Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of this
22nd day of December 2010, by and between Sun River Energy, Inc., a Colorado
Corporation (the “Company”), and Jay Leaver, a Colorado resident (“Employee”).
RECITALS:
The Company desires to employ Employee, and Employee desires to be employed by
the Company, on the terms and conditions hereinafter provided.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein
contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
Section 1. Term of Employment.
This Agreement will remain in effect from the date hereof until the earlier of
(i) three (3) years (the “Initial Term”), (ii) the time when this Agreement is
terminated in accordance with its terms, or (iii) the sale of the Company or
substantially all of its assets, or a Company Sale.
Provided that this Agreement has not been terminated prior to the expiration of
the Initial Term in accordance with the terms contained herein, subsequent to
such time, Employee’s employment hereunder shall be automatically continued for
successive additional terms of one (1) year each unless written notice of
non-renewal is given by either party no less than 30 days prior to the end of
the Initial Term or any additional term, as applicable.
Section 2. Responsibilities of Employee.

  (a)   During the Employment Period, Employee shall serve as Senior Geologist.
Employee shall report to the COO and as otherwise required by the CEO at his
sole discretion. Employee shall perform the following duties:

  a.   participate in the development and analysis of potential acquisitions
and/or divestitures;     b.   participation in implementation and oversight of
exploration and/or development drilling activities including, but not limited to
engineering and geological matters;     c.   participate in production,
maintenance and operation of Company oil and gas assets including, but not
limited to, development and maintenance of reserves information on all oil and
gas assets; and

Page 1 of 18

--------------------------------------------------------------------------------

 

  d.   all other such duties as may be assigned from time to time by the CEO.

  (b)   Further, it is contemplated that upon acceptance of this offer,
Management will recommend to the Board of Directors that Employee be appointed
as Vice President. Upon approval by the Board of Directors, Employee shall
undertake and assume the responsibility of performing for and on behalf of the
Company any and all duties of the Vice President and shall have the duties,
functions, responsibilities and authority commensurate with such office as are
from time to time delegated to Employee by the Management of the Company.    
(c)   Except for activities permitted in connection with the investments and
activities set forth on Schedule 7(b) and those projects excluded by paragraph
7(b)(i), during the Employment Period, Employee shall devote his full time,
skill, and attention and his best efforts during normal business hours to the
business and affairs of the Company to the extent necessary to discharge
faithfully and efficiently the duties and responsibilities delegated and
assigned to Employee herein or pursuant hereto, except for usual, ordinary, and
customary periods of vacation and absence due to illness or other disability,
and shall not be engaged (whether or not during normal business hours) in any
other business or professional activity, whether or not such activity is pursued
for gain, profit, or other pecuniary_advantage; provided, however, that Employee
may (i) serve or continue to serve in any capacity with any not-for-profit
business or professional organization, association, or entity, and (ii) deliver
lectures, fulfill speaking engagements, or teach at educational institutions, so
long as all activities conducted by Employee pursuant to clauses (i) and (ii) of
this proviso do not unreasonably interfere with the performance and fulfillment
of Employee’s duties and responsibilities as an Employee of the Company in
accordance with this Agreement and are not in violation of the non-competition
provisions of Section 7 of this Agreement. In the case of the activities
described in clause (ii) of this proviso, Employee will give the Board at least
ten (10) days prior notice of his intention to engage in any such activity, such
notice to describe briefly the activities in which Employee proposes to be
engaged.     (d)   All services that Employee may render to the Company or any
of its subsidiaries or Affiliates in any capacity during the Employment Period
shall be deemed to be services required by this Agreement and consideration for
the compensation provided for herein.

Section 3. Compensation.
As compensation for the services to be rendered by Employee for the Company
under this Agreement, the Company shall pay Employee during the Employment
Period an annual salary of

Page 2 of 18

--------------------------------------------------------------------------------

 

$160,000.00, which amount may be adjusted upward by the Board, in its sole
discretion, from time to time. Such annual salary shall be payable as follows:

  (a)   Base Compensation. Employee cash compensation in an amount determined by
the Board, in its sole discretion (“Cash Compensation”); provided that such
amount shall not be less than One Hundred Sixty Thousand Dollars ($160,000.00),
(less required withholdings). Cash Compensation shall be earned and payable
periodically in equal installments in accordance with the Company’s normal
payroll practices. Cash Compensation will be subject to annual review pursuant
to the Company’s normal review policy for other similarly situated Employees of
the Company and any changes in Cash Compensation will be communicated in writing
to Employee.

  i.   With respect to common stock, the Company shall, pursuant to the terms of
the 2010 Sun River Energy, Inc. Stock Incentive Plan, issue to Employee in
escrow, on the Effective Date Forty Thousand (40,000) shares of its Common Stock
(“Common Stock”), which shall become earned and vest, in terms of ownership and
voting rights, 1/12th per month thereafter (each a “Vesting Date”) during the
Term and shall be subject to the right of first refusal and repurchase (“Right
of First Refusal”) contained in Exhibit B.     ii.   With respect to stock
options, the Company shall issue to Employee Stock Options (“Stock Options”)
exercisable into One Hundred Twenty Thousand (120,000) shares of Common Stock of
the Company pursuant to the terms of the 2010 Sun River Energy, Inc. Stock
Incentive Plan, as amended (the “Stock Plan"). The Stock Options shall be issued
to Employee on the Effective Date and shall be earned and vest 1/36th each month
thereafter (each a “Vesting Date”) during the Term. The exercise price of the
Stock Options shall equal the average fair market value of a share of the
Company’s common stock on the Effective Date.

  (b)   Other Benefits. Employee is entitled to participate during the Term in
any group health insurance plan, equity or cash incentive compensation plan,
401(k) plan, and any other benefit or welfare program or policy that is made
available, from time to time, to other Employees of the Company, on a basis
consistent with such participation and subject to the terms of the plan
documents, as such plans may be modified, amended, terminated, or replaced from
time to time.     (c)   Fringe Benefits. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement, Employee shall be
entitled to participate on substantially the same terms and conditions in the
Company sponsored fringe benefits generally provided to similarly situated
personnel, such as vacation, sick pay, and any equity incentive plan, including
stock awards and/or bonuses.     (d)   Withholding. As a condition of the
receipt of any payment or benefit hereunder, the Company shall be entitled to
withhold any federal, state or local taxes, in the reasonable judgment of
Company, required by law to be withheld.

Page 3 of 18

--------------------------------------------------------------------------------

 

(Section 4 is Omitted)
Section 5. Vacation and Other Benefits.

  (a)   During the Employment Period, Employee shall be entitled to three
(3) weeks of paid vacation during each twelve-month period commencing on the
date of this Agreement. Employee shall also be entitled to all paid holidays
given by the Company to its employees. Employee agrees to utilize his vacation
at such time or times as are (i) consistent with the proper performance of his
duties and responsibilities under this Agreement, and (ii) mutually convenient
for the Company and Employee.     (b)   During the Employment Period, Employee
shall be entitled to participate in all employee welfare benefit plans,
programs, and arrangements provided by the Company from time to time to its
employees generally, subject to and on a basis consistent with the terms,
conditions, and overall administration (including eligibility and vesting
requirements) of such plans, programs, and arrangements.

Section 6. Business Opportunities and Intellectual Property.

  (a)   During the Employment Period, Employee shall promptly disclose to the
Company all Business Opportunities and Intellectual Property (each as defined
herein).     (b)   Employee hereby assigns and agrees to assign to the Company,
its successors, assigns or designees, all of Employee’s right, title and
interest in and to all Business Opportunities and Intellectual Property, and
further acknowledges and agrees that all Business Opportunities and Intellectual
Property constitute the exclusive property of the Company.     (c)   For
purposes hereof, “Business Opportunities” shall mean all business ideas,
prospects, proposals or other opportunities pertaining to the E&P Business (as
defined herein), including the lease, acquisition, exploration, production,
gathering, transporting, storing or marketing of hydrocarbons and other mineral
and related products (including becoming financially interested in any of the
above) and the exploration potential of geographical areas on which hydrocarbon
exploration prospects are located (other than those interests described on
Schedule 7(b) and except for activities permitted pursuant to Section 7(b)),
which are:

  i.   developed by Employee (A) during the Employment Period, or (B) before the
Employment Period, but only to the extent that it is not contained in existing
projects listed by employee in Schedule 7(b) attached. It is agreed and
understood between the parties that Employee has certain projects whose State
and County shall be disclosed in which the Employee is entitled compensation
should the projects be developed. Employee intends to lend guidance and
expertise to these projects so long as it does not interfere with employment or
Sun River interests. All projects will be disclosed to Employer prior to any
additional efforts of Employee. All projects listed in Schedule 7(b) attached,
Employer expressly waives any interest or ownership in those business
opportunities.

Page 4 of 18

--------------------------------------------------------------------------------

 

  ii.   originated by any third party and brought to the attention of Employee
(A) during the Employment Period, or (B) before the Employment Period, but only
to the extent (x) of Employee’s rights thereto, (y) it would not breach any duty
or obligation of Employee to a third party during such period, and (z) it
pertains to the E&P Business plays, prospects or areas of interest identified on
Schedule 6(c) attached hereto; together, with information relating thereto,
including, without limitation, any Business Records (as defined herein).

  (d)   For purposes hereof “Intellectual Property” shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs and improvements relating to the E&P Business (including,
without limitation, enhancements to or further interpretation or processing of
such information, but excluding any of the same that result from activities
permitted pursuant to Section 7(b)), whether or not patentable or copyrightable,
which do not fall within the definition of Business Opportunities, which are
discovered, conceived, invented, created or developed by Employee, alone or with
others (i) during the Employment Period if such discovery, conception,
invention, creation, or development (x) occurs in the course of Employee’s
employment with the Company, or (y) occurs with the use of any of the Company’s
time, materials, facilities or other assets, or (z) in the opinion of the Board,
relates or pertains in any way to the Company’s purposes, activities or affairs,
or (ii) before the Employment Period, but only to the extent (x) of Employee’s
rights thereto and (y) it would not breach any duty or obligation of Employee to
a third party during such period and (z) it pertains to the E&P Business plays,
prospects or areas of interest identified on Schedule 6(c) attached hereto.

Section 7. Restrictive Covenants.

  (a)   Non-Disclosure. Employee acknowledges that the services he is to render
in the course of his employment by the Company are of a special and unusual
character with unique value to the Company. Employee further acknowledges that
during the Employment Period, the Company has agreed to provide him as one of
its Employees special training and knowledge, Business Opportunities,
Intellectual Property and Confidential Information (as defined herein). Employee
further acknowledges that the Company has agreed to provide him access to and
simultaneous to the execution of this Agreement he shall receive from the
Company certain Confidential Information (as defined herein). Employee covenants
and agrees that he will not at any time, either during or subsequent to his
employment, disclose to any third party or directly or indirectly make use of,
except for business of the Company, any special training and knowledge, Business
Opportunities, Intellectual Property or Confidential Information received from
the Company or any of its subsidiaries. Ancillary to and in an effort to enforce
Employee’s agreement to protect and not to disclose the Company’s or its
subsidiaries’ information as set forth in this Section 7, Employee covenants and
agrees to the restrictions and obligations set forth in this Section 7.     (b)
  Non-Competition During Employment

Page 5 of 18

--------------------------------------------------------------------------------

 

  i.   Employee is a Prospect Generator and as such will provide Employer in
writing with the right of first refusal on all prospects generated. Should
Employer pass in writing on a project Employee shall be free to pursue outside
business activities on his own time, and receive financial gain from these
efforts without claim by Employer. To the extent Employee receives any
compensation of any nature from these efforts, such compensation shall
immediately be split equally with Employer.     ii.   Except for services
related to the activities and interests described above in subparagraph 7(b)(i)
above and on Schedule 7(b), during the Employment Period, Employee shall not
directly or indirectly be employed by or render advisory, consulting or other
services in connection with any business enterprise or person, other than the
Company, that is engaged in leasing, acquiring, exploring, producing, gathering,
transporting, storing or marketing hydrocarbons and related products (the “E&P
Business”)without express written consent of the Board of Directors.     iii.  
Except for services related to the activities and interests described above in
subparagraph 7(b)(i) above and on Schedule 7(b), Employee shall not, directly or
indirectly, in any capacity (including, without limitation, as a proprietor,
investor, director or officer or in any other individual or representative
capacity), be financially interested in or engage in the E&P Business other than
through the Company.     iv.   Except for services related to the activities and
interests described above in subparagraph 7(b)(i) above and on Schedule 7(b),
all investments made by Employee (whether in his own name or in the name of any
Family Member or made by any of Employee’s Affiliates), which relate to the E&P
Business shall be made solely through the Company; and Employee will not
(directly or indirectly through any Family Member) in any capacity (including
alone, as a member, partner, joint venture, equity holder, lender or in any
other capacity), and will not permit any of his Affiliates to, (i) invest or
otherwise participate alongside the Company in any Business Opportunities, or
(ii) invest or otherwise participate in any business or activity relating to a
Business Opportunity, regardless of whether the Company ultimately participates
in such business or activity.

  (c)   Non-Competition After Employment. Except for services related to the
activities and interests described above in subparagraph 7(b)(i) above and on
Schedule 7(b), upon termination of Employee’s employment by the Company pursuant
to Sections 8(b) or 8(c), or by Employee without Good Reason, Employee agrees
that for a period commencing upon the date of termination of Employee’s
employment hereunder (the “Termination Date”) and ending upon the later to occur
of (i) the first anniversary of the Termination Date, or (ii) the third
anniversary of the date hereof, Employee shall not, directly or indirectly
(including, without limitation, as a proprietor, investor, director or officer
or in any other individual or representative capacity) (x) own, acquire, or
solicit the acquisition of, or assist any other person to own, acquire or
solicit the acquisition of,

Page 6 of 18

--------------------------------------------------------------------------------

 

    any Oil and Gas Interests (as defined herein), or any option or other right
to acquire any Oil and Gas Interests, in any case pertaining to or covering, in
whole or in part, the Lands (as defined herein); or (y) engage in or assist any
other person to engage in the E&P Business on or with respect to the Lands.

As used in this Section 7, the term:

  i.   “Oil and Gas Interests” means all: (1) oil and gas leases, mineral
interests, oil, gas and mineral leasehold interests, fee interests, royalty
interests (including, without limitation, landowner royalty interests,
nonparticipating royalty interests and overriding royalty interests), production
payments, net profits interests, subleases, mineral servitudes, licenses,
easements, pooling orders and other interests in oil, gas and other
hydrocarbons, (2) contract rights, joint operating agreements, farm out
agreements, pooling agreements, seismic agreements, cost sharing arrangements
and other agreements relating to the interests under the foregoing clause (1) or
the E&P Business, (3) wells, equipment, associated personal property, pipelines,
fixtures and other assets related to the foregoing, and (4) other operations,
rights, titles and interests relating directly or indirectly to the drilling,
exploration, development, operation, marketing, sale or other disposal of the
foregoing assets and interests.     ii.   “Lands” means any and all lands lying
upon or within three (3) miles of: (1) the boundary of any drilling or spacing
unit within which a producing well lies in which the Company has or had an
interest on or prior to the Termination Date; (2) the boundary of any other Oil
and Gas Interest in which the Company has or had an interest on or prior to the
Termination Date; or (3) the boundary of any Prospect (as defined herein).    
iii.   “Prospect” means an area encompassing territory generally considered
unproven or semi-proven in nature in accordance with generally accepted
standards and practices in the oil and gas industry which (A) the Board has or
had designated, on or prior to the Termination Date, (x) as being prospective
for the discovery of oil, gas, or other hydrocarbons, or (y) for the significant
extension of a pool or deposit of oil, gas, or other hydrocarbons theretofore
discovered, and (B) the Company has acquired or generated proprietary geological
and geophysical information in respect of such territory or has the right to
review geological and geophysical information of a third party in respect of
such territory.

  (d)   During the Employment Period and thereafter until the date upon which
the sale of the Company or substantially all of its assets is consummated,
Employee will not disclose to any third party directly or indirectly or
indirectly make use of, except for the business of the Company, any Confidential
Information. For purposes of this Section 7, it is agreed that Confidential
Information means any and all trade secrets and confidential or proprietary
information pertaining to the Company (the “Confidential Information”). For
purposes of this Section 7, it is agreed that Confidential Information includes,
without limitation, any information heretofore acquired or acquired during the
term hereof,

Page 7 of 18

--------------------------------------------------------------------------------

 

      developed or used by the Company relating to Business Opportunities or
Intellectual Property or other geological, geophysical, economic, financial or
management aspects of the business, operations, properties or prospects of the
Company whether oral or in written form in a Business Record (as defined in
Section 7(g) below). Notwithstanding the foregoing, no information of the
Company will be deemed confidential for the purposes of this Section 7(d) if
such information is or becomes public knowledge through no wrongful act of
Employee or was previously known by Employee prior to entering into this
Agreement and has not been utilized by the Company.   (e)   Non Solicitation.
Except in the event of the termination of Employee’s employment by Employee for
Good Reason or as provided in the next sentence, during the period commencing
upon the Termination Date and ending upon the later to occur of (i) the first
anniversary of the Termination Date, or (ii) the third anniversary of the date
hereof, Employee may not (x) solicit, raid, entice or induce, directly or
indirectly, any employee (or person who was previously an employee within six
months of the Termination Date) of the Company (other than secretarial or
similarly-positioned personnel) or any other person who is under contract with
or rendering services to the Company in an employee-like capacity, to (A)
terminate his employment by, or contractual relationship with, the Company,
(B) refrain from extending or renewing the same (upon the same or new terms),
(C) refrain from rendering services to or for the Company, (D) become employed
by or to enter into contractual relations with any persons other than the
Company, or (E) enter into a relationship with a competitor of the Company or
(y) divert or attempt to divert, any person, concern or entity from doing
business with the Company, or attempt to induce any such person, concern or
entity to cease being a customer or supplier of the Company. Notwithstanding any
other provision of this Agreement, none of the restrictions set forth in this
Section 7(e) shall apply from or after the date of the consummation of the sale
of the Company or substantially all of its assets, or a Company Sale.     (f)  
Injunctive Relief. Employee acknowledges and agrees that the services to be
rendered by him to the Company as one of its Employees are of a special, unique
and extraordinary character and, in connection with such services, he will have
access to Business Opportunities, Intellectual Property and Confidential
Information vital to the Company’s businesses. By reason of this, Employee
consents and agrees that if he violates any of the provisions of this Section 7,
the Company would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction restraining Employee from committing
or continuing any such violation of this Agreement. Such right to an injunction
shall be cumulative and in addition to, and not in lieu of, any other remedies
to which the Company may show itself justly entitled.     (g)   Return of
Business Records. Employee agrees to promptly deliver to the Company, upon the
expiration of the Employment Period, or at any other time when the Company so
requests, all material relating to the business of the Company, including,
without limitation: all geological and geophysical reports and related data such
as maps, charts, logs, seismographs, seismic records and other reports and
related data, calculations,

Page 8 of 18

--------------------------------------------------------------------------------

 

      summaries, memoranda and opinions relating to the foregoing, production
records, electric logs, core data, pressure data, lease files, well files and
records, land files, abstracts, title opinions, title or curative matters,
contract files, notes, records, drawings, manuals, correspondence, financial and
accounting information, customer lists, statistical data and compilations,
patents, copyrights, trademarks, trade names, inventions, formulae, methods,
processes, agreements, contracts, manuals or any other materials relating to the
business of the Company (in this Section 7, collectively called the “Business
Records”), and all copies thereof and therefrom, provided that the Employee
shall not be required to deliver to the Company any Business Records relating to
the interests and activities described on Schedule 7(b). Employee confirms that
all of the Business Records (and all copies thereof and therefrom) that are
required to be delivered to the Company pursuant to this Section 7 constitute
the property of the Company. The obligation of confidentiality set forth in this
Section 7 shall continue notwithstanding Employee’s delivery of any such
documents to the Company.   (h)   Employee represents and covenants that the
execution, delivery and performance by Employee of this Agreement and the
services he is to render to the Company as contemplated by this Agreement will
not (a) be in contravention of or result in any breach or constitute a default
under any applicable law, rule, regulation, judgment, license, permit or order
or any material loan, note or other agreement or instrument to which Employee is
a party or by which he or any of his properties are bound, (b) result in the
Employee disclosing or utilizing any trade secret or proprietary information or
documentation of any Person, or (c) violate any confidential relationship which
Employee may have had with any Person.     (i)   The existence of any claim or
cause of action of Employee against the Company or any officer, manager, or
member of the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants of
Employee contained in this Section 7. In addition, the provisions of this
Section 7 shall continue to be binding upon Employee in accordance with their
terms, notwithstanding the termination of Employee’s employment hereunder for
any reason.     (j)   The parties to this Agreement agree that the limitations
contained in this Section 7 with respect to time, geographical area, and scope
of activity are reasonable. However, if any court should determine that the
time, geographical area, or scope of activity of any restriction contained in
this Section 7 is unenforceable, it is the intention of the parties that such
restrictive covenants set forth herein shall not thereby be terminated but shall
be deemed amended to the extent required to render it valid and enforceable.    
(k)   Nothing contained in this Section 7 shall be construed to prohibit
Employee from investing in stock or other securities listed on a national
securities exchange or actively traded in the over-the-counter market of any
corporation or other entity engaged in a business or activity competitive with
the business of the Company or any of its subsidiaries, provided that Employee,
his Family Members and each of their respective Affiliates shall not, directly
or indirectly, hold more than a total of three percent (3%) of all such shares
of stock or other securities issued and outstanding, and provided further

Page 9 of 18

--------------------------------------------------------------------------------

 

      that Employee shall not perform any services on behalf of, or in the
operation of the affairs of, such corporation or other entity.   (l)   During
any period in which Employee is in breach of any of the covenants set forth in
this Section 7, the time period with respect to such covenant shall be extended
for an amount of time that Employee is in breach thereof.

Section 8. Termination of Employment.

  (a)   Employee’s employment hereunder shall terminate automatically upon his
death.     (b)   If the Company determines in good faith that the Disability (as
defined herein) of Employee has occurred during the Employment Period, the
Company may notify Employee of the Company’s intention to terminate Employee’s
employment hereunder for Disability. In such event, Employee’s employment
hereunder shall terminate effective on the fifth day following the date such
notice of termination is given to Employee. For purposes of this Agreement, the
“Disability” of Employee shall be deemed to have occurred if Employee shall have
been unable to perform his essential duties hereunder for a period consisting of
90 continuous days within any given period of 365 consecutive days, (excluding
any leaves of absence approved by the Board and the number of days of accrued
vacation of Employee) as a result of his physical or mental incapacity; provided
that, if Employee has a physical or mental impairment that substantially limits
one or more major life activities, as defined under the Americans with
Disabilities Act, the Company may extend the 90-day period to reasonably
accommodate Employee’s impairment.     (c)   The Company may terminate
Employee’s employment hereunder at any time for Cause. For purposes of this
Agreement, “Cause” shall mean any of the following: (i) the breach by Employee
of his duties as an employee of the Company, which breach is materially
detrimental to the Company, monetarily or otherwise, (ii) the failure of
Employee to comply in any material respect with any written or oral direction of
the Board which reasonably relates to the performance of his duties that he is
physically able to perform and which would not require him to perform an illegal
act or breach any agreement to which the Company is a party, (iii) the failure
of Employee to substantially perform his duties as an employee after demand for
substantial performance is delivered by the Company to Employee that
specifically identifies the manner in which the Company believes that Employee
has not substantially performed his duties, (iv) the commission by Employee of
any criminal act that constitutes a felony or involves fraud, dishonesty, or
moral turpitude, (v) Employee’s failure to render the services to the Company as
contemplated under this Agreement as a result of alcohol or drug use, (vi) the
taking by Employee of any action, knowing or with reckless disregard that it is
adverse in a material respect to the interests of the Company, its members, or
its assets, (vii) the willful, material violation by Employee of any employer
policies of the Company or its Affiliates, and (viii) the material breach by
Employee of any of his material covenants and agreements contained in this
Agreement. With respect to clauses (i), (ii), (iii) and (v),

Page 10 of 18

--------------------------------------------------------------------------------

 

      Cause shall only exist if Employee fails to cure such matter within ten
(10) days after receiving written notice from the Company.   (d)   The Company
may terminate Employee’s employment hereunder at any time without Cause upon
thirty (30) days notice to Employee.     (e)   Employee may terminate his
employment hereunder at any time for Good Reason or without Good Reason upon
thirty (30) days advance notice to the Company. For purposes of this Agreement,
“Good Reason” means (i) the Company’s failure to timely pay any amount due to
Employee under this Agreement, (ii) a reduction in Employee’s compensation
without Employee’s written consent, or (iii) notwithstanding anything herein to
the contrary, Good Reason shall exist only if the Company fails to cure the
matter described in clauses (i)-(iii) of this Section 8(e) within 30 days after
written notice from Employee.     (f)   In the event of the termination of
Employee’s employment hereunder (for any reason other than the death of
Employee), Employee agrees that if at such time he is a manager or officer of
the Company or any of its subsidiaries, he will promptly deliver to the Company
his written resignation from all such positions, such resignation to be
effective as of the date of termination.

Section 9. Obligations of Company Upon Termination of Employment.

  (a)   If Employee’s employment hereunder is terminated pursuant to
Sections 8(a), 8(b) or 8(c), or if Employee terminates his employment without
Good Reason, the Company shall pay to Employee, or his estate, trust or similar
Person if applicable, on the sixth (6th) day following the Termination Date or
the next regularly scheduled pay day of the Company following the Termination
Date, (i) any accrued but unpaid base salary provided for in Section 3 hereof
for services rendered through the Termination Date, (ii) any accrued but unpaid
expenses required to be reimbursed under Section 3 and (iii) any vacation
accrued to the Termination Date.     (b)   If Employee’s employment hereunder is
terminated by the Company for any reason (other than for death or Disability or
pursuant to Section 8(c)) or by Employee for Good Reason, the Company shall pay
to Employee (i) on the sixth (6th) day following the Termination Date or the
next regularly scheduled pay day of the Company following the Termination Date,
respectively, (A) any accrued but unpaid base salary provided for in Section 3
hereof for services rendered through the Termination Date, (B) any accrued but
unpaid expenses required to be reimbursed under Section 3, and (C) any vacation
accrued to the Termination Date, and (ii) severance pay in an amount equal to
Employee’s base salary pursuant to Section 3 for a period beginning on the
Termination Date and ending upon the later to occur of (x) the first anniversary
of the Termination Date or (y) the third anniversary of the date hereof, payable
in equal monthly installments beginning on the last day of the first month
following the Termination Date; provided, however, that none of the benefits
payable under Section 9(b)(ii) will be payable unless, and the obligation to pay
any severance pursuant to Section 9(b)(ii) shall not accrue until, the Employee
has

Page 11 of 18

--------------------------------------------------------------------------------

 

      signed and delivered an executed general release, which has become
irrevocable, satisfactory to the Company in its reasonable discretion, releasing
the Company and its Affiliates and their respective officers, directors,
managers, members, partners and employees from any and all claims or potential
claims arising from or related to the Employee’s employment or termination of
employment. For the avoidance of doubt, if Employee is terminated without Cause
or Employee terminates his employment for Good Reason, and thereafter Employee
engages in the activities that are within the scope of the restrictions
described in Section 7, Employee shall not be entitled to the severance payment
described in clause (ii) of this Section 9(b).

Section 10. Withholding Taxes.
The Company shall withhold from any payments to be made to Employee hereunder
such amounts (including social security contributions and federal income taxes)
as shall be required by federal, state, and local withholding tax laws.
Section 11. Attorneys’ Fees and Costs.
In the event there is any litigation between the parties hereto with respect to
this Agreement, the prevailing party in such litigation shall be entitled to
recover all attorneys’ fees and costs incurred by such party in connection with
such litigation.
Section 12. Notices.
All notices, requests, or consents provided for or permitted to be given under
this Agreement must be in writing and must be given either by depositing that
writing in the United States mail, addressed to the recipient, postage paid, and
registered or certified with return receipt requested or by delivering that
writing to the recipient in person, by courier, by electronic transmission, or
by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective on receipt by the person to receive it.
Section 13. Governing Law.
It is understood and agreed that the construction and interpretation of this
Agreement shall at all times and in all respects be governed by the laws of the
State of Texas.
Section 14. Assistance in Litigation.
During the Employment Period and for a period of four (4) years thereafter,
Employee shall, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which the Company, or any of its subsidiaries
or Affiliates is, or may become, a party. The Company shall reimburse Employee
for (i) all reasonable, documented out-of-pocket expenses incurred by Employee
in rendering such assistance subject to the Company’s reasonable policies
regarding the reimbursement of expenses and (ii) reasonable compensation for
Employee’s time in rendering such assistance if such assistance occurs after the
Employment Period.

Page 12 of 18

--------------------------------------------------------------------------------

 

Section 15. Severability.
The invalidity or unenforceability of any one provision or more of the
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect to the fullest extent permissible by law. Should any one or more of the
provisions of this Agreement be held to be excessive, unreasonable, or otherwise
unenforceable, then that provision shall be construed by limiting and reducing
it so as to be reasonable and enforceable to the fullest extent compatible with
applicable law.
Section 16. Survival.
Neither the expiration nor the termination of the term of Employee’s employment
hereunder shall impair the rights or obligations of either party hereto which
shall have accrued hereunder prior to such expiration or termination. The
provisions of Sections 6, 7, 9, and 14 and the rights and obligations of the
parties thereunder, shall survive the expiration or termination of the term of
Employee’s employment hereunder.
Section 17. Entire Agreement.
This Agreement, including the schedules attached hereto, contains the entire
agreement and understanding by and between the Company and Employee with respect
to the employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force or
effect. No waiver of any provision of this Agreement shall be valid unless it is
in writing and signed by the party against whom the waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement at such time or any
other time.
Section 18. Modification.
No amendment, alteration or modification to any of the provisions of this
Agreement shall be valid unless made in writing and signed by both parties.
Section 19. Binding Effect; Assignment; No Third Party Benefit.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors, and
assigns; provided, however, that the duties and responsibilities of Employee
hereunder may not be assumed by, or delegated to, any other person. Nothing in
this Agreement, express or implied, is intended to or shall confer upon any
person other than the parties hereto, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this Agreement.

Page 13 of 18

--------------------------------------------------------------------------------

 

Section 20. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument.
Section 21. Voluntary Agreement.
Each party to this Agreement has read and fully understands the terms and
provisions hereof, has had an opportunity to review this Agreement with legal
counsel, has executed this Agreement based upon such party’s own judgment and
advice of counsel (if any), and knowingly, voluntarily, and without duress,
agrees to all of the terms set forth in this Agreement. The parties have
participated jointly in the negotiation and drafting of this Agreement. If an
ambiguity or question of intent or interpretation arises, this Agreement will be
construed as if drafted jointly by the parties and no presumption or burden of
proof will arise favoring or disfavoring any party because of authorship of any
provision of this Agreement.
Section 22. Directly or Indirectly.
Where any provision of this Agreement refers to action to be taken by any
person, or which such person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such person,
including actions taken by or on behalf of any Affiliate of such person.
Section 23. State Law.
It is intended that this Agreement be valid and enforceable under the laws of
the state of Texas, and that the laws of this state shall govern the agreement’s
interpretation.
SIGNATURE PAGE —LEAVER EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the
day and year first above written.

            COMPANY:

Sun River Energy, Inc.
      By:   /s/ Donal R. Schmidt, Jr.         Donal R. Schmidt, Jr. Chief
Executive Officer                 EMPLOYEE:
      By:   /s/ Jay Leaver         Jay Leaver             

Page 14 of 18

--------------------------------------------------------------------------------

 

Schedule 6(c) — 1
SCHEDULE 6(c)
Schedule 7(b) — 1
SCHEDULE 7(b)
Employee is currently engaged in the following oil and gas activities and has
ownership interests in the following Oil and Gas Interests:

Page 15 of 18

--------------------------------------------------------------------------------

 

EXHIBIT B
TERMS OF RIGHT OF FIRST REFUSAL AND REPURCHASE ON SALE OF COMMON
STOCK SHARES (“RIGHTS OF FIRST REFUSAL”)
1. First Refusal on Sale of Shares. If the Employee or a transferee or assignee
of Employee (the “Selling Shareholder”) proposes to sell all or part of his
shares of common stock, the following provisions shall apply:
     (a) Notice: The Selling Shareholder shall first give written notice (the
“Option Notice”) to the Company, which notice shall identify the prospective
purchaser and shall set forth in reasonable detail the terms and conditions upon
which such sale is proposed to be made, and shall be accompanied by copies of
the bona fide offer and any other information furnished to or by the prospective
purchaser(s). Such notice shall automatically grant to the Company an option to
purchase that portion of the Shares of the Selling Shareholder proposed to be
assigned or sold upon the same terms and conditions as contained in the bona
fide offer.
     (b) Shares Covered by Option: The option granted herein to the Company must
be exercised by the Company as to the entire interest being offered (the
“Offered Shares”), unless the Selling Shareholder consents to a sale or transfer
of less than the entire interest.
     (c) Exercise of Option: The Company, at its sole discretion, may, within
thirty (30) days after receipt of the Option Notice (the “Option Period”), give
written notice to the Selling Shareholder (the “Acceptance Notice”), signed by
the Company, that the Company elects to exercise such option, evidencing its
agreement to purchase the Offered Shares.
     (d) Closing of Sale: Closing on the sale of the Offered Shares to the
Company shall take place at the principal place of business of the Company ten
(10) days after the expiration of the Option Period or at such other place and
time as agreed to by the Selling Shareholder and the Company.

Page 16 of 18

--------------------------------------------------------------------------------

 

     (e) Failure to Exercise Option: If the option is not exercised within the
Option Period as to the Offered Shares, the Selling Shareholder may sell or
transfer the Offered Shares within sixty (60) days thereafter to the prospective
purchaser named in the Option Notice at a price and on terms no more favorable
than described in the Option Notice.
     (f) Subsequent Transfers: The Selling Shareholder shall not otherwise sell
or transfer the Offered Shares to any person after the termination of said sixty
(60) day period without again complying with this Section.
     (g) No Pledges: The Employee and each transferee or assignee of the
Employee further agrees and covenants not to pledge, lend, hypothecate or
otherwise grant any interest in the shares of the common stock, without the
prior written consent of the Company, in its sole discretion. The Company shall
be entitled to redeem the shares of common stock at the purchase price thereof
in the event of any breach of this section.
2. Repurchase Rights. The Shares owned by the Employee are subject to forfeiture
and restrictions on transfer in accordance with the terms and conditions of this
Agreement. Subject to the terms of this Agreement, on each month anniversary of
the date of this Agreement during the Term, one thirty-sixth (1/36th) of the
Shares shall no longer be subject to the repurchase right set forth herein.
     Other than as expressly reserved or restricted by this Agreement, the
Employee shall have all the rights of a stockholder with respect to the Shares
unless and until the Company exercises its repurchase rights. The Shareholders
may not sell, transfer, alienate pledge or otherwise encumber (i) any Share or
fraction thereof, or any interest in a Share or (ii) any other interest in this
Agreement, until such Shares are no longer subject to the Company’s repurchase
rights as set forth herein. Dividends paid with respect to Shares in cash or
property other than shares or rights to acquire shares will be paid to the
Employee at the time such dividends are paid to other stockholders. Dividends
with respect to Shares paid in shares or rights to acquire shares will be added
to and become a part of the Shares.

Page 17 of 18

--------------------------------------------------------------------------------

 

     (a) If the Employee’s employment hereunder, is terminated the Company will
have the right (the “Repurchase Right”), but not the obligation, to purchase
from the Employee (or any person to whom Employee shall have transferred any
such Shares) all or any portion of the Shares as to which the Company’s
repurchase right has not expired as set forth above (the “Repurchased Stock”).
But, in the event Employee is terminated without Cause or he terminates his
employment for Good Reason in accordance with Section 4(c) of the Employment
Agreement, then the Company shall have no rights under Exhibit B whatsoever.
     (b) If the Company intends to exercise its Repurchase Right with respect to
such Repurchased Stock, the Company must give Shareholder written notice (the
“Repurchase Notice”) within 60 days after the applicable Severance Date, that
the Company is exercising its Repurchase Right with respect to the Repurchased
Stock, which Repurchase Notice will constitute exercise of the Repurchase Right.
The Company may exercise each Repurchase Right with respect to all or any
portion, of the Repurchased Stock subject to such Repurchase Right. Such
Repurchase Right will expire with respect to the Repurchased Stock subject to
such Repurchase Right to the extent not exercised by the Company within 60 days
after the Severance Date. The price per share for the Repurchased Stock will be
$0.001 per share (the “Repurchase Price”).
     (c) If the Company exercises a Repurchase Right with respect to any
Repurchased Stock, within 30 days after the date of a Repurchase Notice the
Company shall deliver to Employee the Repurchase Price for the Shares of
Repurchased Stock being purchased and Employee shall deliver to the Company
certificates, if any, previously delivered to Employee representing such
Repurchased Stock, duly endorsed for transfer to the Company, or such
certificates and a duly executed stock power transferring such shares of
Repurchased Stock to the Company.

Page 18 of 18

--------------------------------------------------------------------------------

 

SCHEDULE 6(b)
Business ideas not covered by specific prospect areas

  1)   A program written in QBASIC to automatically calculate an extrapolated
decline curve from an oil or gas well’s historical production records.     2)  
An Excel spreadsheet that automatically calculates closure on a metes & bounds —
style survey.     3)   An Excel spreadsheet that calculates economic parameters
for single-well and multiple-well drilling programs.     4)   A program written
in QBASIC that calculates coherency and other attributes from seismic data.    
5)   A program written in QBASIC to create a SEG-Y format vector file from a
color scan of a seismic line.     6)   A QBASIC utility to facilitate importing
waypoint coordinates into a Garmin GPSmap handheld.     7)   A QBASIC utility to
facilitate importing well location and production information into MapInfo.    
8)   A QBASIC utility to facilitate importing seismic navigation data into
MapInfo.

--------------------------------------------------------------------------------

 

SCHEDULE 7(b)
Employee is currently engaged in oil and gas or mineral activities and has
ownership interests in the

          Country   State /Territory   County
USA
  CO   Archuleta, Chaffee, Crowley, Custer, Fremont, Gunnison, Logan, Otero, Rio
Grande, Saguache, Weld
USA
  IA   Adair, Audubon, Carroll, Cass, Guthrie, Shelby
USA
  ID   Ada, Canyon, Gem, Payette
USA
  IL   Clinton, Sangamon, Washington
USA
  MI   Allegan, Barry, Calhoun, Eaton, Hillsdale, Jackson, Kalamazoo
USA
  MN   Dakota, Faribault, Freeborn, Le Seur, Rice, Scott, Steele, Waseca
USA
  ND   Billings, Bottineau, Dunn, Grant, Hettinger, McKenzie, Renville, Stark,
Ward
USA
  NE   Arthur, Cheyenne, Garden, Grant, Morrill, Sheridan
USA
  NM   Catron, DeBaca, Guadalupe, Lincoln, Mora, Otero, Quay, San Miguel,
Socorro
USA
  NV   Elko, Eureka, Nye, White Pine
USA
  NY   Cayuga, Chemung, Onondaga, Oswego, Schuyler, Seneca, Steuben, Wayne
USA
  OH   Ashland, Delaware, Erie, Franklin, Huron, Lorain, Madison, Marion,
Morrow, Pickaway
USA
  OR   Malheur
USA
  UT   Carbon, Duchesne, Grand, Juab, Millard, San Juan, Uintah, Wasatch
USA
  WY   Converse, Goshen, Niobrara, Platte
France
  All     Australia   Northern Territory