PURCHASE AND SALE AGREEMENT

 

Pawnee County, Kansas

 

THIS PURCHASE AND SALE AGREEMENT (“Agreement”), dated August 19, 2013, is by and
among Kansas Petroleum Resources, LLC, a Kansas limited liability company, whose
address is 200 East 1st Street, Suite 307, Wichita, Kansas 67202 (“Seller”), and
Cardinal Energy Group, Inc., a Nevada corporation, whose address 6037 Franz
Road, Suite 103, Dublin, Ohio 43017 (“Buyer”). Seller and Buy are sometime
referred to herein collectively as the “Parties” and individually as a “Party”.

 

W I T N E S S E T H:

 

WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller on the terms and subject to the conditions set forth in this Agreement,
all of Seller’s oil and gas rights, interests and assets in Pawnee County,
Kansas, as described more fully herein.

 

NOW, THEREFORE, in consideration of the premises and of the mutual promises,
contained herein, the mutual benefits to be derived by each Party hereunder and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Buyer and Seller agree as follows:

 

article I.
PURCHASE AND SALE

 

Section 1.1 Purchase and Sale. On the terms and conditions contained in this
Agreement, Seller agrees to sell to Buyer and Buyer agrees to purchase, accept,
and pay for the Assets.

 

Section 1.2  Certain Definitions. As used herein:

 

(a)“Affiliate” means, with respect to any Person, a Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person, with control in such context meaning the ability to direct the
management or policies of a Person through ownership of voting shares or other
securities, pursuant to a written agreement, or otherwise.

 

(b)“Assets” means all of Seller’s right, title and interest in and to the
following:

 

(i)the oil and gas leases, oil, gas, and mineral leases and subleases,
royalties, net profits interests, mineral fee interests, carried interests, and,
without limiting the foregoing, other rights (of whatever character, whether
legal or equitable, and whether vested or contingent) in and to the oil, gas,
and other minerals in, on, under, and that may be produced from, the lands
described on Exhibit “A” (including any renewals, extensions, ratifications and
amendments to such interests whether or not such renewals, extensions,
ratifications or amendments are described on Exhibit “A”) (any such rights or
interests individually referred to as “Lease” or collectively, “Leases”);

 

1

 

 

(ii)any and all oil, gas, helium, water, CO2, or injection wells thereon or on
pooled, communitized, or unitized acreage that includes all or any part of the
Leases, including, without limiting the foregoing, the interests in the wells
described on Exhibit “A”, whether producing, non-producing, permanently or
temporarily plugged and abandoned, and whether or not fully described
(collectively, the “Wells”);

 

(iii)all pooled, communitized, or unitized acreage which includes all or part of
any Leases (the “Units”), and all tenements, hereditaments, and appurtenances
belonging thereto;

 

(iv)all structures, facilities, foundations, wellheads, tanks, pumps,
compressors, separators, heater treaters, valves, fittings, equipment,
machinery, fixtures, flowlines, pipelines, platforms, tubular goods, materials,
tools, supplies, improvements, and any other real, personal, immovable and mixed
property located on, used in the operation of, or relating to the production,
treatment, non-regulated transportation, gathering, marketing, sale, processing,
handling or disposal of hydrocarbons, water, and associated substances produced
or drained from the Leases or the Units (the “Facilities”);

 

(v)all Hydrocarbons produced from, or directly attributable to, the Leases,
Units or Wells on and after the Effective Date;

 

(vi)to the extent transferable, all contracts, permits, rights-of-way,
easements, licenses, servitudes, transportation agreements, pooling agreements,
operating agreements, gas balancing agreements, participation and processing
agreements, confidentiality agreements, side letter agreements and any other
agreement, document or instrument listed on Exhibit “B” INSOFAR ONLY as they
directly relate and are attributable to the Leases, Units, Wells, Hydrocarbons,
or Facilities or the contractual and wellbore rights thereon or therein or the
ownership or operation thereof, or the production, treatment, non-regulated
transportation, gathering, marketing, sale, processing, handling disposal,
storage or transportation of hydrocarbons, water, or substances associated
therewith (the “Assumed Contracts”);

 

(vii)all records relating to the Leases, Units, Wells, Hydrocarbons, Assumed
Contracts and Facilities in the possession of Seller (the “Records”) and
including as follows: all (i) lease, mineral interest, land, and division order
files (including any abstracts of title, title opinions, certificates of title,
title curative documents, and division orders contained therein), (ii) the
Assumed Contracts; (iii) all well, facility, operational, environmental,
regulatory, compliance and historic production files and (iv) all geological
files relating to the Leases (the “Geologic Data”), but not including any
Records (the “Excluded Records”) which (i) Seller is prohibited from
transferring to Buyer by law or existing contractual relationship (including
Geologic Data that is not transferable without payment of a fee or other penalty
to any third party which Buyer has not separately agreed in writing to pay), or
which (ii) constitute Excluded Assets (as hereinafter defined); and

 

2

 

 

(viii)all of Seller’s right, title and interest in and to the Leases, Wells and
Hydrocarbons shall mean one hundred percent (100%) working interest and no less
than an eighty percent (80%) net revenue interest. Seller shall retain as an
overriding royalty, which shall be free and clear of all costs except taxes,
equal to the positive difference between existing burdens on the date of this
Agreement and eighty percent (80%) thereby retaining an overriding royalty and
delivering to Buyer (100%) working interest and eighty percent (80%) net revenue
interest in and to the Leases, Wells and Hydrocarbons.

 

(c)“Business Day” means any day other than a Saturday, a Sunday, or a day on
which banks are closed for business in Kansas.

 

(d)“Governmental Authority” means any national government and/or government of
any political subdivision, and departments, courts, commissions, boards,
bureaus, ministries, agencies, or other instrumentalities of any of them.

 

(e)“Hydrocarbons” means crude oil, gas, helium, casinghead gas, condensate,
natural gas liquids, and other gaseous or liquid hydrocarbons (including,
without limitation, ethane, propane, iso-butane, nor-butane, gasoline, and
scrubber liquids) of any type and chemical composition.

 

(f)“Imbalance” means an imbalance between (a) volumes of Hydrocarbons taken from
the Assets, or on lands unitized therewith, by Seller in excess of those volumes
which Seller would be entitled to receive thereunder and (b) volumes of
Hydrocarbons not taken from the Assets, or land unitized therewith, by Seller
despite Seller’s ownership interest therein and right to receive such volumes
thereunder, regardless of whether such imbalance occurs at the platform,
wellhead, pipeline, gathering system, transportation system, processing plant or
other location.”IRC Code” means the United States Internal Revenue Code of 1986,
as amended.

 

(g)“Lien” means any mortgage, lien, pledge, charge, security interest or other
encumbrance of any kind.

 

3

 

 

(h)“Net Overproduction” means the product of (a) the amount by which (i) the
total volume of overproduction of Hydrocarbons attributable to and accounted for
under the name of Seller and related to any Asset (i.e., volumes of gas taken
from the Leases, or on lands unitized therewith, by any of Sellers in excess of
those volumes which any such Seller would be entitled to receive) exceeds (ii)
the total volume of under production of Hydrocarbons attributable to and
accounted for under the name of Seller and related to any Asset (i.e., volumes
of gas not taken from the Leases, or on lands unitized therewith, despite a
Seller’s ownership interest in and right to receive such volumes) multiplied by
the weighted average sales price for NYMEX Henry Hub/Houston Ship Channel
natural gas price per Mcf of gas or NYMEX Cushing/West Texas Intermediate crude
oil price per Bbl of oil posted as of three (3) business days prior to Closing
Date.

 

(i)“Net Revenue Interest” means the percent of revenue that the working interest
holders keep after paying the royalties to the owners of the Leases and all
other non-operating interests.

 

(j)“Person” means any individual, corporation, partnership, limited liability
company, trust, estate, Governmental Authority, or any other entity

 

(k)“Working Interest” means the percentage ownership of the Lease that the
lessee under such lease has the right to drill, produce, and operate.

 

(l)“Tax” means any tax, governmental fee or other like assessment or charge of
any kind whatsoever (including, but not limited to, withholding on amounts paid
to or by any Person), together with any interest, penalty, addition to tax or
additional amount imposed by any Governmental Authority (domestic or foreign)
responsible for the imposition of any such tax, and which are in respect of
assessments based on or measured by the ownership of the Assets, the production
or removal of Hydrocarbons from Wells and pursuant to Leases and the receipt of
proceeds which are due and relating to the Assets.

 

Section 1.3 Exclusions and Reservations. Specifically excepted and reserved from
this transaction are the following, hereinafter referred to as the “Excluded
Assets”:

 

(a)Seller’s economic analyses, pricing forecasts, legal files or opinions
(except abstracts of title, title opinions, certificates of title, or title
curative documents as provided in Section 1.2(b)(vii) above), attorney-client
communications or attorney work product, and records and documents subject to
confidentiality provisions, claims of privilege or other restrictions on access.

 

(b)All corporate, financial, and Tax records of Seller that relate to Seller’s
business generally (including operation of the Assets); however, Seller shall
furnish Buyer with copies of any financial and Tax records which directly relate
to the Assets and which are necessary for Buyer’s ownership, administration, or
operation of the Assets upon receipt of a written request from Buyer indicating
its desire to obtain copies, and the purpose for same.

 

4

 

 

(c)All Hydrocarbons produced from or attributable to Seller’s interest in the
Assets with respect to all periods prior to the Effective Date, together with
all proceeds from the sale of such Hydrocarbons.

 

(d)Claims of Seller for refund of or loss carry forwards with respect to (i)
production, windfall profit, severance, ad valorem or any other Taxes
attributable to the Assets for any period prior to the Effective Date, or (ii)
income or franchise Taxes for any period prior to the Effective Date.

 

(e)All amounts due or payable to Seller as adjustments or refunds under any
contracts or agreements affecting the Assets, with respect to periods prior to
the Effective Date, specifically including, without limitation, amounts
recoverable from audits under operating agreements and any overpayments of
royalties.

 

(f)Subject to the terms hereof, all monies, proceeds, benefits, receipts,
credits, income or revenues (and any security or other deposits made)
attributable to the Assets or the operation thereof prior to the Effective Date.

 

(i)All of Seller’s patents, trade secrets, copyrights, names, marks, logos and
other intellectual property.

 

(ii)Seller’s service agreements, storage or warehouse agreements, supplier
contracts, service contracts, insurance contracts, and construction agreements.

 

(iii)All documents prepared or received by Seller or its Affiliates with respect
to (i) lists of prospective purchasers for the Assets, (ii) bids submitted by
other prospective purchasers of the Assets, (iii) analyses by Seller or its
Affiliates of any bids submitted by any prospective purchaser, (iv)
correspondence between or among Seller, its representatives and any prospective
purchaser, and (v) correspondence between Seller or any of its representatives
with respect to any of the bids, the prospective purchasers or the transactions
contemplated by this Agreement.

 

(iv)Any contracts that constitute master services agreements or similar
contracts.

 

Section 1.4 Conveyancing Instruments. The Assets to be conveyed by Seller to
Buyer shall be conveyed on an “AS IS, WHERE IS” basis, subject to the express
conditions and limitations contained in this Agreement. The Assets to be
transferred to Buyer shall be transferred pursuant to an Assignment and Bill of
Sale in substantially the form of Exhibit “C” (the “Assignment”) which shall
contain a special warranty of title for claims by, through or under Seller,
together with full rights of subrogation in and to all prior warranties.

 

Section 1.5 Election to Effect IRC §1031 Exchange. In the event either Buyer or
Seller so elect, each Party agrees to accommodate the other in effecting a
tax-deferred exchange under IRC Code §1031. Either Party shall have the right to
elect this tax-deferred exchange at any time prior to the date of Closing. If a
Party elects to effect a tax deferred exchange, the other Party agrees to
execute additional escrow instructions, documents, agreements, or instruments to
effect the exchange, provided that such non electing Party shall incur no
additional costs, expenses, fees, obligations or liabilities as a result of or
connected with the exchange.

 

5

 

 

article II.

PURCHASE PRICE

 

Section 2.1 Purchase Price. As consideration for the sale of the Assets, Buyer
shall pay to Seller or its respective designee, Twenty-Seven Million, Five
Hundred Thousand and No/100 Dollars ($27,500,000.00) (the “Purchase Price”), as
set forth below. The Purchase Price as adjusted in accordance with Section 2.3
shall be referred to as the “Adjusted Purchase Price” and shall be paid at
Closing by Buyer as follows:

 

(a)$25,000,000.00 by wire transfer, in immediately available funds, to such
account(s) as directed in writing by Seller; and

 

(b)$2,500,000.00 in shares of Cardinal Energy Group, Inc. (ticker symbol CEGX)
(“CEGX”) common stock (the “Shares”). The number of Shares will be determined by
dividing $2,500,000.00 by the average closing price of the Cardinal Energy
Group, Inc.’s common stock quoted on the OTCQB during the ten (10) trading days
prior to the Closing Date. At Closing Buyer agrees to deliver or cause to be
delivered these Shares directly to the designees of Seller. Prior to Closing,
Seller will provide to Buyer a Schedule of the names, addresses, tax id numbers
and percentages of ownership for the distribution of the Shares to Seller’s
designees.

 

Section 2.2 Allocation of Purchase Price. Concurrent with the execution of this
Agreement, Seller and Buyer will agree upon an allocation of the unadjusted
Purchase Price among each of the Assets. Such allocation of value shall be
attached to this Agreement as Schedule 2.2. Buyer and Seller agree to be bound
by the allocation of the Purchase Price among tangible and intangible Assets set
forth herein for all tax purposes; to consistently report such allocations for
all federal, state and local income tax purposes; and to timely file all reports
required by the IRC Code, concerning the Purchase Price allocations.

 

Section 2.3 Adjustments to Purchase Price. If adjusted, the Purchase Price shall
be adjusted in accordance with this Section 2.3.

 

(a)The Purchase Price shall be increased by the following amounts (without
duplication):

 

(i)The amount of all expenses relating to the Assets incurred by Seller and
attributable to the period from and subsequent to the Effective Date, including
(a) all operating expenditures, (b) all capital expenditures, royalty
disbursements, and severance and production Tax payments, (c) all prepaid
expenses (other than delay rentals due prior to the Effective Date), and (d) all
other expenses under applicable operating agreements, participation, production
handling, production processing, exploration and development agreements and
other similar types of agreements which cover or relate to any of the Assets (to
the extent such expenses are not reimbursed by third parties and to the extent
not related solely to the negotiations and consummation of this Agreement);

 

6

 

 

(ii)An amount equal to the market value of all Hydrocarbons in storage above the
pipeline connection on the Effective Date that are produced from, attributable
to, or otherwise credited to the Assets; and

 

(iii)The amount of any property or ad valorem Taxes assessed against or related
to the Assets that were paid by Seller prior to the Effective Date but prorated
to Buyer in accordance with Article V.

 

(b)The Purchase Price shall be decreased by the following amounts (without
duplication):

 

(i)An amount equal to the gross proceeds received by Seller from the sale or
disposition of Hydrocarbons produced from, attributable to, or otherwise
credited to the Assets from and subsequent to the Effective Date;

 

(ii)The amount of any property or ad valorem Taxes assessed against or related
to the Assets that will be paid by Buyer from and subsequent to the Effective
Date but prorated to Seller in accordance with Article V;

 

(iii)Reductions due to Defects as provided for in Section 7.2;

 

(iv)Reductions due to denials of consents as specified in Section 8.3;

 

(v)Reductions due to Casualty Loss as provided in Section 11.1; and

 

(vi)Any unpaid joint interest billings relating to the Assets and attributable
to the period of time prior to the Effective Date.

 

Section 2.4 Closing Statement. Seller shall prepare and deliver to Buyer an
accounting statement to be executed by both Parties at Closing (the “Closing
Statement”) no later than five (5) Business Days prior to Closing that shall set
forth the adjustments to the Purchase Price to be made in accordance with
Section 2.3 of this Agreement (with the exception of those provided for under
Sections 2.3(a)(iii) and 2.3(b)(ii) above), it being understood and agreed that
the Closing Statement shall contain reasonable estimates where actual amounts
are not known at the Closing and that as actual costs and revenues are known,
these amounts will be taken into account in the Final Accounting Statement
provided for in Section 9.5. The Closing Statement shall be prepared in
accordance with generally accepted accounting principles used in the United
States oil and gas industry and consistent with Seller’s past practices.

 

7

 

 

Section 2.5 Effective Date of Sale. The effective date of the sale of the Assets
described herein shall be September 30, 2013, as of 7:00 a.m., Central Time Zone
(the “Effective Date”).

 

article III.
ALLOCATION OF REVENUES

 

Section 3.1 Allocation of Revenues. Seller shall receive (or receive credit in
the Closing Statement or the Final Accounting Statement, as applicable, for) all
proceeds from the sale of Hydrocarbons physically produced from or allocable to
the Assets prior to the Effective Date, and shall also receive (or receive
credit in the Closing Statement or the Final Accounting Statement, as
applicable, for) all other revenues and benefits attributable to the Assets
accruing or relating to any period prior to the Effective Date. Buyer shall
receive (or receive credit in the Closing Statement or the Final Accounting
Statement, as applicable, for) all proceeds from the sale of Hydrocarbons
physically produced from or allocable to the Assets on or after the Effective
Date, and shall also receive (or receive credit in the Closing Statement or the
Final Accounting Statement, as applicable, for) the proceeds of all other
revenues and benefits attributable to the Assets accruing or relating to any
period from and subsequent to the Effective Date.

 

Section 3.2 Payment of Invoices. After the Closing, Seller shall be required to
pay only that portion of any invoice received by Seller that is applicable to
work performed or materials received or production handled prior to the
Effective Date; other charges and invoices shall be promptly forwarded to Buyer
for payment by Buyer. Similarly, after the Closing, Buyer shall pay only that
portion of any invoice received that is applicable to work performed or
materials received or production handled on or subsequent to the Effective Date;
other charges and invoices shall be promptly delivered to Seller for payment by
Seller.

 

article IV.
ASSUMPTION OF LIABILITIES AND INDEMNIFICATION

 

Section 4.1 Abandonment Obligations. Buyer assumes and shall timely and fully
satisfy Seller’s Abandonment Obligations (as defined below) associated with the
Assets as set forth in Schedule 4.1. As used herein, the term “Abandonment
Obligations” shall mean and include those obligations of Seller associated with
and liability for (i) the plugging and abandonment of the Wells, (ii) the
removal of caissons and pipelines used in connection with the Wells, and (iii)
the clearance, restoration and remediation of the surface and cleanup and
complete reclamation of the portion of the Leases associated with the Wells.

 

Section 4.2 Contract Obligations. From and after the Effective Date, Buyer shall
observe and comply with all covenants, terms, and provisions, express or
implied, contained in the Assumed Contracts and Buyer shall assume and be
responsible for those obligations of Seller accruing under such Assumed
Contracts.

 

Section 4.3 Buyer’s General Indemnification. Buyer shall indemnify, defend and
hold Seller, its directors, officers, employees, agents and representatives and
Affiliated or parent companies (which additional parties are hereinafter
collectively referred to as the “Seller Indemnified Parties”) harmless from any
and all Claims (as hereinafter defined) arising out of, related to or in
connection with (i) Buyer’s ownership of the Assets on or after the Effective
Date, (ii) any obligations or liabilities assumed by Buyer hereunder, and (iii)
Buyer’s breach of any of its representations, warranties, covenants or
agreements contained in this Agreement. As used in any provision of this
Agreement, “Claims” shall mean all liabilities, losses, costs, damages, fees and
expenses (including, without limitation, expenses associated with investigation
of claims, testing, assessment and remedial actions), penalties, fines,
obligations, judgments, costs of investigation, attorney’s fees, expert’s fees
and disbursements of any kind or of any nature whatsoever, claims, actions,
causes of action, demands, filings, investigations, and all costs of any
administrative proceedings, arbitrations, settlements, mediations, suits or
other legal proceedings.

 

8

 

 

Section 4.4 Seller’s General Indemnification. Seller shall indemnify, defend and
hold Buyer, its directors, officers, employees, agents and representatives and
Affiliated or parent companies (which additional parties are hereinafter
collectively referred to as the “Buyer Indemnified Parties”) harmless from any
and all Claims arising out of, related to, or in connection with (i) except for
environmental liabilities addressed in Section 4.5 below, Seller’s ownership of
the Assets prior to the Effective Date, (ii) any obligations or liabilities
under the Excluded Assets, and (iii) Seller’s breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement.

 

Section 4.5 Assumption and Indemnification of Environmental Risk and
Environmental Liabilities by Buyer. From and after the Effective Date, Buyer
shall assume full responsibility for, and shall comply with and perform all
environmentally-related duties and obligations with respect to the Assets for
all periods of time, whether before, on or after the Effective Date and shall
indemnify, defend and hold harmless each Seller Party and the Seller Indemnified
Parties from against any and all Claims under any Environmental Law (hereafter
defined) with respect to the Assets for such time period. The term
“Environmental Law” means all applicable federal, state and local laws in effect
as of the Closing Date or enacted subsequent to the Closing Date, including
common law, relating to the protection of the public health, welfare and
environment, including, without limitation, those laws relating to the
generation, storage, handling, use, processing, treatment, transportation,
disposal or other management of any pollutants, contaminants, toxins, or
hazardous substances, materials, waste constituents, compounds or chemicals that
are regulated by, or may form the basis of any liability by, any Governmental
Authority.

 

article V.
TAXES

 

Section 5.1 Allocation and Payment of Taxes. All property and ad valorem Taxes
and charges imposed on any of the Assets for a taxable period that includes the
Effective Date shall be prorated among Buyer and Seller based on the number of
days that each Party owns such Assets during such taxable period; and each Party
shall be responsible for its prorated share of such Taxes. Seller shall be
responsible for all oil and gas production, severance, windfall profits, and any
other similar Taxes applicable to Hydrocarbons produced or drained from or
attributable to the Leases or the Units prior to the Effective Date, and Buyer
shall be responsible for all such Taxes applicable to Hydrocarbons produced or
drained from or attributable to the Leases or the Units on and after the
Effective Date. Both of the Parties believe that the sale of the Assets is one
occasional sale exempt from sales or use Taxes; however, in the event that any
such Taxes are assessed against the transaction, Buyer shall be responsible for
the payment of such Taxes.

 

9

 

 

article VI.
REPRESENTATIONS AND WARRANTIES

 

Section 6.1 Seller Representations and Warranties. Seller represents and
warrants to Buyer that, through and as of Closing, the following statements are
accurate:

 

(a)Formation. Seller is a limited liability company duly organized and validly
existing, in good standing, under the laws of the State of Kansas. Seller has
the necessary power and authority to own its Assets and to carry on its business
as now conducted and to enter into and to carry out the terms of this Agreement.

 

(b)Authorization; Noncontravention. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary approval action by or on behalf of Seller. This
Agreement is legal, valid and binding obligation of Seller and is enforceable
against Seller in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors’ rights generally or general principles of equity. The consummation of
the transactions contemplated hereby do not and will not (i) violate Seller’s
organizational documents or (ii) violate any applicable law, rule, regulation,
judgment, injunction, order or decree applicable to Seller.

 

(c)No Brokers. Seller is not a party to, or in any way obligated under, nor does
Seller have any knowledge of, any contract or outstanding claim for the payment
of any broker’s or finder’s fee in connection with the origin, negotiation,
execution, or performance of this Agreement for which Buyer will have any
liability.

 

(d)Information. All material contracts and information affecting the Assets that
are contained in Seller’s Records have been made available for Buyer’s due
diligence review (other than Excluded Records) and the information reported
therein is correct, in all material respects, as of the date of such delivery,
except that no representation or warranty is made as to interpretive data
included therein or to reserve reports.

 

(e)Contracts. To Seller’s knowledge, every material contract affecting or
relating in any material way to the Assets is listed on Exhibit “B” as an
Assumed Contract and each material Assumed Contract is in full force and effect.
Seller has not received any notice of default or material violation of any
Assumed Contract to which Seller is a party or any obligation to which Seller is
bound materially affecting the Assets.

 

(f)Leases. To Seller’s knowledge, all royalties, overriding royalties, and other
payments applicable to Seller’s interest due under the Leases have been properly
and timely paid in all material respects, all conditions necessary to maintain
the Leases in force and effect have been performed in all material respects.

 

10

 

 

(g)Abandonment Obligations. Except as set forth on Schedule 4.1, to Seller’s
knowledge, there are no Abandonment Obligations with respect to the Leases.

 

(h)Imbalances. Except as set forth on Schedule 6.1(h), to Seller’s knowledge, no
Hydrocarbons produced from the Leases are subject to an Imbalance or Net
Overproduction.

 

(i)Marketing. The Assets are not subject to any contractual or other arrangement
for the sale, dedication, processing, handling, gathering, production handling
or transportation of production, or otherwise relating to the marketing of
production, other than those listed on Exhibit “B”.

 

(j)Operations Matters. With respect to the joint, unit or other operating
agreements relating to the Assets, except as disclosed on Schedule 6.1(i), (A)
all of Seller’s accounts under the operating agreements and production handling
agreements are current and there are no outstanding cash calls or payments under
authorities for expenditures for payments which are due or which Seller is
obligated to make which have not been made; and (B) there are no operations
under the operating agreements with respect to which Seller has become a
non-consenting party.

 

(k)Litigation. Except as disclosed on Schedule 6.1(j) attached hereto, there is
no suit, action, claim, investigation or inquiry pending or, to Seller’s
knowledge, threatened, arising out of or with respect to the ownership,
operation or environmental condition of the Assets.

 

(l)Title; Encumbrances. Seller has not previously sold, assigned, transferred,
conveyed, farmed-out, mortgaged, pledged, granted a security interest in, or
otherwise alienated or encumbered or created a reversionary interest in all or
any portion of the Assets. At the Closing, the Assets will be transferred and
assigned to Buyer free and clear of all Liens, except for Permitted
Encumbrances.

 

(m)Preferential Rights and Consents to Assign. Except as disclosed on Schedule
6.1(l) attached hereto, there are no third party preferential rights or third
party consents pertaining to the assignment or transfer of any of the Assets
from Seller to Buyer.

 

(n)Investment Purpose. With respect to the provisions of (m) through (v) of this
Section 6.1, Seller and Seller’s designees will acknowledge they are acquiring
the Shares for their own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the Securities
Act of 1933, as amended (the “Securities Act”); provided, however, that by
making the representations herein, Seller reserves the right to dispose of the
Shares at any time in accordance with or pursuant to an effective registration
statement covering such Shares, or an available exemption under the Securities
Act. The Seller agrees not to sell, hypothecate or otherwise transfer the Shares
unless such Shares are registered under the federal and applicable state
securities laws or unless, in the opinion of counsel satisfactory to Buyer, an
exemption from such law is available.

 

11

 

 

(o)Investment Representations. Seller understands that the Shares have not been
registered under the Securities Act. Seller also understands that the Shares are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon Seller’s representations contained in this
Agreement. Seller hereby further represents and warrants as follows:

 

(i)Seller Bears Economic Risk. Seller is capable of evaluating the merits and
risks of its investment in Buyer and has the capacity to protect its own
interest. Seller must bear the economic risk of this investment indefinitely
unless the Shares are registered pursuant to the Securities Act, or an exemption
from registration is available. Seller understands that Buyer has no present
intention of registering the Shares. Seller also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Seller to
transfer all or any portion of the Shares under the circumstances, in the
amounts or at the times Seller might propose.

 

(ii)Seller Can Protect Its Interest. Seller represents that by reason of its, or
of its management’s business or financial experience, Seller has the ability to
protect its own interests in connection with the transactions contemplated in
this Agreement. Further, Seller is aware of no publication of any advertisement
in connection with the transactions contemplated in this Agreement.

 

(iii)Available Information. Seller has received and read the financial
statements and other publicly available information of CEGX and Buyer CEGX and
has had an opportunity to discuss Buyer’s business, management and financial
affairs with directors, officers and management of CEGX and Buyer. Seller has
also had the opportunity to ask questions or and receive answers from, CEGX and
Buyer and their management regarding the terms and conditions of this Agreement.

 

12

 

 

(iv)Rule 144. Seller acknowledges and agrees that the Shares must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Seller has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act as in
effect from time to time, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information about
Buyer, the resale occurring following the required holding period under Rule 144
and the number of shares being sold during any three-month period not exceeding
specified limitations.

 

(v)Legends. Seller understands that the certificates or other instruments
representing the Shares shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against transfer of such
stock certificates):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE
SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE,
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS,
AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF
COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY
TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

Section 6.2 Buyer’s Representations and Warranties. Buyer represents and
warrants to Seller that through and as of Closing, the following statements are
accurate:

 

(a)Formation. Buyer is a corporation duly organized and validly existing, in
good standing, under the laws of Nevada and is duly qualified to carry on its
business in which it is required to be qualified and has the power and authority
to own its property and to carry on its business as now conducted and to enter
into and to carry out the terms of this Agreement and the transactions
contemplated by this Agreement.

 

(b)Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary approval action by or on behalf of Buyer. This Agreement is
legal, valid and binding obligation of Buyer and is enforceable against Buyer in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors’ rights generally
or general principles of equity. The consummation of the transactions
contemplated hereby do not and will not (i) violate the Buyer’s organizational
documents or (ii) violate any applicable law, rule, regulation, judgment,
injunction, order or decree applicable to Buyer.

 

(c)No Brokers. Buyer is not a party to, or in any way obligated under, nor does
Buyer have any knowledge of, any contract or outstanding claim for the payment
of any broker’s or finder’s fee in connection with the origin, negotiation,
execution, or performance of this Agreement for which Seller will have any
liability.

 

13

 

 

article VII.
DUE DILIGENCE

 

Section 7.1 Due Diligence Review By Buyer. Buyer shall have reasonable access to
Seller’s records pertaining to the Assets and may conduct, at its sole cost,
such title examination or investigation, and other examinations and
investigations, as it may in its sole discretion choose to conduct with respect
to the Assets in order to determine whether Defects (as below defined) exist.
Should, as a result of such examinations and investigations, or otherwise, one
or more matters come to Buyer’s attention which it believes in good faith would
constitute a Defect, Buyer shall promptly, but no later than ten (10) days prior
to Closing (“Notice Deadline”), notify Seller in writing (a “Notice”) of any
Defects.

 

Section 7.2 Nature of Defects. The term “Defect” as used in this Agreement shall
mean the following; provided, however, that Permitted Encumbrances shall not
constitute Defects:

 

(a)Net Revenue Interest or Working Interest Variances. Seller’s ownership of the
Assets is such that, with respect to a Well or any of the Leases listed on
Exhibit “A” hereto, it (A) entitles Seller to receive a decimal share of the
Hydrocarbons from all depths (or if depth limitations are noted on Exhibit “A”,
from the depths specified), as shown on Exhibit “A”, which is less than the
decimal share set forth on Exhibit “A” in connection with any such Wells or
Lease identified as “Net Revenue Interest” on Exhibit A or (B) causes Seller to
be obligated to bear, throughout the productive life of such Well or Leases, a
decimal share of the cost of operation of any such Well or Leases greater than
the decimal share set forth on Exhibit “A” in connection with any such Well or
Leases identified as “Working Interest” on Exhibit A.

 

(b)Liens. Seller’s ownership of an Asset is subject to a lien other than (A) a
lien for Taxes which are not yet delinquent or (B) a mechanic’s or materialmen’s
lien (or other similar lien), or a lien under an operating agreement or similar
agreement, to the extent the same relates to expenses incurred which are not yet
delinquent or (C) liens which will be released at or before Closing.

 

(c)Imperfections in Title. Seller’s ownership of an Asset is subject to an
imperfection in title which, if asserted, would cause a Defect, as defined in
subparagraph (a) above.

 

14

 

 

Section 7.3 Permitted Encumbrances. As used in this Agreement, the term
“Permitted Encumbrance” means:

 

(a)lessor’s royalties, non-participating royalties, overriding royalties, and
division orders and the terms, conditions and restrictions of any Lease or
Assumed Contract covering the Hydrocarbons, and similar burdens if the net
cumulative effect of such burdens does not operate to reduce the net revenue
interest in any Asset to an amount less than the net revenue interest set forth
on Exhibit “A” or increase the working interest of any of the Assets from that
set forth in Exhibit “A” without a corresponding increase in the net revenue
interest;

 

(b)subject to the provisions of Section 8.3 hereof, required nongovernmental
third party consents to assignments and similar agreements with respect to which
prior to Closing (i) waivers or consents are obtained from the appropriate
parties, or (ii) the appropriate time period for asserting such rights has
expired without an exercise of such rights;

 

(c)liens for taxes or assessments not yet due or delinquent;

 

(d)any mechanic’s or materialmen’s lien (or other similar lien), or liens under
an operating agreement or similar agreement, to the extent the liens relate to
expenses incurred but not yet due or delinquent;

 

(e)all rights to consent by, required notices to, filings with, or other actions
by Governmental Authorities in connection with the sale or conveyance of oil and
gas leases or interests therein, if the same are customarily obtained subsequent
to such sale or conveyance;

 

(f)easements, rights-of way, rights of use, servitudes, permits, surface leases
and other rights in respect of surface operations, provided they do not
materially interfere with the operation or use of the Assets;

 

(g)defects, irregularities and deficiencies in title of or to any rights-of-way,
rights of use, easements, surface leases or other rights which in the aggregate
do not materially impair the use of such rights-of-way, rights of use,
easements, surface leases or other rights for the purpose of which such rights
will be held by Buyer and would not have a material adverse effect on the
operation or value of any of the Assets; and

 

(h)any lien, privilege or encumbrance covering the Assets to be released at or
prior to Closing, which Seller has disclosed on Schedule 7.3.

 

15

 

  

Section 7.4 Seller’s Response to Notices; Failure to Respond. Seller shall have
three (3) Business Days from receipt of a Notice to respond to any Notice timely
delivered by Buyer pursuant to this Article VII. Such response must be in
writing to be effective and may include an objection to the existence or amount
of any claimed Defect or adjustment, or an election to cure any claimed Defect.
Failure to so respond by Seller shall constitute a waiver of any rights to cure
or object to Defects timely asserted by Buyer prior to the Notice Deadline. If,
prior to Closing, Seller waives any rights to cure or object to a Defect, the
Purchase Price shall be adjusted by the amount of such Defect claimed by Buyer
in its Notice. The Purchase Price shall not be adjusted unless the total
adjustment is greater than $10,000.00 and then only to the extent of the excess
over $10,000.00.

 

Section 7.5 Election to Cure. Whether Seller elects to cure or objects to an
asserted Defect, the Closing shall proceed if otherwise permitted by this
Agreement and the Purchase Price shall be reduced by the amount of such asserted
Defect, but only to the extent such Defect exceeds $10,000.00. If Seller elects
to cure (in its response or after arbitration) an asserted Defect, Seller shall
then have until sixty (60) days after the Closing, or, if Seller disputes the
asserted Defect and arbitration of such dispute occurs, sixty (60) days after
the arbitration proceedings set forth below are completed, to cure the
underlying asserted Defect at its sole cost, risk and expense. The deadline to
cure any underlying defect shall be extended for up to thirty (30) days as long
as Seller works diligently toward such cure. Upon completing the cure for any
such Defect, Seller shall be entitled to payment in immediately available funds
within ten (10) Business Days of the date Seller demonstrates to Buyer’s
reasonable satisfaction that such asserted Defect has been cured.

 

Section 7.6 Arbitration. If Seller and Buyer cannot agree on whether an asserted
Defect exists, or (before or after the Closing) whether an asserted Defect has
been cured, or the amount of reduction in the Purchase Price for any Defect,
then such issue shall be settled by arbitration in accordance with Article X. If
the aggregate Purchase Price reduction claimed by Buyer exceeds ten percent
(10%) of the Purchase Price and neither Party has terminated this Agreement
pursuant to Section 9.3, then the Closing will be postponed until the completion
of the arbitration. If the Seller prevails in such arbitration, Buyer shall pay
to Seller in immediately available funds within ten (10) Business Days from the
date of the arbitration panel’s decision the amount determined by such panel to
be owed Seller.

 

article VIII.
ADDITIONAL COVENANTS

 

Section 8.1 Access to Records. Seller agrees that it will give Buyer, or Buyer’s
authorized representatives, at Seller’s office and at all reasonable times
before the Closing Date, access to Seller’s records pertaining to the Seller’s
ownership and the operation of the Assets (including, without limitation, title
files, division order files, directly related financial and tax accounting
records, well files, health, safety and environmental records, lease files,
abstracts, production records, joint interest billing records, records relating
to platform and pipeline construction, operation and maintenance and production,
severance and ad valorem tax records), for the purpose of conducting due
diligence reviews. Buyer may make copies of such records, at its expense, but
shall, if Seller so requests, return all copies so made if the Closing does not
occur; all costs of copying such items shall be borne by Buyer. Seller shall not
be obligated to provide Buyer with access to any records or data which Seller
cannot provide to Buyer without, in Seller’s opinion, breaching, or risking a
breach of, agreements with other parties, or waiving, or risking waiving, legal
privilege.

 

16

 

 

Section 8.2 Interim Operation. Seller covenants that from the execution of this
Agreement to the Closing, except as provided herein or otherwise consented to in
writing by Buyer, Seller will take all reasonable steps consistent with past
practice to maintain the Leases and Units in full force and effect, to timely
pay Seller’s expenses attributable to the operation of the Assets and to satisfy
Seller’s royalty obligations attributable to the Leases and Units and to
maintain all of Seller’s insurance coverage in place prior to the Effective
Date, all to the extent possible as a non-operator of the Assets. Except as
necessary in Seller’s sole judgment in emergency situations, Seller shall not,
without Buyer’s consent, voluntarily incur any liability or enter into any
commitment with respect to the Assets which will cost in excess of $10,000.00
net to Buyer with respect to an individual project; cancel any contract
associated with the Assets except in the ordinary course of business; or enter
into any hedging, forward sales or similar agreements with respect to production
from the Assets.

 

Section 8.3 Consents to Assign. Seller represents that the transfer by Seller of
the Assets, or any portion thereof, is not subject to the approval of lessors or
governmental agencies having jurisdiction, other forms of consent or certain
rights of first refusal or preferential rights of purchase in favor of third
parties, however, Seller shall, prior to Closing, use its reasonable efforts to
attempt to obtain the necessary non-governmental approvals, consents to assign
and waivers of preferential rights, if any such approvals, consents or waivers
are discovered. If any such approvals, consents or waivers are denied or not
acquired or obtained prior to Closing, the value associated the affected Assets
shall be subtracted from the Purchase Price by the amount allocated for the
affected Assets on Schedule 2.2 by Buyer with the remaining Assets being
conveyed at Closing and the value associated with the affected Assets remaining
in escrow after Closing. Seller shall then have until sixty (60) days after the
Closing to secure consents and waivers of preferential rights at its sole cost,
risk and expense. The deadline to secure any consents and waivers of
preferential rights shall extended for up to thirty (30) days as long as Seller
works diligently to secure such. Upon successfully acquiring such consents or
waivers, Seller shall be entitled to payment in immediately available funds
within ten (10) Business Days of the date Seller demonstrates to Buyer’s
reasonable satisfaction that such consents or waivers have been secured.

 

Section 8.4 Area of Mutual Interest. The Parties hereto stipulate that the
precise geographic region where the Leases are located and one (1) mile from the
exterior boundaries of the Leases as an Area of Mutual Interest (“AMI”). Within
three (3) years from the date of this Agreement in the event Seller acquires any
new leases in the AMI, Seller shall offer these leases to Buyer at cost and
Buyer shall have the option but not the obligation to take these new leases from
Seller, however, in the event Buyer acquires any leases in the AMI from Seller,
Seller shall retain an overriding royalty equal to the existing overriding
royalty that Seller acquired under this Agreement and an overriding royalty
equal to the difference of burdens and eighty percent (80%) in a new lease that
is within the AMI but was not one of the original Leases to this Agreement.
Likewise within three (3) years from the date of this agreement, in the event
Buyer acquires any replacement Leases or any new leases in the AMI, Buyer agrees
to convey an overriding royalty to Seller in the amount of four percent (4%) of
one hundred percent (100%), however, this overriding royalty will be reduced so
that Buyer’s net revenue interest shall never be reduced to less than eighty
percent (80%). If less than a full interest is acquired in any replacement
Leases or new leases, the overriding royalty shall be proportionately reduced.

 

17

 

 

Section 8.5 Operation after the Closing Date. Seller agrees to remain as the
contract operator of the Wells after the Closing Date under a transitional
operating agreement on terms reasonably approved by Buyer and signed at Closing.

 

article IX.
CLOSING, TERMINATION AND FINAL ADJUSTMENTS

 

Section 9.1 Conditions Precedent.

 

(a)Each Party’s obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver by the other Party of the
following conditions:

 

(i)No provision of any applicable law or regulation and no judgment, injunction,
order or decree shall prohibit the consummation of the Closing.

 

(ii)No action or proceeding by or before any Governmental Authority shall have
been instituted or threatened (and not subsequently dismissed, settled or
otherwise terminated) which might restrain, prohibit or invalidate any of the
transactions contemplated by this Agreement, other than an action or proceeding
instituted or threatened by a Party or any of its Affiliates.

 

(b)The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions (unless
waived by Buyer in its sole discretion):

 

(i)Seller shall have performed and complied in all material respects with all
terms of this Agreement required to be performed or complied with by it at or
prior to Closing, including, without limitation, those matters reflected in
Section 9.2.

 

(ii)The representations and warranties of Seller contained in Section 6.1 shall
be true and correct in all material respects on the Closing Date as though made
on and as of the Closing Date (except for representations and warranties that
are made as of a specific date, which shall be true and correct on and as of
such date).

 

(iii)Buyer shall have completed its audit of the financial records related to
the Leases, Wells and Facilities as required by its lenders, closed on its
financing commitment with such lenders and received a certificate of an
appropriate officer of Seller with respect to the matters reflected in Section
9.1(b)(i) and Section 9.1(b)(ii).

  

18

 

 

(c)The obligation of Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions (unless
waived by Seller in its sole discretion):

 

(i)Buyer shall have performed and complied in all material respects with all
terms of this Agreement required to be performed or complied with by it at or
prior to Closing including, without limitation, those matters reflected in
Section 9.2.

 

(ii)The representations and warranties of Buyer contained in Section 6.2 shall
be true and correct in all material respects on the Closing Date as though made
on and as of the Closing Date (except for representations and warranties that
are made as of a specific date, which shall be true and correct on and as of
such date).

 

(iii)Seller shall have received a certificate of an appropriate officer of Buyer
with respect to the matters reflected in Section 9.1(c)(i) and Section
9.1(c)(ii).

 

Section 9.2 Closing.

 

(a)The closing of the transactions contemplated herein and the transfer of the
Assets shall occur on or before September 30, 2013 (“Closing Date”), at Seller’s
office or Seller’s bank’s offices, at 10:00 a.m., Central Standard Time, or such
other date, time, and place as Seller and Buyer may agree in writing (the
“Closing”) provided that if Buyer’s lenders are not ready to close on the
Closing Date and the Buyer has used diligent efforts, the Closing Date may be
extended (if necessary) for up to 30 days.

 

(b)At Closing, the following shall occur:

 

(i)Buyer and Seller shall execute, acknowledge and delivery a duplicate original
of the Assignments in substantially the form of Exhibit “C”, in form and
substance sufficient to convey title to the Assets in accordance with the terms
of this Agreement;

 

(ii)Buyer and Seller shall execute, acknowledge and deliver a duplicate original
Closing Statement and any such other instruments as are reasonably necessary to
effectuate the conveyance of the Assets to Buyer, including without limitation,
separate assignments of the Assets on officially approved forms in sufficient
counterparts to satisfy applicable statutory and regulatory requirements for the
transfer of the Assets; and

 

(iii)At the Closing, upon delivery of the documents and materials described in
this Section, Buyer shall pay to Seller the Adjusted Purchase Price.

 

Section 9.3 Termination. This Agreement and the transactions contemplated hereby
may be terminated in the following instances:

 

(a)By mutual written consent of the Parties;

 

19

 

 

(b)By Seller if any of the conditions set forth in Section 9.1(a) or Section
9.1(c) have not been fulfilled or waived at Closing;

 

(c)By Buyer if any of the conditions set forth in Section 9.1(a) or Section
9.1(b) have not been fulfilled or waived at Closing;

 

(d)By either Party, if the aggregate value of all uncured Defects at Closing,
exceeds ten percent (10%) of the Purchase Price;

 

(e)By either Party, if the aggregate value of all Casualty Losses at Closing
exceeds ten percent (10%) of the Purchase Price; or

 

(f)By either Party if the Closing shall not have occurred (other than as a
result of a breach by the Party seeking to terminate this Agreement) on or
before October 30, 2013.

 

Section 9.4 Effect of Termination. If Buyer, through no fault of Seller, fails,
refuses, or is unable for any reason not permitted by this Agreement to close
the sale pursuant hereto, Seller may, at its option, assert its right of
specific performance or pursue any other rights or remedies to which it may be
entitled, at law or in equity. Likewise, if Seller, through no fault of Buyer,
fails, refuses, or is unable for any reason not permitted by this Agreement to
close the sale pursuant hereto, Buyer may, at its option, assert its right of
specific performance or pursue any other rights or remedies to which it may be
entitled, at law or in equity.

 

Section 9.5  Final Accounting Statement. Within one hundred eighty (180) days
after the Closing Date, Buyer shall prepare a final accounting statement (the
“Final Accounting Statement”) for its adjustments to the Purchase Price provided
for in Section 2.4 and any other adjustments arising pursuant to this Agreement.
Buyer shall submit the Final Accounting Statement to Seller, along with copies
of third party vendor invoices in excess of $10,000.00, or other evidence of
expenses agreed to by Buyer and Seller, and Seller shall have thirty (30) days
to review same and confirm the accuracy thereof. Upon agreement by Buyer and
Seller as to the accuracy of said Final Accounting Statement, or upon the
expiration of said thirty (30) day period, whichever occurs first, Seller or
Buyer, whichever the case may be, shall promptly pay to the other such sum as
may be found due, after making adjustments for any payments made at Closing in
accordance with the Closing Statement.

 

If Buyer and Seller are unable to agree to all adjustments respecting the Final
Accounting Statement within thirty (30) days after Seller’s receipt of the Final
Accounting Statement submitted by Buyer, adjustments which are not in dispute
shall be made between Buyer or Seller at the expiration of such 30-day period,
and as to the adjustments which remain in dispute, Buyer and Seller shall
continue to negotiate in good faith to reach a final agreement as to such
disputed adjustments. Provided, however, if Buyer and Seller are unable to agree
to such final adjustments within ninety (90) days after Buyer provides the Final
Accounting Statement to Seller, either Party may submit such disagreement to
arbitration as provided in Article X. The costs and expenses of the arbitration
shall be shared equally by Seller and Buyer. Within five (5) days after the
decision of the arbitrator, the Buyer or Seller, as the case may be, shall
promptly make a cash payment to the other equal to the sum as may be found to be
due as the Final Accounting Statement.

 

Nothing in this Section shall limit any right of either Party to assert a claim
for revenues or reimbursement after the Final Accounting Statement, and in this
regard (i) should any Party receive revenues to which the other is entitled,
such Party shall pay over such revenues to the appropriate Party within 30 days
of receipt thereof, and (ii) should any Party pay for costs or expenses for
which the other Party is responsible, such Party shall be reimbursed by the
other Party within 30 days of the date the responsible Party receives an invoice
for such costs and expenses.

 

20

 

 

article IV.
GOVERNING LAW AND RESOLUTION OF DISPUTES

 

Section 10.1 Governing Law. This Agreement is governed by and interpreted under
the laws of the State of Kansas, without regard to its choice of law rules,
except that the substantive and procedural rules of the Federal Arbitration Act,
9 U.S.C. §§ 1-16 (the “Act”) shall govern the Article X.

 

Section 10.2 Resolution of Disputes. The Parties shall exclusively and finally
resolve any Dispute (“Dispute” defined as meaning any dispute or controversy
arising out of this Agreement, including a dispute or controversy regarding the
existence, construction, validity, interpretation, enforceability, termination
or breach of this Agreement, whether based in contract, tort or otherwise)
between them using direct negotiations, mediation and arbitration as set out in
this Article X. A Party who violates this Article X shall pay all legal and
consulting fees and costs incurred by the other Party in any suit, action, or
proceeding to enforce this Article X. While the procedures in this Article X are
pending, each Party shall continue to perform its obligations under this
Agreement, unless to do so would be impossible or impracticable under normal
circumstances.

 

Section 10.3 Direct Negotiations. If a Dispute arises, a Party shall initiate
the resolution process by giving notice setting out in writing and in detail the
issues in Dispute and the value of the Claim to the other Party. A meeting
between the Parties, attended by individuals with decision-making authority,
must take place within thirty (30) days from the date the notice was sent in an
attempt to resolve the Dispute through direct negotiations. All negotiations
under this provision shall be treated as compromise and settlement negotiations
for purposes of applicable rules of evidence.

 

Section 10.4 Mediation. If the Dispute cannot be settled by direct negotiations
within thirty (30) days of initiation of the resolution process, either Party
may initiate mediation by giving notice to the other Party. The place of
mediation is Wichita, Kansas.

 

Section 10.5 Arbitration. If the Dispute is not resolved by mediation within
thirty (30) days from the date of the notice requiring mediation, or if the
Dispute is unresolved within sixty (60) days from the date requiring direct
negotiations, then the Dispute shall be finally settled by binding arbitration
and either Party may initiate such arbitration by giving notice to the other
Party. If a Party refuses to toll all applicable statutes of limitations and
defenses based upon the passage of time while the proceedings in Section 10.3
and 10.4 are pending, or if for any reason a Party believes its Claims may be
time barred, then any Party may file an arbitration proceeding in an attempt to
preserve its Claims and such proceeding shall be stayed by the arbitrator or
arbitrators after appointment so that the Parties may continue efforts to
resolve this Dispute as set out in this Article X. The arbitration shall be
conducted in accordance with the Institute for Conflict Prevention and
Resolution Rules for Non-Administered Arbitration (“CPR”) Rules, except to the
extent conflicts between the CPR Rules then in force and the provisions of this
Agreement, in which event the provisions of this Agreement shall prevail. The
CPR is the appointing authority. The place of arbitration is Wichita, Kansas.

 

21

 

 

Section 10.6 Arbitration Provisions. The following provisions shall apply to any
arbitration proceedings commenced pursuant to Section 10.5:

 

(a)The number of arbitrators shall be one if the monetary value of the Dispute
is US$5,000,000 (or its currency equivalent) or less. The number of arbitrators
shall be three if the monetary value is greater than US$5,000,000 or its
currency equivalent.

 

(b)The arbitrator or arbitrators must remain neutral, impartial and independent
regarding the Dispute and the Parties. If the number of arbitrators to be
appointed is one, that arbitrator or the presiding arbitrator if the arbitrators
are three, must be a lawyer experienced in the resolution of disputes with
experience relating to the issues in dispute.

 

(c)The Parties waive any Claim for, and the arbitrator has or arbitrators have
no power to award, the damages waived and released under this Agreement. The
arbitrator has or arbitrators have no authority to appoint or retain expert
witnesses for any purpose unless agreed to by the Parties. The arbitrator has or
arbitrators have the power to rule on objections concerning jurisdiction,
including the existence or validity of this arbitration clause and existence or
the validity of this Agreement.

 

(d)All arbitration fees and costs shall be borne equally by the Parties
regardless of which Party prevails. Each Party shall bear its own costs of legal
representation and witness expenses.

 

(e)The arbitrator is or arbitrators are authorized to take any interim measures
as the arbitrator considers or arbitrators consider necessary, including the
making of interim orders or awards or partial final awards. An interim order or
award may be enforced in the same manner as a final award using the procedures
specified below. Further, the arbitrator is or arbitrators are authorized to
make pre- or post-award interest at applicable statutory interest rates during
the relevant period.

 

(f)The Dispute should be resolved as quickly as possible. The arbitrator’s or
arbitrators’ award must be issued within three months from the completion of the
hearing, or as soon as possible thereafter.

 

Section 10.7 Enforceability.

 

(a)The Parties waive irrevocably their right to any form of appeal, review or
recourse to any court or other judicial authority, to the extent that such
waiver may be validly made.

 

22

 

 

(b)Except for proceedings to preserve property pending determination by the
arbitrator or arbitrators or to enforce an award, the mandatory exclusive venue
for any judicial proceeding permitted in this Agreement is the court of
competent jurisdiction in Pawnee, Kansas. The Parties consent to the
jurisdiction of these courts and waive any defenses they have regarding
jurisdiction. Proceedings to confirm an award may be filed as provided in this
Section 10.7 at any time within one year after the award is made.

 

(c)Proceedings to enforce judgment entered on an award may be brought in any
court having jurisdiction over the person or assets of the non-prevailing Party.
The prevailing Party may seek, in any court having jurisdiction, judicial
recognition of the award, or order of enforcement or any other order or decree
that is necessary to give full effect to the award.

 

Section 10.8 Confidentiality.

 

(a)The Parties agree that any Dispute and any negotiations, mediation and
arbitration proceedings between the Parties in relation to any Dispute shall be
confidential and shall not be disclosed to any third party.

 

(b)Without prejudice to the foregoing, the Parties agree that disclosure may be
made:

 

(i)In order to enforce any of the provisions of this Agreement, including
without limitation, the Parties agreement to arbitrate, any arbitration order or
award and any court judgment;

 

(ii)To the auditors, legal advisers, lenders, insurers and Affiliates of that
Party to whom the confidentiality obligations set out in this Agreement shall
extend;

 

(iii)Where that Party is under a legal or regulatory obligation to make such
disclosure, but limited to the extent of that legal obligation; or

 

(iv)With the prior written consent of the other Party.

 

(c)The Parties agree to submit to the jurisdiction of the courts of Ohio, for
the purposes of any proceedings to enforce this Article X and shall prevent any
information, documents or materials belonging to a Party from being used or
disclosed by that Party for any purpose.

 

23

 

 

article V.
MISCELLANEOUS

 

Section 11.1 Casualty Loss of Assets. If prior to Closing, any of the Assets are
damaged or destroyed by fire or other casualty (a “Casualty Loss”), Seller may
repair the damage at its cost or, at its sole option, either reduce the Purchase
Price by a mutually agreed estimated cost of the repair or replacement or
withdraw the damaged Asset from the sale and reduce the Purchase Price by the
allocated value thereof. If Buyer and Seller are unable to agree as to the
amount of such price reduction prior to Closing or if the amount of such price
reduction exceeds ten percent (10%) of the purchase Price, then either Party may
elect to terminate this Agreement; provided that such terminating Party is not
in default hereunder.

 

Section 11.2 Books and Records. Seller shall, at the cost of Seller, deliver the
Records to Buyer at Closing or within five (5) Business Days thereafter.

 

Section 11.3 Publicity. Seller and Buyer shall consult with each other with
regard to all press releases or other public or private announcements made
concerning this Agreement or the transactions contemplated hereby, and except as
may be required by applicable laws or the applicable rules and regulations of
any Governmental Authority or stock exchange, neither Buyer nor Seller shall
issue any such press release or other publicity without the prior written
consent of the other Party, which shall not be unreasonably withheld. No press
release shall ever include any reserve estimates.

 

Section 11.4 Entire Agreement. This Agreement constitutes the entire agreement
between Seller and Buyer with respect to the transactions contemplated herein,
and supersedes all prior oral or written agreements, commitments,
understandings, or information otherwise furnished by Seller to Buyer with
respect to such matters. No amendment shall be binding unless in writing and
signed by both Parties. Headings used in this Agreement are only for convenience
of reference and shall not be used to define the meaning of any provision. This
Agreement is for the benefit of Seller and Buyer only and not for the benefit of
third parties.

 

Section 11.5 Notices. All notices and consents to be given hereunder shall be in
writing and shall be deemed to have been duly given if delivered either by
personal delivery, telex, telecopy or similar facsimile means, by certified or
registered mail, return receipt requested, or by courier or delivery service,
addressed to the Parties hereto at the following addresses:

 

If to Seller: If to Buyer:     200 East 1st Street, Suite 307 6037 Franz Road,
Suite 103 Wichita, Kansas 67202 Dublin, Ohio 43017 Attn: Rod Anderson Attn:
Timothy Crawford Title: Managing Member Title: Chief Executive Officer
Phone  ___________ Phone  (614) 459-4959 Fax:   ____________ Fax:   (614)
389-6643

 

or at such other address and number as either Party shall have previously
designated by written notice given to the other Party in the manner herein above
set forth. Notices shall be deemed given when received, if sent by facsimile
means (confirmation of such receipt by confirmed facsimile transmission being
deemed receipt of communications); and when delivered and receipted for (or upon
the date of attempted delivery where delivery is refused), if hand-delivered,
sent by express courier or delivery service, or sent by certified or registered
mail, return receipt requested.

 

Section 11.6 Governing Law. This Agreement shall be governed as prescribed under
Section 10.1. The validity of the conveyances affecting the title to real
property shall be governed by and construed in accordance with the laws of the
jurisdiction in which such property is situated.

 

24

 

 

Section 11.7 Confidentiality. Buyer acknowledges that all information furnished
or disclosed pursuant hereto by Seller but not already known to or in the
possession of Buyer must remain confidential prior to Closing. Buyer may
disclose such confidential information already known to or in the possession of
Buyer as permitted for that class of data or may disclose Seller-provided
confidential information or data only to its subsidiaries or Affiliates, agents,
advisors, counsel or representatives (herein “Representatives”) who have agreed,
prior to being given access to such information, to be bound by the terms of
this Agreement as its bears upon confidential information and requirements of
confidentiality found herein. In the event that Closing of the transactions
contemplated by this Agreement does not occur for any reason, Buyer and its
Representatives shall promptly return to Seller or destroy all non-proprietary
or non-interpretive materials and information delivered or disclosed by Seller,
but excluding any confidential information, notes, summaries, compilations,
analyses or other material derived from the inspection or evaluation of material
and information already known to or in the possession of Buyer.

 

Section 11.8 Conflict of Interest. Conflicts of interest related to this
Agreement are strictly prohibited. Except as otherwise expressly provided
herein, neither Seller nor any director, employee or agent of Seller shall give
to or receive from any director, employee or agent of Buyer any gift,
entertainment or other favor of significant value, or any commission, fee or
rebate. Likewise, neither Seller nor any director, employee or agent of Seller
shall enter into any business relationship with any director, employee or agent
of Buyer (or of any Affiliate of Buyer), unless such person is acting for and on
behalf of Buyer, without prior written notification thereof to Buyer. Each Party
shall promptly notify the other Party of any violation of this Section, and any
consideration received by a Party as a result of such violation shall be paid
over or credited to the other Party. Each Party, or its designated
representative(s), may audit any and all records of the other Party for the sole
purpose of determining whether there has been compliance with this Agreement.

 

Section 11.9 Survival. Except as provided in this Section 11.10, all
representations and warranties of Seller and Buyer contained herein shall
survive for a period of 12 months after the Closing Date. The covenants and
other agreements of Seller and Buyer set forth in this Agreement shall survive
the Closing until fully performed.

 

Section 11.10 Further Cooperation. After the Closing, each Party shall execute,
acknowledge, and deliver all documents, and take all such acts which from time
to time may be reasonably requested by the other Party in order to carry out the
purposes and intent of this Agreement.

 

Section 11.11 Counterparts. This Agreement may be executed in one or more
counterparts with the same effect as if all signatures of the Parties hereto
were on the same document, but in such event each counterpart shall constitute
an original, and all of such counterparts shall constitute one Agreement; but in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart signed by each Party.

 

Section 11.12 Exhibits and Schedules. All of the Exhibits and Schedules referred
to in this Agreement are hereby incorporated into this Agreement by reference
and constitute a part of this Agreement. Each Party to this Agreement and its
counsel has received a complete set of Exhibits and Schedules prior to and as a
part of the execution of this Agreement.

 

25

 

 

Section 11.13 Severability. If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, all other
conditions and provisions of the Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transaction
contemplated hereby is not affected in any materially adverse manner to the
other Party.

 

Section 11.14 Expenses and Recording. Except as otherwise specifically provided,
all fees, costs and expenses incurred by Buyer or Seller in negotiating this
Agreement or in consummating the transactions contemplated by this Agreement
shall be paid by the Party incurring the same, including, without limitation,
legal and accounting fees, costs and expenses. Buyer shall be responsible for
the filing and recording of the Assignments and other instruments required to
convey title to the Assets to Buyer. Buyer shall bear all required documentary,
filing and recording fees and expenses incurred in connection therewith.

 

Section 11.15 CONSPICUOUSNESS / EXPRESS NEGLIGENCE. THE DEFENSE, INDEMNIFICATION
AND HOLD HARMLESS PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE
WHETHER OR NOT THE DAMAGES, LOSSES, INJURIES, LIABILITIES, COSTS OR EXPENSES IN
QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED PARTY. BUYER AND
SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE
AND IS CONSPICUOUS.

 

Section 11.16 MUTUAL WAIVER OF CONSEQUENTIAL DAMAGES. NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL
OR INDIRECT DAMAGES, WHETHER ARISING IN TORT, CONTRACT, UNDER ANY STATUTE, UNDER
ANY INDEMNITY PROVISION OR OTHERWISE. THE PARTIES INTEND THAT THE LIMITATIONS
UNDER THIS SECTION 11.16 IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE
WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING, WITHOUT
LIMITATION, THE NEGLIGENCE OR STRICT LIABILITY OF ANY PARTY, WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.

 

Section 11.17 ASSIGNMENT. Buyer shall be entitled to assign its rights, but not
its obligations, under this Agreement at Closing to an affiliate of Buyer.

 

IN WITNESS WHEREOF, the Parties hereto have caused their authorized
representatives to execute this Agreement effective on the date first above
written.

 

SELLER:   BUYER:       Kansas Petroleum Resources, LLC   Cardinal Energy Group,
Inc.       By: /s/ Rod Anderson   By: /s/ Timothy W. Crawford Name: Rod
Anderson     Name: Timothy W. Crawford Title: Managing Member   Title: Chief
Executive Officer

 

26

 

 

ATTACHED TO THE PURCHASE AND SALE AGREEMENT DATED AUGUST 19, 2013 BETWEEN KANSAS
PETROLEUM RESOURCES, LLC, AS SELLER, AND CARDINAL ENERGY GROUP, INC., AS BUYER.

 

Exhibit “A”

 

Oil and Gas Leases

 

The “Net Revenue Interest” of the Lessee under each of the leases set forth on
this Exhibit A shall not be less than 80%.

 

The “Working Interest” of the Lessee under each of the leases set forth on this
Exhibit A shall be 100%.

 

 

[Insert list of leases here]

 

Wells and Other Assets

 

GENERAL DESCRIPTION OF THE PROPERTY TO BE ACQUIRED

 

General Location: Pawnee County, Kansas Current Production: 240 BOPD Current
Wells Producing: 18 Total Wells: 19 Acreage: 17,000 Acres

General Description:

 

●3D Seismic on all 17,000 acres

●Two (2) water disposal systems with two disposal wells drilled to the Arbuckle
formation

●6,000 + acres are HBP

●Two plus years remain on the existing leases (17,000 acres) with an option to
extend the term of the leases.

●At least an 80% NRI to be provided

●Approximately 30 PUD locations with a total of 50 potential locations which
include 3D seismic.

●Primary productive zone is Mississippian Osage and Warsaw formation which have
been drilled vertically for the 19 wells.

 

Average wells in this area produce approximately 90,000 barrels of oil per well
from the Mississippian formation and about the same from the Cherokee formation.
The Chase wells have potential for natural gas production of over 1BCF per wells
from 2500’.

 

 

 

 

Exhibit “B”

 

List of contracts, permits, rights-of-way, easements, licenses, servitudes,
transportation agreements, pooling agreements, operating agreements, gas
balancing agreements, participation and processing agreements, confidentiality
agreements, side letter agreements and any other agreement, document or
instrument

 

 

 

 

Exhibit “C”

ASSIGNMENT AND BILL OF SALE

 

THIS ASSIGNMENT AND BILL OF SALE (“Assignment”) effective from and after 7:00
a.m., Central Standard Time, ___________, 2013 (said date and time hereinafter
referred to as the “Effective Date”), is by and between Kansas Petroleum
Resources, LLC, a Kansas limited liability company, whose mailing address is 201
East 1st Street, Suite 307, Wichita, Kansas 67202 (“Assignor”) and Cardinal
Energy Group, Inc., a Nevada corporation, whose mailing address is 6037 Franz
Road, Suite 103, Dublin, Ohio 43017 (“Assignee”).

 

W I T N E S S E T H:

 

1.Conveyance. For and in consideration of the sum of One Hundred and No/100
dollars ($100.00), cash in hand paid, and other valuable consideration,
including the assumption by Assignee of certain obligations and liabilities
described in that certain Purchase and Sale Agreement dated August ____, 2013,
by and between Assignor, as Seller, and Assignee, as Buyer (“Purchase and Sale
Agreement”), the receipt and sufficiency of which are hereby acknowledged,
Assignor, subject to said Purchase and Sale Agreement (which Purchase and Sale
Agreement is incorporated herein by reference for all purposes), does hereby
sell, transfer, assign, convey, set over and deliver unto Assignee (without
warranty of any kind, express or implied, except that Assignor shall warrant
title to Assignee as to the Assets (as defined below), and in particular to the
working interests and net revenue interests shown on Exhibit A, against the
claims of all persons claiming an interest therein by, through or under
Assignor, hereinafter called the “Special Warranty”), with subrogation against
Assignor’s predecessors in title, excluding Affiliates, subject to the terms
hereof, all of Assignor’s rights, title and interests in and to the following
(collectively, the “Assets”):

 

a.The oil and gas leases, oil, gas and mineral leases, mineral executive
interests, contractual rights, rights to explore, produce and develop, rights to
drain, wellbore interests and/or properties set forth in Exhibit “A” and further
including, if applicable, all renewals and extensions of those leases and all
leases issued in substitution therefore (any such rights or interests
collectively referred to as the “Leases”).

 

b.Any unitization, pooling and/or communitization agreements, declarations,
designations or orders relating to the Leases and all of Assignor’s interest in
and to the properties covered or units created thereby to the extent
attributable to the Leases (collectively, the “Units”).

 

c.All oil and gas wells, salt water disposal wells, injection wells and other
wells located on affecting or draining any of the Leases, within the Units or as
listed on Exhibit “A” (collectively, the “Wells”).

 

 

 

 

d.All structures, facilities, foundations, wellheads, tanks, pumps, compressors,
separators, heater, valves, fittings, equipment, machinery, fixtures, flowlines,
pipelines, platforms, tubular goods, materials, tools, supplies, improvements,
and any other real, personal, immovable and mixed property located on, used in
the operation of, or relating to the production, treatment, non-regulated
transportation, gathering, marketing, sale, processing, handling or disposal of
hydrocarbons, water, and associated substances produced from the Leases or the
Units (the “Facilities”) .

 

e.All natural gas, casinghead gas, drip gasoline, natural gasoline, natural gas
liquids, condensate, products, crude oil and other hydrocarbons, helium, whether
gaseous or liquid, produced or drained from or allocable to the Assets (as
hereinafter defined on and after the Effective Date (the “Hydrocarbons”).

 

f.To the extent transferable, all contracts, permits, rights-of-way, easements,
licenses, servitudes, transportation agreements, pooling agreements, operating
agreements, gas balancing agreements, participation and processing agreements,
confidentiality agreements, side letter agreements and any other agreement,
document or instrument listed on Exhibit “A” INSOFAR ONLY as they directly
relate and are attributable to the Leases, Units, Wells, Hydrocarbons, or
Facilities or the contractual and wellbore rights thereon or therein or the
ownership or operation thereof, or the production, treatment, non-regulated
transportation, gathering, marketing, sale, processing, handling disposal,
storage or transportation of hydrocarbons, water, or substances associated
therewith (the “Assumed Contracts”).

 

g.Records relating to the Leases, Units, Wells, Hydrocarbons, Assumed Contracts
and Facilities in the possession of Assignor (the “Records”) and including as
follows: all (i) lease, land, and division order files (including any abstracts
of title, title opinions, certificates of title, title curative documents, and
division orders contained therein), (ii) the Assumed Contracts; (iii) all well,
facility, operational, environmental, regulatory, compliance and historic
production files and (iv) all geological files relating to the Leases (the
“Geologic Data”), but not including any records which (i) Assignor is prohibited
from transferring to Assignee by law or existing contractual relationship, or
which (ii) constitute Excluded Assets (as hereinafter defined in Section 2)

 

2.Exclusions and Reservations: Specifically excepted and reserved from this
Assignment are the following, hereinafter referred to as the “Excluded Assets”:

 

a.All corporate, financial, and tax records of Assignor; however, Assignor shall
furnish Assignee with copies of any financial and tax records which directly
relate to the Assets, or which are necessary for Assignee’s ownership,
administration, or operation of the Assets upon receipt of a written request
from Assignee indicating its desire to obtain copies, and the purpose for same.

 

b.All oil, gas and other liquid or gaseous hydrocarbons produced from or
attributable to Assignor’s interest in the Assets with respect to all periods
prior to the Effective Date, together with all proceeds from the sale of such
hydrocarbons.

 

 

 

 

c.Claims of Assignor for refund of or loss carry forwards with respect to (i)
production, windfall profit, severance, ad valorem or any other taxes
attributable to the Assets for any period prior to the Effective Date, (ii)
income or franchise taxes.

 

d.All amounts due or payable to Assignor as adjustments or refunds under any
contracts or agreements affecting the Assets, with respect to periods prior to
the Effective Date, specifically including, without limitation, amounts
recoverable from audits under operating agreements and any overpayments of
royalties.

 

e.Subject to the terms hereof, all monies, proceeds, benefits, receipts,
credits, income or revenues (and any security or other deposits made)
attributable to the Assets or the operation thereof prior to the Effective Date.

 

f.All Assignor’s patents, trade secrets, copyrights, names, marks and logos.

 

g.Assignor’s service agreements, storage or warehouse agreements, supplier
contracts, service contracts, insurance contracts, and construction agreements.

 

h.Overriding royalty, which shall be free and clear of all costs except taxes,
equal to the positive difference between existing burdens on the date hereof and
eighty percent (80%) and delivering to Buyer a 100% working interest in and to
the Leases, Wells and Hydrocarbons.

 

TO HAVE AND TO HOLD the Assets unto Assignee, its successors and assigns
forever, subject to the terms, conditions and reservations set forth herein, in
the Leases, the Units, the Assumed Contracts, and in the Purchase and Sale
Agreement.

 

3.Purchase and Sale Agreement. This Assignment is made subject to the unrecorded
Purchase and Sale Agreement. Any term used herein and not defined in this
Assignment shall have the definition or meaning given to it in the Purchase and
Sale Agreement. The Purchase and Sale Agreement shall be binding on and inure
for the benefit of the rightful successors and permitted assigns of the Assignor
and Assignee.

 

4.Assumption of Obligations. Subject to the terms of the Purchase and Sale
Agreement, in its elections and for the operations of the Assets, all after the
effective date, Assignee shall observe and comply with all covenants, terms, and
provisions, express or implied, contained in the Assumed Contracts and Assignee
shall assume and be responsible for those express obligations of Assignor
accruing under such Assumed Contracts on or after the Effective Date.

 

5.Abandonment Obligations. As additional consideration for the sale of the
Assets, Assignee shall assume and timely and fully satisfy Assignor’s share of
the Abandonment Obligations (as defined below) associated with the Wells. As
used herein, the term “Abandonment Obligations” shall mean and include those
obligations, defined by regulation as of the Effective Date, associated with and
liability for (i) the plugging and abandonment of the Wells, (ii) the removal of
caissons and pipelines used in connection with the Assets, and (iii) the
clearance, restoration and remediation of the surface and cleanup and complete
reclamation of the sea floor portion of the Leases associated with the Wells.

 

 

 

 

6.Entire Agreement. This Assignment along with the Purchase and Sale Agreement
and any applicable forms of assignment constitute the entire understanding
between Assignor and Assignee with regard to the subject matter hereof,
superseding all prior statements, representations, discussions, agreements and
understandings.

 

7.Conflicts. In case of any conflict between the terms and provisions of the
Purchase and Sale Agreement and the terms and provisions of this Assignment, the
terms and provisions of the Purchase and Sale Agreement shall prevail.
Notwithstanding the foregoing, third parties may rely upon this Assignment for
the description of the Assets conveyed, which Assets are not reduced or
diminished in any manner by the terms of the Purchase and Sale Agreement.

 

IN WITNESS WHEREOF, this Assignment is executed by the parties hereto before the
undersigned competent witnesses, as of the dates acknowledged below, but
effective from and after 7:00 a.m., Central Standard Time, August 30, 2013,
subject to any applicable approvals by any Governmental Authority having
jurisdiction.

 

Witnesses:   ASSIGNOR:     Kansas Petroleum Resources, LLC       Name          
    By: Printed Name:   Its:  

 

 

Witnesses:   ASSIGNEE:     Cardinal Energy Group, Inc.       Name:              
By: Timothy W. Crawford Printed Name   Its:

 

 

 

 

STATE OF KANSAS

 

COUNTY OF _____________

 

On this _____ day of August, 2013, before me appeared Rod Anderson, to me, a
Notary Public, personally known, who being by me duly sworn did say that he is
the Managing Member of Kansas Petroleum Resources, LLC, a Kansas limited
liability company, and that said instrument was signed on behalf of said
company, by authority of governing authorization, and said appearer acknowledged
that he executed the same as the free act and deed of said company.

 

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date
hereinabove written.

 

      Notary Public, State of Kansas

 

STATE OF OHIO

 

COUNTY OF ________________

 

On this ___ day of August, 2013, before me appeared Timothy Crawford, to me, a
Notary Public, personally known, who being by me duly sworn did say that he is
the Chief Executive Officer of Cardinal Energy Group, Inc., a Nevada
corporation, and that said instrument was signed in behalf of said company, by
authority of its governing authorization, and said appearer acknowledged that he
executed the same as the free act and deed of said company.

 

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date
hereinabove written.

 

      Notary Public, State of Ohio

 

 

 

 

Exhibit “A”

 

Attached to and made a part of that Assignment and Bill of Sale dated effective
August 30, 2013 by and between Kansas Petroleum Resources, LLC, as Assignor, and
Cardinal Energy Group, Inc., as Assignee

 

Oil and Gas Leases and Wells – One Hundred Percent (100%) Working Interest and
Eighty Percent (80%) Net Revenue Interest.

 

EXHIBIT “A” – CONTINUED - ATTACHED TO THE PURCHASE AND SALE AGREEMENT DATED
AUGUST ____, 2013 BETWEEN KANSAS PETROLEUM RESOURCES, LLC, AS SELLER, AND
CARDINAL ENERGY GROUP, INC., AS BUYER.

 

 

 

 

Schedule 2.2

 

Allocation of Value of Assets

 

To be provided at Closing.

 

Schedule 4.1

 

Abandonment Obligations

None

 

Schedule 6.1(h)

 

Imbalance or Net Overproduction

None

 

Schedule 6.1(i)

 

Outstanding Operational Matters and Bills

None

 

Schedule 6.1(j)

 

Outstanding Litigation

None

  

Schedule 6.1(l)

 

Third-Party Preferential Rights to Purchase and Consents to Assign

None

  

Schedule 7.3

 

List of liens, privileges or encumbrances

None