration (each an “Indemnified Party”) as provided in American Exploration’s articles of incorporation or bylaws, in each case as in effect on the date of this Agreement, or pursuant to any other agreements in effect on the date hereof, copies of which have been provided to Mainland, including provisions relating to the advancement of expenses incurred in the defense of any action or suit, shall survive the Merger and shall remain in full force and effect for at least six (6) years from the Effective Time.  From and after the Effective Time, Mainland shall be liable to pay and perform in a timely manner such indemnification obligations.  Mainland agrees that any claims for indemnification hereunder as to which it has received written notice prior to the sixth anniversary of the Effective Time shall survive, whether or not such claims shall have been finally adjudicated or settled prior to such anniversary.  American Exploration hereby represents and warrants to Mainland that, to its knowledge after due inquiry, there are no claims made, pending or threatened against an Indemnified Party arising in whole or in part out of actions or omissions in his or her capacity as an officer or director of American Exploration.

(b)  

Mainland (the “Indemnifying Party”) shall defend and hold harmless each Indemnified Party against all losses, claims, damages, liabilities, fees, expenses, judgments and fines arising in whole or in part out of actions or omissions in their capacity as such occurring at or prior to the Effective Time, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such losses, claims, damages, liabilities, fees, expenses, judgments and fines as such expenses are incurred, provided that nothing herein shall impair any rights of any Indemnified Party.  Promptly after receipt by an Indemnified Party under this §5.8(b) of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against an Indemnifying Party under this §5.8(b), notify the Indemnifying Party of the commencement thereof; but the omission so to notify an Indemnifying Party will not relieve it from any liability which it may have to any Indemnified Party.  In case any such action is brought against any Indemnified Party and it notifies an Indemnifying Party of the commencement thereof, the Indemnifying Party will be entitled to participate therein and, to the extent that it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the Indemnifying Party), and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof (and so long as the Indemnifying Party satisfies such obligations), the Indemnifying Party will not be liable to such Indemnified Party under this §5.8(b) for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an Indemnified Party.

(c)  

Mainland shall maintain officers’ and directors’ liability insurance policies covering the Indemnified Parties for a period of not less than six years after the Effective Time, but only to the extent related to actions or omissions prior to the Effective Time.

(d)  

The obligations of Mainland under this §5.8 shall survive the consummation of the Merger and shall not be terminated or modified in such a manner as to adversely affect any Indemnified Party to whom this §5.8 applies without the consent of such affected Indemnified Party (it being expressly agreed that the Indemnified Parties to whom this  §5.8 applies shall be third party beneficiaries of this §5.8, each of whom may enforce the provisions of this §5.8).

(e)  

If Mainland or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Mainland shall assume the obligations set forth in this §5.8.

(a)  

the Board of Directors of Mainland will have:

(b)  

The Board of Directors of American Exploration will have

(c)  

the Merger shall have been approved at the American Exploration Meeting by more than 50% of the votes cast by the American Exploration Shareholders represented in person or by proxy at the American Exploration Meeting which actually vote in favor or against the American Exploration Merger Resolutions;

(d)  

the Merger shall have been approved at the Mainland Meeting by more than 50% of the votes cast by the Mainland Shareholders represented in person or by proxy at the Mainland Meeting which actually vote in favor or against the Mainland Merger Resolutions;

(e)  

each of Mainland and American Exploration shall have completed their due diligence inspection conducted in conjunction with the Merger and the transactions contemplated herein to the satisfaction of Mainland and American Exploration, respectively;

(f)  

there shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated by this Agreement and there shall be no proceeding, of a judicial or administrative nature or otherwise, brought by a Governmental Entity in progress or threatened that relates to or results from the transactions contemplated by this Agreement that would, if successful, result in an order or ruling that would preclude completion of the transactions contemplated by this Agreement in accordance with the terms hereof or would otherwise be inconsistent with any regulatory approvals which have been obtained;

(g)  

all consents, waivers, permits, orders and approvals of any Governmental Entity and the expiry of any waiting periods, in connection with, or required to permit the consummation of the Merger, the failure of which to obtain or the non-expiry of which would constitute a criminal offence, or would have a Material Adverse Effect on Mainland or American Exploration, as the case may be, shall have been obtained or received on terms that will not have a Material Adverse Effect on Mainland and/or American Exploration;

(h)  

there shall not be pending or threatened any suit, action or proceeding by any Governmental Entity, in each case that has a reasonable likelihood of success;

(i)  

seeking to restrain or prohibit the consummation of the Merger or seeking to obtain from Mainland or American Exploration any damages that are material in relation to American Exploration taken as a whole;

(ii)  

seeking to prohibit or materially limit the ownership or operation by Mainland of any material portion of the Business or Assets of American Exploration or to compel Mainland to dispose of or hold separate any material portion of the Business or Assets of American Exploration, as a result of the Merger;

(iii)  

seeking to prohibit Mainland from effectively controlling in any material respect the Business or operations of American Exploration; or

(iv)  

there is in effect any other circumstance which is reasonably likely to have a Material Adverse Effect on Mainland or American Exploration or the Surviving Corporation;

(i)  

all necessary regulatory approvals shall have been obtained; and

(j)  

neither party shall have given notice to the other within thirty (30) days of the date hereof terminating this Agreement based on the results of the due diligence investigation conducted by the party giving notice.  It is the parties’ intention that each party shall have a due diligence investigation period, expiring thirty (30) days from the date of this Agreement, in order to conduct such due diligence investigations as the parties deem necessary to determine the feasibility, economic or otherwise, of the transactions contemplated in this Agreement.  Either party may terminate this Agreement at any time within such thirty (30) day period by delivery to the other of written notice of termination of this Agreement.  Upon such termination, this Agreement shall be of no further force and effect.  Either party may waive the due diligence period in writing at its option.

(a)  

all covenants of American Exploration under this Agreement to be performed on or before the Effective Date shall have been duly performed by American Exploration in all material respects;

(b)  

the amount of American Exploration’s unencumbered cash in its bank accounts at the Effective Time, less all payables and accrued payables estimated as of Closing, and assuming the Pending Avere Agreements shall have closed and consideration due to American Exploration from Avere Energy, Inc. thereunder shall have been paid, shall be at least $1,600,000 (less $50,000 per month allowable operating expenses incurred for each month, pro rated, from March 1, 2010 to the Effective Time); the amount of American Exploration’s unencumbered cash in its bank accounts at the Effective Time is expected to be nil as of Closing if the Pending Avere Agreements have not closed or the consideration due to American Exploration from Avere Energy, Inc. thereunder have not been paid prior to Closing;

(c)  

the number of holders of American Exploration Shares exercising their American Exploration Dissent Rights shall not exceed 5% of the total issued and outstanding American Exploration Shares;

(d)  

the number of holders of Mainland Shares exercising their Mainland Dissent Rights shall not exceed 5% of the total issued and outstanding Mainland Shares;

(e)  

the representations and warranties of American Exploration under this Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct in all material respects as of such earlier date, or except as affected by transactions contemplated or permitted by this Agreement) and Mainland shall have received an officer’s certificate of American Exploration addressed to Mainland and dated the Effective Date, signed on behalf of American Exploration by one senior executive officer of American Exploration, confirming the same as at the Effective Date;

(f)  

between the date hereof and the Effective Date, there shall not have occurred a Material Adverse Change to American Exploration;

(g)  

the parties shall have agreed upon a definitive Exchange Ratio;

(h)  

all necessary corporate action shall have been taken by American Exploration to permit the consummation of the Merger;

(i)  

Mainland shall have received a satisfactory legal opinion from American Exploration’s Lawyers as described in §8.2(a)(vii); and

(a)  

all covenants of Mainland under this Agreement to be performed on or before the Effective Date shall have been duly performed by Mainland in all material respects;

(b)  

the amount of Mainland’s unencumbered cash in its bank accounts at the Effective Time less all payables and accrued payables estimated (on a consolidated basis) as of Closing, and assuming that the transaction contemplated by that certain purchase agreement by and between Mainland, as seller, and Exco Operating Company, LP, as buyer, dated March 12, 2010 shall have closed and consideration due to Mainland from Exco Operating Company, LP thereunder shall have been paid, shall be at least $7,500,000 (less $50,000 per month allowable operating expenses incurred for each month, pro rated, from March 1, 2010 to the Effective Time);

(c)  

the number of holders of American Exploration Shares exercising their American Exploration Dissent Rights shall not exceed 5% of the total issued and outstanding American Exploration Shares;

(d)  

the number of holders of Mainland Shares exercising their Mainland Dissent Rights shall not exceed 5% of the total issued and outstanding Mainland Shares;

(e)  

all representations and warranties of Mainland under this Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct in all material respects as of such earlier date, or except as affected by transactions contemplated or permitted by this Agreement) and American Exploration shall have received a certificate of Mainland addressed to American Exploration and dated the Effective Date, signed on behalf of Mainland by one senior executive officer of Mainland, confirming the same as at the Effective Date;

(f)  

there shall not have occurred a Material Adverse Change to Mainland in the Pre-Effective Date Period;

(g)  

the parties shall have agreed upon a definitive Exchange Ratio;

(h)  

all other necessary corporate action shall have been taken by Mainland to permit the consummation of the Merger and the issue of Mainland Shares and Mainland Options pursuant to the Merger;

(i)  

the Mainland Shareholders shall have passed the Mainland Merger Resolutions, the Board of Directors of Mainland shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by Mainland to permit the consummation of the Merger.

(j)  

American Exploration shall have received a satisfactory legal opinion from Mainland’s Lawyers as described in §8.2(b)(v);

(a)  

cause any of the representations or warranties of the other party contained herein to be untrue or inaccurate in any material respect on the date hereof or on the Effective Date; or

(b)  

result in the failure in any material respect to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by the other hereunder prior to the Effective Date.

(b)  

waive any inaccuracies or modify any representation contained herein or in any document delivered pursuant hereto;

(c)  

waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the Parties; and

 

7.3 

 

(a) If any condition contained in §6.1 or §6.2 is not satisfied at or before the Termination Date to the satisfaction of Mainland, then Mainland may by notice to American Exploration terminate this Agreement and the obligations of the Parties hereunder except as otherwise herein provided, without detracting from the rights of Mainland arising from any breach by American Exploration of a covenant or representation made by it herein, which condition would have been satisfied, but for such a breach

(b)  

If any condition contained in §6.1 and §6.4 is not satisfied at or before the Termination Date to the satisfaction of American Exploration, then American Exploration may by notice to Mainland terminate this Agreement and the obligations of the Parties hereunder except as otherwise herein provided, without detracting from the rights of American Exploration arising from any breach by Mainland of a covenant or representation made by it herein, which condition would have been satisfied, but for such a breach.

(c)  

The Board of Directors of American Exploration may by notice to Mainland terminate this Agreement, if the Board of Directors of American Exploration has (i) withdrawn, or modified or changed in a manner adverse to Mainland its approval or recommendation of this Agreement or the Merger in order to approve and permit American Exploration to execute a definitive agreement relating to a Superior Proposal, and (ii) determined in good faith, after consultation with outside legal counsel to American Exploration, that the failure to take such action as set forth in the preceding clause (i) would result in a breach of the Board of Directors’ fiduciary duties under applicable Nevada law, notwithstanding all terms and conditions which may be offered by Mainland in negotiations entered into pursuant to the following proviso to this clause (ii); provided, however, that the Board of Directors shall not take any such action in connection with a Superior Proposal until American Exploration shall have given Mainland such reasonable notice of all material terms and conditions of the Superior Proposal as may be possible taking into account the terms of the Superior Proposal, and American Exploration shall have, and shall have caused its respective financial and legal advisors to, negotiate in good faith with Mainland to make such adjustments in the terms and conditions of this Agreement as would enable American Exploration to proceed with the transactions contemplated herein on such adjusted terms.

(i)  

be terminated by the mutual agreement of Mainland and American Exploration (without further action on the part of the American Exploration Shareholders) anytime prior to the filing of the Articles of Merger;

(ii)  

be terminated by either Mainland or American Exploration, if there shall be passed any law or regulation that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited, or if any injunction, order or decree enjoining Mainland or American Exploration from consummating the transactions contemplated by this Agreement is entered and such injunction, order or decree shall become final and non-appealable;

(A)  

the Board of Directors of American Exploration shall have failed to recommend or withdrawn or modified or changed in a manner adverse to Mainland its approval or recommendation of this Agreement or the Merger, or

(B)  

this Merger is not, prior to 21 days prior to the Termination Date, submitted for the approval of the American Exploration Shareholders’ at the American Exploration Meeting

(A)  

the Board of Directors of Mainland shall have failed to recommend or withdrawn or modified or changed in a manner adverse to American Exploration its approval or recommendation of this Agreement or the Merger, or

(B)  

this Merger is not, prior to 21 days prior to the Termination Date, submitted for the approval of the American Exploration Shareholders’ at the Mainland Meeting.

(e)  

If the Effective Date does not occur on or prior to the Termination Date, then this Agreement shall automatically terminate unless extended by mutual agreement.

(f)  

If this Agreement is terminated in accordance with any of the foregoing provisions of this §7.3, no party shall have any further liability to perform its obligations hereunder except as otherwise contemplated hereby, and provided that neither the termination of this Agreement nor anything contained in this §7.3(f) shall relieve either party from any liability for any breach by it of this Agreement, including from any inaccuracy in its representations and warranties and any non-performance by it of its covenants made herein.

(a)  

American Exploration shall deliver or cause to be delivered for the release subject to §8.3 to Mainland:

(ii)  

a duly executed certificate by a senior executive officer of American Exploration dated as at the Effective Date to the effect that the representations and warranties of American Exploration contained in this Agreement are true and correct in all material respects and that the covenants and agreements of American Exploration to be performed on or before the Effective Date pursuant to the terms of this Agreement have been duly performed in all material respects including the required cash balance as set out in §6.2(b);

(iii)  

a certified copy of a resolution of the directors of American Exploration duly passed, with a certification that it has not been rescinded and continues in effect, approving this Agreement, such resolution, the Merger and matters thereunder;

(v)  

any necessary waivers, consents and approvals from other parties with respect to Material Contracts should Mainland determine that any are needed notwithstanding American Exploration’s representations to the contrary herein;

(vii)  

the favorable legal opinion of American Exploration’s Lawyers, in form reasonably satisfactory to Mainland’s Lawyers, including:

(A)  

the due authorization, execution and delivery by American Exploration of this Agreement and the agreements required to be executed by American Exploration pursuant thereto and that each of such agreements is a legal, valid and binding obligation of American Exploration in accordance with its terms, except as may be limited by laws of general application affecting the rights of creditors generally, the effect of equitable principles and that the availability of equitable remedies is subject to the discretion of the court before which any proceedings therefor may be brought;

(B)  

as to the due incorporation, organization, and good standing with respect to the filing of annual returns of American Exploration; and

(C)  

as to the corporate power and capacity of American Exploration to own the Assets owned by it and to conduct the Business conducted by it;

(i)  

a certified copy of the Mainland Merger Resolutions;

(ii)  

a treasury direction addressed to the Transfer Agent directing the issuance to the former American Exploration Shareholders the number of Mainland Shares determined in accordance with the terms of this Agreement; provided, however, that each certificate representing any American Exploration Shares, until surrendered to the Transfer Agent in exchange for a certificate representing the appropriate number of Mainland Shares, shall be deemed after the Effective Time to represent the holder’s right and entitlement to be recognized as the holder of record of the number of Mainland Shares determined by the Exchange Ratio in accordance with this Agreement;

(iii)  

a duly executed certificate of one senior executive officer of Mainland dated as at the Effective Date to the effect that the representations and warranties of Mainland contained in this Agreement are true and correct in all material respects and that the covenants and agreements of Mainland to be performed on or before the Effective Date pursuant to the terms of this Agreement have been duly performed in all material respects;

(iv)  

a certified copy of a resolution of the directors of Mainland duly passed, with a certification that such resolution has not been rescinded and continues in effect, authorizing the execution, delivery and implementation of this Agreement and of all transactions contemplated hereby and of all documents to be delivered by Mainland pursuant hereto; and

(v)  

a favorable legal opinion of Mainland’s Lawyers, in form reasonably satisfactory to American Exploration’s Lawyer, including:

(A)  

Mainland has the corporate power and capacity to execute and deliver this Agreement and complete the transactions contemplated hereby, that all corporate proceedings have been taken to complete the Merger under this Agreement, and that this Agreement and each of the other agreements required hereunder has been duly and validly authorized, executed and delivered by Mainland and each such agreement is a legal, valid and binding obligation of Mainland in accordance with its terms, except as may be limited by laws of general application affecting the rights of creditors generally, the effect of equitable principles, and the availability of equitable remedies is subject to the discretion of the court before which any proceedings therefor may be brought,

(B)  

the incorporation, organization and good standing in respect of the filing of annual returns of Mainland,

(C)  

the due and valid issue of the Mainland Shares to American Exploration security holders receiving such securities;

 

9.5 

 

(a) No director or officer of Mainland shall have any personal liability whatsoever to American Exploration under this Agreement, or any other document delivered in connection with this Agreement on behalf of Mainland

(b)  

No director or officer of American Exploration shall have any personal liability whatsoever to Mainland under this Agreement, or any other document delivered in connection with this Agreement on behalf of American Exploration.

 

9.7 

 

(a) Mainland shall be responsible for the costs of preparing and filing the Registration Statement.  Each party shall otherwise be responsible for its costs in connection with the Merger; provided, however, that in the event of a successful Merger, then Mainland shall be responsible for all costs of the Merger.  Provided, however, that Mainland may allocate expenses between Mainland and American Exploration after the Merger, as it determines appropriate in its sole discretion.  In the event either party terminates the Merger before it is concluded, each party will be responsible for its own costs.

(b)  

American Exploration represents and warrants to Mainland that no broker, finder or investment banker, is or will be entitled to any brokerage, finder’s or other fee or commission from American Exploration in connection with the transactions contemplated hereby or by the Merger.

(c)  

Mainland represents and warrants to American Exploration that no broker, finder or investment banker, is or will be entitled to any brokerage, finder’s or other fee or commission from Mainland in connection with the transactions contemplated hereby or by the Merger.

A.  

American Exploration Corporation (the “Company”) has entered into a merger agreement and plan of merger dated March 22, 2010 (the “Agreement and Plan of Merger”) with Mainland Resources, Inc. (“Mainland”); and

B.  

Pursuant to the Agreement and Plan of Merger, Mainland will acquire all of the issued and outstanding shares, stock options and common stock purchase warrants of the Company in consideration for the issuance of shares of the common stock of Mainland, and of stock options and common stock purchase warrants of Mainland, on the terms and subject to the conditions of the Agreement and Plan of Merger.

1.  

The merger of the Company with and into Mainland on the terms and subject to the conditions of the Agreement and Plan of Merger is hereby approved and recommended to the stockholders of the Company;

2.  

The execution of the Agreement and Plan of Merger by the Company is hereby ratified and approved; and

3.  

Any one officer or director of the Company is hereby authorized and directed for and on behalf of the Company to call a meeting of the stockholders of the Company in order to solicit the approval of the Agreement and Plan of Merger from the stockholders of the Company, and to further execute or cause to be executed, under the seal of the Company or otherwise, and to deliver or cause to be delivered, all such other documents, agreements, amendments to agreements, and instruments and to perform or cause to be performed all such other acts and things as in such person’s opinion may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document, agreement, amendment to an agreement, or instrument or the doing of any such act or thing, including but not limited to amendments to the Agreement and Plan of Merger.

A.  

Mainland Resources, Inc. (the “Company”) has entered into a merger agreement and plan of merger dated March 22, 2010 (the “Agreement and Plan of Merger”) with American Exploration Corporation (“American Exploration”); and

B.  

Pursuant to the Agreement and Plan of Merger, the Company will acquire all of the issued and outstanding shares, stock options and common stock purchase warrants of American Exploration in consideration for the issuance of shares of the common stock of the Company, and of stock options and common stock purchase warrants of the Company, on the terms and subject to the conditions of the Agreement and Plan of Merger.

1.  

The merger of American Exploration with and into the Company on the terms and subject to the conditions of the Agreement and Plan of Merger is hereby approved and recommended to the stockholders of the Company;

2.  

The execution of the Agreement and Plan of Merger by the Company is hereby ratified and approved; and

3.  

Any one officer or director of the Company is hereby authorized and directed for and on behalf of the Company to call a meeting of the stockholders of the Company in order to solicit the approval of the Agreement and Plan of Merger from the stockholders of the Company, and to further execute or cause to be executed, under the seal of the Company or otherwise, and to deliver or cause to be delivered, all such other documents, agreements, amendments to agreements, and instruments and to perform or cause to be performed all such other acts and things as in such person’s opinion may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document, agreement, amendment to an agreement, or instrument or the doing of any such act or thing, including but not limited to amendments to the Agreement and Plan of Merger.

1.  

Letter Agreement between American Exploration and Avere Energy, Inc. dated February 26, 2010.

2.  

Letter of Intent between American Exploration and Avere Energy, Inc. effective January 15, 2010.

3.  

Convertible Debenture Agreement between American Exploration and DMS, Ltd. effective October 13, 2009.

4.  

Joint Operating Agreement among American Exploration, Guggenheim Energy Opportunities, LLC, and Mainland, executed October 12, 2009.

5.  

Letter Agreement between American Exploration and Mainland dated September 25, 2009.

6.  

Third Amendment to Option Agreement between American Exploration and Westrock Land, Corp. effective August 19, 2009.

7.  

Loan Agreement between American Exploration and Devinder Randhawa, a director of American Exploration, dated June 5, 2009

8.  

Second Amendment to Option Agreement between American Exploration and Westrock Land, Corp. effective April 29, 2009.

9.  

Loan Agreement between American Exploration and David Sidoo, a related third party, dated May 29, 2009.

10.  

Loan Agreement between American Exploration and David Sidoo, a related third party, dated May 15, 2009.

11.  

First Amendment to Option Agreement between American Exploration and Westrock Land, Corp. effective January 8, 2009.

12.  

Option Agreement between American Exploration and Westrock Land, Corp. effective November 3, 2008.

13.  

CDN$100,000 5% Convertible Debenture dated October 13, 2009, made by American Exploration and payable to DMS Ltd.

14.  

Rescission Agreement between American Exploration and Dev Randhawa dated August 18, 2009, relating to that certain convertible note dated June 5, 2009, made by American Exploration in the principal amount of $50,000 and payable to Dev Randhawa.

15.  

Rescission Agreement between American Exploration and David Sidoo dated August 18, 2009, relating to that certain convertible note dated May 29, 2009, made by American Exploration in the principal amount of CDN$8,200 and payable to David Sidoo.

16.  

Rescission Agreement between American Exploration and David Sidoo dated August 18, 2009, relating to that certain convertible note dated May 15, 2009, made by American Exploration in the principal amount of $30,000 and payable to David Sidoo.

Cory Bass

50,000

0.80

Sept. 25, 2019

12,500

1.50

Moni Minhas

100,000

0.80

Sept. 14, 2019

25,000

1.50

Marc Bustin

100,000

0.80

Sept. 14, 2019

25,000

1.50

Brian Manko

150,000

0.80

Sept. 14, 2019

37,500

1.50

David Sidoo

250,000

0.80

Sept. 14, 2019

62,500

1.50

Herb Dhaliwal

300,000

0.80

Sept. 25, 2019

75,000

1.50

Dev Randhawa

750,000

0.80

Sept. 14, 2019

187,500

1.50

Steve Harding

1,000,000

0.80

Sept. 14, 2019

250,000

1.50

076103 B.C. Ltd.

130,000

260,000

1.00

31/8/2010

12,500

25,000

1.50

24/9/2010

Mercado Exportaciones del Petroleo Inc.

200,000

400,000

0.50

17/8/2010

66,667

133,334

1.25

21/9/2010

150,000

300,000

0.50

24/2/2011

1.  

Purchase Agreement by and between Mainland, as seller and Exco Operating Company, LP, as buyer, dated March 10, 2010.

2.  

Senior Secured Advancing Line of Credit Agreement between Mainland and Guggenheim Corporate Funding, LLC dated October 16, 2009.

3.  

Executive Service Agreement between Mainland and Mark Witt effective September 22, 2009.

4.  

Executive Service Agreement between Mainland and Michael Newport effective September 22, 2009.

Joint Operating Agreement among Mainland, American Exploration, and Guggenheim Corporate Funding executed October 12, 2009.

Letter Agreement between Mainland and American dated October 1, 2009.

7.  

Security Agreement between Mainland and Guggenheim Corporate Funding, LLC effective August 7, 2009.

Consulting Service Letter Agreement between Mainland and VCS Group, Inc., of which a director of Mainland is the sole director, officer, and shareholder, dated February 11, 2009.

9.  

Amendment to Option Agreement between Mainland and Westrock Land, Corp. effective August 28, 2009.

10.  

Option Agreement between Mainland and Westrock Land, Corp. effective June 22, 2009.

11.  

Assignment, Conveyance, and Bill of Sale between Mainland and Petrohawk Properties, LP effective August 4, 2008.

12.  

Operating Agreement between Mainland and Petrohawk Properties, LP dated August 1, 2008.

13.  

Letter Agreement between Mainland and Petrohawk Energy Corporation effective July 14, 2008.