Participation Agreement (2007)Full Document 

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Effective Date:       January 31, 2007    
Parties:                  Nautilus Poplar, LLC    
                                 825 East Speer Boulevard, Suite 100E  
                                 Denver, Colorado 80218  
                                 Aspen Exploration Corporation  
                                 PO Box 22530  
                                 Bakersfield, California 93390-2530  


A.    Nautilus, a Montana limited liability company, is a party to an Agreement of Purchase and Sale (“PSA”) dated January 2, 2007 with Ballard Petroleum Holdings, LLC pursuant to which Nautilus will acquire from Seller certain oil and gas properties, rights and assets (as more specifically described in the PSA, the “Assets”).

B.    Aspen, a Delaware corporation, desires to acquire from Nautilus an undivided interest in the Assets subject to and promptly after the closing of the sale and purchase transactions contemplated by the PSA (the “Closing”), and Nautilus is willing to assign and transfer such undivided interest on the terms and conditions of this Participation Agreement (this Agreement).

C.    Nautilus intends to finance a portion of the Purchase Price (as defined in the PSA) for the Assets, and certain related cash bonding costs, through a $3,335,000 credit facility (“Credit Facility”) established pursuant a Loan Agreement dated February 12, 2007 between Nautilus, as borrower, and Jonah Bank of Wyoming (“Bank”), as lender (the “Loan Agreement”).

D.    Aspen desires to participate in the benefits under the Credit Facility in order to finance a portion of the price to be paid Nautilus for an undivided interest in the Assets and a portion of Aspen’s share of the cash bonding costs, and Nautilus is willing to allow such participation on the terms and conditions of this Agreement.

E.    Nautilus intends to operate the Assets and to develop the Assets through the management of Nautilus by its subsidiary, Nautilus Technical Group, LLC, a Colorado limited liability company ("Nautilus Tech").

F.   Aspen desires to convey a portion of its interest in the Assets to Nautilus Tech after Payout (as defined below).

G.    HRC Partners LLC, another working interest owner according to terms of an agreement similar to this, desires to evaluate the hydrocarbon potential of the Assets insofar as they cover and affect certain formations.


In consideration of the Recitals, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be bound hereby, Nautilus and Aspen (each a “Party” and collectively the (“Parties”) hereby agree as follows:



     Section 1.1    Sale and Purchase.

     Subject to and immediately following the Closing under the PSA, and subject to the terms and conditions hereof, effective January 1, 2007, Nautilus hereby agrees to sell, assign, transfer, convey and set over to ASPEN, and ASPEN hereby agrees to purchase from Nautilus, an undivided 12.5% of all of Nautilus’ right, title, estate and interest (whether absolute or contingent, legal or beneficial) in and to the Assets (such undivided 12.5% right, title, estate and interest being referred to herein as the “ASPEN Assets”).

     Section 1.2    ASPEN Purchase Price; Payments by ASPEN.


     a.    The aggregate consideration to be paid by ASPEN for the ASPEN Assets is the sum of One Million Three Hundred Eighty Seven Thousand Five Hundred Dollars ($1,387,500) (the “ASPEN Purchase Price”). The ASPEN Purchase Price shall be adjusted in proportion to any operating adjustments made to the Purchase Price payable by Nautilus under Sections 2.5 and 7.1 of the PSA. The ASPEN Purchase Price shall be payable as follows:


     i.    No later than 5:00 pm, Mountain Time, February 1, 2007, ASPEN shall pay Nautilus the sum of One Million Twelve Thousand Five Hundred Dollars ($1,012,500) in immediately available funds by certified or cashiers’ check, or by wire transfer to an account designated by Nautilus (the “ASPEN Cash Payment”). ASPEN hereby authorizes and directs Nautilus, and Nautilus hereby expressly and unconditionally undertakes and agrees, to remit the ASPEN Cash Payment to Seller at Closing, and the ASPEN Cash Payment shall be credited against the Purchase Price payable to Seller at Closing.


      ii.    At Closing, Nautilus shall remit, or cause to be remitted, to Seller, from the loan proceeds under the Loan Agreement, an amount equal to the difference between the ASPEN Purchase Price and the ASPEN Cash Payment, or Three Hundred and Seventy Five Thousand Dollars ($375,000), which amount shall be credited against the Purchase Price payable to Seller at Closing.


      b.    Any adjustments to the ASPEN Purchase Price which are not determined as of January 31 2007 shall be settled by payment to or by Nautilus and ASPEN, as the case may be, without interest, as soon as practicable after January 31, 2007, and in any event no later than the date the final settlement between Nautilus and Seller occurs under the PSA.


      c.    In addition to and simultaneously with the ASPEN Cash Payment, ASPEN shall pay Nautilus;


     i.    the sum of up to Fifty Three Thousand Seven Hundred Fifty Dollars ($53,750) representing ASPEN’s 12.5% share of the estimated acquisition costs of Four Hundred and Thirty Thousand Dollars ($430,000) incurred by Nautilus in the connection with the acquisition of the Assets (the “Additional ASPEN Payment”). At such time as the actual acquisition costs incurred by Nautilus are determined, ASPEN shall pay Nautilus an amount, if any, by which such actual costs exceed the Additional ASPEN Payment or, if applicable, Nautilus shall refund to ASPEN an amount, if any, by which such actual costs are less than the Additional ASPEN Payment;

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