Exhibit 10.20

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (hereinafter referred to as this “Agreement”),
dated November 16, 2017 (hereinafter referred to as the “Execution Date”), is
made by and between EARTHSTONE LEGACY PROPERTIES, LLC, a Texas limited liability
company (hereinafter referred to as “Seller”), and STATOIL OIL & GAS LP, a
Delaware limited partnership (hereinafter referred to as “Buyer”). Seller and
Buyer are herein collectively referred to as “Parties” and separately as
“Party”.

This Agreement shall be effective as of the Execution Date, but the conveyances
of the Properties contemplated herein shall be effective as of 12:01 AM
prevailing central time on December 1, 2017 (hereinafter referred to as the
“Effective Time”).

1.1Agreement.  At Closing, Seller shall sell, assign, transfer and convey and
Buyer shall purchase and accept, in each case as of the Effective Time, for the
consideration hereinafter set forth, and subject to the terms and provisions
herein contained, all of Seller’s right, title and interest, together with all
of Seller’s duties and obligations, in, to and under the following described
properties, rights and interests (such right, title and interest, singularly
referred to as the “Property” or collectively referred to as the “Properties”):

a.the oil, gas and/or mineral leases and other properties described in Exhibit
A, including any ratifications, extensions and amendments thereto (hereinafter
referred to as the “Leases”), and the lands covered thereby, including all fee
mineral interests, royalty interests, overriding royalty interests,
non-participating royalty interests, executive rights, production payments, net
profits interests, reversionary interests, operating interests and any other
leasehold or mineral interests of any kind or nature, and any lands pooled,
unitized or communitized therewith (hereinafter referred to as the “Lands”);

b.the oil, gas and condensate wells (whether producing, shut-in or temporarily
abandoned), water source, water injection or other injection or disposal wells
and systems located on, within the geographic boundaries of or otherwise
affected by the Leases, the Lands or the Units (as defined herein), including
those described in Exhibit B (hereinafter referred to as the “Wells”);

c.all other rights (of whatever kind or character, whether legal or equitable,
and whether vested or contingent) in the oil, gas and other minerals in and
under or that may be produced from the Lands, Leases, Units and Wells, even
though Seller’s interest in the oil, gas and other minerals may be incorrectly
described in, or omitted from, Exhibit A or Exhibit B;

d.all presently existing and valid oil, gas and/or mineral unitization, pooling,
and/or communitization agreements, declarations and/or orders relating to
Seller’s interest in any of the Properties described in Articles 1.1(a), (b) and
(c), and in the Properties covered and the units created thereby (including all
units formed under orders, rules, regulations, or other official acts of any
federal, state, or other authority having jurisdiction, voluntary unitization
agreements, designations and/or declarations) (hereinafter referred to as the
“Units”);

e.all contracts or agreements, including all sales, purchase, exchange,
gathering, transportation, processing and oil and gas marketing contracts,
operating agreements, unit agreements, balancing agreements, farmout agreements,
farmin agreements, participation agreements and exploration agreements, insofar
and only to the extent that such agreements and contracts cover or relate to:
(i) any of the Properties described in Articles 1.1(a), (b), (c), (f), or (g) or
(ii) the exploration, development, operation, or maintenance thereof or the
treatment, storage, transportation or marketing of production therefrom,
including, those contracts or agreements described on Exhibit C  (hereinafter
collectively referred to as the “Contracts”);

f. all materials, supplies, machinery, equipment, facilities, supervisory
control and data acquisition systems, improvements and other personal property
and fixtures located on the Lands or the Units (including but not by way of
limitation, all Wells, wellheads, wellhead equipment, processing equipment,
pumping units, flowlines,

 

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pipelines, gas lines, power lines, tubing, platforms, separators, treaters,
rods, tanks, buildings, towers, SCADA equipment, radios, meters, computers,
spare parts, junk, injection facilities, saltwater disposal facilities,
compressors, compression facilities, gathering systems, and other equipment)
that are used or held for use primarily in connection with any of the Properties
described in Articles 1.1(a), (b), (c), (d) or (g) (hereinafter collectively
referred to as the “Equipment”);  

g.all easements, rights-of-way, surface leases, fee surface interests, and other
surface rights, all permits and licenses, and all other appurtenances being
primarily used or held for use in connection with, or otherwise related to, the
exploration, development, operation or maintenance of any of the Properties
described in Articles 1.1(a), (b), (c) or (d), or the treatment, storage,
transportation or marketing of production therefrom (or allocated thereto),
including, without limitation, these set forth on Exhibit D;

h.the oil, gas, and other hydrocarbons (including crude oil, natural gas,
casinghead gas, drip gasoline, natural gasoline, natural gas liquids,
condensate, and other hydrocarbons, whether gaseous or liquid) (hereinafter
collectively referred to as the “Hydrocarbons”) produced from or attributable to
the Wells, Lands or Units from and after the Effective Time; and

i.any and all original (or copies, if originals are not available) lease files,
right-of-way files, division order files, well files, abstracts, title opinions,
title files, contract/agreement files, marketing files, revenue files,
accounting files, payment files and any and all other files, information, and
records, including, without limitation, all seismic data to the extent that it
is transferable, and geological records, data, surveys, and interpretations,
insofar as they relate to any of the Properties described herein (hereinafter
collectively referred to as the “Records”).

1.2Excluded Assets.  All properties, rights and interests of Seller or its
affiliates other than the Properties are retained by Seller or such affiliates,
as applicable, and are referred to herein collectively as the “Excluded Assets”.

2.Purchase Price.  The purchase price for the Properties shall be the amount of
Twenty-Seven Million Dollars and No/100 ($27,000,000.00), subject to the
adjustments as provided herein (hereinafter referred to as the “Purchase Price”)
and the portion of the unadjusted Purchase Price allocated to each Well as
reflected on Schedule 2.2, is herein referred to as the “Allocated
Value”).  Buyer has paid by wire transfer in immediately available funds, ten
percent (10%) of the Purchase Price to Seller, to Seller’s bank account, as a
performance deposit (hereinafter referred to as the “Deposit”) and the remainder
of the Purchase Price shall be payable by Buyer to Seller at Closing by wire
transfer in immediately available funds to Seller’s bank account (the details of
which shall be part of the Preliminary Settlement Statement (as defined
herein)).

3.Closing.  The closing (hereinafter referred to as the “Closing”) of the sale
of the Properties contemplated by this Agreement shall take place electronically
on December 20, 2017 at 10:00 a.m., provided that all of the conditions to
Closing set forth in Article 10 have been satisfied or waived (other than such
conditions as may be, by their terms, only satisfied at the Closing or on the
Closing Date).  The date on which the Closing actually occurs may be referred to
herein as the “Closing Date”.  

4.Representations and Warranties.  Each Party (hereinafter referred to as the
“Representing Party”), as to such Representing Party, represents and warrants to
the other Party as of the Execution Date and the Closing Date (unless a specific
date is set forth below, in which case such specific date shall apply to such
representation and warranty), as follows:

a.Valid and Binding.  Where Seller is the Representing Party, such Party is duly
qualified and has full right and authority to own the Properties.  Where Buyer
is the Representing Party, as of the Closing, such Party shall be duly qualified
and has full right and authority to own the Properties.  This Agreement, the
Assignment (as defined herein) (when delivered) and any other document executed
by the Representing Party in connection herewith, will constitute the
enforceable, valid, and binding obligations of the Representing Party,
enforceable against the Representing Party in accordance with its terms.

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b.Organization and Existence.  The Representing Party is duly organized, validly
existing and in good standing under the laws of the state of its formation.

c.Power, Authority and Non-Contravention.  The Representing Party has the legal
power and right to enter into and perform this Agreement and the transactions
contemplated hereby.  The consummation of the transactions contemplated by this
Agreement does not violate or conflict with:

 

(i)

any provision of the limited liability company agreement, operating agreement,
or other governing documents of the Representing Party;

 

(ii)

any agreement or instrument to which the Representing Party is a party or by
which the Representing Party is otherwise bound; or

 

(iii)

any judgment, order, license, permit, ruling or decree applicable to the
Representing Party or where the Representing Party is as a party in interest or
any law, rule, permit or regulation applicable to the Representing Party.

 

d.No Broker’s Fees.  The Representing Party has incurred no obligation
contingent or otherwise, for any broker’s, finder’s or consultant’s fees for
which the other Party will be liable.

e.No Pending Claims.  There is no suit, action, claim, investigation or inquiry
by any person or entity or by any administrative agency or governmental
authority and no legal, administrative or arbitration proceeding pending or, to
the Representing Party’s knowledge, threatened, against the Representing Party
or any of its affiliates that has, or will, affect the Representing Party’s
ability to consummate the transactions contemplated herein.  In addition, Seller
represents and warrants to Buyer that there is no suit, action, or claim pending
or, to Seller’s knowledge, threatened, arising out of or related to the
Properties or Seller’s ownership of all or any portion thereof, including
without limitation any claim or action alleging any breach, termination, or
cancellation of any or all of the Properties.

f.No Bankruptcy Proceedings.  There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by or, to the Representing
Party’s knowledge, threatened against the Representing Party.

g.Compliance with Anti-Bribery Laws.      The Representing Party has not made,
offered, authorized, requested, received or accepted or will not make, offer,
authorize, request, receive or accept, in each case, with respect to the matters
that are the subject of this Agreement, any payment, gift, promise or other
advantage, whether directly or indirectly, through any Person, to or for the use
or benefit of any Person, where such payment, gift, promise or advantage would
violate (a) applicable anti-corruption Laws of the United States, (b) the US
Foreign Corrupt Practices Act, or (c) the principles described in (i) the
Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions, signed in Paris on December 17, 1997 and effective on
February 15, 1999 and (ii) such Convention’s Commentaries.

5.Additional Representations and Warranties of Seller. Seller represents and
warrants to Buyer as of the Execution Date and the Closing Date (unless a
specific date is set forth below, in which case such specific date shall apply
to such representation and warranty), as follows:  

a.Consents and Preferential Purchase Rights.  Except as set forth on Schedule
5(a), there are no restrictions on assignment (including requirements for
consents from third parties to any assignment), preferential purchase rights,
rights of first refusal or similar arrangements (“Consents and Preferential
Rights”) applicable to any or all of the Properties that, in each case, that are
required to be obtained in connection with the transfer of any or all of the
Properties by Buyer as contemplated hereby or the consummation of the other
transactions contemplated by this Agreement.  Any and all Consents and
Preferential Rights described on Schedule 5(a) will be handled as outlined under
Article 8(e) and (f) of this Agreement.

b.Taxes.  All ad valorem, real property, severance and other similar taxes due
and payable by Seller with respect of any or all of the Properties or production
therefrom prior to the Effective Time have been paid, except ad valorem taxes
for the accounting year in which the Closing occurs that are not yet due and
payable.  All

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tax returns relating to or prepared in connection with any such taxes that are
required to be filed by Seller have been timely filed and all such tax returns
are true, correct and complete in all material respects, and all such taxes that
are or have become due have been timely paid in full, and Seller is not
delinquent in the payment of any such taxes.  Seller’s interest in the
Properties are not, or prior to Closing will not be, subject to tax partnership
reporting for federal income tax purposes.  

c.Contracts.  Schedule 5(b) sets forth all Contracts of the following type
(hereinafter collectively referred to as the “Material Contracts”): (i) any
Hydrocarbon purchase and sale, transportation, gathering, treating, compressing,
processing, dedication, storage, operating or similar Contract, (ii) any
Contract that is a joint operating agreement, farmin agreement, farmout
agreement, term assignment, participation agreement, area-of-mutual-interest
agreement, communitization agreement, lease purchase agreement, prospect
generation agreement or other similar agreement, to the extent, and then only to
the extent, that such agreements contain any outstanding obligations required to
be performed by, or that are otherwise binding on, Seller that will be binding
on Buyer after Closing, (iii) any Contract that (A) cannot be terminated by
Seller (or by Buyer after Closing) without penalty upon 30 days’ or less notice
or (B) involves an annual obligation or income more than Ten Thousand Dollars
and No/100 ($10,000.00), (iv) any Contract that is an indenture, mortgage, loan,
credit agreement, sale-leaseback, guaranty of any obligation, bond, letter of
credit or similar financial Contract, and (v) any Contract that constitutes a
partnership agreement, joint venture agreement or similar Contract.  All of the
Contracts are in full force and effect.  Seller is not in material breach or
default (and no situation exists that, with the passing of time or giving of
notice would create a material breach or default) under any Contract, and, to
Seller’s knowledge, no material breach or default by any third party (or
situation that, with the passing of time or giving of notice would create a
material breach or default) exists or is threatened.  True, complete and correct
copies of all Contracts have been provided to Buyer on or prior to the Execution
Date.

d.P&A.  Except as set forth on Schedule 5(c), there exists no Well that
(i) Seller is currently obligated by applicable law or contract to plug and
abandon or (ii) has been plugged and abandoned in a manner that does not comply
in all material respects with applicable laws and rules, regulations, permits,
judgments, orders and decrees of any court or the applicable federal and state
regulatory authorities.

e.Compliance with Laws.  There has been no material violation of any law or
regulation (excluding any Environmental Law (defined below) or regulation, which
is expressly covered by Article 5(f) relating to the ownership of the Properties
by Seller) or, to Seller’s knowledge, the operation of the Properties by any
other person.

f.Environmental.

 

(i)

With respect to the Properties, Seller has not entered into, and, to Seller’s
knowledge, no predecessor to Seller has entered into, or is subject to, any
material agreements, consents, orders, decrees, judgments, license or permit
conditions, or other directives of governmental entities in existence as of the
Execution Date that is based on any Environmental Laws or that require any
remediation or change in the present conditions of the Properties.  

 

(ii)

Seller has not received written notice and has no knowledge of (a) any release,
disposal, event, condition, activity or incident related to any hazardous
substances that may impact any portion of the Properties; (b) any violations of,
or liability under Environmental Laws with respect to the presence of any
hazardous materials at, on, under, or emanating to or from any of the
Properties; or (c) any actual or potential liability for the investigation or
remediation of any disposal or release of hazardous materials at, on, under or
emanating to or from any of the Properties.

 

(iii)

True, complete and correct copies of all investigations, audits or other reports
addressing environmental matters, if any, related to Seller’s ownership of any
portion of the Properties that are in Seller’s possession or control have been
provided to Buyer.

g.Current Commitments. Except as set forth in Schedule 5(d), as of the Execution
Date, there are no outstanding authorities for expenditures or other written
capital proposals proposed by Seller to any person or proposed by any person to
Seller, to conduct operations (hereinafter referred to as the “AFEs”) relating
to the Properties that are in excess of Ten Thousand Dollars & No/100
($10,000.00) (net to Seller’s interest) and for which all of the activities
anticipated in such AFEs have not been completed by the Execution Date.

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h.Imbalances. Schedule 5(e) sets forth all imbalances associated with any of the
Wells as of the Effective Time (hereinafter referred to as the “Imbalances”).

i.Take-or-Pay.  Seller is not obligated by virtue of any take-or-pay payment,
advance payment or other similar payment, to deliver Hydrocarbons attributable
to the Properties, or proceeds from the sale thereof, attributable to the
Properties at some future time without receiving payment therefor at or after
the time of delivery that would be binding on Buyer after Closing.

j.Non-Consent. Excluding the wells listed on Schedule 5(f), as of the Execution
Date, no operations are being conducted or have been conducted on the Properties
with respect to which Seller has elected to be a non-consenting party under the
applicable operating agreement and with respect to which all of Seller’s rights
have not yet reverted to it.

k.Litigation. There are no proceedings pending or threatened in writing against
Seller that affect the Properties or against the Properties, or that seeks to
enjoin or otherwise prohibit any of the transactions contemplated in this
Agreement.

l.Condemnation.Seller has not received any written notice of any pending or
threatened condemnation of any portion of the Properties.

m.Liens. Other than Permitted Encumbrances (defined below), the Properties are
not burdened by any outstanding liens, mortgages, security interests, pledges,
charges or encumbrances, or other arrangements substantially equivalent thereto.

n.Fair Value. Seller hereby represents and warrants, and the Parties agree that:
(i) the consideration given and to be exchanged by the Parties and to be
received by Seller as provided in this Agreement shall constitute a
contemporaneous or substantially contemporaneous exchange of equivalent value
for the Properties transferred by Seller to Buyer, (ii) Seller and Buyer entered
into this Agreement in good faith, (iii) no Party requires any further
information, facts, research, evidence, or third party analysis or opinion in
connection with the Parties’ decision to execute this Agreement and (iv) no
Party shall have the right to benefit in any manner, either directly or
indirectly, from the assertion by any person or entity that the receipt by any
Party to this Agreement of consideration to be exchanged pursuant to this
Agreement, shall constitute or shall have constituted less than reasonably
equivalent value for the consideration given pursuant to this Agreement, or a
preferential payment with respect to any debts or obligations resolved pursuant
to this Agreement.

6.Additional Representations and Warranties of Buyer.  Buyer represents and
warrants to Seller as of the Execution Date and as of the Closing Date (unless a
specific date is set forth below, in which case such specific date shall apply
to such representation and warranty), as follows:  

a.Independent Evaluation. Buyer (i) is sophisticated in the evaluation,
purchase, ownership of oil and gas properties and related facilities, (ii) is
capable of evaluating, and hereby acknowledges that it has so evaluated, the
merits and risks of the Properties, Buyer’s acquisition, ownership, and its
obligations hereunder, and (iii) is able to bear the economic risks associated
with the Properties, Buyer’s acquisition, ownership and its obligations
hereunder. In making its decision to enter into this Agreement and to consummate
the transactions contemplated hereby, (x) Buyer has relied or shall rely solely
on the representations, warranties and covenants of Seller under this Agreement
and the special warranty of title in the Assignment, its own independent
investigation and evaluation of the Properties and the advice of its own legal,
tax, economic, environmental, engineering, geological and geophysical advisors
and the express provisions of this Agreement, and (y) subject to Seller’s
representations and warranties in Articles 4 and 5 and the special warranty of
title in the Assignment, and subject to Seller’s indemnification obligations in
Article 12, Buyer has satisfied or shall satisfy itself through its own due
diligence as to the environmental and physical condition of and contractual
arrangements and other matters affecting the Properties.

b. Accredited Investor. Buyer is an “accredited investor,” as such term is
defined in Regulation D of the Securities Act of 1933, as amended, and will
acquire the Properties for its own account and not with a view to a sale,
distribution, or other disposition thereof in violation of the Securities Act of
1933, as amended, and the rules and regulations thereunder, any applicable state
blue sky laws or any other applicable securities laws.

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7. Disclaimer of Warranties. Other than the express representations and
warranties of Seller contained in Articles 4 and 5 and the special warranty of
Defensible Title in the Assignment (as hereinafter defined), Seller hereby
expressly disclaims any and all other representations and warranties, express,
implied, statutory or otherwise. Buyer agrees that the Properties are being sold
by Seller “where is” and “as is,” with all faults. Specifically as a part of the
foregoing, but not in limitation thereof, Buyer acknowledges that Seller has not
made and Seller expressly disclaims any representation or warranty, whether
express, implied, under common law, by statute or otherwise, as to the title or
condition of the Properties.

a.NORM and Hazardous Materials.  Buyer acknowledges that the Properties have
been used for exploration, development and production of Hydrocarbons and that
there may be Hydrocarbons, produced water, wastes, Hazardous Materials or other
materials located on or under the Properties or associated with the
Properties.  Buyer further acknowledges that the equipment and sites included in
the Properties, and the materials and equipment located on the Properties, or
included in the Properties may contain wastes, hazardous materials and/or
NORM.  Buyer acknowledges that NORM may affix or attach itself to the inside of
Wells, materials and equipment as scale or in other forms.  Buyer acknowledges
that hazardous materials, NORM containing material, and/or wastes may have come
in contact with the soil or other environmental media.  Furthermore, Buyer
acknowledges that special procedures may be required for the remediation,
removal, transportation, disposal or other management or handling of soil,
water, wastes, hazardous materials, and NORM from the Properties.

8.Title Matters.

a.Title Defects.  As used herein, the term “Title Defect” shall mean (x) any
lien, encumbrance, defect or failure of Seller’s ownership of any or all of the
Properties or lack of information provided by Seller evidencing Seller’s
ownership of any or all of the Wells, as shown on Exhibit B, that causes Seller
not to have Defensible Title, or (y) other than any disclosures on Schedule
5(f), any suspended interest or non-consent/deemed non-consent election by
Seller in a Well which causes Seller to not receive any revenue from such
Well.  No individual Title Defect shall be asserted by Buyer unless the amount
of such individual Title Defect is in excess of Fifteen Thousand Dollars &
No/100 ($15,000.00).  As used herein, the term “Defensible Title” shall mean
title to the Properties (on a property-by-property basis) that, subject to
Permitted Encumbrances:

 

(i)

entitles Seller to receive not less than the net revenue interest for each of
the Wells, as set forth in Exhibit B;

 

(ii)

obligates Seller to bear not more than the working interest for each of the
Wells, as set forth in Exhibit B; and

 

(iii)

will be free and clear of all mortgages, liens, defects and other encumbrances
at the time of Closing.

As used herein, “Permitted Encumbrances” shall mean (i) royalty interests,
overriding royalty interests, working interests and other payments on production
to the extent they do not, individually or in the aggregate, reduce Seller’s net
revenue interest in any of the Properties from that specified in Exhibit B, as
applicable; (ii) liens for taxes for which payment is not due; (iii) liens of
mechanics, materialmen, warehousemen, landlords, vendors, and carriers and any
similar liens arising by operation of law that, in each instance, arise in the
ordinary course for sums not yet due; (iv) the terms of the Contracts, provided
that such Contracts are listed on Schedule 5(c) and true, complete and correct
copies thereof have been delivered to Buyer on or prior to the Execution Date;
(v) easements, rights of way, servitudes, permits, and surface leases to the
extent, individually or in the aggregate, such rights could not reasonably be
expected to impair the ownership, operation, development, production or use of
the Property or any portion thereof; (vi) plat restrictions, zoning laws,
restrictive covenants and conditions, and building and other land use laws;
(vii) mortgages, security interests, pledges and similar encumbrances burdening
the Properties for which Seller obtains a full release prior to or
contemporaneously with the Closing; and (viii) consents and approvals from
governmental authorities for the assignment of the Properties to Buyer that are
customarily and reasonably obtained after the assignment of properties similar
to the Properties.

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b.Notice of Title Defects.  If Buyer determines that any or all of the
Properties are subject to any Title Defect, then Buyer may deliver to Seller
written notice of such Title Defects on or before December 13, 2017.  Seller
shall have the right, but not the obligation, to attempt to cure any asserted
Title Defects prior to Closing.  For any Title Defect not cured prior to
Closing, Seller may either convey the Property subject to the Title Defect,
either with or without indemnification, to Buyer at Closing, or remove the
Property subject to the Title Defect from the Properties conveyed at Closing.

c.Title Defect Amount.  If any Title Defect is not cured or removed prior to
Closing and Buyer does not waive such Title Defect, then the Purchase Price
payable at Closing by Buyer shall be reduced pursuant to Article 11(a)(iv) by an
amount equal to the following (hereinafter referred to as the “Title Defect
Amount”):

 

(i)

if Buyer and Seller agree on the amount, then that amount shall be the Title
Defect Amount;

 

(ii)

if the Title Defect represents a decrease in (A) the actual net revenue interest
for any Well, below (B) the net revenue interest set forth in Exhibit B for such
Well, then the Title Defect Amount shall be the product of (y) the Allocated
Value of such Well multiplied by (z) a fraction, the numerator of which is the
net revenue interest shown on Exhibit B minus the actual net revenue interest
for such Well and the denominator of which is the net revenue interest for such
Well set forth in Exhibit B;

 

(iii)

if the Title Defect represents Seller owning a working interest in a Well or
Property which is larger than the Working Interest shown on Exhibit B, but only
to the extent there is not a proportionate increase in the net revenue interest
for such Well or Property, then the Title Defect Amount shall be the product of
(y) the Allocated Value of such Well or Property multiplied by (z) a fraction,
the numerator of which is the working interest increase and the denominator of
which is the working interest shown for such Well or Property on Exhibit B.

 

(iv)

if the Title Defect represents a suspended interest or non-consent/deemed
non-consent election by Seller in a Well, other than those disclosed on Schedule
5(f), which causes Seller to not receive any revenue from such Well, the Title
Defect Amount shall be the Allocated Value for such Well.

 

(v)

if the Title Defect results from a lack of information provided by Seller to
prove Seller’s ownership of any or all of the Wells, as shown on Exhibit B, then
(a) if Buyer is able to calculate a working interest and/or net revenue interest
from the limited title documentation provided by Seller for such Well, the Title
Defect amount shall be the Allocated Value for such Well multiplied by the
difference between the working interest and/or net revenue interest shown on
Exhibit B for such Well and the working interest and/or net revenue interest for
such Well calculated by Buyer, or (b) if Buyer is unable to calculate a working
interest and/or net revenue interest from the limited title documentation
provided by Seller for such Well, the Title Defect amount shall be the Allocated
Value for such Well.

 

(vi)

if the Title Defect consists of a lien, encumbrance or other charge that is
undisputed and liquidated in amount, the Title Defect Amount shall be the
undisputed and liquidated amount necessary to be paid to remove the Title
Defect; and

 

(vii)

if the Title Defect is of a type not described above in subsections (i) through
(v) above, then, in each case, the Title Defect Amount shall be determined by
taking into account the Allocated Value of the Property so affected, the portion
of Seller’s interest in the Property affected by the Title Defect, the legal
effect of the Title Defect, the potential economic effect of the Title Defect
over the life of the affected Property, the values placed upon the Title Defect
by Buyer and Seller and such other factors as are necessary to make a proper
evaluation.

In the event Seller and Buyer cannot agree on Title Defect Amount pursuant to
the foregoing, then (A) Buyer’s good faith estimate of the Title Defect Amount
(pursuant to the foregoing) shall be used for determining whether the conditions
to Closing have been met (and the amount, if any, of any associated adjustment
to be used for purposes of Closing) and (B) after Closing, the disputed amounts
shall be finally resolved by a dispute resolution process using a single
impartial arbitrator, with at least ten (10) years’ experience in oil and gas
title issues, to be selected by mutual

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agreement of the Seller and Buyer, or, in the event Buyer and the Seller cannot
agree on an arbitrator, such arbitrator shall be selected by the Houston office
of the American Arbitration Association.  The arbitrator’s decision as to the
Title Defect Amount shall be final and not appealable.  Buyer and Seller shall
each bear its own attorneys’ fees and costs in such arbitration and the fees of
such arbitrator shall be split equally between Buyer and Seller.  Such
arbitration shall be conducted in Houston, Texas.  Once appointed, the
arbitrator shall not have any ex parte communications with any of the affected
parties.

d.Notwithstanding anything to the contrary contained in this Agreement, no
adjustment of the Purchase Price shall be made for Title Defects for which
notices have been timely and otherwise validly delivered, unless the aggregate
of all Title Defect Amounts, as determined in accordance with this Agreement,
equals or exceeds two percent of the Purchase Price.

e.Consents.  Prior to Closing, Seller shall use commercially reasonable efforts
to obtain all consents set forth in Schedule 5(a) provided that Seller shall not
be required to provide consideration or undertake obligations to or for the
benefit of the holders of such consents.  Seller shall deliver by certified mail
return receipt requested written requests for such consents to the holder
thereof.  If (a) Seller fails to obtain a consent prior to the Closing, (b) the
failure to obtain such consent would cause the assignment of such Property or
Properties to Buyer to be void, and (c) the requirements of Article 8 are met,
then the portion of the Property or Properties subject to such failed consent
shall constitute a Title Defect (subject to the terms of Article 8), and Seller
and Buyer shall have the right and remedies set forth in Article 8 with respect
thereto.

f.Preferential Rights to Purchase.  Prior to Closing, Seller shall use
commercially reasonable efforts to comply with all preferential rights to
purchase or similar rights relative to the sale of any of the Properties as set
forth in Schedule 5(a), provided that Seller shall not be required to provide
consideration or undertake obligations to or for the benefit of the holders of
the Preferential Rights to Purchase.  In accordance with this Agreement and the
applicable Contracts, Seller shall deliver by certified mail return receipt
requested written notices of the proposed transfer of any Properties subject to
the Preferential Rights to Purchase to the holders of such rights.  Seller shall
promptly notify Buyer if any Preferential Rights to Purchase are exercised or if
the requisite period has elapsed without said rights having been exercised.  If
a Third Party who has been offered an interest in any Property or Properties
pursuant to a Preferential Right to Purchase elects, prior to Closing, to
purchase such Property or Properties pursuant to the aforesaid offer, then the
Property or Properties or part thereof so affected will be deemed an Excluded
Asset or Assets, the Purchase Price will be reduced by the Allocated Value
attributable thereto, and (subject to the other terms of this Agreement) the
Parties shall proceed to Closing.  If, as of the Closing Date, no waiver,
consent or exercise notice has been received by Seller from the holder of a
Preferential Right to Purchase and the time for exercising such Preferential
Right to Purchase has not expired, then the Properties covered by the
Preferential Right to Purchase will remain with Seller as Excluded Assets and
the Purchase Price shall be adjusted by the Allocated Values of such Properties
(or portions thereof). Upon the expiration of such Preferential Right to
Purchase, to the extent such Preferential Right to Purchase has not been
exercised, the Properties (or portions thereof) covered by such Preferential
Right to Purchase shall be assigned to Buyer using a form of assignment
substantially similar to the Assignment, and Buyer shall pay to Seller an amount
equal to the Purchase Price adjustment referenced in the immediately foregoing
sentence, subject to any adjustments for Title Defects.

9.Environmental Matters.  

a.Environmental Law.  As used herein, the term “Environmental Law” shall mean
any statute, law, ordinance, rule, regulation, code, order, judicial writ,
injunction or decree issued by any federal, state or local governmental
authority in effect on or before the Effective Time relating to the control of
any pollutant or protection of the air, water, land or environment or the
release or disposal of hazardous materials, hazardous substances or waste
materials, including, without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act, as amended, the Resources Conservation and Recovery Act,
as amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendment and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Act, as amended, the
Oil Pollution Act, as amended, the Emergency Planning and Community Right to
Know Act, as amended, and comparable state and local laws addressing pollution
or protection of the environment, biological or cultural resources and all
regulations implementing the foregoing.

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b.Environmental Conditions.  As used herein, the term Environmental Conditions
shall mean (a) any condition with respect to the air, soil, subsurface, surface
waters, ground waters and/or sediment that causes Seller not to be in compliance
with any Environmental Law or (b) any condition, environmental pollution,
contamination or degradation on the Properties that would require remediation
under any Environmental Law.

c.Notice of Environmental Conditions.  If Buyer determines that any of the
Properties which are not operated by Buyer are subject to any Environmental
Condition that has associated with it a Remediation Amount greater than Fifteen
Thousand Dollars & No/100 ($15,000.00), then Buyer may deliver to Seller written
notice of such Environmental Condition on or before the date December 13, 2017.
Seller shall have the right, but not the obligation, to attempt to cure any
asserted Environmental Condition prior to Closing.

d.Remedies for Environmental Conditions.  If any asserted Environmental
Condition is not cured or removed prior to Closing and Buyer does not waive such
asserted Environmental Condition, Seller shall have the option to (i) remove the
portion of the Properties subject to such asserted Environmental Condition from
the transaction contemplated by this Agreement and reduce the Purchase Price by
the Allocated Value of the portion of the Properties so removed or (ii) reduce
the Purchase Price by an amount equal to the most cost effective estimate
reasonably available, consistent with industry standards, to perform any
remediation required to comply with applicable Environmental Laws or to remedy
the asserted Environmental Condition (hereinafter referred to as the
“Remediation Amount”) or (iii) with Buyer’s consent, agree to fully indemnify
Buyer for the asserted Environmental Condition.

e.Notwithstanding anything to the contrary contained in this Agreement, no
adjustment of the Purchase Price shall be made for any asserted Environmental
Conditions for which notices have been timely and otherwise validly delivered,
unless the aggregate of all Remediation Amounts, as determined in accordance
with this Agreement, equals or exceeds two percent (2%) of the Purchase Price.

10.Closing Obligations and Conditions.

a.Seller’s Obligations.  At the Closing, Seller shall do and deliver to Buyer
the following:

 

(i)

execute, acknowledge and deliver assignments of the Properties, which shall
contain a special warranty of Defensible Title by, through and under Seller, but
not otherwise (hereinafter collectively referred to as the “Assignment”), which
shall be in substantially the form of Exhibit E, together with any federal,
state, or other governmental agency form assignments necessary to transfer the
Properties to Buyer;

 

(ii)

Letters-In-Lieu to all Operators/Disbursers;

 

(iii)

any consents and/or waivers of preferential rights to purchase, if any, Seller
has obtained prior to Closing;

 

(iv)

furnish evidence reasonably acceptable to Buyer of release of all liens,
mortgages, security interests, pledges, charges or encumbrances or other
arrangements substantially equivalent thereto (other than Permitted
Encumbrances) affecting the Properties or any part;

 

(v)

execute and deliver the Preliminary Settlement Statement in accordance with
Article 11(b).

 

(vi)

such other documents, instruments and agreements as Buyer reasonably requests as
required to consummate the transactions contemplated by this Agreement.

b.Buyer’s Obligations.  At the Closing, Buyer shall do and deliver to Seller the
following:

 

(i)

execute, acknowledge and deliver the Assignment, together with the federal,
state, or other governmental agency form assignments necessary to transfer the
Properties to Buyer;

 

(ii)

deliver by wire transfer to Seller an amount equal to the Purchase Price, as
adjusted under Article 11(a); and

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(iii)

execute and deliver the Preliminary Settlement Statement in accordance with
Article 11(b).

 

(iv)

such other documents, instruments and agreements as Seller reasonably requests
as required to consummate the transactions contemplated by this Agreement.

c.Buyer’s Conditions.  Buyer’s obligation to proceed to Closing is, at Buyer’s
election, subject to the fulfillment of each of the following conditions, prior
to or at Closing:

 

(i)

All representations and warranties of Seller contained in this Agreement shall
be true and correct in all material respects as of the Closing Date as if such
representations and warranties were made as of the Closing Date, and Seller
shall have, in all material respects, performed and satisfied all covenants and
fulfilled all conditions required by this Agreement.

 

(ii)

The aggregate downward adjustment to the Purchase Price to be applied at Closing
due to any Title Defects and asserted Environmental Conditions does not exceed
twenty percent (20%) of the Purchase Price.

 

(iii)

Seller has executed and/or delivered, as applicable, all of the items listed in
Article 10(a)(i), (ii), (iii) and (iv).

Notwithstanding anything to the contrary, Buyer may, in its sole discretion,
terminate this Agreement if any or all of the conditions set forth in Article
10(c)(i), (ii), or (iii) have not been satisfied as of the Closing Date, in
which case this Agreement shall be of no further force and effect, Seller shall
return the Deposit to the Buyer, and neither Party shall have any further
obligation or liability hereunder.  Notwithstanding anything to the contrary,
Buyer may, in its sole discretion, terminate this Agreement if the conditions
set forth in Article 10(c)have not been satisfied as of January 31, 2018
(hereinafter referred to as the “Outside Date”), in which case this Agreement
shall be of no further force and effect, Seller shall return the Deposit to the
Buyer, and neither Party shall have any further obligation or liability
hereunder.

d.Seller’s Conditions.  Seller’s obligation to proceed to Closing is, at
Seller’s election, subject to the fulfillment of each of the following
conditions, prior to or at Closing:

 

(i)

All representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the Closing Date as if such
representations and warranties were made as of the Closing Date, and Buyer shall
have, in all material respects, performed and satisfied all covenants and
fulfilled all conditions required by this Agreement.

 

(ii)

The aggregate downward adjustment to the Purchase Price to be applied at Closing
due to any Title Defects and Environmental Conditions does not exceed twenty
percent (20%) of the Purchase Price.

 

(iii)

Buyer has executed and/or delivered, as applicable, all of the items listed in
Article 10(b)(i), (ii), and (iii).

Notwithstanding anything to the contrary, Seller may, in its sole discretion,
terminate this Agreement if any or all of the conditions set forth in Article
10(d)(i), (ii), or (iii) have not been satisfied as of the Closing Date, in
which case this Agreement shall be of no further force and effect, Seller shall
retain the Deposit, and neither Party shall have any further obligation or
liability hereunder.  Notwithstanding anything to the contrary, Seller may, in
its sole discretion, terminate this Agreement if the conditions set forth in
Article 10(d) have not been satisfied as of the Outside Date, in which case this
Agreement shall be of no further force and effect, Seller shall return the
Deposit to the Buyer, and neither Party shall have any further obligation or
liability hereunder.

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11. Certain Adjustments; Settlement Statement.  

a.At the Closing, appropriate adjustments to the Purchase Price shall be made
between Buyer and Seller so that:

 

(i)

except as otherwise provided herein, all cost and expenses (including all ad
valorem and property taxes, all drilling costs, all capital expenditures, all
overhead charges under applicable operating agreements, all operating expenses
and lease expenses):

 

(A)

which are attributable, allocable, or incurred in the ownership, use, and/or
operation of the Properties, prior to the Effective Time, shall be borne by
Seller; and

 

(B)

which are attributable, allocable, or incurred in the ownership, use, and/or
operation of the Properties on or after the Effective Time, will be borne by
Buyer;

 

(ii)

all proceeds (net of applicable production, severance, and similar taxes) from
the sale of Hydrocarbons:

 

(A)

from the Properties and attributable to periods prior to the Effective Time,
shall be received by Seller; and

 

(B)

from the Properties and attributable to periods on or after the Effective Time
will be received by Buyer; and

 

(iii)

the Purchase Price is decreased by the Title Defect Amount for all uncured and
unwaived Title Defects and the Remediation Amount for all uncured and unwaived
asserted Environmental Conditions unless the Property related thereto is
retained by Seller and not included in the Properties conveyed at Closing; and

 

(iv)

the Purchase Price is decreased by an amount equal to the Allocated Value for
the Properties excluded pursuant to this Agreement.

b.On or before December 15, 2017, Seller shall have delivered to Buyer, based
upon the best information reasonably available to it, a schedule setting forth
Seller’s good faith estimate of the amount of the adjustments provided for in
Article 9(a) (hereinafter referred to as the “Preliminary Settlement
Statement”). Buyer and Seller shall have made all good faith efforts to agree on
all adjustments in the Preliminary Settlement Statement prior to Closing,
provided that if Buyer and Seller are unable to agree on such adjustments, then
Buyer shall retain the right to dispute such matter in the manner set forth in
Article 11(c). If the amount of adjustments so determined which would result in
a credit to Buyer exceed the amount of adjustments so determined which would
result in a credit to Seller, Buyer shall receive a credit, for the amount of
such excess, against the Purchase Price to be paid at the Closing, and, if the
converse is true, Buyer shall pay, at the Closing (in addition to amounts
otherwise then owed), the amount of such excess.

c. On or before ninety (90) days after the Closing, Seller shall in good faith
prepare a final settlement statement (hereinafter referred to as the “Final
Settlement Statement”) reflecting and itemizing all adjustments provided for in
Article 11(a) (whether the same be made to account for expenses or revenues not
considered in making the Preliminary Settlement Statement, or to correct errors
made in the Preliminary Settlement Statement). Buyer shall respond in writing
with any objections and proposed corrections to the Final Settlement Statement
no later than thirty (30) days after the receipt of the Final Settlement
Statement.  If Buyer timely delivers objections and proposed corrections, then
the Parties shall endeavor to use all commercially reasonable efforts to resolve
all such objections and proposed corrections.  If the Parties cannot resolve
their differences within thirty (30) days of Seller’s receipt of Buyer’s
objections and proposed corrections, then either Party may submit the matter for
resolution by binding arbitration in accordance with Article 11(e).  If Buyer
does not respond to the Final Settlement Statement by signing or objecting to it
in writing within thirty (30) days of receipt, the proposed Final Settlement
Statement will be deemed conclusively approved by Buyer and neither party shall
have any recourse or claim with respect to any item contained therein.  Within
three business days after the Parties’ approval (or deemed approval) of the
Final Settlement Statement, any amount owing thereunder by Seller to Buyer or
Buyer to Seller shall be paid and delivered in readily available funds.  

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d.Each of Buyer and Seller shall share all information available to such Party
and pertaining to or relating to the adjustments contemplated by this Article 11
with the other Party. Should any additional items which would be the subject of
adjustments provided for in Articles 11(a) and 11(c) come to the attention of
Buyer or Seller after such adjustments under this Article 11 are concluded, such
adjustments shall be made by appropriate payments from Buyer to Seller or from
Seller to Buyer within ten (10) days of the date such information becomes
available and is verified by both Parties. The Parties agree that any
adjustments pursuant to this Article 11 shall be treated as adjustments to the
Purchase Price for federal income tax purposes.  

e.Any arbitration conducted as a result of Article 11(c) shall be a dispute
resolution process using a single impartial arbitrator, with at least ten years’
experience in oil and gas accounting issues, to be selected by mutual agreement
of the Seller and Buyer, or, in the event Buyer and the Seller cannot agree on
an arbitrator, such arbitrator shall be selected by the Houston office of the
American Arbitration Association.  The arbitrator’s decision as to the disputed
amounts shall be final and not appealable.  Buyer and Seller shall each bear its
own attorneys’ fees and costs in such arbitration and the fees of such
arbitrator shall be split equally between Buyer and Seller.  Such arbitration
shall be conducted in Houston, Texas.  Once appointed, the arbitrator shall not
have any ex parte communications with any of the affected parties.

12.Indemnification.  

a.Indemnification by Buyer. Except for the limited indemnification provided by
Seller in Article 12(c) below, Buyer hereby assumes and agrees to fulfill,
perform, pay and discharge (or cause to be fulfilled, performed, paid and
discharge) all claims, obligations and liabilities, known or unknown, with
respect to the Properties, regardless of whether such obligations or liability
arose prior to, on, or after the Effective Time, including claims, obligations
and liabilities relating in any manner to the Material Contracts, or the
condition, use or ownership of the Properties. Buyer shall be solely liable and
responsible to the Operators of the Properties for its proportionate share of
all cost associated with the plugging and abandoning of all Wells and facilities
now located or hereafter drilled or placed on the Properties by the Operators
thereof, and any surface restoration or environmental clean-up or Environmental
Liability associated therewith.

Buyer shall also indemnify and hold Seller harmless, it affiliates, and each of
their respective officers, members, managers, partners, directors, employees,
and representatives (hereinafter referred to as the “Indemnified Parties”)
against any and all liabilities, damages, losses, costs and expenses (including
reasonable attorneys’ and consultants’ fees and expenses) incurred or suffered
by the Indemnified Parties as a result of, relating to, or arising out of
Buyer’s desire to physically access the Properties prior to Closing, then any
and all claims for personal injuries to or death of Buyer’s employees,
contractors, agents, consultants or representatives, or any damage to Buyer’s
property or others acting on behalf of Buyer, regardless of whether such claims
arise out of or result in whole or in part from the condition of the Properties
or Seller’s (or its Affiliates, or its or their employees’, agents’,
contractors’, successors’ or assigns’) sole or concurrent negligence or fault;
and any and all claims for personal injuries to or death of employees of Seller,
its Affiliates or Third Parties, and damage to the Property or Properties of
Seller, its Affiliates or Third Parties, to the extent caused by the negligence,
gross negligence or willful misconduct of Buyer;

b.Survival of Buyer Representations, Warranties, Indemnification, Covenants and
Agreements.  The representations, warranties, indemnification, covenants and
agreements of Buyer under this Agreement will survive Closing for a period of
one (1) year.

c.Indemnification by Seller. Seller hereby retains and agrees to fulfill,
perform, pay and discharge (or cause to be fulfilled, performed, paid and
discharge) all claims, obligations and liabilities, known or unknown, with
respect to the Properties, which obligations or liability arose prior to the
Effective Time, including claims, obligations and liabilities relating in any
manner to the Material Contracts, or the condition, use or ownership of the
Properties but insofar and only insofar as to any and all properties not
operated by Buyer and then only for a period of six months after Closing.  

d.Survival of Seller Representations, Warranties, Covenants and
Agreements.  Except for the special warranty of title contained in the
Assignment and Article 13(a), the representations, warranties, covenants and
agreements of Seller Buyer under this Agreement will survive Closing for a
period of six (6) months or such shorter

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period if expressly set forth in this Agreement.  Any assertion or claim by
Buyer under this Agreement must be made in a written notice delivered to Seller
on or prior to the end of such six (6) months or shorter period.  Failure of
Buyer to make such assertion or claim within such period will be deemed a waiver
by Buyer of such assertion or claim, and Seller shall have no liability for such
assertion or claim which is not timely made.

e.Casualty or Condemnation Loss.  If during the time period between the
Execution Date and Closing, any portion of a Property or Properties is destroyed
by a fire or other casualty or is taken in condemnation or under right of
eminent domain (hereinafter collectively referred to as a “Casualty Loss”),
Buyer will nevertheless be required to close and, at Seller’s option either (a)
the Purchase Price will be reduced by Seller’s reasonable estimate of the amount
of such Casualty Loss, such amount not to exceed the Allocated Value of such
Property or Properties; or (b) the affected Property or Properties will be
excluded from the transaction and deemed an Excluded Asset or Assets.

13.Miscellaneous.

a.Amendment to Exhibits and Schedules. The Buyer agrees that Seller shall have
the continuing right until the Closing Date to add, supplement or amend the
exhibits and schedules to this Agreement.

b.Taxes.  All sales, use or other taxes and duties, levies or other governmental
charges (including recording or similar fees and expenses) incurred by or
imposed with respect to the property transfers undertaken pursuant to this
Agreement shall be the responsibility of, and shall be paid by, Seller.  Seller
shall retain responsibility for, and shall bear and pay, all taxes assessed with
respect to the ownership and operation of the Properties for any period ending
prior to the Effective Time and Buyer shall be responsible for, and shall bear
and pay, all taxes assessed with respect to the ownership and operation of the
Properties for any period from and after the Effective Time.

c.Access.  Upon execution of this Agreement and payment of the Deposit, Seller
shall make available and grant access to Buyer and its representatives,
employees, and consultants, during normal business hours, and at other mutually
agreeable times prior to Closing, to (i) the Contracts, the Records, all title
records (including, title opinions, curative title documents, and run sheets)
and all revenue, cost accounting, payment and other similar records related to
the Properties and (ii) the Leases, the Units, the Wells, and all other
Properties.  Buyer shall have such access rights up to three (3) days prior to
Closing.  

d.Operations Prior to Closing.  Until the Closing or earlier termination of this
Agreement, Seller shall: (i) notify Buyer of any claim or demand that might
affect title to, or operation or use of, the Properties; (ii) notify Buyer of
any changes, circumstances, facts or occurrences (whether or not within the
control of any Seller, to the extent that such Seller has knowledge of the
event) that if existing on the Execution Date would constitute a breach of any
of the representations and warranties made by Seller herein, (iii) pay all
taxes, costs and expenses attributable to its interest in the Properties as such
taxes, costs and expenses become due and (iv) not (without Buyer’s prior written
consent): (A) abandon any Well unless such abandonment is required by applicable
law (and then only after providing prior written notice thereof to Buyer), (B)
transfer, sell, release or otherwise dispose of all or any portion of any of the
Properties, (C) directly or indirectly initiate, solicit, encourage, continue to
discuss, entertain or accept any offer or proposal regarding the possible
acquisition by any person other than Buyer (including by way of a purchase of
equity, purchase of assets or merger, consolidation or reorganization), of all
or any portion of the Properties, (D) commence or consent to an operation, other
than routine maintenance or emergency repairs, if the estimated cost of the
operation exceeds Ten Thousand Dollars and No/100 ($10,000.00) in the aggregate,
(E) create a lien, security interest or other encumbrance on any of the
Properties, (F) amend any Lease or Contract or enter into any new contract or
other agreement affecting the Properties, or (G) waive, compromise or settle any
claim that could affect ownership, operation or value of any of the Properties
by an amount exceeding Ten Thousand Dollars and No/100 ($10,000.00) net to the
interest in the Properties to be acquired by Buyer pursuant to this Agreement.

e.Further Assurances.  After the Closing, each Party at the request of the other
and without additional consideration, shall execute and deliver, or shall
otherwise cause to be executed and delivered, from time to time, such further
instruments of conveyance or transfer, and do such further acts, as necessary to
more fully and effectively convey and deliver the Properties to Buyer.  

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f.Entire Agreement.  This Agreement, the documents to be executed hereunder, and
the Exhibits and Schedules attached hereto constitute the entire and exclusive
agreement between the Parties with respect to the subject matter hereof.  No
amendment, waiver or termination of this Agreement shall be binding unless in
writing and executed by the Parties hereto and referencing this Agreement.

g.Notices.  Any notice, communication, request, instruction or other document
required or permitted hereunder must be in writing and delivered in person, by
U.S. Mail postage prepaid, return receipt requested, Federal Express delivery
(or other reputable delivery service), or electronic transmission (including
electronic mail) (provided that notice by any electronic transmission is
promptly followed with a copy delivered in person, by U.S. Mail postage prepaid,
return receipt requested, or Federal Express delivery (or other reputable
delivery service)), to the addresses of the applicable Party set forth below.
Notices delivered in person or by electronic transmission shall be deemed
received upon delivery, notices sent by U.S. Mail postage prepaid, return
receipt requested, shall be deemed received on the date shown as received on the
return notice, and notices sent by Federal Express delivery (or other reputable
delivery service) shall be deemed received on the date shown on the confirmation
of delivery.

Buyer:

Statoil Oil & Gas LP

6300 Bridge Point Pkwy

Building 2, Suite 100

Austin, TX  78730

Attention: Kate Beck

Bakken Asset Manager

Office Telephone: 512-427-3484

E-Mail: KACAP@statoil.com

Seller:

Earthstone Legacy Properties, LLC

1400 Woodloch Forest Drive

Suite 300

The Woodlands, TX 77380-1197

Attention: Christopher E. Cottrell

Executive Vice President Land & Marketing

Office Telephone:  281-771-3045

Office Fax:  832-823-0478

Mobile:  281-703-9219

E-Mail:  chris@earthstoneenergy.com

With a copy to:

Earthstone Legacy Properties, LLC

1400 Woodloch Forest Drive

Suite 300

The Woodlands, TX 77380-1197

Attention:  Robert Anderson

Executive Vice President Corporate Development & Engineering

Office Telephone:  281-771-3067

Office Fax:  832-823-0478

Mobile:  713-819-0104

E-Mail:  Robert@earthstoneenergy.com

Either Party may, by written notice so delivered, change its address for notice
purposes hereunder.

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h.Choice of Law.  Without regard to principles of conflicts of law, this
Agreement shall be construed and enforced in accordance with and governed by the
laws of the State of Texas.

i.Venue.  Each Party irrevocably submits to the non-exclusive jurisdiction of
any Texas state court or U.S. federal court sitting in Harris County, Texas in
any dispute arising out of or relating to this Agreement, and hereby irrevocably
agrees that all damages in respect of such dispute may be heard and determined
in such Texas state or U.S. federal court.

j.Counterpart Execution.  This Agreement may be executed in counterparts, all of
which are identical and all of which constitute one and the same instrument. It
shall not be necessary for Buyer and Seller to sign the same counterpart. The
execution and delivery of this Agreement by Buyer and Seller may be evidenced by
facsimile or other electronic transmission (including scanned documents
delivered by email), which shall be binding upon Buyer and Seller.

k.Remedies.  Notwithstanding anything herein to the contrary, neither Seller nor
Buyer shall have any remedy arising under or related to this Agreement for any
special, consequential or punitive damages; provided that any special,
consequential, or punitive damages recovered by a third party (except an
affiliate of the indemnified Party) shall be recoverable by a Party to the
extent that such Party is entitled to indemnification for the matter with
respect to which such damages are recovered.

l.Assignment.  This Agreement may not be assigned, in whole or in part, by
either Party without the express written consent of the other Party, which
consent may be withheld in its sole and absolute discretion, and any assignment
that is made without such consent shall be void.

m.Confidentiality.  Neither Party may disclose the existence of this Agreement
or any of the terms or provisions thereof, to any person, without the prior
written consent of the other Party.  Notwithstanding the foregoing, a Party may
disclose, or permit the disclosure of information which would otherwise be
confidential, if and to the extent that it is required by applicable law or any
securities exchange or regulatory, governmental or other authority with relevant
powers to which any Party is subject or submits, whether or not the requirement
has the force of law.

n.Successors and Assigns. This Agreement shall be binding upon and benefit the
Parties’ respective successors and assigns, and the provisions hereof shall be
covenants running with the land.

o.Third Party Beneficiaries. Except as expressly provided in Section 12, this
Agreement is made solely for the benefit of the Parties hereto, and no other
person shall have or claim or be entitled to enforce any rights, benefits or
obligations under this Agreement.

p.Announcements. The Parties shall consult with each other with regard to all
press releases and other announcements concerning (i) this Agreement or (ii) the
operations within the Properties to the extent such press releases or
announcements make reference to the name of the other Party and, except as may
be required by law or the applicable rules and regulations of any governmental
authority or stock exchange.  Neither Party shall issue any such press release
or make any other announcement without the prior written consent of the other
Party, which consent shall not be unreasonably withheld.

q. Rules of Construction.  As used in this Agreement, (i) any pronoun in
masculine, feminine or neuter gender shall be construed to include all other
genders, (ii) the term “including” shall be construed to be expansive rather
than limiting in nature and to mean “including without limitation,” except where
the context clearly otherwise requires, (iii) each term defined in this
Agreement in the singular shall include the plural of that term, and each term
defined in this Agreement in the plural shall include the singular of that term,
(iv) the words “this Agreement,” “herein,” “hereby,” “hereunder,” and “hereof,”
and words of similar import refer to this Agreement as a whole and not to any
particular part of this Agreement unless the context clearly or expressly
provides or indicates otherwise, (v) the term “person” means any individual,
firm, corporation, company, partnership, joint venture, limited partnership,
limited liability company, association, trust, estate, labor union,
organization, governmental authority or any other entity, (vi) the term
“affiliate” shall mean, with respect to any person, any person directly or

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indirectly through one or more intermediaries, controlling, controlled by or
under common control with such person and “control”, including the correlative
terms “controlled” and “controlling”, means the possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies (whether through ownership of securities or any partnership or other
ownership interest, by contract or otherwise) of a person and (vii) any
reference herein to the “knowledge” or “awareness” of a Party shall mean the
actual knowledge or awareness of any of such Party’s owners, officers or members
of its governing authority and the knowledge or awareness that a reasonably
prudent person should have (whether by inquiry or otherwise) in the same or
similar circumstances. The headings of the sections of this Agreement are for
guidance and convenience of reference only and shall not limit or otherwise
affect any of the terms and the conditions of this Agreement.  No information or
knowledge obtained or capable of being obtained by a Party or any of its
representatives, whether through investigation, due diligence efforts or
otherwise, shall affect or be deemed to modify any representation, warranty,
covenant or other agreement of any Party contained herein.  Each Party shall
have the right to rely fully upon the representations, warranties, covenants and
other agreements of the other Party contained in this Agreement.   The Parties
and their respective counsel participated in the review and/or preparation of
this Agreement.  In the event of any ambiguity in this Agreement, all Parties
acknowledge and agree that no presumption shall arise based on the identity of
the draftsman of any provision of this Agreement.    

 

Signature Page Follows

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Executed, on the Execution Date, by:

 

SELLER:

 

 

 

EARTHSTONE LEGACY PROPERTIES, LLC

 

 

 

By:

 

/s/ Christopher E. Cottrell

 

 

Christopher E. Cottrell

 

 

Executive Vice President Land & Marketing

 

 

 

BUYER:

 

 

 

STATOIL OIL AND GAS LP

 

 

 

By Statoil Oil & Gas Services Inc., Its General Partner

 

 

 

By:

 

/s/ Kate Beck

Name:

 

Kate Beck

Title:

 

Asset Manager

 

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Exhibits and Schedules

 

Exhibit A:

 

Leases and Lands

Exhibit B:

 

Wells

Exhibit C:

 

Contracts

Exhibit D:

 

Easements

Exhibit E:

 

Assignment Form

 

 

 

Schedule 2.2:

 

Allocated Values

Schedule 5(a):

 

Consents and Preferential Rights To Purchase

Schedule 5(b):

 

Material Contracts

Schedule 5(c):

 

P&A

Schedule 5(d):

 

Current Commitments

Schedule 5(e):

 

Imbalances

Schedule 5(f):

 

Non-Consent Wells

 

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