EXHIBIT 10.5
SYNERGY RESOURCES CORPORATION
600 17th Street, 2800 South
Denver, Colorado 80202
(720) 359-1591
August 7, 2008
Ed Holloway
Petroleum Management LLC
20203 Highway 60
Platteville, CO 80651
Re: Proposed Assignment of Oil and Gas Interests
Dear Mr. Holloway,
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The purpose of this letter is to summarize the principal terms pursuant to
which it is intended Synergy Resources Corporation (SRC) will acquire certain
working interests in certain oil and gas leases in Weld County, Colorado from
Petroleum Management, LLC and/or Petroleum Exploration & Management, LLC
(collectively "PM"). This letter sets forth the principal terms of such
agreement as follows:
1. Oil and Gas Working Interests/Prospects Available for Assignment. PM has
certain working interests available for assignment to SRC, subject to the
conditions set forth herein, and such working interests shall be made
available for assignment if the conditions are met by Synergy. The
properties under lease ("Prospects") and available for working interest
ownership assignment are attached as Exhibit A. The conditions of the
parties entering into an Assignment of Oil and Gas Interests are as
follows:
a. SRC has successfully completed its merger with Brishlin and additional
funding in the amount of a sale of 2,000,000 shares at $3.50 each (total $7
million minimum).
b. This funding occurs on or before November 1, 2008. c. If only partial
funding is accomplished by SRC, then a reduced
percentage of working interest ownership may be reflected in the
Assignment, subject to both parties' approval. Pending the November 1,
2008 deadline, PM will not sell or assign the interest set forth on
Exhibit A to any other third party. All of the working interests
conveyed will be at a 75% net revenue interest and a $1,000 lease cost
per net acre. The percentage of working interest ownership may vary
with each Prospect. Additional Prospects may be made available with
additional funding received by Synergy.
2. Deposit. In order to hold this working interest SRC will deliver, at
the signing of this letter, $100,000.00 in certified funds or by wire transfer
to PM. These funds are refundable, and if the transaction contemplated herein
does not occur, these monies will be returned to SRC. If the transaction
contemplated herein does occur, then this amount shall be applied to the
purchase price of the Assignment of Oil and Gas Interests.
3. Assignment of Oil and Gas Interests. Immediately upon execution of this
Letter of Intent, the Parties shall diligently cause to be prepared a form of
Assignment of Oil and Gas Interests ("Assignment") on or before November 1,
2008, containing provisions in accordance with the foregoing, together with such
other appropriate terms and conditions as are customary in such assignments. The
Assignment shall be recorded in the records of the Clerk and Recorder of Weld
County, Colorado, upon closing. The Assignment shall also provide that, pending
the closing date, SRC and its representatives shall at all times have access to
all pertinent data and other information as its representatives shall request
from time to time.
4. Confidentiality. It is, of course, understood that all access,
investigations and contact to be conducted by either party or its
representatives shall be conducted and maintained in strict confidence, and
should the transactions contemplated by this Letter of Intent not be completed
for any reason whatsoever, each party and its representatives shall keep
confidential any information concerning the others' operations and business and
shall return all documentation to the originating party.
5. Conditions. The Assignment shall provide that the obligations of SRC
and PM are expressly subject to, among other provisions, the following:
a. Review and approval of the Assignment by the respective Boards of
Directors of SRC and PM;
b. A favorable review by counsel of the good and marketable title of PM
to the Prospects listed on Exhibit A;
c. The receipt by each Party of a favorable opinion of counsel to the
other relating to such matter as are customarily delivered in
connection with the Assignment contemplated hereby;
d. The completeness and accuracy at all times up to and including the
closing, of the representations, warranties, agreements and covenants
of the Parties as contained in the Assignment; and
6. Expiration. This Letter of Intent shall expire on the earliest to occur
of the following events:
a. The effective date of the Assignment;
b. November 1, 2008; or
c. The date of termination of this Letter of Intent by the mutual consent
of PM and SRC in writing.
7. Miscellaneous. PM and SRC agree to diligently and timely negotiate in
good faith toward a definitive Assignment satisfactory to each Party. During the
term following execution of this Letter of Intent and until the Letter of Intent
is terminated as provided herein, PM shall not enter into or otherwise undertake
negotiations or execute agreements pertaining to the Assignment of this working
interest with any third party. It is, of course, understood that this Letter of
Intent is intended to be, and shall be construed only as, a statement of intent
summarizing and evidencing the discussions between the Parties and is not an
agreement with respect to the transactions contemplated hereby and is not
binding on either Party until the Assignment is executed and delivered by the
Parties and at that time, the respective rights and obligations of the Parties
shall be only as defined in the Assignment; provided, however, that the
respective obligations of SRC and PM under paragraphs 3, 4, 5 and 6 shall be
binding upon you and us when this Letter of Intent is executed by you and
returned to us.
8. Costs. Whether or not the transactions contemplated hereby are
consummated, each Party shall pay its own costs in connection with this Letter
of Intent and the obligations contemplated thereby.
If the foregoing meets with your approval, please execute it on behalf of
the Company and return the duplicate to us, whereupon the letter shall
constitute the Letter of Intent between us in accordance with the terms and
conditions set forth above. We agree that facsimile signatures shall have the
same force and effect as originals for all purposes intended hereby.
Respectfully submitted,
SYNERGY RESOURCES CORPORATION
By: /s/ William E. Scaff, Jr.
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William Scaff, Vice President
PETROLEUM MANAGEMENT LLC
By: /s/ Ed Holloway
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Edward Holloway, Managing Member
EXHIBIT A - Prospects
Oil and Gas Leases currently owned by PM or its affiliates as to the following
property:
1. South 1/2 of Section 16, Township 4 North, Range 67 West, Weld County,
Colorado.
2. Northwest 1/4 of Section 21, Township 5 North, Range 66 West, Weld
County, Colorado.
3. Northwest 1/4 of Section 4, Township 5 North, Range 66 West, Weld
County, Colorado.
AMENDMENT TO
LETTER AGREEMENT
Dated August 7, 2008
The Parties agree that the November 1, 2008 date appearing in Sections
1.b, 3, and 6(b) of the Letter Agreement between the Parties dated August 7,
2008 is amended to August 31, 2009.
Dated: November 1, 2008 SYNERGY RESOURCES CORPORATION
By: /s/ Ed Holloway
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Ed Holloway, President
PETROLEUM EXPLORATION AND MANAGEMENT, LLC
By: /s/ William E. Scaff, Jr.
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Manager