ACQUISITION AGREEMENTAsset Purchase Agreement |
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This
Agreement is made and entered into this _ 21st _ day of
October, 2007 by and among Fellows Energy Ltd
(“Fellows”) and Mark S. Dolar, Dolar Energy,
L.L.C. (“Dolar”); Uton Divide LLC
(“Uton”); and Cochrane Resources, Inc.
(“Cochrane”), collectively called
“Dolar”.
RECITALS
Pursuant
to conversations of the past weeks, the parties desire to
enter into this Agreement (which is exclusive,
except to the extent provided below) in order to provide for
(1) the earn-in by Fellows on the Divide, Pinedale and Wilkens
Ridge projects as provided herein; (2) for the hiring of Mark
S. Dolar and Ken Allen into the management of Fellows and
their appointment as directors of Fellows, in accordance with
the provisions of this
Agreement; and (3) to provide for the
potential growth of Fellows through a joint venture
or other financing arrangement, or a potential business
combination whereby Fellows would merge with a new company to
be named Moose Mountain Energy, Inc., hereinafter referred to
as “Newco” through a reverse merger with Newco, as
described below. It is expected that either Fellows
or Newco would continue to conduct the business of Fellows and
of Dolar and would raise capital through a joint venture, or
other financing, or in connection with a merger with Newco to
conclude the transactions described below and to acquire
and/or develop the assets as described below.
NOW
THEREFORE, in consideration of the mutual promises and
covenants of the parties, it is hereby agreed as
follows:
1. Earn-In
and Acquisition Agreement relating to the Divide Field
project
Fellows
hereby agrees to acquire, and/or assist in the arranging of
financing (through purchase, joint venturing or otherwise) for
the acquisition of the 23.73% undivided interest owned by Uton
Divide, LLC in the Divide Field project, including the
interests in the three existing wells on the project and the
production and equipment and other assets related thereto, all
as more particularly described in Exhibit A attached hereto,
for a total cash consideration of $2,400,000. The
agreement to make the acquisition is subject to customary
technical, title and legal due diligence being completed to
the reasonable satisfaction of Fellows and to financing as
hereinafter contemplated, as well as to the execution and
delivery of conveyance documents containing representations
and warranties and such other customary provisions as are
reasonably required by Fellows. At the option of
Dolar, up to 50.0% of the purchase price may be taken in stock
of Newco (in the event Newco is involved in the
transaction). Closing shall occur on or
before February 28, 2008, except as may be extended as
provided below. Interests conveyed shall be
described on Exhibit “A” attached
hereto.
Upon
completion of the acquisition of the interests of Dolar,
Fellows or Newco will commit to fund Dolar’s portion of
drilling and seismic budgets that are anticipated to be
established for the second half of 2008, including $1,500,000
(being 23.73% of the total anticipated budget for the second
half of 2008). Failure to fund
such budget is governed by the provisions of Paragraph 6
below.
Newco
shall also have the option to offer to purchase the remaining
73.27% interest in the play for $7,500,000 in the event Newco
timely acquires the Uton Divide LLC interests.
1
2.
Earn-In and Acquisition Agreement relating to the
Pinedale Project
Fellows
hereby agrees to acquire, and/or assist in the arranging of
financing (through purchase, joint venturing or otherwise) for
the acquisition of the leasehold interests of a 25%
working interest held by Dolar in the Pinedale project in
Wyoming (as further described in Exhibit A) for $100,000 in
cash payable to Dolar at closing, and $87,500 worth of stock
to Mark Dolar at closing in the event Newco is used in the
financing; otherwise the entire $187,500 shall be paid to
Dolar in cash at closing. The agreement to
make the acquisition is subject to customary technical, title
and legal due diligence being completed to the reasonable
satisfaction of Fellows and to financing as hereinafter
contemplated, as well as to the execution and delivery of
conveyance documents containing representations and warranties
and such other customary provisions as are reasonably required
by Fellows. Upon closing, Dolar will deliver assignments with
respect to a 25% working interest in an 81.0% net revenue
interest in the leases owned of record, with royalty rates of
15.0% or less. Leases with royalty rates exceeding
15.0% NRI will be delivered at 80.0% net revenue
interest. Interests to be conveyed are more
particularly described on Exhibit “B” attached
hereto.
Upon
completion of the acquisition of the interests of Dolar in the
Pinedale Project, Newco shall make a drilling commitment of
$5,250,000 (being 25% on a four well program) in 2008. Failure
to meet the drilling commitment is governed by the provisions
of Paragraph 6 below.
3. Earn-In
and Acquisition Agreement Relating to the Wilkens Ridge Waterflood
Project
Fellows
hereby agrees to acquire, and/or assist in the arranging of
financing (through purchase, joint venturing or otherwise) for
the acquisition of the interests owned by Cochrane in the
proposed Wilkens Ridge Waterflood Unit Project. The
exact interest owned will be determined on the basis of
participation in the unit when formed, but it is believed
Cochrane will own at least 35% in the Unit, and will be the
Operator. Increased interest in the
development project may be available should current owners
decline participation in the Unit.
Cochrane
will also convey interests from various operated and
non-operated wells in the Uinta Basin of eastern Utah and
North Dakota; along with equipment and other assets
related thereto, all as more particularly described in Exhibit
“C” attached hereto, for a total cash
consideration of $510,000 to Cochrane/Dolar. The leases will
be assigned at an eighty percent (80%) net revenue interest.
The agreement to make the acquisition is subject to customary
technical, title and legal due diligence being completed to
the reasonable satisfaction of Fellows and to financing as
hereinafter contemplated, as well as to the execution and
delivery of conveyance documents containing representations
and warranties and such other customary provisions as are
reasonably required by Fellows. At the option of
Cochrane, up to 50.0% of the purchase price may be taken in
stock of Newco (in the event Newco is involved in the
transaction).
Upon
completion of the acquisition of the interests of Cochrane,
Fellows or Newco will commit to fund Cochrane’s portion
of drilling and waterflood conversion budgets that are
anticipated to be established for the second half of 2008,
including $1,400,000, being based on 35% of the total
anticipated budget for the Wilkens Ridge Waterflood Unit in
the first half of 2008. In the event Cochrane ends
up owning more than the projected 35% interests, contributions
for the 2008 drill program will be increased
accordingly. Failure to meet such funding
shall be governed by the provisions of Paragraph 6
below.
4. Fellows/Newco
Management
Fellows
and Dolar will merge management resources to operate the
Newco. Mark S. Dolar will join Fellows as
President/COO and as a Director, and upon execution of this
Agreement is hereby appointed as such and accepts such
appointment. Dolar will oversee business
development and acquisitions and will receive an incentive
stock package, salary and benefits on an industry
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