ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated as of September 25, 2006
between Nova Leasing, LLC ("Seller"), and Sun River Energy, Inc., a Colorado
Corporation ("Buyer")
RECITALS:
WHEREAS, Seller holds certain mineral lease interests listed on Exhibit
A for the exploration of minerals in Wyoming ("Assets") hereafter;
WHEREAS, Seller desires to convey such assets to Buyer subject to
certain conditions, and Buyer desires to acquire such assets, upon the terms and
subject to the conditions herein set forth; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Seller and Buyer agree as follows:
ARTICLE 1
TERMS OF TRANSACTION
1.1 Assets to be Transferred. At the Closing, and on the terms and subject to
the conditions set forth in this Agreement, Seller shall sell, assign,
transfer, deliver and convey to Buyer, and Buyer shall purchase from
Seller, an 85% working interest in 80% net revenue interest for the assets
listed on Exhibit A with the effective date of transfer October 25, 2006,
subject to drilling commitments in Exhibit B. The assignments delivered by
Seller are not to be filed or recorded until after the first payment is
received by Seller from Buyer on or before March 15, 2007. If said payment
is not made timely and in full, the assignments shall be returned to Seller
and all rights and duties under this agreement terminate.
1.2 Purchase Price and Payment. In consideration of the transfer by Seller to
Buyer of the assets, Buyer shall provide to Seller the consideration as
follows: $6,600,000 in the form of a Promissory Note bearing interest at
7.5%, due in three payments: $1,100,000 on or before March 15, 2007,
$2,800,000 on October 15, 2007 and $2,700,000 on October 15, 2008, notes to
be secured by assets listed on Exhibit A. Note shall contain a 30%
prepayment penalty, but the note and security agreement shall provide for
substitution of collateral of equivalent or better security. In addition,
the Buyer shall issue to Seller 880,000 shares of restricted common stock
of Sun River Energy, Inc., (to be issued as additional consideration,
effective October 5, 2006) which shares shall be subject to registration
rights, in favor of seller. The transfer of stock by Buyer to Seller is
non-refundable.
1.3 The parties have agreed that the Seller's retained 15% working interest is
to be carried as a working interest participant on the assets listed in
Exhibit A as set forth on Exhibit B and within the area of mutual interest
as described on Exhibit C.
ARTICLE 2
CLOSING
2.1 Closing; Closing Date. The closing of the transactions contemplated hereby
(the "Closing") shall occur on or before October 25, 2006
At the Closing, each of the parties hereto shall make the following
deliveries or such deliveries in substitution therefore as are satisfactory to
the indicated recipient:
2.2 Deliveries by Seller.
(1) Seller shall deliver to Buyer: Assignment of Leases to the assets as is
appropriate.
(2) The assignments shall contain reverter clauses in the event of non
exploration and development as contained on Exhibit B hereto.
2.3 Deliveries by Buyer.
(1) Buyer shall issue a Promissory Note payable to Seller in the amount of
$6,600,000 as required herein and a Mortgage, Security and Pledge Agreement
and UCC - 1 securing the note against the assets assigned and held by Buyer
and Buyer shall deliver in addition 880,000 shares of stock (as a
non-refundable down payment) as noted above.
ARTICLE 3
WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.l Authority Relative to this Agreement. Seller has full power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
3.2 Title to Assets. Seller is the owner of, and has good and indefeasible
title to the fee minerals and valid leases on the mineral leases.
3.3 Seller Representation. Seller has no knowledge of any facts or
circumstances the existence or absence of which are reasonably likely to
cause assets to be valueless.
3.4 The assets will be delivered free and clear of liens and encumbrances
except those required in this contract.
ARTICLE 4
ADDITIONAL AGREEMENTS & WARRANTIES OF BUYER
4.1 Buyer agrees to the terms of Reverter Clauses as listed on Exhibit B.
4.2 Fees and expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses, including fees and expenses of counsel,
financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fee or expense.
ARTICLE 5
TERMINATION
5.1 Termination. This Agreement may be terminated and the transaction
contemplated hereby abandoned at any time prior to the Closing in the
following manner:
(a) by Seller, if Buyer shall have failed to fulfill in any material
respect any of its material obligations under this Agreement; or
(b) by Buyer, if Seller shall have failed to fulfill in an material respect
any of its material obligations under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused this
Agreement to be executed by their duly authorized representatives, all as of the
day and year first above written.
SELLER:
Nova Leasing, LLC
By: /s/Xxxxxx Xxxxxx
Title:Managing Director
Date: 9/27/2006
BUYER:
Sun River Energy, Inc.
By: /s/Xxxxxx X. Xxxxxxx
Title: President
Date: 9/25/2006
EXHIBIT A
A conditional assignment of an 85% working interest in an 80% NRI to
Buyer in and to the following described mineral leases and seller shall receive
and retain a 15% carried working interest in the xxxxx through completion. (The
carried interest is more particularly described in Exhibit B):
"List of Leases"
EXHIBIT B
Condition subject to a drilling and development commitment as follows:
At least 4 xxxxx shall be drilled on or before thirty six months after
closing or October 31, 2009, or all undrilled acreage (each well holds 160 acres
except in the event the well holds a Federal Unit, in which case the entire
Participating Area within the Federal Unit shall be held) shall revert to
Seller. Thereafter at least 4 xxxxx per year shall be drilled on the acreage in
order to continue to hold it.
The Parties agree to enter into a standard form Joint Operating
Agreement prior to commencement of drilling operations anywhere within the AMI
lands. Seller's 15% retained working interest will be carried at no cost to
Seller through completion in the first four xxxxx drilled. The JOA will provide
for no more than a 300% penalty on operations subsequent to the carry. Seller
will pay its share of costs of lease acquisition and seismic work prior to
completion of four xxxxx.
In addition, at least one of the first four xxxxx drilled must
penetrate and test the Madison Formation for the Buyer to earn to all depths. If
none of the first four xxxxx penetrates and tests the Madison Formation then the
Buyer will assign to Seller all its right, title and interest in all leases in
the AMI lands below the deepest depth penetrated and tested in the first four
xxxxx.
The leases for which the assignment is made, have specific limitations,
and the assignment is made subject to those limitations.
