Exhibit 10.1

 

Execution Version

PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”) is executed on the 15th day
of November, 2013, but is effective for all purposes as of the Effective Time
(as defined hereinafter) and is by and between CP Exploration, LP (hereinafter
referred to as “Seller”, whether one or more), and Black Ridge Oil & Gas, Inc.
(hereinafter referred to as “Buyer”, whether one or more). Seller and Buyer are
sometimes referred to herein individually as a “Party” or collectively as
“Parties.”

 

In consideration of the mutual promises contained herein, Buyer and Seller do
hereby understand, acknowledge and agree as follows:

 

RECITALS

 

WHEREAS, Seller owns certain oil and gas leasehold interests and related assets
and contractual rights more fully described on the exhibits hereto; and

 

WHEREAS, Seller desires to sell and Buyer desires to acquire these interests and
related assets on the terms and conditions hereinafter provided;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller and Buyer hereby agree as follows:

 

ARTICLE 1 - PURCHASE AND SALE

 

1.1 Seller agrees to sell and convey, and Buyer agrees to purchase and pay for,
all of Seller’s right, title and interest to the “Assets”, which term, as used
herein, shall mean:

 

(a)The undivided interests described or referred to on Exhibit A attached hereto
and made a part hereof for all purposes in and to the entire estates created by
the leases, licenses, permits and other agreements described on Exhibit A hereto
(hereinafter collectively referred to as the “Leases”), insofar as the Leases
cover and relate to the lands described therein (hereinafter collectively
referred to as the “Lands”), together with identical undivided interests in and
to all the property and rights incident thereto, and all rights in, to and under
all agreements, including, but not limited to, all operating agreements, leases,
permits, surface agreements, rights-of-way, easements, licenses, farmouts, side
letter agreements, options, election letters and orders in any way relating
thereto; all rights, titles and interests of Seller in and to the Lands and any
agreements relating thereto, even though the interest of Seller is incorrectly
described in, or a description of such interest be omitted from, or the interest
of Seller is incorrectly stated or limited on Exhibit A hereto; and all right,
title and interest of Seller in, to and under or derived from, the Leases of
whatsoever kind, character or nature relating to the Lands, even though such
interests be incorrectly described in, or a description thereof be omitted from,
Exhibit A hereto;

 

1

 

 

(b)All rights, titles and interests of Seller in and to the oil and gas wells
located on the Leases, as described on Exhibit B (the “Wells”), together with
all associated personal property, equipment, pipelines, flow lines, gathering
systems, fixtures, portable buildings, structures and improvements on the Lands,
appurtenant thereto or used or obtained in connection with the Leases, with the
Lands or with the production, treatment, sale or disposal of oil, gas or other
hydrocarbons or waste produced therefrom or attributable thereto and all other
appurtenances thereunto belonging;

 

(c)All other leasehold interests, mineral interests, royalty and overriding
royalty interests, production payment interests or other interests burdening
production, if any, owned by Seller in and to the Lands and/or the Leases or
attributable to production therefrom as of the Effective Time;

 

(d)All unitization, pooling and operating agreements, as well as statutory
participation consents, and the units created thereby which relate to the Assets
or interests described in Exhibit A hereto, including any and all production and
spacing units formed or defined under orders, regulations, rules and other
official acts of the governmental authority having jurisdiction, together with
any right, title and interest created thereby in the Leases and the Lands;

 

(e)All oil, gas and other hydrocarbons stored upon (or stored elsewhere) which
are produced from the Leases or from the Lands, or attributable to them in any
unit of which the Leases or the Lands form a part from and after the Effective
Time; and

 

(f)All of the files, records, correspondence, data (including, but not limited
to, engineering, geological, geophysical and production data), reports and maps,
of any kind or character, now in the possession or control of Seller that
relates to the items described in subparagraphs (a) through (e) above, without
limitation (hereinafter referred to as the “Records”).

 

1.2 The purchase and sale of the Assets shall be effective as of October 1, 2013
at 12:01 A.M., local time where the Assets are located (referred to herein as
the “Effective Time”).

 

ARTICLE 2 – PURCHASE PRICE

 

2.1 Purchase Price. The purchase price for the Assets shall be TWENTY MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($20,500,000.00) (hereinafter referred
to as the “Preliminary Purchase Price”); provided, however, the Preliminary
Purchase Price shall be adjusted at “Closing” (as that term is hereinafter
defined) as follows:

 

2

 

 

(a)The Preliminary Purchase Price shall be increased by:

 

(i)The value (which shall be based on and shall be determined by posted field
prices prevailing as of the Effective Time) of all merchantable allowable oil
and/or condensate in storage above the pipeline connections and natural gas
liquids in storage on or off the Lands as of the Effective Time and credited to
the Assets, less applicable taxes and gravity adjustments deducted by the
purchasers thereof;

 

(ii)All prepaid and other expenses attributable to the Assets in compliance with
this Agreement and paid or incurred by Seller from and after the Effective Time
to the date of Closing, including, but not limited to, lease operating expenses;
and

 

(iii)Any other amount agreed upon by Buyer and Seller.

 

(b)The Preliminary Purchase Price shall be reduced by:

 

(i)All proceeds received or receivable by or on behalf of Seller from sales of
production attributable to the Assets from and after the Effective Time to the
date of Closing;

 

(ii)All unpaid ad valorem, property, production, severance and similar taxes
accruing to the Assets prior to the Effective Time; which amount shall, to the
extent not actually assessed, be computed based upon such taxes and assessments
for the preceding calendar year, or, if such taxes or assessments are assessed
on other than a calendar year basis, for the tax related year last ended;

 

(iii)Amounts collected by Seller for sales of oil, gas and/or other hydrocarbons
from the Assets, if any, that are payable to royalty owners, overriding royalty
owners and working interest owners, and are held in suspense because of lack of
information necessary to their release, questions as to ownership, address, or
any other reason; and

 

(iv)Any other amount agreed upon by Buyer and Seller.

 

Notwithstanding the foregoing and anything to the contrary set forth in this
Agreement, each Party shall be responsible for one hundred percent (100%) of the
drilling and completion costs of the respective Wells for which each Party is
responsible, regardless of the date when such costs were incurred or paid, as
set forth the attached Exhibit C. The Preliminary Purchase Price shall be
increased or reduced accordingly and any necessary post-Closing adjustments
pursuant to Article 9 shall be made to fulfill the purposes of this provision.

 

3

 

 

2.2 Performance Deposit

 

(a)Concurrent with the execution of this Agreement, Buyer shall deliver to U.S.
Bank, N.A., as escrow agent (“Escrow Agent”), an amount equal to ten percent
(10%) of the Preliminary Purchase Price as a performance deposit (the
“Performance Deposit”), pursuant to the Escrow Agreement attached hereto as
Exhibit F to assure Buyer’s performance of its obligations hereunder. The
Performance Deposit shall be applied against the Purchase Price if Closing
occurs or otherwise distributed in accordance with the terms of this Agreement.
If the Performance Deposit is not received by Escrow Agent by the close of
business on the third business day after the execution of this Agreement, this
Agreement shall be null and void, and the Parties shall have no further
obligation to each other hereunder. Buyer shall be solely responsible for paying
any and all expenses and fees related to the use of Escrow Agent whether or not
this transaction is consummated, and the Parties agree that no such expenses or
fees shall be deducted from the Performance Deposit.

 

(b)Subject to the other provisions of this Section 2.2, if all of the conditions
to Closing set forth in Article 7 hereof have not been satisfied or waived by
the Parties on or before the Closing (or such later date as hereafter may be
mutually agreed upon by the Parties in writing), this Agreement shall terminate
automatically. If (i) the conditions to Buyer’s obligations to close as set
forth in Article 7 have not been satisfied or such conditions waived by Buyer by
such date, or (ii) Buyer terminates this Agreement pursuant to Section 5.3,
Section 6.2, or Article 11 below, the Performance Deposit shall be disbursed by
Escrow Agent to Buyer as Buyer’s sole and exclusive remedy. If this transaction
is not consummated by Buyer on such date for any other reason, the Performance
Deposit shall be disbursed by Escrow Agent to Seller as agreed liquidated
damages and not as a penalty, it being agreed that actual damages would be
difficult to ascertain and that such amount is reasonable, and Buyer and Seller
shall promptly (and in no event later than two (2) calendar days) execute a
Joint Direction to authorize such disbursement. If the transactions contemplated
herein are consummated by the Parties, Escrow Agent shall disburse the
Performance Deposit to Seller at Closing. Prior to any disbursement by Escrow
Agent of the Performance Deposit, the Parties shall provide to the Escrow Agent
a Joint Direction instructing the Escrow Agent to disburse to the appropriate
Party.

 

2.3 Transfer of Ownership. At Closing, ownership of the Assets conveyed to Buyer
shall pass as of the Effective Time and all other attributes of ownership shall
pass as of the date of Closing. All costs and expenses incurred by Seller in
accordance with the terms of this Agreement for normal and necessary operation
of the Assets after the Effective Time, including reasonable and customary fixed
rate overhead charges prescribed by applicable operating agreements, shall be
borne by Buyer. Prior to the Effective Time, all such costs and expenses shall
be borne by Seller.

 

4

 

 

ARTICLE 3 – REPRESENTATIONS AND WARRANTIES

 

3.1 Seller represents and warrants unto Buyer that:

 

(a)Seller is a limited partnership validly existing and in good standing under
the laws of the State of Nevada, with the requisite legal power and authority to
own its properties and assets and to carry on its business as now being
conducted.

 

(b)Seller has the requisite legal power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly authorized by the director or
owners of Seller. This Agreement constitutes the valid and binding obligation of
Seller, enforceable against it in accordance with the terms hereof, subject to
the effects of bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect, and no other act, approval or proceeding on
the part of Seller or any other parties is required to authorize the execution
and delivery of this Agreement by Seller or the consummation of the transactions
contemplated hereby.

 

(c)All tax returns of Seller required by law to be filed have been filed and are
complete and correct in all material respects, and to Seller’s knowledge, all
taxes, assessments, fees and other governmental charges or penalties, of any
kind or character, which have become due and payable and which have been
assessed against the Assets and all production of oil, gas and/or other
hydrocarbons attributable to the Assets prior to the Effective Time, or against
Seller or its properties or other assets, have been timely and properly paid in
full.

 

(d)Seller has not incurred any liability, contingent or otherwise, for brokers'
or finders' fees relating to the transactions contemplated by this Agreement for
which Buyer shall have any responsibility whatsoever.

 

(e)Seller has not filed for protection from its creditors under any bankruptcy,
reorganization, or other law or statute and no such proceeding is being
contemplated or threatened by or against Seller.

 

(f)Seller shall not, directly or indirectly, reserve, retain or assign any
recorded or unrecorded interest in the Assets, or the production attributable
thereto, and Seller shall not reserve any recorded or unrecorded executory
rights.

 

(g)To Seller’s knowledge, Exhibit C sets forth all authorities for expenditures
and other commitments to incur capital expenditures outstanding during the time
period prior to the Effective Time in excess of Fifty Thousand Dollars
($50,000.00) net to Seller’s interest in connection with ownership or operations
of the Assets for which Seller has received its net revenue share of the
production payments (“Outstanding AFEs”).

 

5

 

 

(h)This Agreement and the Escrow Agreement, and the execution and delivery
hereof and thereof by Seller, do not and the consummation of the transactions
contemplated hereby will not (i) conflict with or result in a breach of the
charter or bylaws of Seller or any other governing documents of Seller, (ii)
violate, conflict with, or constitute a default under, or result in the creation
or imposition of any encumbrance under any mortgage, indenture, or agreement
(including the Leases) to which Seller is a party or by which the Assets are
bound, which violation, conflict, or default might adversely affect the ability
of Seller to perform its obligations under this Agreement and the Escrow
Agreement, or (iii) violate any statute or law or any judgment, decree, order,
writ, injunction, regulation, or rule of any court or governmental authority,
which violation might adversely affect the ability of Seller to perform its
obligations under this Agreement.

 

(i)Seller is not a party to, and has not received written notice of, any suit or
action pending, arising out of, or related to Seller’s ownership or operation of
the Assets or the transactions contemplated by this Agreement; and to Seller’s
knowledge, there is no suit or action pending, arising out of, or related to the
ownership, operation or value of the Assets or the transactions contemplated by
this Agreement.

 

(j)To Seller’s knowledge, Exhibit D sets forth all operating agreement(s),
exploration agreements, joint development agreements, farmout and farmin
agreements, unit agreements or unit operating agreements to which the Assets are
subject (collectively, the “Material Agreements”).

 

(k)Seller has provided copies to Buyer of all environmental reports, studies,
audits, evaluations and notices completed prior to the date of this Agreement
and in Seller’s possession, including Phase I Environmental Site Assessments,
relating to the Assets.

 

6

 

 

(l)To Seller’s knowledge, all valid calls for payment or prepayment under
operating agreements and statutory participation consents to which the Assets
are subject that are due and owing by Seller have been made by Seller in all
material respects (timely, and before the same became delinquent), and, to the
knowledge of Seller, as of the date of this Agreement, all payments with respect
to delay rentals, shut-in royalties and royalties due and owing by Seller (and
before the same became delinquent) have been made by the operator of such Assets
in all material respects other than those delinquent payments that are contested
by such operator in good faith in the normal course of business or are held in
suspense.

 

(m)Neither Seller nor any affiliate of Seller serves as operator of any of the
Assets.

 

(n)To Seller’s knowledge, no consent, approval, authorization or permit of, or
filing with or notification to, any person is required for or in connection with
the execution and delivery of this Agreement by Seller or for or in connection
with the consummation of the transactions and performance of the terms and
conditions contemplated hereby by Seller. To Seller’s knowledge, there are no
preferential purchase rights covering any of the Assets.

 

(o)No operations are being conducted or have been conducted with respect to the
Assets as to which Seller has elected to be a non-consenting party under the
terms of any applicable operating agreement or non-consent statute.

 

3.2 Buyer represents and warrants to Seller that:

 

(a)This Agreement and the execution and delivery hereof does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of any law or regulation (excepting any federal or state antitrust law
or regulation as to which no representation or warranty is made) to which Buyer
is bound, or any provision of any indenture, mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which Buyer or any
of its assets or properties is bound, which violation, breach or default would
materially adversely affect the business or financial condition of Buyer.

 

(b)Buyer has incurred no liability, contingent or otherwise, for brokers' or
finders' fees relating to the transactions contemplated by this Agreement for
which Seller shall have any responsibility whatsoever.

 

(c)Buyer has not filed for protection from its creditors under any bankruptcy,
reorganization, or other law or statute and no such proceeding is being
contemplated or threatened by or against Buyer.

 

ARTICLE 4 – COVENANTS

 

4.1 Seller covenants and agrees with Buyer that:

 

(a)Seller will continue to make available to Buyer for examination and copying
any of the information, materials or documents comprising the Records, as Buyer
may reasonably desire, including, but not limited to, production records
relating to the Assets, electric logs, mud logs and production logs, and other
well records. Seller shall permit Buyer's authorized representatives to consult
with Seller's employees during reasonable business hours and to conduct, at
Buyer's sole risk and expense, on-site inspections of well-tests and inventories
of the Assets.

 

7

 

 

(b)During the period from the date of this Agreement to the date of Closing,
without the prior written consent of Buyer, Seller will not convey or dispose of
any part of the Assets (other than oil, gas, and other hydrocarbons produced
from the Leases and Lands and attributable to the Assets in the regular course
of business).

 

(c)Prior to the date of Closing, Seller shall carry on its business with respect
to the Assets in substantially the same manner as Seller has heretofore, and
shall not introduce any new method of operation or accounting with respect to
the Assets.

 

(d)Without the prior written consent of Buyer, Seller shall not enter into any
new agreements or commitments with respect to the Assets which extend beyond the
date of Closing, shall not make any capital expenditures on any of the Assets in
excess of amounts permitted to be expended in applicable joint operating
agreements without authorities for expenditure, and shall not encumber, sell or
otherwise dispose of any of the Assets other than personal property which is
replaced by equivalent property or consumed in the normal operation of the
Assets.

 

(e)Seller shall promptly notify Buyer of any demand, suit, action or other
proceeding before any court or governmental agency and any cause of action which
relates to the Assets or which might result in impairment or loss of Seller's
title to any of the Assets.

 

(f)Seller shall use reasonable efforts to cause all representations and
warranties of Seller in this Agreement to be true and correct on and as of the
date of Closing and, to the extent the conditions precedent to the obligations
of Buyer are within the control of Seller, shall cause such conditions to be
satisfied on or prior to the date of Closing. To the extent the conditions
precedent to the obligations of Buyer are not within the control of Seller,
Seller shall use reasonable efforts to cause such conditions to be satisfied on
or prior to the date of Closing.

 

(g)During the period from the date of this Agreement to Closing, Seller shall
(i) consult with Buyer with respect to each election proposal or participation
request which is received by Seller with respect to any Asset or any new oil and
gas well proposed pursuant thereto, and consult with Buyer with respect to all
material decisions to be made with respect to the Assets and new oil and gas
wells proposed pursuant thereto regarding the incurring of costs for
discretionary expenditures for operations for which approval for expenditures
are not prepared and (ii) not transfer, sell, hypothecate, encumber, abandon, or
otherwise dispose of or terminate any portion of the Assets without the written
consent of Buyer.

 

8

 

 

(h)Seller shall cooperate with Buyer and its representatives and shall (i)
furnish and provide access to Buyer and its representatives to all such
financial, operating and other data and information related to the Assets
necessary for Buyer to comply with any applicable requirements for filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended and the rules and regulations of the Securities and Exchange
Commission, promulgated thereunder including, but not limited to, joint interest
billings and revenue statements, and which Buyer or any of its representatives
may reasonably request and (ii) instruct the representatives of Seller to
cooperate with Buyer in its investigation and review.

 

(i)In recognition of the time that will be expended and the expense that will be
incurred by Buyer in connection with the transactions contemplated hereby,
Seller will not, and will cause its officers, directors, employees, attorneys,
financial advisors, agents or other representatives to not, directly or
indirectly, encourage, solicit, engage in negotiations or discussions about, or
provide information with respect to, any third party inquiry or proposal
relating to the possible direct or indirect acquisition of all or any portion of
the Assets from the date of this Agreement through 5:00 P.M., Central Standard
Time, on December 13, 2013.

 

4.2 Buyer covenants and agrees with Seller that:

 

(a)Buyer shall cause all representations and warranties of Buyer in this
Agreement to be true and correct on and as of the date of Closing and, to the
extent the conditions precedent to the obligations of Seller are within the
control of Buyer, shall cause such conditions to be satisfied on or prior to the
date of Closing. To the extent the conditions precedent to the obligations of
Seller are not within the control of Buyer, Buyer shall cause such conditions to
be satisfied on or prior to the date of Closing.

 

9

 

 

(b)Notwithstanding anything contained herein to the contrary, all engineering,
geological and geophysical data, reports and maps, and all other confidential
data provided to Buyer by Seller, whether before or after the date of this
Agreement, relating to the Assets shall be treated by Buyer as strictly
confidential, and shall not be disclosed to any person, firm or corporation
(except in connection with the securing or financing for the purchase of the
Assets) without the prior written consent of Seller. In the event the sale
hereunder does not close, this covenant shall survive termination of this
Agreement; in the event the sale hereunder closes, this covenant shall terminate
at Closing. Seller understands and acknowledges that Buyer may solicit third
parties to participate in the ownership and operation of the Assets and in
connection therewith may disclose to such third parties certain information
furnished by Seller to Buyer. In this regard, Buyer shall cause any such third
party to treat any and all information furnished to such third party as strictly
confidential. Notwithstanding the foregoing, Buyer shall be permitted to make
and filings and disclosure required by the Securities and Exchange Commission
regarding this Agreement and the transactions contemplated hereby.

 

(c)Buyer shall promptly make all regulatory filings to be made by a purchaser.

 

ARTICLE 5 – TITLE TO ASSETS

 

5.1 The transfer of the Assets by Seller to Buyer shall be by warranty of title,
by, through and under Seller, but not otherwise. Other than the foregoing
special warranty, Seller makes no other warranty or representation herein,
expressed or implied, statutory or otherwise, with respect to Seller’s title in
and to the Assets, and Seller’s conveyance of title to the Assets shall be made
without any other express, statutory or implied warranty or covenant whatsoever
as to title, description, the existence of encumbrances, or physical condition
thereof.

 

5.2 For purposes of this Agreement,

 

(a) “Title Defect” means, subject to and except for any Permitted Encumbrances,
(i) any discrepancy in Seller's interest in the Assets as set forth in Exhibit A
hereto, or (ii) any encumbrance, irregularity or defect in Seller's title to any
of the Assets that renders such title not defensible or otherwise would reduce
the net revenue interest to be acquired by Buyer in the Leases through this
Agreement, as set forth in Exhibit A.

 

(b) “Permitted Encumbrances” mean (i) defects in the early chain of title
consisting of failure to recite marital status; (ii) tax liens and operator’s
liens for amounts not yet due and payable or those that are being contested in
good faith by Seller in the ordinary course of business; (iii) all rights to
consent by, required notices to, filings with or other actions by the applicable
governmental agency or entity in connection with the sale or conveyance of oil
and gas leases or interests if such consent, notices, filings or other actions
are customarily obtained subsequent to the sale or conveyance; (iv) defects or
irregularities of title arising out of events or transactions which have been
conclusively barred by statutes of limitations or by adverse possession; and (v)
defects or irregularities of title pertaining to producing Assets which for a
period of ten (10) years or more has not delayed or prevented Seller from
receiving its net revenue share of the proceeds from production from such
Assets.

 

10

 

 

5.3 Buyer shall have until December 6, 2013, at 5:00 P.M. (“Defect Notice
Date”), Central Standard Time, within which to examine title to the Assets. If
Buyer advises Seller that its title to the Assets is not good and defensible as
to any part thereof, Buyer shall by such date and time deliver to Seller with a
notice (such notice hereinafter referred to as the "Defect Notice") setting
forth the Title Defect(s). The Defect Notice shall be in writing and shall
include a detailed description of: (i) the Title Defect(s), (ii) Buyer’s good
faith determination as to the allocated value of the Title Defect(s) with
respect to, and as a percentage of, the Preliminary Purchase Price, and (iii)
the basis for the problem or defect that Buyer believes causes the Assets, or
portion thereof, to be defective. If Buyer advises Seller on or before the
Defect Notice Date of any Title Defect(s) which renders title to the Assets not
good and defensible and the Parties agree that the total combined allocated
value(s) of the Title Defect(s) is/are greater than two and one-half percent
(2.5%) of the Preliminary Purchase Price, Seller shall have until Closing to
attempt to cure any such Title Defect. If Seller shall fail or elect not to
satisfy or cure any such title objection on or before Closing, or should a
dispute exist between Parties as to whether the total combined allocated
value(s) of the Titles Defect(s) are greater than or equal to 2.5% of the
Preliminary Purchase Price, then Buyer shall have the option either to: (a)
accept title to the Assets for which the Defect Notice was submitted; or (b)
terminate this Agreement. Any defect or deficiency concerning Seller’s title to
the Assets not asserted by Buyer on or prior to the Defect Notice Date shall be
deemed waived by Buyer (which waived defects shall be deemed Permitted
Encumbrances).

 

ARTICLE 6 – ENVIRONMENTAL MATTERS

 

6.1 For purposes of this Agreement,

 

(a)“Environmental Defect” means, with respect to any given Asset, an individual
environmental condition identified with specificity by Buyer that constitutes a
violation of Environmental Laws or contamination by a Hazardous Substance or
Contaminant, excluding, however any environmental conditions deemed not to be
Environmental Defects by application of this Article 6.

 

(b)“Environmental Laws” means any and all laws, statutes, ordinances, rules,
regulations or orders of any federal, state, tribal or local administrative,
executive, judicial, legislative, police, regulatory or taxing authority
pertaining to health or the environment including, without limitation, the Clean
Air Act, as amended, 42 U.S.C. §7401 et seq, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. §9601
et seq (“CERCLA”), the Federal Water Pollution Control Act, as amended, 33
U.S.C. § 1251 et seq., the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. §651 et seq, the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. §6901 et seq (“RCRA”), the Safe Drinking Water Act,
as amended, the Toxic Substances Control Act, as amended, 15 U.S.C. §2601 et
seq, the Hazardous & Solid Waste Amendments Act of 1984, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, Pub. L. 99-499
100 Stat. 1613, the Hazardous Materials Transportation Act, as amended, 49
U.S.C. § 5101 et seq, the Oil Pollution Act of 1990, 33 U.S.C. §2701 et seq
(“OPA”), any state laws implementing the foregoing federal laws, and any state
laws pertaining to the handling of oil and gas exploration and production wastes
or the use, maintenance and closure of pits and impoundments, and all other
environmental conservation or protection laws in effect as of the date hereof
which are applicable to the Assets.

 

11

 

 

(c)“Hazardous Substance” means any (a) “hazardous substance” or “toxic
substance” as defined in CERCLA or the Hazardous Materials Transportation Act,
49 U.S.C. §1802; (b) “hazardous waste” as that term is defined by RCRA; (c) any
“hazardous waste” or “hazardous waste constituent” as defined in 40 C.F.R.
§260–270 specifically including Appendix VII of the subpart B of 40 C.F.R. part
261; (d) any source, special, nuclear or byproduct material as defined in 42
U.S.C. 2070 et seq.; (e) asbestos or an asbestos containing substance; (f) a
toxic or hazardous chemical substance that is present in the quantities that
exceed exposure standards as those terms are interpreted pursuant to 29 U.S.C.
§655 and the rules, regulations and orders promulgated thereunder including,
without limitation, 29 C.F.R. part 1910; (g) an acid forming or toxic material
regulated pursuant to 30 U.S.C. 1265; (h) a pesticide other than a pesticide
registered for general use under Subchapter 2 of Chapter 6 of 7 U.S.C. 136(b);
(i) a “hazardous air pollutant” as defined in 42 U.S.C. §7412(1); (j) a chemical
substance or mixture for which a finding has been made subjecting it to
regulation pursuant to or which is otherwise subject to regulation pursuant to
15 U.S.C. §2604(f) and 2605; (k) an “imminently hazardous chemical substance or
mixture” as defined in 15 U.S.C. §2606(f); (l) a “hazardous substance” as
defined in 33 U.S.C. §1321(a)(14); (m) a “toxic pollutant” as defined in 33
U.S.C. §1362(13); (n) any pollutant or contaminant or hazardous, dangerous or
toxic chemicals materials or substances within the meaning of any other
applicable federal, state or local regulation, ordinance or requirement
(including consent decrees and administrative order) relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste substance or material; (o) polychlorinated biphenyls or substances or
compounds containing product chlorinated biphenyls; (p) any other waste,
substance or material either (i) identified as of the date of this Agreement as
hazardous, dangerous or toxic by the office, agency, department, commission,
board, bureau or instrumentality responsible for environmental matters of the
state having or exercising jurisdiction over such waste substance or material,
(ii) having characteristics or qualities of flammability, corrosivity,
carcinogenicity, mutogenicity or toxicity or (iii) that creates or contributes
conditions that any governmental agency can require to be subject to remedial
action.

 

12

 

 

(d)“Contaminant” means any substances or materials defined as hazardous or toxic
or which are regulated or form a basis of liability under any Environmental Law
and including, without limitation, solid waste (whether toxic, non-toxic
hazardous or non-hazardous), asbestos, polychlorinated biphenyls (PCB’s), crude
oil and any refined or unrefined fractions thereof and radioactive substances
and including any other material or substance which may constitute a health,
safety or environmental hazard.

 

6.2 Buyer shall have until the Defect Notice Date within which to conduct its
environmental due diligence of the Assets, which shall be limited to a review of
the records maintained by the applicable governmental authorities. If Buyer, in
good faith, determines an Environmental Defect exists, then Buyer may deliver
written notice (such notice hereinafter referred to as the “Environmental Defect
Notice”) to Seller of the existence of any alleged Environmental Defect. The
Environmental Defect notice shall clearly (i) identify the Asset(s) to which it
relates, (ii) describe the Environmental Defect in reasonable detail by
providing Seller with copies of any and all environmental site assessments and
other documentation related to the alleged Environmental Defect, (iii) describe
the professional qualifications of the person who determined the alleged
Environmental Defect exists, (iv) identify the procedures recommended to correct
the Environmental Defect, and (v) include a good faith determination as to the
allocated value of the Environmental Defect(s) with respect to, and as a
percentage of, the Preliminary Purchase Price, with the computation and
information upon which Buyer’s belief is based. If Buyer advises Seller on or
before the Defect Notice Date of any Environmental Defect(s) and Parties agree
that the total combined allocated value(s) of the Environmental Defect(s) is/are
greater than two and one-half percent (2.5%) of the Preliminary Purchase Price,
Seller shall have until Closing to attempt to cure any such Environmental
Defect. If Seller shall fail or elect not to satisfy or cure any such
Environmental Defect on or before Closing, or should a dispute exist between
Parties as to whether the total combined allocated value(s) of the Environmental
Defect(s) are greater than or equal to 2.5% of the Preliminary Purchase Price,
then Buyer shall have the option either to: (a) accept title to the Assets for
which the Environmental Defect Notice was submitted; or (b) terminate this
Agreement. Any Environmental Defect concerning the Assets not asserted by Buyer
on or prior to the Defect Notice Date shall be deemed waived by Buyer.

 

ARTICLE 7 – CONDITIONS TO CLOSING

 

7.1 The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or written waiver of the
condition that all representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the date of
Closing as if such representations and warranties were made at and as of the
date of Closing, and Buyer shall have performed and satisfied all covenants and
conditions required by this Agreement to be performed and satisfied by Buyer at
or prior to the date of Closing.

 

7.2 The obligations of Buyer to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or written waiver of the conditions
that all representations and warranties of Seller contained in this Agreement
shall be true in all material respects at and as of the date of Closing as if
such representations and warranties were made at and as of the date of Closing,
and Seller shall have performed and satisfied all covenants and agreements
required by this Agreement to be performed and satisfied by Seller at or prior
to the date of Closing.

 

13

 

 

7.3 The obligations of each Party to consummate the transactions contemplated by
this Agreement are subject, at the option of each such Party, to the
satisfaction or written waiver by each such party, of the following conditions:

 

(a)All necessary consents, permissions, novations and approvals by third parties
or governmental authorities (except consents, permissions and approvals of
governmental authorities customarily obtained subsequent to transfer) in
connection with the sale and transfer by Seller and purchase by Buyer of the
Assets and in connection with the transfer by Seller of all permits, agreements
and licenses necessary or appropriate for the operation of the Assets, shall
have been obtained or waived by the party adversely affected, and all necessary
regulatory filings shall have been made.

 

(b)At Closing, there shall not be pending or instituted, threatened or proposed,
any action or proceeding by or before any court or administrative agency or any
other person challenging or complaining of, or seeking to collect damages or
other relief in connection with, the transactions contemplated by this
Agreement.

 

(c)At Closing, no state or federal statue, rule, regulation or action shall
exist or shall have been adopted or taken, and no judicial or administrative
decision shall have been entered (whether on a preliminary or final basis),
which would prohibit, restrict or delay the consummation of the transactions
contemplated by this Agreement or make illegal the payments due hereunder.

 

ARTICLE 8 – CLOSING

 

8.1 Consummation of the purchase and sale transaction contemplated by this
Agreement, (the “Closing”) shall, unless otherwise agreed in writing by Seller
and Buyer, either: a) be held at the offices of Seller located at 420 Oil
Center, Lafayette, Louisiana 70503, at 10:00 a.m., local time, or b) be
conducted via e-mail, on or before December 13, 2013, or at such other date or
place as the Parties may agree in writing (herein called “Closing Date”). Time
is of the essence, and the Closing Date shall not be extended unless by written
agreement of the Parties.

 

8.2 At Closing:

 

(a)Seller shall execute, acknowledge and deliver to Buyer, or Buyer's designee,
the instrument entitled “Assignment and Bill of Sale” in substantially the form
as set forth in Exhibit D attached hereto and made a part hereof for all
purposes (hereinafter referred to as the “Assignment”).

14

 

 

(b)Seller and Buyer shall execute and deliver a settlement statement prepared
and submitted by Seller to Buyer at least three (3) business days prior to
Closing with back-up information sufficient for Buyer to verify the information
thereon, and approved by Buyer prior to Closing, which settlement statement
shall set forth the Closing Amount (as that term is hereinafter defined) and
each adjustment and the calculation of such adjustments used to determine such
amount. The term “Closing Amount” means the Preliminary Purchase Price adjusted
as provided for in this Agreement, using for such adjustments the best
information then available.

 

(c)Buyer and Escrow Agent shall deliver to Seller cash by wire transfer in the
amount of the Closing Amount.

 

(d)Seller shall deliver to Buyer such information, documents and records
relating to the Assets as have not theretofore delivered to Buyer; provided,
however, Seller may make and retain copies thereof for the purpose of reviewing
the post-closing adjustments described in Section 9.1 below.

 

(e)The Parties will execute and deliver any other appropriate assignments, bills
of sale, deeds or instruments necessary to transfer the Property to Buyer or to
effect and support the transaction contemplated in this Agreement, including,
without limitation, any conveyances on official forms and related documentation
necessary to transfer the Assets to Buyer in accordance with requirements of
governmental regulations.

 

ARTICLE 9 – OBLIGATIONS AFTER CLOSING

 

9.1 As soon as is reasonable after the date of Closing, Buyer shall prepare in
accordance with this Agreement and with generally accepted accounting
principles, a statement (hereinafter referred to as the “Post Closing
Statement”) setting forth each adjustment or payment that was not finally
determined at Closing, and showing the calculation of the final sales price
based thereon (hereinafter referred to as the “Final Purchase Price”). Buyer
shall submit the Post Closing Statement to Seller and shall afford Seller access
to Buyer's records pertaining to the computation of the Post Closing Statement.
As soon as is reasonably practicable after the receipt of the Post Closing
Statement, but in no event longer than 45 days from date of receipt, Seller
shall deliver to Buyer a written report containing any changes that Seller
proposes to make to the Post Closing Statement. Seller and Buyer shall agree
with respect to the amount due pursuant to such post closing adjustment no later
than 90 days after the date of Closing. The date upon which said agreement is
reached shall be hereinafter referred to as the “Settlement Date”. In the event
that (a) the Final Purchase Price is more than the amount delivered to Seller at
Closing, Buyer shall pay, within 30 days subsequent to the Settlement Date, to
Seller, by wire transfer, the amount of such difference, if any, or (b) the
Final Purchase Price is less than the amount delivered to Seller at Closing,
Seller shall pay, within 30 days subsequent to the Settlement Date, to Buyer, by
wire transfer, the amount of such difference, if any.

 

15

 

 

9.2 Buyer shall pay all sales taxes occasioned by the sale of the Assets, if
any, and Buyer shall pay all documentary, filing and recording fees required in
connection with the filing and recording of any assignments or other recordable
instruments to be executed at Closing or thereafter.

 

9.3 Promptly after Closing, Buyer shall file the Assignment for record in each
of the counties wherein the Lands are located.

 

9.4 After Closing, Seller and Buyer shall execute, acknowledge and deliver such
other instruments and take such further action as may be deemed by Buyer as
necessary, advisable or appropriate to carry out the intent and purposes of the
transactions contemplated by this Agreement and the respective obligations of
Buyer and Seller hereunder or as may be necessary to provide Buyer with the use
and enjoyment of the Assets.

 

ARTICLE 10 –OBLIGATIONS AND INDEMNITIES

 

10.1 Seller does hereby assume and agree to pay, perform, fulfill and discharge
all Retained Obligations and will hold Buyer and its officers, members, managers
and employees harmless therefrom. “Retained Obligations” shall mean all Seller’s
interest in or connection to any claim or liability that arises out of the
Seller’s ownership, operation or use of the Assets prior to the Effective Time
related to: (i) the payment of operating expenses; (ii) the payment of the
Outstanding AFEs, insofar as the Outstanding AFEs relate to the drilling and
completion of the Wells from which production has commenced before the Effective
Time; (iii) all liabilities, duties and obligations, express or implied, imposed
upon Seller under the provisions of the Leases; and (iv) all of Seller’s
obligations to indemnify Buyer arising under this Agreement.

 

10.2 Buyer does hereby assume and agree to pay, perform, fulfill and discharge
all Assumed Obligations and indemnify and hold Seller and its officers, members,
managers and employees harmless therefrom. “Assumed Obligations” shall mean
Buyer’s interest in or connection to any claim or liability of whatever nature
that arises out of the ownership, operation or use of the Assets after the
Effective Time, including, without limitation, Buyer’s proportional share of the
obligation to (i) plug and abandon or remove and dispose of all wells,
structures, flow lines, pipelines and other equipment now or hereafter located
on the Leases, (ii) cap and bury all flow lines and other pipelines now or
hereafter located on the Leases; (iii) restore the premises constituting the
Leases; and (iv) all environmental claims or liabilities which relate to or
arise with respect to the Leases and Lands, arising prior to or after the
Effective Time, including without limitation the obligation to dispose of
naturally occurring radioactive material and all other pollutants, wastes,
contaminants or hazardous, extremely hazardous or toxic materials, substances,
chemical or wastes; and all of Buyer’s obligations to indemnify Seller arising
under this Agreement.

 

16

 

 

10.3 Seller’s Indemnity. SELLER AGREES TO INDEMNIFY, DEFEND AND HOLD BUYER AND
EACH OF ITS PARTNERS, SHAREHOLDERS, MANAGERS, MEMBERS, EMPLOYEES, OFFICERS,
DIRECTORS AND REPRESENTATIVES (“BUYER INDEMNITEES”) HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS WITH RESPECT TO ALL LIABILITIES AND OBLIGATIONS OR ALLEGED OR
THREATENED LIABILITIES AND OBLIGATIONS CAUSED BY, RELATED TO, ATTRIBUTABLE TO OR
ARISING OUT OF (I) THE RETAINED OBLIGATIONS, (II) SELLER’S BREACH OF ITS
REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE 3, OR (III) SELLER’S BREACH
OF ITS COVENANTS CONTAINED IN THIS AGREEMENT. THE DEFENSE AND INDEMNITY
OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE SOLE OR
PARTIAL OR COMPARATIVE OR CONCURRENT OR OTHER FAULT, NEGLIGENCE OR STRICT,
PRE-EXISTING OR OTHER LIABILITY ON THE PART OF BUYER. ADDITIONALLY, THE DEFENSE
AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE
NATURE OF THE OBLIGATIONS OF BUYER, BE THEY IN TORT, CONTRACT, QUASI-CONTRACT,
STATUTORY OR OTHERWISE.

 

10.4 Buyer’s Indemnity. BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD SELLER AND
SELLER’S AFFILIATES AND EACH OF THEIR SHAREHOLDERS, MANAGERS, MEMBERS,
EMPLOYEES, OFFICERS, DIRECTORS AND REPRESENTATIVES (“SELLER INDEMNITEES”)
HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS WITH RESPECT TO ALL LIABILITIES AND
OBLIGATIONS OR ALLEGED OR THREATENED LIABILITIES AND OBLIGATIONS CAUSED BY,
RELATED TO, ATTRIBUTABLE TO OR ARISING OUT OF THE (I) ASSUMED OBLIGATIONS, (II)
BUYER’S BREACH OF ITS REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE 3, OR
(III) BUYER’S BREACH OF ITS COVENANTS CONTAINED IN THIS AGREEMENT. THE DEFENSE
AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE
SOLE OR PARTIAL OR COMPARATIVE OR CONCURRENT OR OTHER FAULT, NEGLIGENCE OR
STRICT, PRE-EXISTING OR OTHER LIABILITY ON THE PART OF SELLER. ADDITIONALLY, THE
DEFENSE AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY
REGARDLESS OF THE NATURE OF THE OBLIGATIONS OF SELLER, BE THEY IN TORT,
CONTRACT, QUASI-CONTRACT, STATUTORY OR OTHERWISE.

 

ARTICLE 11 – CASUALTY LOSS

 

If all or any part of the Assets shall be materially damaged, destroyed or
abandoned prior to the date of Closing, Seller shall immediately notify Buyer,
and Buyer shall have the right and option of terminating this Agreement, if such
damage, destruction or abandonment shall result in a diminution of the market
value of the Assets by more than two and one-half percent (2.5%) of the
Preliminary Purchase Price.

 

17

 

 

ARTICLE 12 – LIKE-KIND EXCHANGES

 

Each Party consents to the other Party’s assignment of its rights and
obligations under this Agreement to its Qualified Intermediary (as that term is
defined in Section 1.1031(k)-l(g)(4)(v) of the Treasury Regulations) and/or to
its Qualified Exchange Accommodation Titleholder (as that term is defined in
Rev. Proc. 2007-37 issued effective September 15, 2000) in connection with
effectuation of a like-kind exchange, in whole or in part, as provided in
Section 1031 of the Code and the Treasury Regulations thereto, and if
applicable, Rev. Proc. 2000-37, 2000-2 C.B. 308 (Sept. 18, 2000), as amended by
Rev. Proc. 2004-51, 2004-33 I.R.B. 294 (Jul. 20, 2004) (a “Like-Kind Exchange
Transaction”). However, Seller and Buyer acknowledge and agree that any
assignment of this Agreement to a Qualified Intermediary or Qualified Exchange
Accommodation Titleholder does not release either Party from any of its
respective liabilities and obligations to the other Party under this Agreement,
including, without limitation, indemnities, warranties, representations or
covenants set forth in this Agreement. If requested by the other Party, each
Party agrees to cooperate with the other Party (to the extent reasonable) to
attempt to structure the transaction as a Like-Kind Exchange Transaction. If a
Like-Kind Exchange Transaction occurs, the Parties recognize that IRS Form 8824,
Like-Kind Exchanges, will be required to be filed, and each Party consents to
the filing of such Form and will fully cooperate, to the extent necessary, with
the other Party in filing such Form

 

ARTICLE 13 – MISCELLANEOUS

 

13.1 All of the Exhibits referred to in this Agreement are hereby incorporated
herein by this reference.

 

13.2 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs or successors and assigns.

 

13.3 Any notice required or permitted to be given hereunder shall be deemed to
have been properly given (a) three days after deposited in the United States
Mail, with first-class postage affixed, (b) immediately upon receipt of an email
or a facsimile, (c) immediately upon receipt via Federal Express or by Express
Mail, or (d) immediately upon receipt of Certified or Registered United States
Mail, Return Receipt Requested, all of which shall be addressed to the party to
whom notice is intended at the following address of each party:

 

If to Seller:

 

CP Exploration, LP

420 Oil Center

Lafayette, LA 70503

Attention: Tom Powell

Facsimile: (337) 988-0998

E-mail: tpowell@tdoil.com

 

18

 

 

If to Buyer:

 

Black Ridge Oil & Gas, Inc.

10275 Wayzata Boulevard, Suite 310

Minnetonka, MN 55305

Attention: Mike Eisele

Facsimile: (952) 303-5706

E-mail: mike.eisele@blackridgeoil.com

 

or at such other address as may from time to time be designated by Seller or
Buyer in writing.

 

13.4 This Agreement may not be amended nor any rights hereunder be waived except
by an instrument in writing signed by Seller and Buyer.

 

13.5 If any provision of this Agreement shall be held illegal or invalid, this
Agreement shall be construed and enforced as if such illegal or invalid
provision had not been contained herein.

 

13.6 The provisions hereof constitute the complete agreement of Seller and Buyer
with respect to the subject matter hereof and supersede all previous agreements,
understandings and/or negotiations between Seller and Buyer, whether written or
oral, with respect thereto. Words in the singular form in this Agreement shall
be construed to include the plural and vice versa.

 

13.7 This Agreement is governed by the laws of the State of North Dakota.

 

[Signature Page follows.]

 

 

 

 

 

19

 

 

IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written and effective as of the Effective Time.

 

SELLER:

 

CP EXPLORATION, LP

  

By: CP Exploration Management, LLC

Its: General Partner

 

 

/s/ Tom L. Powell, IV                                                   

By: Tom L. Powell, IV

Title: Manager

 

 

BUYER:

 

BLACK RIDGE OIL & GAS, INC.

 

 

/s/ Ken DeCubellis                                                      

By: Ken DeCubellis

Title: CEO

 

20