Exhibit 10.1

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

BLACK ELK ENERGY OFFSHORE OPERATIONS, LLC

AS SELLER

AND

RENAISSANCE OFFSHORE, LLC

AS PURCHASER

Dated as of March 1, 2013

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TABLE OF CONTENTS

 

ARTICLE 1 PURCHASE AND SALE

     1   

Section 1.1

 

Purchase and Sale

     1   

Section 1.2

 

Assets

     1   

Section 1.3

 

Excluded Assets

     3   

Section 1.4

 

Effective Time; Proration of Costs and Revenues

     5   

Section 1.5

 

Delivery of Records

     6   

ARTICLE 2 PURCHASE PRICE

     7   

Section 2.1

 

Purchase Price

     7   

Section 2.2

 

Allocation of Purchase Price

     7   

Section 2.3

 

Adjustments to Purchase Price

     7   

Section 2.4

 

Deposit

     9   

Section 2.5

 

Allocation of Purchase Price

     9   

ARTICLE 3 TITLE MATTERS

     10   

Section 3.1

 

Seller’s Title

     10   

Section 3.2

 

Definition of Defensible Title

     10   

Section 3.3

 

Definition of Permitted Encumbrances

     12   

Section 3.4

 

Notice of Title Defect Adjustments

     14   

Section 3.5

 

Casualty or Condemnation Loss

     18   

Section 3.6

 

Limitations on Title Defects

     19   

Section 3.7

 

Limitations on Applicability

     19   

ARTICLE 4 ENVIRONMENTAL MATTERS

     21   

Section 4.1

 

Assessment

     21   

Section 4.2

 

NORM, Wastes and Other Substances

     24   

Section 4.3

 

Environmental Defects

     24   

Section 4.4

 

Inspection Indemnity

     25   

Section 4.5

 

Exclusive Remedy

     26   

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER

     26   

Section 5.1

 

Generally

     26   

Section 5.2

 

Existence and Qualification

     26   

Section 5.3

 

Power

     27   

Section 5.4

 

Authorization and Enforceability

     27   

Section 5.5

 

No Conflicts

     27   

Section 5.6

 

Liability for Brokers’ Fees

     27   

Section 5.7

 

Litigation

     27   

Section 5.8

 

Taxes and Assessments

     28   

 

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Section 5.9

 

Condemnation

     28   

Section 5.10

 

Contracts

     28   

Section 5.11

 

Payments for Hydrocarbon Production

     28   

Section 5.12

 

Governmental Authorizations

     29   

Section 5.13

 

Outstanding Capital Commitments

     29   

Section 5.14

 

Imbalances

     29   

Section 5.15

 

Bankruptcy

     29   

Section 5.16

 

Affiliated Contracts

     30   

Section 5.17

 

Foreign Person

     30   

Section 5.18

 

Preference Rights

     30   

Section 5.19

 

Transfer Requirements and Other Consents

     30   

Section 5.20

 

No Violation of Laws

     30   

Section 5.21

 

Environmental

     30   

Section 5.22

 

Suspended Funds

     30   

Section 5.23

 

Non-Consent Operations

     31   

Section 5.24

 

BOEM or BSEE Incidents of Non-Compliance and Suspensions

     31   

Section 5.25

 

Casualty Losses

     31   

Section 5.26

 

Third Party Beneficiary

     31   

Section 5.27

 

Condition of Personal Property

     31   

Section 5.28

 

Bonds, Letters of Credit, Guarantees and Other Securities

     31   

Section 5.29

 

Idle Iron

     31   

Section 5.30

 

Seller’s Insurance Coverage

     32   

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER

     32   

Section 6.1

 

Existence and Qualification

     32   

Section 6.2

 

Power

     32   

Section 6.3

 

Authorization and Enforceability

     32   

Section 6.4

 

No Conflicts

     32   

Section 6.5

 

Liability for Brokers’ Fees

     33   

Section 6.6

 

Litigation

     33   

Section 6.7

 

Financing

     33   

Section 6.8

 

Limitation

     33   

Section 6.9

 

SEC Disclosure

     33   

Section 6.10

 

Bankruptcy

     33   

Section 6.11

 

Qualification

     34   

Section 6.12

 

Consents

     34   

Section 6.13

 

Independent Evaluation

     34   

Section 6.14

 

NORM, Wastes and Other Substances

     34   

 

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ARTICLE 7 COVENANTS OF THE PARTIES

     35   

Section 7.1

 

HSR Act

     35   

Section 7.2

 

Government Reviews

     35   

Section 7.3

 

Breaches

     35   

Section 7.4

 

Letters-in-Lieu; Transition Agreement; Assignments; Operatorship

     36   

Section 7.5

 

Public Announcements

     36   

Section 7.6

 

Operation of Business

     36   

Section 7.7

 

Preference Rights and Transfer Requirements

     37   

Section 7.8

 

Tax Matters

     39   

Section 7.9

 

Further Assurances

     39   

Section 7.10

 

Performance Bond

     40   

Section 7.11

 

Insurance

     41   

Section 7.12

 

No Solicitation of Transactions

     41   

Section 7.13

 

Record Retention

     42   

Section 7.14

 

Bonds, Letters of Credit and Guarantees

     42   

Section 7.15

 

Cure of Misrepresentations

     42   

Section 7.16

 

Cooperation with Respect to Seller Retained Litigation, Etc.

     42   

Section 7.17

 

Plugging, Abandonment, Decommissioning and Other Costs

     43   

Section 7.18

 

Arena Imbalance

     43   

ARTICLE 8 CONDITIONS TO CLOSING

     43   

Section 8.1

 

Conditions of Seller to Closing

     43   

Section 8.2

 

Conditions of Purchaser to Closing

     44   

ARTICLE 9 CLOSING

     46   

Section 9.1

 

Time and Place of Closing

     46   

Section 9.2

 

Obligations of Seller at Closing

     46   

Section 9.3

 

Obligations of Purchaser at Closing

     47   

Section 9.4

 

Closing Adjustments and Closing Payment

     48   

ARTICLE 10 TERMINATION

     50   

Section 10.1

 

Termination

     50   

Section 10.2

 

Effect of Termination

     51   

Section 10.3

 

Distribution of Deposit Upon Termination

     51   

ARTICLE 11 POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS; DISCLAIMERS
AND WAIVERS

     52   

Section 11.1

 

Assumed Seller Obligations

     52   

Section 11.2

 

Survival

     53   

Section 11.3

 

Indemnification by Seller

     53   

Section 11.4

 

Indemnification by Purchaser

     54   

 

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Section 11.5

 

Indemnification Proceedings

     54   

Section 11.6

 

Limitations on Indemnities

     56   

Section 11.7

 

Release

     57   

Section 11.8

 

Disclaimers

     57   

Section 11.9

 

Waiver of Trade Practices Acts

     58   

Section 11.10

 

Redhibition Waiver

     59   

Section 11.11

 

Recording

     59   

Section 11.12

 

Non-Compensatory Damages

     59   

Section 11.13

 

Disclaimer of Application of Anti-Indemnity Statutes

     60   

ARTICLE 12 MISCELLANEOUS

     60   

Section 12.1

 

Counterparts

     60   

Section 12.2

 

Notices

     60   

Section 12.3

 

Sales or Use Tax Recording Fees and Similar Taxes and Fees

     61   

Section 12.4

 

Expenses

     61   

Section 12.5

 

Change of Name

     61   

Section 12.6

 

Governing Law and Venue

     61   

Section 12.7

 

Captions

     62   

Section 12.8

 

Waivers

     62   

Section 12.9

 

Assignment

     62   

Section 12.10

 

Entire Agreement

     62   

Section 12.11

 

Amendment

     62   

Section 12.12

 

No Third-Party Beneficiaries

     62   

Section 12.13

 

References

     63   

Section 12.14

 

Construction

     63   

Section 12.15

 

Conspicuousness

     63   

Section 12.16

 

Severability

     64   

Section 12.17

 

Time of Essence

     64   

Section 12.18

 

Limitation on Damages

     64   

Section 12.19

 

Financial Reporting

     64   

 

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EXHIBITS

 

Exhibit A    Leases Exhibit A-1    Wells and Units Exhibit B    Form of
Assignment, Conveyance and Bill of Sale Exhibit B-1    Form of Assignment of
Record Title to Oil and Gas Leases Exhibit B-2    Form of Assignment of Oil and
Gas Lease Operating Rights Exhibit B-3    Form of Assignment of Rights of Way
Exhibit C    Form of Title Indemnity Agreement Exhibit D    Intentionally Left
Blank Exhibit E    Intentionally Left Blank Exhibit F    Form of Escrow
Agreement Exhibit G    Form of Transition Agreement Exhibit H    Form of
Required Bond

SCHEDULES

 

Schedule 1.2(d)   Contracts Schedule 1.2(e)   Easements Schedule 1.2(f)  
Equipment Schedule 1.2(g)   Pipelines Schedule 1.2(k)   Geologic Data
Schedule 1.3(h)   Excluded Contracts Schedule 2.2   Allocated Values
Schedule 3.3(n)   Permitted Encumbrances Schedule 5.7   Litigation Schedule 5.8
  Taxes and Assessments Schedule 5.11   Hydrocarbon Production Payments Schedule
5.12   Governmental Authorizations Schedule 5.13   Outstanding Capital
Commitments Schedule 5.14   Imbalances Schedule 5.21   Environmental Schedule
5.22   Suspended Funds Schedule 5.23   Non-Consent Operations Schedule 5.24  
BOEM or BSEE Incidents of Non-Compliance and Suspensions Schedule 5.27  
Condition of Personal Property Schedule 5.28   Bonds, Letters of Credit,
Guarantees and Other Securities Schedule 5.29   Copy of Idle Iron Documentation
Schedule 5.30   Seller’s Insurance Coverages Schedule 7.6   Operation of
Business Schedule 7.7   Preference Rights and Transfer Requirements Schedule 8.1
  Existing Mortgages

 

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DEFINITIONS

“Adjustment Period” means the period between the Effective Time and the Closing
Date.

“Adjusted Purchase Price” means the Purchase Price after calculating and
applying the adjustments set forth in Section 2.3.

“AFE” means authority for expenditure.

“Affected Well” has the meaning set forth in Section 3.4(g)(v).

“Affiliates” with respect to any Person, means any Person that directly or
indirectly controls, is controlled by or is under common control with such
Person. The concept of control, controlling or controlled as used in the
aforesaid context means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of another, whether
through the ownership of voting securities, by contract or otherwise. No Person
shall be deemed an Affiliate of any Person by reason of the exercise or
existence of rights, interests or remedies under this Agreement.

“Agreed Accounting Firm” has the meaning set forth in Section 9.4(b).

“Agreed Interest Rate” means the rate of interest published in the Wall Street
Journal from time to time, as the one month London Interbank Offered Rate
(LIBOR) plus 75 basis points, with adjustments in that rate to be made on the
same day as any change in that rate.

“Agreement” means this Purchase and Sale Agreement.

“Allocated Value” has the meaning set forth in Section 2.2.

“Arena” means Arena Energy, LP.

“Arena Imbalance” has the meaning set forth in Section 7.18.

“Assets” has the meaning set forth in Section 1.2.

“Assumed Seller Obligations” has the meaning set forth in Section 11.1.

“BOEM” means the Bureau of Ocean Energy Management of the United States
Department of the Interior.

“BSEE” means the Bureau of Safety and Environmental Enforcement of the United
States Department of the Interior.

“Business Day” means each calendar day except Saturdays, Sundays, and Federal
holidays.

“Claim” or “Claims” means any demand, claim or notice sent or given by a Person
to another Person in which the former asserts that it has suffered a Loss or has
become party to a Proceeding that is the responsibility of the latter Person.

 

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“Claim Notice” has the meaning set forth in Section 11.2(b).

“Closing” has the meaning set forth in Section 9.1(a).

“Closing Date” has the meaning set forth in Section 9.1(b).

“Closing Payment” has the meaning set forth in Section 9.4(a).

“Closing Statements” means the Preliminary Closing Statement and the Final
Closing Statement.

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” has the meaning set forth in Section 4.1(h).

“Contracts” has the meaning set forth in Section 1.2(d).

“Conveyance” has the meaning set forth in Section 3.1(b).

“Cure Period” has the meaning set forth in Section 3.4(c).

“Customary Post-Closing Consents” means the consents and approvals for the
assignment of the Assets to Purchaser that are customarily obtained after the
assignment of properties similar to the Assets.

“Defective Support Property” has the meaning set forth in Section 3.4(g)(v).

“Defensible Title” has the meaning set forth in Section 3.2.

“Deposit” has the meaning set forth in Section 2.4.

“DOJ” means the Department of Justice.

“DTPA” has the meaning set forth in Section 11.9.

“Earned” has the meaning set for in Section 1.4(b).

“Easements” has the meaning set forth in Section 1.2(e).

“Effective Time” has the meaning set forth in Section 1.4(a).

“Environmental Claim Date” has the meaning set forth in Section 4.3.

“Environmental Defect” has the meaning set forth in Section 4.3.

“Environmental Defect Amount” has the meaning set forth in Section 4.3.

“Environmental Defect Deductible” has the meaning set forth in Section 4.3.

 

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“Environmental Defect Notice” has the meaning set forth in Section 4.3.

“Environmental Laws” means, as the same may have been amended, superseded or
replaced, any federal, state or local statute, law, regulation, ordinance, rule,
order or decree including any rule of common law, relating to (i) the control of
any potential pollutant or protection of the environment, including air, water
or land, (ii) the generation, handling, treatment, storage, disposal or
transportation of waste materials, or (iii) the regulation of or exposure to
Hazardous Materials alleged to be harmful, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et seq. (“CERCLA”); the Resource Conservation and Recovery Act, 42 U.S.C.
§ 6901 et seq. (“RCRA”); the Federal Water Pollution Control Act, 33 U.S.C. §
1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq. the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances
Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. §
2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
§ 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.;
the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Atomic
Energy Act, 42 U.S.C. § 2011 et seq.; and all applicable related law, whether
local, state, territorial, or national, of any Governmental Body having
jurisdiction over the property in question addressing pollution or protection of
human health, safety, natural resources or the environment and all regulations
implementing the foregoing. The term “Environmental Laws” includes all judicial
and administrative decisions, orders, directives, and decrees issued by a
Governmental Body pursuant to the foregoing.

“Environmental Liabilities” means any and all environmental response costs
(including costs of remediation), damages, natural resource damages,
settlements, consulting fees, expenses, penalties, fines, orphan share,
prejudgment and post-judgment interest, court costs, attorneys’ fees, and other
liabilities Incurred or imposed (i) pursuant to any order, notice of
responsibility, directive (including requirements embodied in Environmental
Laws), injunction, judgment or similar act (including settlements) by any
Governmental Body to the extent arising out of any violation of, or remedial
obligation under, any Environmental Laws which are attributable to the ownership
or operation of the Assets prior to, on or after the Effective Time or
(ii) pursuant to any claim or cause of action by a Governmental Body or other
Person for personal injury, property damage, damage to natural resources,
remediation or response costs to the extent arising out of any exposure to
Hazardous Materials, any violation of, or any remediation or obligation under,
any Environmental Laws which is attributable to the ownership or operation of
the Assets prior to, on or after the Effective Time; provided, however,
notwithstanding the foregoing, Purchaser’s liability or responsibility for any
penalties or fines shall be limited to matters attributable to the ownership or
operation of the Assets on or after the Effective Time.

“Equipment” has the meaning set forth in Section 1.2(f).

“Escrow Agreement” has the meaning set forth in Section 2.4.

“Excluded Assets” has the meaning set forth in Section 1.3.

“Excluded Contracts” means those contracts described on Schedule 1.3(f).

 

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“Excluded Seller Obligations” has the meaning set forth in Section 11.1.

“Existing Mortgages” means those certain mortgages and deeds of trust described
on Schedule 8.1 together with related financing statements.

“Existing Mortgagees” means the mortgagees, trustees, and deed of trust
beneficiaries holding the Existing Mortgages.

“Final Adjustment” has the meaning set forth in Section 9.4(b).

“Final Closing Statement” has the meaning set forth in Section 9.4(b).

“Final Purchase Price” has the meaning set forth in Section 9.4(b).

“FTC” shall mean the Federal Trade Commission.

“Fundamental Representations” has the meaning set forth in Section 11.2(a).

“Geologic Data” means all (i) seismic, geological, geochemical or geophysical
data (including cores and other physical samples of materials from wells or
tests) belonging to Seller or licensed from third parties relating to the
Properties that can be transferred without additional consideration to such
third parties (or including such licensed data in the event Purchaser agrees to
pay such additional consideration), and (ii) interpretations of seismic,
geological, geochemical or geophysical data belonging to Seller or licensed from
third parties that can be transferred without additional consideration to such
third parties (or including such licensed data in the event Purchaser agrees to
pay such additional consideration).

“Governmental Authorizations” has the meaning set forth in Section 5.12.

“Governmental Body” or “Governmental Bodies” means any federal, state, local,
municipal, or other government; any governmental, regulatory or administrative
agency, commission, body or other authority exercising or entitled to exercise
any administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power; and any court or governmental tribunal.

“Hazardous Material” means (i) any “hazardous substance,” as defined by CERCLA,
(ii) any “hazardous waste” or “solid waste,” in either case as defined by RCRA,
and any analogous state statutes, and any regulations promulgated thereunder,
(iii) any solid, hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any applicable Environmental
Laws, (iv) any radioactive material, including any naturally occurring
radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof, (v) any
regulated asbestos-containing materials in any form or condition, (vi) any
regulated polychlorinated biphenyls in any form or condition, and
(vii) petroleum, petroleum hydrocarbons or any fraction or byproducts thereof.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

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“Hydrocarbons” means oil, gas, casinghead gas, condensate and other gaseous and
liquid hydrocarbons or any combination thereof and sulphur and other minerals
extracted from or produced with the foregoing.

“Imbalance” or “Imbalances” means any over-production, under-production,
over-delivery, under-delivery, or similar imbalance of Hydrocarbons produced
from or allocated to the Assets, regardless of whether such over-production,
under-production, over-delivery, under-delivery, or similar imbalance arises at
the platform, wellhead, pipeline, gathering system, transportation system,
processing plant or other location.

“Included Geologic Data” has the meaning set forth in Section 1.2(k).

“Incurred” has the meaning set forth in Section 1.4(b).

“Indemnified Person” has the meaning set forth in Section 11.5.

“Indemnifying Party” has the meaning set forth in Section 11.5.

“Indemnity Agreement” has the meaning set forth in Section 3.4(d)(ii).

“Independent Expert” has the meaning set forth in Section 4.3.

“Individual Benefit Threshold” has the meaning set forth in Section 3.4(j).

“Individual Environmental Threshold” has the meaning set forth in Section 4.3.

“Individual Title Threshold” has the meaning set forth in Section 3.4(j).

“Lands” has the meaning set forth in Section 1.2(a).

“Laws” means all statutes, laws, rules, regulations, ordinances, orders, court
decisions, and codes of Governmental Bodies.

“Leases” has the meaning set forth in Section 1.2(a).

“Losses” means any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), diminution in value, monetary damages,
fines, fees, Taxes, penalties, interest obligations, deficiencies, losses and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other actual out of pocket expenses Incurred in
investigating and preparing for or in connection with any Proceeding).

“Lowest Cost Response” means the response required or allowed under
Environmental Laws that addresses the condition present at the lowest cost
(considered as a whole taking into consideration any material negative impact
such response may have on the operations of the relevant assets and any
potential material additional costs or liabilities that may likely arise as a
result of such response) as compared to any other response that is required or
allowed under Environmental Laws.

 

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“Material Adverse Effect” means any effect that is material and adverse to the
ownership, operation or value of the Assets, taken as a whole, and as currently
operated; provided, however, that “Material Adverse Effect” shall not include
(i) any effect resulting from entering into this Agreement or the announcement
of the transactions contemplated by this Agreement; (ii) any effect resulting
from changes in general market, economic, financial or political conditions or
any outbreak of hostilities or war, (iii) any effect that affects the
Hydrocarbon exploration, production, development, processing, gathering and/or
transportation industry generally (including changes in commodity prices or
general market prices in the Hydrocarbon exploration, production, development,
processing, gathering and/or transportation industry generally), and (iv) any
effect resulting from a change in Laws or regulatory policies. The Parties
hereby agree that any effect which adversely impacts the ownership, operation or
value of the Assets in an amount (such amount to be determined after discounting
the present value of any such effects on a PV 10 basis) equal to or greater than
$1,000,000.00 shall constitute a Material Adverse Effect for purposes of this
definition (unless otherwise specifically excluded in subclauses (i) through
(iv) above), and any effect less than $1,000,000.00 (as determined above) shall
not constitute a Material Adverse Effect for purposes of this definition.

“Material Environmental Defect” means an uncured Environmental Defect that
exceeds the Individual Environmental Threshold.

“Material Title Benefit” means a Title Benefit that exceeds the Individual
Benefit Threshold.

“Material Title Defect” means an uncured Title Defect that exceeds the
Individual Title Threshold.

“Net Revenue Interest” has the meaning set forth in Section 3.2(a).

“Net Title Benefit Amount” has the meaning set forth in Section 3.4(e).

“Net Title Defect Amount” has the meaning set forth in Section 3.4(d)(i).

“NORM” means naturally occurring radioactive material.

“Notice Period” has the meaning set forth in Section 11.5(a).

“P&A Obligations” has the meaning set forth in Section 7.17.

“Party” means either Seller or Purchaser.

“Parties” means Seller and Purchaser.

“Performance” has the meaning set forth in Section 7.10(d).

“Permitted Encumbrances” has the meaning set forth in Section 3.3.

 

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“Person” means any individual, firm, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization,
Governmental Body or any other entity.

“Personal Property” has the meaning set forth in Section 1.2(g).

“Pipelines” has the meaning set forth in Section 1.2(g).

“Preference Property” has the meaning set forth in Section 7.7(b).

“Preference Right” means any right or agreement that enables any Person to
purchase or acquire any Asset or any interest therein or portion thereof as a
result of or in connection with (i) the sale, assignment or other transfer of
any Asset or any interest therein or portion thereof or (ii) the execution or
delivery of this Agreement or the consummation or performance of the terms and
conditions contemplated by this Agreement.

“Preliminary Closing Statement” has the meaning set forth in Section 9.4(a).

“Proceeding” has the meaning set forth in Section 5.7.

“Properties” has the meaning set forth in Section 1.2(c).

“Property Costs” has the meaning set forth in Section 1.4(b).

“Purchase Price” has the meaning set forth in Section 2.1.

“Purchaser” has the meaning set forth in the preamble hereto.

“Purchaser Indemnified Persons” has the meaning set forth in Section 11.3.

“Purchaser’s Representatives” has the meaning set forth in Section 4.1(a).

“Records” has the meaning set forth in Section 1.2(j).

“REGARDLESS OF FAULT” means WITHOUT REGARD TO THE CAUSE OR CAUSES OF ANY CLAIM,
INCLUDING, WITHOUT LIMITATION, EVEN THOUGH A CLAIM IS CAUSED IN WHOLE OR IN PART
BY:

OTHER THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE NEGLIGENCE (WHETHER SOLE,
JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE OR PASSIVE), STRICT
LIABILITY, OR OTHER FAULT OF THE SELLER INDEMNIFIED PERSONS, THE PURCHASER
INDEMNIFIED PERSONS, OR ANY OTHER PERSON OR ENTITY; AND/OR

A PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT, OF THE PREMISES OF PURCHASER’S
PROPERTY OR SELLER’S PROPERTY (INCLUDING WITHOUT LIMITATION THE ASSETS), OR
PROPERTY OF ANY OTHER PERSON OR ENTITY; AND/OR

 

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THE UNSEAWORTHINESS OF ANY VESSEL OR UNAIRWORTHINESS OF ANY AIRCRAFT OF A PARTY
WHETHER CHARTERED, OWNED, OR PROVIDED BY THE PURCHASER INDEMNIFIED PERSONS,
SELLER INDEMNIFIED PERSONS, OR ANY OTHER PERSON OR ENTITY.

“Retained Asset” has the meaning set forth in Section 7.7(c).

“Required Bond” has the meaning set forth in Section 7.10.

“Seller Indemnified Persons” has the meaning set forth in Section 11.4.

“Seller Operated Assets” shall mean Assets operated by Seller.

“Ship Shoal Retained Assets” has the meaning set forth in Section 9.1(c).

“Subject Properties” has the meaning set forth in Section 1.2(d).

“Tax Returns” means any report, return, information statement, payee statement
or other information, or any amendment thereof, required to be provided to any
Governmental Body with respect to Taxes, including any return of an affiliated,
combined or unitary group, and any and all work papers relating thereto.

“Taxes” means all state and local sales, use, ad valorem, property, severance,
production, excise, stamp, documentary, real property transfer or gain, gross
receipts, goods and services, registration, capital or transfer taxes or other
governmental fees or charges imposed by any Taxing Authority on the Properties,
the transfer of the Properties, or the production of Hydrocarbons from the
Properties, including any interest, penalties or additional amounts which may be
imposed with respect thereto. “Taxes” does not include any tax imposed on or
measured by income.

“Taxing Authority” means, with respect to any Tax, the Governmental Body that
imposes such Tax, and the agency (if any) charged with the collection of such
Tax for such Governmental Body, including any governmental or quasi-governmental
entity or agency that imposes, or is charged with collecting, social security or
similar Taxes or premiums

“Termination Date” has the meaning set forth in Section 10.1(b)(i).

“Third Party Claim” has the meaning set forth in Section 11.5(a).

“Title Arbitrator” has the meaning set forth in Section 3.4(i).

“Title Benefit” has the meaning set forth in Section 3.2(d).

“Title Benefit Amount” has the meaning set forth in Section 3.4(e).

“Title Benefit Deductible” has the meaning set forth in Section 3.4(j).

“Title Benefit Notice” has the meaning set forth in Section 3.4(b).

 

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“Title Claim Date” has the meaning set forth in Section 3.4(a).

“Title Defect” has the meaning set forth in Section 3.2(d).

“Title Defect Amounts” has the meaning set forth in Section 3.4(d)(i).

“Title Defect Deductible” has the meaning set forth in Section 3.4(j).

“Title Defect Notice” has the meaning set forth in Section 3.4(a).

“Title Defect Property” has the meaning set forth in Section 3.4(a).

“Transfer Requirement” means any consent, approval, authorization or permit of,
or filing with or notification to, any Person which is required to be obtained,
made or complied with for or in connection with any sale, assignment or transfer
of any Asset or any interest therein; provided, however, that “Transfer
Requirement” shall not include any consent of, notice to, filing with, or other
action by any Governmental Body in connection with the sale or conveyance of oil
and/or gas leases or interests therein or Easements or interests therein, if
they are not required prior to the assignment of such oil and/or gas leases,
Easements or interests or they are customarily obtained subsequent to the sale
or conveyance (including consents from state agencies).

“Transfer Taxes” has the meaning set forth in Section 12.3.

“Transition Agreement” has the meaning set forth in Section 7.4(b).

“Units” has the meaning set forth in Section 1.2(c).

“Wells” has the meaning set forth in Section 1.2(b).

 

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PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “Agreement”) dated as of March 1, 2013,
is executed by and between Black Elk Energy Offshore Operations, LLC, a Texas
limited liability company (“Seller”), and Renaissance Offshore, LLC, a Delaware
limited liability company (“Purchaser”).

RECITALS

A. Seller owns various oil and gas properties, either of record or beneficially,
more fully described in the exhibits hereto.

B. Seller desires to sell to Purchaser and Purchaser desires to purchase from
Seller the properties and rights of Seller hereafter described, in the manner
and upon the terms and conditions hereafter set forth.

C. Capitalized terms used herein shall have the meanings ascribed to them in
this Agreement as such terms are identified and/or defined in the preceding
Definitions Section hereof.

NOW, THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto, intending to be legally bound
by the terms hereof, agree as follows:

ARTICLE 1

PURCHASE AND SALE

Section 1.1 Purchase and Sale.

At the Closing, and upon the terms and subject to the conditions of this
Agreement, Seller agrees to sell, transfer and convey the Assets to Purchaser
and Purchaser agrees to purchase, accept and pay for the Assets and to assume
the obligations attributable to the Assets (including, without limitation the
Assumed Seller Obligations).

Section 1.2 Assets.

As used herein, the term “Assets” means, subject to the terms and conditions of
this Agreement, all of Seller’s right, obligation, title, interest and estate,
real or personal, recorded or unrecorded, movable or immovable, tangible or
intangible, in and to the following (but excluding the Excluded Assets):

(a) All of (i) the oil and gas leases; subleases and other leaseholds; net
profits interests; carried interests; farmout rights; options; contractual
rights; and other properties and interests described on Exhibit A (collectively,
the “Leases”), and all other mineral rights or interests in or affecting the
Leases, even if not described or referenced on Exhibit A, together with each and
every kind and character of right, title, claim, and interest that Seller has in
and to the lands covered by the Leases or the lands currently pooled, unitized,
communitized or consolidated therewith (collectively, the “Lands”);

 

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(b) All oil, gas, water, disposal or injection wells shown on Exhibit A-1
whether producing, shut-in, or temporarily abandoned, and any other oil, gas,
water, disposal or injections wells located on or associated with the Lands,
even if not shown on Exhibit A-1, whether producing, shut-in, or temporarily
abandoned (collectively, the “Wells”);

(c) All pools and units shown on Exhibit A-1 (even to the extent not located on
the Lands or including any of Wells), and all pools and units which include any
Lands or all or a part of any Leases or include any Wells, even if not shown on
Exhibit A-1 (the “Units”; the Units, together with the Leases, Lands and Wells,
being hereinafter referred to as the “Properties”), and including all interest
of Seller derived from the Leases in production of Hydrocarbons from any such
Unit, whether such Unit production of Hydrocarbons comes from Wells located on
or off of a Lease, and all tenements, hereditaments and appurtenances belonging
to the Leases and Units;

(d) All contracts, agreements, and instruments by which the Properties,
Equipment, Pipelines, Records, and Included Geologic Data (collectively, the
“Subject Properties”) are bound, or that relate to or are otherwise applicable
to the Subject Properties, only to the extent such contracts are valid and
existing and applicable to the Subject Properties rather than Seller’s other
properties, including but not limited to, operating agreements, unitization,
pooling and communitization agreements, declarations and orders, joint venture
agreements, farmin and farmout agreements, exploration agreements, participation
agreements, exchange agreements, transportation or gathering agreements,
agreements for the sale and purchase of oil, gas, casinghead gas or processing
agreements to the extent applicable to the Properties or the Hydrocarbons
produced from the Properties, including but not limited to those identified on
Schedule 1.2(d) (collectively, the “Contracts”), but excluding any master
service agreements and any contracts, agreements and instruments to the extent
transfer is restricted by third-party agreement or applicable Law and the
necessary consents to transfer are not obtained pursuant to Section 7.7 and
provided that “Contracts” shall not include the instruments constituting the
Leases or Easements;

(e) All easements, permits, licenses, servitudes, rights-of-way, surface leases
and other surface rights and all contracts, agreements, and instruments by which
they are bound (collectively, the “Easements”) appurtenant to, and used or held
for use in connection with the Properties (including those identified on
Schedule 1.2(e)), but excluding any permits and other rights to the extent
transfer is restricted by third-party agreement or applicable Law and the
necessary consents to transfer are not obtained pursuant to Section 7.7;

(f) All platforms, equipment, machinery, fixtures and other tangible personal
property and improvements set forth on Schedule 1.2(f) and all other platforms,
equipment, machinery, fixtures and other tangible personal property and
improvements located on the Properties or used, or held for use, primarily in
connection with the operation of the Properties (collectively, “Equipment”);

 

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(g) All flow lines, pipelines, gathering systems and appurtenances thereto set
forth on Schedule 1.2(g) and all flow lines, pipelines, gathering systems and
appurtenances thereto located on the Properties or used, or held for use, in
connection with the operation of the Properties (collectively, “Pipelines” and,
together with the Equipment and Wells, “Personal Property”);

(h) All Hydrocarbons produced from or attributable to the Leases, Lands, and
Wells from and after the Effective Time;

(i) All Imbalances;

(j) All lease files; land files; well files; gas and oil sales contract files;
gas processing files; division order files; abstracts; title opinions; land
surveys; environmental surveys, inspections, assessments, and reports; logs;
maps; engineering data and reports; interpretive data, technical evaluations and
technical outputs; reserve studies and evaluations, to the extent delivered to
Purchaser prior to the date hereof; and other books, records, data, files, and
accounting records, in each case to the extent related to the Assets, or used or
held for use in connection with the maintenance or operation thereof, but
excluding (i) any books, records, data, files, logs, maps, evaluations, outputs,
and accounting records to the extent disclosure or transfer would result in a
violation of applicable Law or is restricted by any Transfer Requirement that is
not satisfied pursuant to Section 7.7, (ii) computer or communications software
or intellectual property (including tapes, codes, data and program documentation
and all tangible manifestations and technical information relating thereto),
(iii) attorney-client privileged communications and work product of Seller’s or
any of its Affiliates’ legal counsel (other than title opinions), (iv) reserve
studies and evaluations other than any that have been delivered to Purchaser
prior to the date hereof, and (v) records relating to the negotiation and
consummation of the sale of the Assets (subject to such exclusions, the
“Records”); provided, however, that Seller may retain the originals of such
Records as Seller has reasonably determined may be required for existing
litigation, tax, accounting, and auditing purposes;

(k) All Geological Data specifically listed on Schedule 1.2(k) (collectively,
“Included Geological Data”); and

(l) All computers, software (provided it is transferable), specialty tools,
SCADA systems, peripherals, radio and telephone equipment to the extent the same
are necessary to operate the Properties or Equipment.

Section 1.3 Excluded Assets.

Notwithstanding the foregoing, the Assets shall not include, and there is
excepted, reserved and excluded from the purchase and sale contemplated hereby
(collectively, the “Excluded Assets”):

(a) all corporate, partnership, limited liability company, financial, income and
franchise tax and legal records of Seller that relate to Seller’s business
generally (whether or not relating to the Assets), and all books, records and
files that relate to the Excluded Assets and those records retained by Seller
pursuant to Section 1.2(j) and copies of any other Records retained by Seller
pursuant to Section 1.5;

 

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(b) all reserve estimates and economic estimates other than those delivered to
Purchaser on or before the date hereof, and, to the extent excluded from
Section 1.2(j), all logs, interpretive data, technical evaluations and technical
outputs;

(c) all rights to any refund of Taxes or other costs or expenses borne by Seller
or Seller’s predecessors in interest and title attributable to periods prior to
the Effective Time;

(d) Seller’s area-wide bonds supplemental bonds, bonds delivered by Seller to
any third person in connection with acquisition of any properties, all escrow
agreements and escrow funds established by Seller in connection with acquisition
of any properties, permits and licenses or other permits, licenses or
authorizations used in the conduct of Seller’s business;

(e) Intentionally left blank;

(f) all trade credits, account receivables, note receivables, take-or-pay
amounts receivable, and other receivables attributable to the Assets with
respect to any period of time prior to the Effective Time;

(g) all claims and causes of action (including any claims for insurance
proceeds) arising from acts, omissions or events or damage to or destruction of
property with respect to all periods prior to the Effective Time;

(h) any agreements excluded from the definition of “Contracts” in Section 1.2(d)
or identified on Schedule 1.3(h);

(i) all rights, titles, claims and interests of Seller or any Affiliate of
Seller (i) to or under any policy or agreement of insurance or any insurance
proceeds; except to the extent provided in Section 3.5, and (ii) to or under any
bond or bond proceeds;

(j) any patent, patent application, logo, service mark, copyright, trade name,
trademark or other intellectual property of or associated with Seller or any
Affiliate of Seller or any business of Seller or of any Affiliate of Seller;

(k) except to the extent used in the operation of any of the Personal Property,
all personal computers and associated peripherals and all radio and telephone
equipment;

(l) all proprietary and other computer software;

(m) all documents and instruments of Seller that may be protected by an
attorney-client privilege;

(n) except to the extent specifically provided in Section 1.2(k), all Geologic
Data;

(o) all offices and office leases;

(p) any personal property that is not directly related to the Assets;

 

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(q) Seller’s entitlement to the undivided 50% before payout working interest in
the SS 219 #B-26ST2 Well contractually acquired by Seller from Fairways Offshore
Exploration, Inc. (“Fairways”) as a result of non-consent operations on the SS
219 #B-26ST2 Well pursuant to that certain Offshore Operating Agreement dated as
of July 1, 2007 between Maritech Resources, Inc. and Fairways covering Ship
Shoal Block 219, and all production and non-consent penalty attributable to
Seller’s 50% working interest participation in the well for such undivided 50%
non-consent working interest. Notwithstanding anything to the contrary set forth
in this Agreement, the foregoing reserved interest forms no portion of Seller’s
undivided 50% working interest in the SS219 #B-26ST2 Well currently owned of
record by Seller pursuant to its interest in Lease OCS 0829 that forms a portion
of the Assets;

(r) amounts payable pursuant to that certain Contribution Agreement dated as of
November 1, 2004 between Maritech Resources, Inc. and Forest Oil Corporation
pertaining to abandonment obligations with respect to Ship Shoal 219 (Lease OCS
0829);

(s) the Excluded Contracts; and

(t) the SS 219 “C,” toppled platform and the wells and associated pipelines, if
any, directly related thereto, together with all abandonment obligations
associated therewith and operatorship thereof.

Seller and Purchaser recognize that the Excluded Assets may include automation
equipment or telemetry equipment that is critical to the operation of some of
the Assets. Seller and Purchaser recognize that it is not the intention hereof
to damage the value of Assets through the exclusion of such equipment and in the
event of the existence of the essential equipment, the Parties will enter into
an agreement, for no additional consideration, that will preserve the value of
such Assets.

Section 1.4 Effective Time; Proration of Costs and Revenues.

(a) Subject to Section 1.5, possession of the Assets shall be transferred from
Seller to Purchaser at the Closing, but for purposes of the adjustments made to
the Closing Statements certain financial benefits and burdens of the Assets
shall be transferred effective as of 7:00 A.M., local time, on January 1, 2013
(the “Effective Time”), as described below.

(b) “Earned” and “Incurred”, as used in this Agreement, shall be interpreted in
accordance with generally accepted accounting principles and Council of
Petroleum Accountants Society (COPAS) standards, as applicable. “Property Costs”
means all third-party costs attributable to the ownership and operation of the
Assets (including without limitation costs of insurance relating specifically to
the Assets, royalties and overriding royalties payable on account of production
from the Assets, and ad valorem, property, severance, Hydrocarbon production and
similar taxes based upon or measured by the ownership or operation of the Assets
or the production of Hydrocarbons therefrom, but excluding taxes imposed on or
measured by income and any other taxes) and capital expenditures Incurred in the
ownership and operation of the Assets in the ordinary course of business and,
where applicable, in accordance with the relevant operating or unit agreement,
if any, and overhead costs charged to the Assets under the relevant operating
agreement or unit agreement, if any, by unaffiliated third parties and, with
respect to Assets operated by Seller, $4,500.00 per field per month (pro rated
for any partial

 

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months as applicable and without offset for any overhead costs reimbursed by
third parties), but excluding without limitation liabilities, losses, costs, and
expenses attributable to (i) claims for personal injury or death, property
damage or violation of any Law, (ii) obligations to plug wells,
(iii) obligations to dismantle, abandon and salvage platforms, pipelines,
facilities, and other equipment (iv) obligations to remediate any contamination
of groundwater, surface water, soil, Equipment or Pipelines under applicable
Environmental Laws, (iv) obligations to furnish make-up gas according to the
terms of applicable gas sales, gathering or transportation contracts, (v) gas
balancing obligations and (vi) obligations to pay working interests, royalties,
overriding royalties or other interests held in suspense, all of which are
addressed in Article 11 or elsewhere in this Agreement. Notwithstanding anything
to the contrary set forth in this Agreement, however, Purchaser shall have no
liability or responsibility for Property Costs attributable to Seller’s bonding
or surety obligations or with respect to the cost of any windstorm insurance
premiums Incurred by Seller. Determination of whether Property Costs are
attributable to the period before or after the Effective Time for purposes of
the adjustments in the Closing Statements shall be based on when services are
rendered, when the goods are delivered, or when the work is performed. For
clarification, the date an item or work is ordered is not the date of a
transaction for settlement purposes in the Closing Statements, but rather the
date on which the item ordered is delivered to the job site, or the date on
which the work ordered is performed, shall be the relevant date. For purposes of
allocating Hydrocarbon production (and accounts receivable with respect
thereto), (i) liquid Hydrocarbons shall be deemed to be “from or attributable
to” the Leases, Lands, Units, and Wells when they pass through the liquid sales
and/or royalty meters, and (ii) gaseous Hydrocarbons shall be deemed to be “from
or attributable to” the Leases, Lands, Units, and Wells when they pass through
the gas sales meters on the pipelines through which they are transported. Seller
shall provide to Purchaser, no later than five (5) days prior to Closing, all
data necessary to support any estimated allocation, for purposes of establishing
the adjustment to the Purchase Price pursuant to Section 2.3 hereof that will be
used to determine the Closing Payment for purposes of the Preliminary Closing
Statement (as defined in Section 9.4(a)). Ad valorem and property taxes,
right-of-way fees, insurance premiums and other Property Costs that are paid
periodically shall be prorated based on the number of days in the applicable
period falling before and the number of days in the applicable period falling at
or after the Effective Time, except that Hydrocarbon production, severance and
similar taxes shall be prorated based on the number of units actually produced,
purchased or sold or proceeds of sale, as applicable, before, and at or after,
the Effective Time.

Section 1.5 Delivery of Records.

Seller, at Seller’s and Purchaser’s joint cost and expense, shall deliver the
Records to Purchaser within thirty (30) days following Closing. Other than any
original Records retained by Seller pursuant to Section 1.2(j), Purchaser shall
be entitled to all original Records maintained by Seller. Seller shall be
entitled to keep a copy or copies of all Records; provided, however, that Seller
shall not sell or otherwise allow third parties to review, copy or otherwise use
(for any purpose) any Records retained by Seller for its own account.

 

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ARTICLE 2

PURCHASE PRICE

Section 2.1 Purchase Price.

The purchase price for the Assets (the “Purchase Price”) shall be $55,000,000.00
payable in United States currency by wire transfer in same day funds as and when
provided in this Agreement and as adjusted as provided in Section 2.3.

Section 2.2 Allocation of Purchase Price.

Schedule 2.2 contains the Allocated Value of the Assets. For the purposes
hereof, the “Allocated Value” of an Asset shall mean the portion of the Purchase
Price that has been allocated to a particular field listed in Schedule 2.2. The
allocations may be relied upon for all purposes hereunder, including all of the
following:

(a) As a basis for adjustments to the Purchase Price for any casualty or
condemnation loss and any Title Defect Amounts;

(b) To notify holders of preferential rights of Purchaser’s offer; and

(c) As otherwise provided in this Agreement.

In the event any Claims, excluding any Claims by a Governmental Body, are
brought against Seller Indemnified Persons arising from or under or attributable
or relating to the allocations as contained in Schedule 2.2, Purchaser shall
indemnify and defend Seller Indemnified Persons from and against any such
Claims.

Section 2.3 Adjustments to Purchase Price.

For purposes of the Closing Statements, the Purchase Price for the Assets shall
be adjusted as follows (with such adjustments being made so as not to give any
duplicative effect) with all such amounts being determined in accordance with
generally accepted accounting principles and Council of Petroleum Accountants
Society (COPAS) standards:

(a) Reduced by the aggregate amount of the following proceeds actually received
by Seller: (i) proceeds from the sale of Hydrocarbons (net of any royalties,
overriding royalties or other burdens on or payable out of Hydrocarbon
production, gathering, processing and transportation costs and any Hydrocarbon
production, severance, sales or excise taxes not reimbursed to Seller by the
purchaser of Hydrocarbon production) produced from or attributable to the
Properties during the period between the Effective Time and the date the Final
Closing Statement is executed by Seller and Purchaser, and (ii) other proceeds
earned with respect to the Assets during the period between the Effective Time
and the date the Final Closing Statement is executed by Seller and Purchaser;

(b) Increased by the aggregate amount of the following proceeds actually
received by Purchaser: (i) proceeds from the sale of Hydrocarbons (net of any
royalties, overriding royalties or other burdens on or payable out of
Hydrocarbon production, gathering, processing and

 

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transportation costs and any Hydrocarbon production, severance, sales or excise
taxes not reimbursed to Purchaser by the purchaser of Hydrocarbon production)
produced from or attributable to the Properties for periods prior to the
Effective Time, and (ii) other proceeds earned with respect to the Assets for
periods prior to the Effective Time;

(c) Reduced to the extent provided in Section 7.7 with respect to Preference
Rights and Retained Assets;

(d)(i) If Seller makes the election under Section 3.4(d)(i) with respect to a
Material Title Defect, subject to the Title Defect Deductible, reduced by the
Net Title Defect Amount with respect to such Material Title Defect for which the
Title Defect Amounts have been determined and (ii) subject to the Title Benefit
Deductible, increased by the Net Title Benefit Amount with respect to the
Material Title Benefits for which the Title Benefit Amounts have been
determined;

(e) Subject to the Environmental Defect Deductible, reduced by the Environmental
Defect Amount with respect to each uncured Material Environmental Defect if the
Environmental Defect Amount has been determined;

(f) Increased by the amount of all Property Costs and other costs attributable
to the ownership and operation of the Assets (including any overhead costs under
Section 1.4 deemed charged to the Assets with respect to the Adjustment Period
even though not actually paid) incurred by Seller after the Effective Time and
actually paid by Seller, whether before or after the Effective Time, except any
Property Costs and other such costs already deducted in the determination of
proceeds in Section 2.3(a), provided, however, there shall be no upward
adjustment of the Purchase Price with respect to any Property Costs or other
costs incurred by Seller after the Effective Time in order to remedy any
violation of Laws, including any Environmental Laws, or associated with any
activities to respond to incidents of non-compliance;

(g) Reduced for any Properties excluded from the Assets pursuant to
Section 3.4(d)(iii);

(h) Increased or reduced as agreed upon in writing by Seller and Purchaser;

(i) Increased by the value of the amount of merchantable Hydrocarbons stored
under standard conditions in tanks and upstream of the pipeline(s) sales meter,
attributable to the Assets that belong to Seller as of the Effective Time (which
value shall be computed at the applicable third-party contract prices for the
month of December, 2012 for such stored Hydrocarbons);

(j) Reduced by the actual net aggregate Imbalances, if any, owed by Seller to
third-parties, as of the Effective Time or increased by the actual net aggregate
Imbalances, if any, owed by third parties to Seller as of the Effective Time, in
each case multiplied by a price of $2.50 per MMBtu;

 

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(k) Decreased by the amount of all Property Costs and other costs attributable
to the ownership and operation of the Assets for periods prior to the Effective
Time which are actually paid by Purchaser; and

(l) Increased by the costs Incurred and actually paid by Seller for all
plugging, abandonment, and decommissioning work performed on the Assets after
the Effective Time as and to the extent reflected on Schedule 2.3(l).

Each adjustment made pursuant to Section 2.3(a) shall serve to satisfy, up to
the amount of the adjustment, Purchaser’s entitlement to Hydrocarbon production
from or attributable to the Properties during the Adjustment Period, and to the
value of other income, proceeds, receipts and credits earned with respect to the
Assets during the Adjustment Period, and as such, Purchaser shall not have any
separate duplicative rights to receive any Hydrocarbon production or income,
proceeds, receipts and credits with respect to which an adjustment has been
made. Similarly, the adjustment described in Section 2.3(f) shall serve to
satisfy, up to the amount of the adjustment, Purchaser’s obligation to pay
Property Costs and other costs attributable to the ownership and operation of
the Assets which are Incurred during the Adjustment Period, and as such,
notwithstanding anything in this Agreement to the contrary, Purchaser shall not
be separately obligated to pay for any Property Costs or other such costs with
respect to which an adjustment has been made.

Section 2.4 Deposit.

Prior to 5 p.m. CST on March 4, 2013, Purchaser will have paid to Liskow &
Lewis, A Professional Law Corporation, an earnest money deposit in an amount
equal to ten percent (10%) of the Purchase Price (the “Deposit”). The Deposit
shall be non-interest bearing and held in escrow pursuant to an escrow agreement
substantially in the form attached hereto as Exhibit F (the “Escrow Agreement”),
applied and against the Purchase Price if the Closing occurs or shall be
otherwise distributed in accordance with the terms of this Agreement. If
Purchaser fails to timely pay the Deposit this Agreement shall terminate. All
costs of the Escrow Agreement and the escrow agent shall be borne by Purchaser.

Section 2.5 Allocation of Purchase Price.

Purchaser has prepared and delivered to Seller a proposed allocation of the
Purchase Price among each of the Assets, consistent with the principles of
Section 1060 of the Code and the Treasury Regulations thereunder. The proposed
allocation of the Purchase Price shall be the basis for the proposed allocation
of the Final Purchase Price. Purchaser shall afford Seller and its
representatives the opportunity to review such proposed allocation. Each Party
shall cooperate fully and promptly with the other and their respective
representatives in such examination with respect to all reasonable requests
related thereto. After completion of its review of the proposed allocation
prepared and delivered by Purchaser and if Seller is in agreement with the
proposed allocation of the Final Purchase Price prepared by Purchaser, Purchaser
and Seller shall use the Allocated Values as the basis for reporting asset
values and other items for purposes of all federal, state, and local Tax
Returns, including without limitation Internal Revenue Service Form 8594, if
required, or any similar statement of such allocation that may be
required. After completion of its review of the proposed allocation prepared and
delivered by Purchaser, if Seller disagrees with the proposed allocation of the
Final

 

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Purchase Price prepared by Purchaser, Purchaser and Seller shall work together
in good faith to resolve any disagreed items. If Purchaser and Seller are not
able to resolve all disagreed items, the Parties will agree to proceed as if the
Agreement were silent with respect to an allocation of the Final Purchase Price
among each of the Assets.

ARTICLE 3

TITLE MATTERS

Section 3.1 Seller’s Title.

(a) Except for the special warranty of title referenced in Section 3.1(b) and
without limiting Purchaser’s right to adjust the Purchase Price by operation of
this Article 3, Seller makes no warranty or representation, express, implied,
statutory or otherwise, with respect to Seller’s title to any of the Assets, and
Purchaser hereby acknowledges and agrees that the sole remedy for any defect of
title, including any Title Defect, with respect to any of the Assets (i) before
Closing, shall be as set forth in Section 3.4(d) and (ii) after Closing, shall
be pursuant to the special warranty of title referenced in Section 3.1(b).

(b) The conveyance covering the Assets to be delivered by Seller to Purchaser
shall be substantially in the forms of Exhibit B, Exhibit B-1, Exhibit B-2, and
Exhibit B-3 (each, a “Conveyance”). Each Conveyance shall contain a special
warranty of Defensible Title by, through and under Seller and its Affiliates,
but not otherwise, to the Units and Wells shown on Exhibit A-1, subject to the
Permitted Encumbrances, but shall otherwise be without warranty of title of any
kind, express, implied or statutory or otherwise. Purchaser’s protection under
Seller’s special warranty of title in the Conveyance shall be limited to the
Allocated Value of any the Units and Wells as set forth on Schedule 2.2.

(c) Purchaser shall not be entitled to protection under Seller’s special
warranty of title in the Conveyance against any Title Defect reported by
Purchaser under Section 3.4(a) and/or any Title Defect actually known by
Purchaser or any of its Affiliates prior to the Title Claim Date.

(d) Notwithstanding anything herein provided to the contrary, if a Title Defect
under this Article 3 results from any matter which could also result in the
breach of any representation or warranty of Seller set forth in Article 5, then
Purchaser shall only be entitled to assert such matter before Closing, as a
Title Defect to the extent permitted by this Article 3, and shall be precluded
from also asserting such matter as the basis of the breach of any such
representation or warranty.

Section 3.2 Definition of Defensible Title.

As used in this Agreement, the term “Defensible Title” means the title of Seller
with respect to the Units and Wells shown in Exhibit A-1 that, except for and
subject to Permitted Encumbrances:

(a) Entitles Seller to receive a share of the Hydrocarbons produced, saved and
marketed from any Unit or Well shown in Exhibit A-1 throughout the duration of
the productive

 

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life of such Unit or Well (after satisfaction of all royalties, overriding
royalties, net profits interests or other similar burdens on or measured by
production of Hydrocarbons) (a “Net Revenue Interest”), of not less than the Net
Revenue Interest shown in Exhibit A-1 for such Unit or Well, except (solely to
the extent that such actions do not cause a breach of Seller’s covenants under
Section 7.6) for decreases in connection with those operations in which Seller
may from and after the Effective Time become a non-consenting co-owner,
decreases resulting from the establishment or amendment from and after the
Effective Time of pools or units, decreases in connection with any payouts of
non-consent penalties as reflected in Exhibit A-1, and decreases required to
allow other working interest owners to make up past underproduction or pipelines
to make up past under deliveries, all as reflected on Schedule 5.14 and except
as stated in such Exhibit A-1;

(b) Obligates Seller to bear a percentage of the costs and expenses for the
maintenance and development of, and operations relating to, (i) any Unit or Well
shown in Exhibit A-1 not greater than the “working interest” shown in Exhibit
A-1 for such Unit or Well without increase throughout the productive life of
such Unit or Well, except as stated in Exhibit A-1 and except for increases
resulting from contribution requirements with respect to non-consenting
co-owners under applicable operating agreements and increases that are
accompanied by at least a proportionate increase in Seller’s Net Revenue
Interest; and

(c) Is free and clear of liens, encumbrances, obligations, security interests,
irregularities, pledges, or other defects (other than Permitted Encumbrances).

(d) As used in this Agreement, the term “Title Defect” means any lien, charge,
encumbrance, obligation (including contract obligation), defect, or other matter
(including without limitation a discrepancy in Net Revenue Interest or working
interest) that causes Seller not to have Defensible Title in and to the Units
and Wells shown on Exhibit A-1 as of the Effective Time and the Closing. As used
in this Agreement, the term “Title Benefit” shall mean any right, circumstance
or condition that operates to increase the Net Revenue Interest of Seller in any
Unit or Well shown on Exhibit A-1, without causing a greater than proportionate
increase in Seller’s working interest above that shown in Exhibit A-1 as of the
Effective Time. Notwithstanding the foregoing, the following shall not be
considered Title Defects:

 

  (i) defects based solely on (1) lack of information in Seller’s files, or
(2) references to a document(s) if such document(s) is not in Seller’s files;

 

  (ii) defects arising out of lack of corporate or other entity authorization
unless Purchaser provides affirmative evidence that the action was not
authorized and results in another Person’s superior claim of title to the
relevant Asset;

 

  (iii) defects based on failure to record Leases issued by any state or federal
Governmental Body, or any assignments of such Leases, in the real property,
conveyance or other records of the county or parish in which such Property is
located;

 

  (iv) defects based on a gap in Seller’s chain of title in the county or parish
records as to Leases, unless such gap is affirmatively shown to exist in such
records by an abstract of title, title opinion or landman’s title chain (which
documents shall be included in a Title Defect Notice);

 

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  (v) defects that have been cured by applicable Laws of limitation or
prescription;

 

  (vi) defects arising out of a lack of survey, unless a survey is expressly
required by applicable Laws;

 

  (vii) defects disclosed herein (including on any Schedule or Exhibit hereto)
or otherwise known by Purchaser prior to executing this Agreement; and

 

  (viii) the Existing Mortgages and related financing statements to be released
with respect to the Assets at Closing.

Section 3.3 Definition of Permitted Encumbrances.

As used herein, the term “Permitted Encumbrances” means any or all of the
following:

(a) Royalties and any overriding royalties, reversionary interests and other
burdens on production, to the extent that any such burden does not reduce
Seller’s Net Revenue Interest below that shown in Exhibit A-1 or increase
Seller’s working interest above that shown in Exhibit A-1 without a
proportionate increase in the Net Revenue Interest;

(b) All Leases, unit agreements, pooling agreements, operating agreements,
Hydrocarbon production sales contracts, division orders and other contracts,
agreements and instruments applicable to the Assets, to the extent that they do
not, individually or in the aggregate, reduce Seller’s Net Revenue Interest
below that shown in Exhibit A-1 or increase Seller’s working interest above that
shown in Exhibit A-1 without a proportionate increase in the Net Revenue
Interest;

(c) Preference Rights applicable to this transaction as set forth in Schedule
7.7;

(d) Transfer Requirements applicable to this transaction as set forth in
Schedule 7.7;

(e) Liens for current Taxes or assessments not yet delinquent or, if delinquent,
are being contested in good faith in the normal course of business;

(f) Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s
and other similar liens or charges arising in the ordinary course of business
for amounts not yet delinquent (including any amounts being withheld as provided
by Law);

(g) All rights to consent by, required notices to, filings with, or other
actions by Governmental Bodies in connection with the sale or conveyance of the
Assets or interests therein pursuant to this or to any future transaction if
they are not required or customarily obtained prior to the sale or conveyance;

 

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(h) Rights of reassignment arising upon final intention to abandon or release
the Assets, or any one of them to the extent reflected in one or more of the
Contracts set forth on Schedule 1.2(d);

(i) Easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations, to the extent that they do not
(i) reduce Seller’s Net Revenue Interest below that shown in Exhibit A-1,
(ii) increase Seller’s working interest above that shown in Exhibit A-1 without
a proportionate increase in Net Revenue Interest, or (iii) detract in any
material respect from the value of, or interfere in any material respect with
the use, ownership or operation of, the Assets subject thereto or affected
thereby (as currently used, owned and operated) and which would be acceptable by
a reasonably prudent purchaser engaged in the business of owning and operating
oil and gas properties;

(j) Calls on Hydrocarbon production under existing Contracts that are listed on
Schedule 1.2(d);

(k) All rights reserved to or vested in any Governmental Body to control or
regulate any of the Assets in any manner, and all obligations and duties under
all applicable Laws or under any franchise, grant, license or permit issued by
any such Governmental Body;

(l) Any encumbrance on or affecting the Assets which is discharged by Seller at
or prior to Closing;

(m) Any farmout agreements that are listed on Schedule 1.2(d) affecting the
Assets;

(n) Any matters shown on Schedule 3.3(n);

(o) Any other liens, charges, encumbrances, defects or irregularities which do
not, individually or in the aggregate, detract in any material respect from the
value of, or interfere in any material respect with the use or ownership of, the
Assets subject thereto or affected thereby (as currently used or owned), which
would be accepted by a reasonably prudent purchaser engaged in the business of
owning and operating oil and gas properties, and which do not reduce Seller’s
Net Revenue Interest below that shown in Exhibit A-1, or increase Seller’s
working interest above that shown in Exhibit A-1 without a proportionate
increase in Net Revenue Interest;

(p) Matters that would otherwise be considered Title Defects but that do not
meet the Individual Title Threshold set forth in Section 3.4(j);

(q) Imbalances associated with the Assets;

(r) Liens granted under applicable joint operating agreements for amounts not
yet delinquent; and

(s) Such Title Defects as Purchaser may have waived expressly in writing.

 

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Section 3.4 Notice of Title Defect Adjustments.

(a) To assert a claim of a Title Defect prior to Closing, Purchaser must deliver
claim notices to Seller (each a “Title Defect Notice”) on or before seven
(7) days prior to the Closing Date (the “Title Claim Date”). Each Title Defect
Notice shall be in writing and shall include (i) a description of the alleged
Title Defect(s), (ii) the individual Units or Wells in Exhibit A-1 affected by
the Title Defect (each a “Title Defect Property”), (iii) the Allocated Value of
each Title Defect Property, (iv) supporting documents reasonably necessary for
Seller (as well as any title attorney or examiner hired by Seller) to verify the
existence of the alleged Title Defect(s), and (v) the amount by which Purchaser
reasonably believes the Allocated Value of each Title Defect Property is reduced
by the alleged Title Defect(s) and the computations and information upon which
Purchaser’s belief is based. Notwithstanding any other provision of this
Agreement to the contrary, but subject to Purchaser’s rights in connection with
the special warranty of title referenced in Section 3.1(b), Purchaser shall be
deemed to have waived its right to assert Title Defects of which Seller has not
been given notice on or before the Title Claim Date.

(b) Seller shall have the right, but not the obligation, to deliver to Purchaser
on or before the Title Claim Date, with respect to each Title Benefit, a notice
(a “Title Benefit Notice”) including (i) a description of the Title Benefit,
(ii) the Units or Wells in Exhibit A-1 affected, (iii) the Allocated Values of
the Units or Wells in Exhibit A-1 subject to such Title Benefit and (iv) the
amount by which Seller reasonably believes the Allocated Value of those Units or
Wells is increased by the Title Benefit, and the computations and information
upon which Seller’s belief is based. Seller shall be deemed to have waived all
Title Benefits of which it has not given notice to Purchaser on or before the
Title Claim Date.

(c) Seller shall have the right, but not the obligation, to attempt, at its sole
cost, to cure or remove at any time prior to Closing (the “Cure Period”), unless
the Parties otherwise agree, any Title Defect of which it has been advised in
writing by Purchaser.

(d) Remedies for Title Defects.

In the event that any Title Defect is not waived by Purchaser or cured on or
before Closing, subject to the Parties’ rights under Section 3.4(i), Seller
shall elect to have any of the following remedies apply:

 

  (i) subject to the Individual Title Threshold and the Title Defect Deductible,
adjust the Purchase Price by an amount (the “Net Title Defect Amount”) equal to
the difference between (A) the amounts agreed upon (“Title Defect Amounts”)
pursuant to Section 3.4(g) by Purchaser and Seller as being the aggregate value
of all Title Defects (taking into consideration the Allocated Value of the
Properties subject to such Title Defects, the portion of the Properties subject
to such Title Defects and the legal effect of such Title Defects on the
Properties affected thereby; provided, however, that the methodology, terms and
conditions of Section 3.4(g) shall control any such determination) and (B) the
Title Benefit Amounts;

 

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  (ii) with Purchaser’s consent, indemnify Purchaser against all liability,
loss, cost and expense resulting from such Title Defect pursuant to an indemnity
agreement (the “Indemnity Agreement”) in the form attached hereto as Exhibit C;
or

 

  (iii) retain the portion or percentage of the Property that is subject to such
Title Defect, together with all associated Assets, in which event the Purchase
Price shall be reduced by an amount equal to the Allocated Value associated
therewith; or

 

  (iv) elect to attempt to cure the Title Defect. Seller shall then have 180
days after Closing in which to cure the Title Defect. Any Property so held back
from the initial Closing will be conveyed to Purchaser at a delayed Closing
within ten (10) days following the date that the Title Defect is cured, at which
time Seller shall be entitled to payment by Purchaser of the full Allocated
Value of the Property, subject to the Purchase Price adjustments thereto under
Section 1.4 and Section 2.3, and provided further that if multiple delayed
Closings are contemplated as a result of this provision and/or Section 7.7(c),
the delayed Closings may be consolidated on dates mutually agreeable to the
Parties. In the event that Seller is unable to cure the Title Defect within 180
days of the initial Closing, then the remedies set forth in subsection (i) or
(iii) shall be the sole remedies for such Title Defect. All other provisions of
Section 3.4(i) shall apply as written and the Title Expert shall be selected
within fifteen (15) Business Days of the end of the 180 day cure period.

(e) With respect to each Unit, Well or other Asset in Exhibit A-1 affected by
Title Benefits reported under Section 3.4(b), subject to the Individual Benefit
Threshold and the Title Benefit Deductible, the Purchase Price shall be
increased by an amount (the “Net Title Benefit Amount”) equal to the difference
between (i) the Title Benefit Amounts, as determined pursuant to Section 3.4(h)
and (ii) the Title Defect Amounts.

(f) Section 3.4(d) shall be the exclusive right and remedy of Purchaser with
respect to Title Defects asserted by Purchaser pursuant to Section 3.4(a).
Section 3.4(e) shall be the exclusive right and remedy of Seller with respect to
Title Benefits asserted by Seller pursuant to Section 3.4(b).

(g) The Title Defect Amount resulting from a Title Defect shall be the amount by
which the Allocated Value of the Title Defect Property is reduced as a result of
the existence of such Title Defect and shall be determined in accordance with
the following methodology, terms and conditions:

 

  (i) if Purchaser and Seller agree on the Title Defect Amount, that amount
shall be the Title Defect Amount;

 

  (ii) if the Title Defect is a lien, encumbrance or other charge which is
undisputed and liquidated in amount, then the Title Defect Amount shall be the
amount necessary to be paid to remove the Title Defect from the Title Defect
Property;

 

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  (iii) if the Title Defect represents a discrepancy between (A) the Net Revenue
Interest for any Title Defect Property and (B) the Net Revenue Interest stated
on Exhibit A-1, then the Title Defect Amount shall be the product of the
Allocated Value of such Title Defect Property multiplied by a fraction, the
numerator of which is the Net Revenue Interest decrease and the denominator of
which is the Net Revenue Interest stated on Exhibit A-1;

 

  (iv) if the Title Defect represents an obligation, encumbrance, burden or
charge upon or other defect in title to the Title Defect Property of a type not
described in subsections (i), (ii) or (iii) above, the Title Defect Amount shall
be determined by taking into account the Allocated Value of the Title Defect
Property, the portion of the Title Defect 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 Title Defect Property, the values placed upon the
Title Defect by Purchaser and Seller and such other factors as are necessary to
make a proper evaluation; provided, however, that if such Title Defect is
reasonably capable of being cured, the Title Defect Amount shall not be greater
than the reasonable cost and expense of curing such Title Defect;

 

  (v) if (A) the Title Defect Property is not a Well (or specified zone(s)
therein, (B) such title Defect Property does not have an Allocated Value,
(C) the Title Defect with respect to such Title Defect Property causes a loss of
title to such Title Defect Property and (D) the loss of such title to such Title
Defect Property will prevent the continued operation or production of a Well (or
one or more specified zone(s) therein) shown in Exhibit A-1 (such Well or the
specified zone(s) therein being referred to as the “Affected Well”) and the
other Assets are not capable of providing an alternative means to support, in
all material respects, the continued operation or production of the Affected
Well, then such Title Defect Property (a “Defective Support Property”) and such
Affected Well(s) shall collectively be considered a single Title Defect Property
for purposes of this Section 3.4(g); provided, however, that the Title Defect
Amount resulting from the Title Defect affecting such Defective Support Property
shall be the lesser of (1) the reasonable cost to replace such Defective Support
Property, if such Defective Support Property is reasonably capable of being
replaced, (2) the reasonable cost of providing an alternative means to support
in all material respects the continued operation or production of the Affected
Well, or (3) the Title Defect Amount that would otherwise be applicable to such
Title Defect under this Section 3.4(g);

 

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  (vi) the Title Defect Amount with respect to a Title Defect Property shall be
determined without duplication of any costs or losses included in another Title
Defect Amount hereunder; and

 

  (vii) notwithstanding anything to the contrary in this Article 3, the
aggregate Title Defect Amounts attributable to the effects of all Title Defects
upon any Title Defect Property shall not exceed the Allocated Value of the Title
Defect Property.

(h) Title Benefit Amount. The Title Benefit Amount resulting from a Title
Benefit shall be determined in accordance with the following methodology, terms
and conditions:

(i) if Purchaser and Seller agree on the Title Benefit Amount, then that amount
shall be the Title Benefit Amount; and

(ii) if the Title Benefit represents a benefit in title of a type not described
above, the Title Benefit Amount shall be determined by taking into account the
Allocated Value of the affected property, the portion of the subject property
affected by the Title Benefit, the legal effect of the Title Benefit, the
potential economic effect of the Title Benefit over the life of the subject
property, the values placed upon the Title Benefit by Purchaser and Seller and
such other reasonable factors as are necessary to make a proper evaluation.

(i) Seller and Purchaser shall attempt in good faith to agree on all Title
Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts prior to
Closing. If Seller and Purchaser are unable to agree by Closing, the Title
Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts in
dispute shall be exclusively and finally resolved by arbitration pursuant to
this Section 3.4(i). There shall be a single arbitrator, who shall be a title
attorney with at least ten (10) years experience in oil and gas titles involving
properties in the regional area in which the Properties are located, as selected
by mutual agreement of Purchaser and Seller within fifteen (15) Business Days
after the end of the Cure Period, and absent such mutual agreement, by the
Houston office of the American Arbitration Association (the “Title Arbitrator”).
The arbitration proceeding shall be held in Houston, Texas and shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, to the extent such rules do not conflict with the terms
of this Section. The Title Arbitrator’s determination shall be made within
fifteen (15) Business Days after submission of the matters in dispute and shall
be final and binding upon both Parties, without right of appeal. In making his
determination, the Title Arbitrator shall be bound by the rules set forth in
Section 3.4(g) and Section 3.4(h) and may consider such other matters as in the
opinion of the Title Arbitrator are necessary or helpful to make a proper
determination. Additionally, the Title Arbitrator may consult with and engage
disinterested third parties to advise the arbitrator, including without
limitation petroleum engineers. The Title Arbitrator shall act as an expert for
the limited purpose of determining the specific disputed Title Defects, Title
Benefits, Title Defect Amounts and Title Benefit Amounts submitted by either
Party and may not award damages, interest or penalties to either Party with
respect to any matter. Seller and Purchaser shall each bear its own legal fees
and other costs of presenting its case. Each Party shall bear one-half of the
costs and expenses of

 

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the Title Arbitrator, including any costs Incurred by the Title Arbitrator that
are attributable to such third party consultation. Within ten (10) days after
the Title Arbitrator delivers written notice to Purchaser and Seller of his
award with respect to a Title Defect Amount or a Title Benefit Amount,
(i) Purchaser shall pay to Seller the amount, if any, so awarded by the Title
Arbitrator to Seller and (ii) Seller shall pay to Purchaser the amount, if any,
so awarded by the Title Arbitrator to Purchaser.

(j) Notwithstanding anything to the contrary, (i) in no event shall there be any
adjustments to the Purchase Price or other remedies provided by Seller for any
individual uncured Title Defect for which the Title Defect Amount therefor does
not exceed $75,000 (“Individual Title Threshold”); and (ii) in no event shall
there be any adjustments to the Purchase Price or other remedies provided by
Seller for uncured Title Defects unless the aggregate Title Defect Amounts
attributable to all uncured Material Title Defects exceeds a deductible in an
amount equal to five percent (5%) of the Purchase Price (the “Title Defect
Deductible”), after which point adjustments to the Purchase Price or other
remedies shall be made or available to Purchaser only to the extent the
aggregate Title Defect Amounts with respect to uncured Material Title Defects
are in excess of such Title Defect Deductible. Notwithstanding anything to the
contrary, (i) in no event shall there be any adjustments to the Purchase Price
for any individual Title Benefit for which the Title Benefit Amount does not
exceed $75,000 (“Individual Benefit Threshold”); and (ii) in no event shall
there be any adjustments to the Purchase Price for any Title Benefit unless
(i) the excess of the aggregate Title Benefit Amounts attributable to all
Material Title Benefits exceeds a deductible in an amount equal to five percent
(5%) of the Purchase Price (“Title Benefit Deductible”), after which point
adjustments to the Purchase Price shall be made only to the extent the aggregate
Title Benefit Amounts with respect to such Material Title Benefits exceed the
Title Benefit Deductible.

Section 3.5 Casualty or Condemnation Loss.

(a) Notwithstanding anything herein to the contrary, from and after the
Effective Time, but subject to the provisions of Section 3.5(b) and
Section 3.5(c) and below, Purchaser shall assume all risk of loss with respect
to and any change in the condition of the Assets and for production of
Hydrocarbons through normal depletion (including but not limited to the watering
out of any Well, collapsed casing or sand infiltration of any Well) and the
depreciation of Personal Property due to ordinary wear and tear with respect to
the Assets. Until Closing, Seller shall promptly notify Purchaser of each
instance of a casualty loss with respect to the Assets, or any portion thereof,
occurring from and after the execution of this Agreement up to the Closing, to
the extent known to Seller and estimated to exceed $100,000.00.

(b) If, after the Effective Time but prior to the Closing Date, any portion of
the Assets is destroyed by fire or other casualty or is taken in condemnation or
under right of eminent domain, and the aggregate amount (based on the Allocated
Value of the affected Assets) of any such loss or taking exceeds fifteen percent
(15%) of the Purchase Price, Purchaser and Seller shall negotiate in good faith
in an effort to agree to a mutually acceptable remedy. If Seller and Purchaser
do not mutually agree to an acceptable remedy with respect to such casualty or
taking on or before the Closing Date, then either Seller or Purchaser, in its
sole discretion, shall have the right to terminate this Agreement and Purchaser
shall promptly receive back the Deposit upon such termination. If the aggregate
amount of any such loss or taking is fifteen percent (15%) or

 

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less of the Purchase Price, Purchaser shall be required to close and Seller
shall elect by written notice to Purchaser prior to Closing either (i) to cause
the Assets affected by such casualty or taking to be repaired or restored to at
least its condition prior to such casualty or taking, at Seller’s sole cost, as
promptly as reasonably practicable (which work may extend after the Closing
Date), or (ii) with Purchaser’s consent, to indemnify Purchaser through a
document reasonably acceptable to Seller and Purchaser against any costs or
expenses that Purchaser reasonably incurs to repair the Assets subject to such
casualty or taking or (iii) mutually agree with Purchaser to an acceptable
remedy with respect to such casualty or taking through a Purchase Price
adjustment or otherwise. In the case of (i) or (ii), Seller shall retain all
rights to insurance, condemnation awards and other claims against third parties
with respect to the casualty or taking except to the extent the Parties
otherwise agree in writing.

(c) If any action for condemnation or taking under right of eminent domain is
pending or threatened with respect to any Asset or portion thereof after the
date of this Agreement, but no taking of such Asset or portion thereof occurs
prior to the Closing Date, Purchaser shall nevertheless be required to close and
Seller, at Closing, shall assign, transfer and set over to Purchaser or
subrogate Purchaser to all of Seller’s right, title and interest (if any) in
such condemnation or eminent domain action, including any future awards therein,
insofar as they are attributable to the Assets threatened to be taken, except
that Seller shall reserve and retain (and Purchaser shall assign to Seller) all
rights, titles, interests and claims against third parties for the recovery of
Seller’s costs and expenses Incurred prior to the Closing in defending or
asserting rights in such action with respect to the Assets.

Section 3.6 Limitations on Title Defects.

Subject to the following sentence, the right of Purchaser to assert a Title
Defect under this Agreement shall terminate as of the Title Claim Date, provided
there shall be no termination of Purchaser’s or Seller’s rights under 0 with
respect to any bona fide Title Defect properly reported in a Title Defect Notice
or bona fide Title Benefit Claim properly reported in a Title Benefit Notice on
or before the Title Claim Date. Thereafter, Purchaser’s sole and exclusive
rights and remedies with regard to title to the Assets shall be as set forth in,
and arising under, the Conveyance transferring the Assets from Seller to
Purchaser.

Section 3.7 Limitations on Applicability.

(a) Purchaser shall use its best efforts after Closing to obtain the
unconditional approval by the BOEM of (i) the Assignments of Record Title to Oil
and Gas Lease(s) in the form attached hereto as Exhibit B-1; (ii) the
Assignments of Oil and Gas Lease Operating Rights in the form attached hereto as
Exhibit B-2; and (iii) the Assignments of Rights of Way in the form attached
hereto as Exhibit B-3. In the event Purchaser or its nominated operator is
elected successor operator under the operating agreements applicable to any of
the Leases, Purchaser also obligates itself to ensure that it or the successor
operator makes application to the BOEM to qualify as operator with respect to
that portion of the Assets it will operate. Purchaser shall take any actions
reasonably required of it by the BOEM or any other regulatory agencies to obtain
all requisite regulatory approvals, including but not limited to, the purchase
and posting of any and all bonds, supplemental bonds or other securities which
may be required of it pursuant to OPA and 30 C.F.R §§ 250.7, 256.58, 256.59, and
256.61 in excess of any existing lease, pipeline or

 

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area-wide bond(s). Until the governmental approval with respect to an assignment
described in this Section 3.7 is obtained, however, the following shall occur:

 

  (i) Seller, insofar as BOEM is concerned, shall continue to hold the operating
rights and record title to the applicable Assets as nominee for Purchaser;

 

  (ii) Purchaser’s indemnity obligation under Section 11.4 shall include any and
all claims, expenses of any kind or character relating to the Assets accruing
after the Effective Time, including but not limited to any regulatory costs
incurred by Seller, excluding, however, any bonding costs and excluding any and
all claims and expenses of any kind or character arising from the gross
negligence or willful misconduct of Seller;

 

  (iii) As provided for in the Transition Agreement, Seller shall act as
Purchaser’s nominee with respect to the Assets but shall be authorized to act
only upon and in accordance with Purchaser’s specific written instructions, and
Seller shall have no authority, responsibility or discretion to perform any
tasks or functions with respect to the Assets other than those which are purely
administrative or ministerial in nature, unless otherwise specifically requested
and authorized by Purchaser in writing; and

(b) Purchaser shall continue to maintain and provide at its cost the insurance
coverage as reviewed by Seller under Section 8.1(i) of this Agreement. If the
BOEM does not, within twelve months from the Closing Date, approve all (i) the
Assignments of Record Title of the Leases into Purchaser, (ii) the Assignments
of Oil and Gas Lease Operating Rights into Purchaser, and (iii) the Assignments
of Rights of Way into Purchaser, then as to those assignments that the BOEM has
approved, the transaction contemplated by this Agreement will proceed as to
those Assets in accordance with the terms and conditions of this Agreement,
mutatis mutandis, and as to each of those assignments that the BOEM has not
approved due to a reason other than the BOEM’s delay in addressing otherwise
valid filings by Purchaser, Seller, at its option, or Purchaser at its option
unless the lack of approval is due directly to Purchaser’s failure to comply
with any Law or regulations of BOEM, may either:

 

  (i) continue or direct Seller to continue to hold the operating rights, title
to the Leases and the rights of way as Purchaser’s nominee, or,

 

  (ii) upon 30 days’ notice to the other Party, rescind the purchase and sale of
the Assets that are the subject of such non-approvals and terminate this
Agreement as to those Assets, but only as to those Assets.

(c) The exercise by Seller of the option to rescind as specified in
Section 3.7(b)(ii), however, shall be predicated upon Seller’s reasonable
determination either that (x) Purchaser has failed to comply with the
requirements of 30 C.F.R. § 256.64 and not taken any and all actions required by
BOEM to obtain such approval, or (y) there had been a Material Adverse Effect on
the financial condition of Purchaser after Closing.

 

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(d) Upon such termination and rescission, this Agreement shall be null and void
as between Purchaser and Seller with respect to the non-approved Assets and
(i) Purchaser shall return to Seller the assignments and any and all other
documents, materials and data previously delivered to Purchaser with respect to
such Assets; and (ii) Seller shall return to Purchaser the Purchase Price
allocated to such Assets in Schedule 2.2 without interest, less the proceeds of
production net of all expenses, capital expenditures, royalties, and costs of
operations (including plugging and abandonment expenses but excluding mortgage
interest and any burdens or encumbrances created by Purchaser which shall be
released prior to this payment) attributable to the Leases and other rights from
and after the Effective Time. In no event, however, shall Seller ever be
required to reimburse Purchaser for any expenditures associated with workovers,
recompletions, or the drilling, completion or plugging and abandonment of wells
drilled or work performed by Purchaser on or with respect to such Assets unless
same were necessary to perpetuate the related Leases or operating rights or
other rights. Seller shall not be liable to Purchaser if BOEM approvals are not
obtained, except as expressly provided in this Section 3.7.

(e) Prior to execution hereof, Purchaser has reviewed information promulgated by
the BOEM regarding the amounts and terms for the posting of supplemental bonds
or pledge of securities pursuant to the provisions of 30 C.F.R §§ 256.61 and
250.7, and within a reasonable time of any BOEM determination pursuant to such
regulations, Purchaser (directly or through its representative) shall exercise
commercially reasonable efforts to satisfy the BOEM requirements concerning
same, including all financial responsibility requirements under OPA.

(f) The Parties acknowledge and agree that certain of the offshore Assets are in
the nature of contract rights that are not recognized by the BOEM as “record
title” or “operating rights,” and that, accordingly, the BOEM will not approve,
and Purchaser and Seller do not expect the BOEM to approve, the assignment of
these interests from Seller to Purchaser. Purchaser shall ensure nevertheless
that the assignment documents relating to such interests are appropriately filed
in the “non-required filing” system of the BOEM. Such interests shall be
excluded from the scope of Section 3.7(a) for all purposes.

ARTICLE 4

ENVIRONMENTAL MATTERS

Section 4.1 Assessment.

(a) From and after the date hereof and up to and including the Closing Date (or
earlier termination of this Agreement) but subject to (i) applicable Laws,
(ii) the other provisions of this Section 4.1 and (iii) obtaining any required
consents of third parties, including third party operators of the Assets (with
respect to which consents Seller shall use commercially reasonable efforts to
obtain), Seller shall afford to Purchaser and its officers, employees, agents,
accountants, attorneys, investment bankers and other authorized representatives
(“Purchaser’s Representatives”) full access, during normal business hours and
upon reasonable notice, to the Assets and all Records and other documents in
Seller’s or its Affiliates’ possession relating primarily to the Assets. Seller
shall also make available to Purchaser and Purchaser’s Representatives, upon
reasonable notice during normal business hours, Seller’s personnel knowledgeable
with respect to the Assets in order that Purchaser may make such diligence
investigation as Purchaser considers necessary or appropriate. All
investigations and due

 

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diligence conducted by Purchaser or any Purchaser’s Representative shall be
conducted at Purchaser’s sole cost, risk and expense and any conclusions made
from any examination done by Purchaser or any Purchaser’s Representative shall
result from Purchaser’s own independent review and judgment.

(b) Purchaser shall be entitled to conduct a non-invasive environmental site
assessment with respect to the Assets (the “Assessment”). Seller or its designee
shall have the right to accompany Purchaser and Purchaser’s Representatives
whenever they are on site on the Assets. Notwithstanding anything herein to the
contrary, Purchaser shall not have access to, and shall not be permitted to
conduct any environmental due diligence with respect to any Assets where Seller
does not have the authority to grant access for such due diligence; provided,
however, Seller shall use its commercially reasonable efforts to obtain
permission from any third party operator to allow Purchaser and Purchaser’s
Representatives such access, it being understood by Purchaser that the execution
by Purchaser of a customary boarding agreement may be a condition of such
access.

(c) Notwithstanding anything herein to the contrary, Purchaser shall not have
access to, and shall not be permitted to conduct any environmental due diligence
with respect to any Assets where Seller does not have the authority to grant
access for such due diligence; provided, however, Seller shall use its
commercially reasonable efforts to obtain permission from any third party
operator to allow Purchaser and Purchaser’s Representatives such access, it
being understood by Purchaser that the execution by Purchaser of a customary
boarding agreement may be a condition of such access.

(d) Purchaser shall coordinate its environmental site assessments and physical
inspections of the Assets with Seller to minimize any inconvenience to or
interruption of the conduct of business by Seller. Purchaser shall abide by
Seller’s, and any third party operator’s, safety rules, regulations and
operating policies while conducting its due diligence evaluation of the Assets
including any environmental or other inspection or assessment of the Assets.

(e) Upon Seller’s request, Purchaser agrees to provide Seller promptly, but not
later than the Environmental Claim Date, copies of all reports, test results,
and other documentation and data prepared or compiled by Purchaser and/or any of
Purchaser’s Representatives and which contain information collected or generated
from Purchaser’s due diligence with respect to the Assets. Seller shall not be
deemed by its receipt of said documents or otherwise to have made any
representation or warranty, expressed, implied or statutory, as to the condition
to the Assets or to the accuracy of said documents or the information contained
therein.

(f) Upon completion of Purchaser’s due diligence, Purchaser shall at its sole
cost and expense and without any cost or expense to Seller or its Affiliates,
(i) repair all damage done to the Assets in connection with Purchaser’s due
diligence in accordance with recognized industry standards or requirements of
third party operators, (ii) restore the Assets to the approximate same or better
condition than existed prior to commencement of Purchaser’s due diligence, to
the full extent of any damage related to Purchaser’s due diligence, and
(iii) remove all equipment, tools or other property brought onto the Assets in
connection with Purchaser’s due diligence. Any disturbance to the Assets
(including, without limitation, any real property, platform or other fixtures
associated with such Assets) resulting from Purchaser’s due diligence will be
promptly corrected by Purchaser.

 

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(g) During all periods that Purchaser, and/or any of Purchaser’s Representative
are on the Assets, Purchaser shall maintain, at its sole expense the types and
amounts of insurance set forth below. Upon Seller’s request, Purchaser shall
provide evidence of such insurance through certificates or other verifications.

 

  •  

Workmen’s Compensation Insurance, with statutory limits in accordance with all
applicable state, federal and maritime laws, and Employer’s Liability Insurance
of at least $1,000,000 per accident/occurrence, including but not limited to an
“Alternate Employer” or “Borrowed Servant” endorsement in favor of Seller.
Purchaser shall carry the following additional insurance as applicable: U.S.
Longshoremen’s and Harbor Worker’s Compensation Act Liability (including the
Outer Continental Shelf Lands Act) for statutory limits, and Maritime Employer’s
Liability of at least $1,000,000 per accident/occurrence (including but not
limited to coverage for Jones Act, General Maritime Laws and Death on the High
Seas Act; Transportation, Wages, Maintenance and Cure; Voluntary Compensation;
Alternate Employer/Borrowed Servant endorsement in favor of Seller and “In rem”
endorsement).

 

  •  

General Liability Insurance, with limits of at least $1,000,000 combined single
limit per occurrence, including but not limited to coverage for public liability
including bodily injury and property damage liability, personal/advertising
injury, contractual liability for those liabilities assumed by the Party herein,
cross liability and severability of interest, liability for removal of
wreck/debris, liability for pollution and cleanup on a sudden and accidental
basis, products and completed operations, Purchaser’s protective
liability/independent contractors/work sublet, and with the “care, custody, and
control exclusion” deleted.

 

  •  

Automobile Liability Insurance, with limits of at least $1,000,000 combined
single limit per accident/occurrence for bodily/personal injury and property
damage, including but not limited to coverage for all owned, hired and non-owned
vehicles or automotive equipment used by or for Purchaser and contractual
liability for those liabilities assumed by Purchaser herein.

 

  •  

Charterer’s Legal Liability Insurance, with limits of at least $1,000,000
combined single limit per occurrence.

 

  •  

Aircraft—If applicable, for all aircraft owned, operated, chartered, or brokered
by or for Purchaser in connection with its transportation to or activities at
the Assets, Purchaser or its agent shall carry or require the owner or operator
of such aircraft to carry (including the Umbrella Excess Liability Insurance
Aircraft Liability Insurance, with limits of at least $1,000,000 combined single
limit per occurrence, including but not limited to coverage for bodily injury,
death and property damage, Passenger Liability, and contractual liability for
those liabilities assumed by Purchaser herein.

 

  •  

Umbrella Excess Liability Insurance, with limits of at least $10,000,000 per
accident/occurrence, in excess of the primary liability coverage and limits
above.

 

  •  

For liabilities assumed by Purchaser herein, all of the above insurance
coverages shall be endorsed to provide that:

 

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  (1) Purchaser’s insurers waive their right of subrogation (equitable or by
assignment, express or implied, loan receipt or otherwise) against Seller.

 

  (2) Purchaser’s insurers name Seller as additional insureds (except for
Worker’s Compensation and Property Insurance).

 

  (3) Purchaser’s insurance coverage is primary over any insurance coverage
maintained by Seller. .

(h) All information obtained by Purchaser and its representatives pursuant to
this Section 4.1 shall be subject to the terms of that certain confidentiality
agreement dated November 6, 2012, by and between Seller and Purchaser (the
“Confidentiality Agreement”).

Section 4.2 NORM, Wastes and Other Substances.

Purchaser acknowledges that the Assets have been used for the exploration,
development, and production of Hydrocarbons and that there may be petroleum,
produced water, wastes, or other substances or materials located in, on or under
the Properties or associated with the Assets. Equipment and sites included in
the Assets may contain Hazardous Materials, including NORM. NORM may affix or
attach itself to the inside of wells, materials, and equipment as scale, or in
other forms. The wells, materials, and equipment located on the Properties or
included in the Assets may contain Hazardous Materials, including NORM.
Hazardous Materials, including NORM, may have come in contact with various
environmental media, including without limitation, water, soils or sediment.
Special procedures may be required for the assessment, remediation, removal,
transportation, or disposal of environmental media and Hazardous Materials,
including NORM, from the Assets.

Section 4.3 Environmental Defects.

If, as a result of its investigation pursuant to Section 4.1, Purchaser
determines that with respect to any individual Asset, there exists a violation
of an Environmental Law (other than with respect to NORM and other than with
respect to any issues disclosed herein or on any Exhibit or Schedule hereto or
any other matter with respect to which Purchaser has knowledge prior to entering
into this Agreement) (in each case, an “Environmental Defect”), then on or prior
to seven (7) days before the Closing Date (the “Environmental Claim Date”),
Purchaser may notify Seller in writing of such Environmental Defect (an
“Environmental Defect Notice”). For all purposes of this Agreement, Purchaser
shall be deemed to have waived any Environmental Defect which Purchaser fails to
assert as an Environmental Defect by an Environmental Defect Notice received by
Seller on or before the Environmental Claim Date. To be effective, each such
notice shall set forth (i) a description of the matter constituting the alleged
Environmental Defect, (ii) the Units/Wells and the associated Asset affected by
the Environmental Defect, (iii) the estimated Lowest Cost Response to eliminate
the Environmental Defect in question (the “Environmental Defect Amount”), and
(iv) supporting documents reasonably necessary for Seller to verify the
existence of the alleged Environmental Defect and the Environmental Defect
Amount. Commencing on the date that is two weeks after the execution of this
Agreement, Purchaser shall furnish Seller once every two (2) weeks until the
Environmental Claim Date with an Environmental Defect Notice if any officer of
Purchaser or its Affiliates discovers or becomes

 

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aware of an Environmental Defect during such two (2) week period. Seller shall
have the right, but not the obligation, to cure any Environmental Defect before
Closing or, provided that the Parties shall have agreed to the general plan of
remediation with respect to such Environmental Defect and the time period by
which such remediation shall take place, after Closing. If Seller disagrees with
any of Purchaser’s assertions with respect to the existence of an Environmental
Defect or the Environmental Defect Amount, Purchaser and Seller will attempt to
resolve the dispute prior to Closing. If the dispute cannot be resolved within
ten (10) days of the first meeting of Purchaser and Seller, either Party may
submit the dispute to an environmental consultant approved in writing by Seller
and Purchaser that is experienced in environmental corrective action at oil and
gas properties in the relevant jurisdiction and that shall not have performed
professional services for either Party or any of their respective Affiliates
during the previous five years (the “Independent Expert”). The Independent
Expert may elect to conduct the dispute resolution proceeding by written
submissions from Purchaser and Seller with exhibits, including interrogatories,
supplemented with appearances by Purchaser and Seller, if necessary, as the
Independent Expert may deem necessary. After the Parties and Independent Expert
have had the opportunity to review all such submissions, the Independent Expert
shall call for a final, written offer of resolution from each Party. The
Independent Expert shall render its decision within twenty (20) Business Days of
receiving such offers by selecting one or the other of the offers. The
Independent Expert may not award damages, interest or penalties to either Party
with respect to any matter. The decision of the Independent Expert shall be
final and binding upon both Parties, without right of appeal. Seller and
Purchaser shall each bear its own legal fees and other costs of presenting its
case to the Independent Expert. Each Party shall bear one-half of the costs and
expenses of the Independent Expert. The Parties shall adjust the Purchase Price
to reflect the Environmental Defect Amounts, as agreed by the Parties or as
determined by the Independent Expert, for all uncured Environmental Defects;
provided, that notwithstanding anything to the contrary, (a) in no event shall
there be any adjustments to the Purchase Price for any individual uncured
Environmental Defect for which the Environmental Defect Amount therefor does not
exceed $75,000 (“Individual Environmental Threshold”); and (b) in no event shall
there be any adjustments to the Purchase Price for any uncured Environmental
Defect unless the aggregate Environmental Defect Amount attributable to all
Material Environmental Defects exceeds five percent (5%) of the Purchase Price
(the “Environmental Defect Deductible”), after which point Purchaser shall be
entitled to adjustments to the Purchase Price or other remedies only to the
extent the aggregate Environmental Defect Amounts with respect to all uncured
Material Environmental Defects are in excess of such Environmental Defect
Deductible. To the extent the Independent Expert fails to determine any disputed
Environmental Defect Amounts prior to Closing, then, within ten (10) days after
the Independent Expert delivers written notice to Purchaser and Seller of his
award with respect to an Environmental Defect Amount, Seller shall pay to
Purchaser the amount, if any, so awarded by the Independent Examiner.

Section 4.4 Inspection Indemnity.

Purchaser hereby agrees to defend, indemnify and hold harmless each of the third
party operators and owners of the Assets and Seller Indemnified Parties from and
against any and all Losses arising out of, resulting from or relating to any
field visit, environmental property assessment, or other due diligence activity
conducted by Purchaser or any Purchaser’s Representative with respect to the
Assets, even if such Losses arise out of or result from, solely

 

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or in part, the sole, active, passive, concurrent or comparative negligence,
strict liability or other fault or violation of Law of or by any such third
party operator or owner or Seller Indemnified Party, excepting only Losses
actually resulting on the account of the gross negligence or willful misconduct
of such person.

Section 4.5 Exclusive Remedy.

Subject to the limitations contained therein, Section 4.3 shall be the exclusive
right and remedy of Purchaser with respect to any Environmental Defect.
Purchaser hereby waives any claims of cost recovery or contribution from Seller
or its Affiliates related to the Assets under any Environmental Law or other
cause of action.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLER

Section 5.1 Generally.

(a) Any representation or warranty qualified “to the knowledge of Seller” or “to
Seller’s knowledge” or with any similar knowledge qualification is limited to
matters within the actual knowledge of the officers of Seller or its Affiliates
and those employees of Seller or any of its Affiliates who have responsibility
for the Assets and who have the following titles: President and Chief Executive
Officer; Vice-President of HSE&C; Vice President of Land; Land Manager; and
Chief Technical Officer. “Actual knowledge” for purposes of this Agreement means
information actually personally known by such Persons.

(b) Inclusion of a matter on a Schedule in relation to a representation or
warranty which addresses matters having a Material Adverse Effect shall not be
deemed an indication that such matter does, or may, have a Material Adverse
Effect. Likewise, the inclusion of a matter on a Schedule in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would, or may, breach such representation or warranty absent its
inclusion on such Schedule. Matters may be disclosed on a Schedule to this
Agreement for purposes of information only.

(c) Subject to the foregoing provisions of this Section 5.1, the disclaimers and
waivers contained in Section 11.8, Section 11.9, and Section 11.10 and the other
terms and conditions of this Agreement, Seller represents and warrants to
Purchaser the matters set out in the remainder of this Article 5.

Section 5.2 Existence and Qualification.

Seller is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Texas and is duly qualified to do
business as a foreign corporation where the Assets are located, except where the
failure to so qualify would not have a Material Adverse Effect.

 

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Section 5.3 Power.

Seller has the power and authority to enter into and perform this Agreement and
consummate the transactions contemplated by this Agreement.

Section 5.4 Authorization and Enforceability.

The execution, delivery and performance of this Agreement, and the performance
of the transactions contemplated hereby, have been duly and validly authorized
by all necessary limited liability company action on the part of Seller. This
Agreement has been duly executed and delivered by Seller (and all documents
required hereunder to be executed and delivered by Seller at Closing will be
duly executed and delivered by Seller) and this Agreement constitutes, and at
the Closing such documents will constitute, the valid and binding obligations of
Seller, enforceable against Seller in accordance with their terms except as such
enforceability may be limited by applicable bankruptcy or other similar laws
affecting the rights and remedies of creditors generally as well as to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at Law).

Section 5.5 No Conflicts.

Subject to the giving of all notices to third parties and the receipt of all
consents, approvals and waivers from third parties in connection with the
transactions contemplated hereby, the execution, delivery and performance by
Seller of this Agreement and the consummation of the transactions contemplated
herein will not (i) conflict with or result in a breach of any provisions of the
organizational documents of Seller, (ii) result in a default or the creation of
any encumbrance or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any Lease,
Contract, note, bond, mortgage, indenture, license or other material agreement
to which any Seller is a party or by which any Seller or the Assets may be bound
or (iii) violate any material Laws applicable to any Seller or any of the
Assets.

Section 5.6 Liability for Brokers’ Fees.

Purchaser shall not directly or indirectly have any responsibility, liability or
expense, as a result of undertakings or agreements of Seller or its Affiliates,
for brokerage fees, finder’s fees, agent’s commissions or other similar forms of
compensation in connection with this Agreement or any agreement or transaction
contemplated hereby.

Section 5.7 Litigation.

With respect to the Assets and Seller’s or any of its Affiliates’ ownership,
operation, development, maintenance, or use of any of the Assets, except as set
forth in Schedule 5.7: (i) no proceeding, arbitration, action, suit, pending
settlement, or other legal proceeding of any kind or nature before or by any
Governmental Body (each, a “Proceeding,” and collectively “Proceedings”)
(including any take-or-pay claims) to which Seller or any of its Affiliates is a
party and which relates to the Assets is pending or, to Seller’s knowledge,
threatened against Seller or any of its Affiliates; (ii) to Seller’s knowledge,
no Proceeding or investigation to which Seller is not a party which relates to
the Assets is pending or threatened; and (iii) no notice in

 

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writing from any third party (including any Governmental Body) has been received
by Seller or any of its Affiliates threatening any Proceeding relating to the
Assets which could have a Material Adverse Effect (excluding any notices
relating to any Environmental Liabilities or Environmental Law to the extent
reflected in Section 5.21 or Schedule 5.21).

Section 5.8 Taxes and Assessments.

For all periods prior to Closing, except as disclosed in Schedule 5.8, Seller
has filed all tax returns required to be filed by any Governmental Body and all
ad valorem, property, production, severance and similar taxes and assessments
(including penalties and interest) based on or measured by the ownership of the
Assets, the production of Hydrocarbons or the receipt of proceeds therefrom that
have become due and payable before the Closing have been properly paid, other
than taxes which are being contested in good faith. Except as disclosed in
Schedule 5.8, the Parties with respect to all unit operating agreements, joint
operating agreements, and similar agreements governing operation of the
Properties have elected to be excluded from the application of Subchapter K of
the Code. Except as disclosed on Schedule 5.8, the Parties with respect to all
unit operating agreements, joint operating agreements, and similar agreements
that have not elected to be excluded from the application of Subchapter K of the
Code have made the Section 754 election to adjust basis in accordance with
Section 743.

Section 5.9 Condemnation.

To Seller’s knowledge, there is no actual or threatened taking (whether
permanent, temporary, whole or partial) of any part of the Properties by reason
of condemnation or the threat of condemnation.

Section 5.10 Contracts.

Except as disclosed on Schedule 5.10, to the knowledge of Seller, Seller has
paid its share of all costs (including all Property Costs) payable by it under
the Contracts. Seller is in compliance and, to Seller’s knowledge, all
counterparties are in compliance under all Contracts, except as disclosed on
Schedule 5.10 and except for such non-compliance as would not, individually or
in the aggregate, have a Material Adverse Effect. To Seller’s knowledge,
Schedule 5.10 sets forth all agreement(s) or contracts (i) for the sale,
exchange, or other disposition of Hydrocarbons produced from or attributable to
Seller’s interest in the Assets that is not cancelable without penalty or other
material payment without first providing more than 60 days prior written notice
and (ii) that could reasonably be expected to result in aggregate payments by
Seller or aggregate revenues to Seller, of more than $200,000.00 (net to the
interest of Seller) during the current or any subsequent fiscal year (based
solely on the terms thereof and without regard to any expected increase in
volumes or revenues).

Section 5.11 Payments for Hydrocarbon Production.

Except as set forth on Schedule 5.11, to the knowledge of Seller (a) all
material rentals, royalties, excess royalty, overriding royalty interests,
Hydrocarbon production payments, and other payments due and payable by Seller to
lessors, overriding royalty holders and other interest owners under or with
respect to the Assets and the Hydrocarbons produced therefrom or

 

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attributable thereto, have been paid, and (b) Seller is not obligated under any
contract or agreement for the sale of gas from the Assets containing a
take-or-pay, advance payment, prepayment, or similar provision, or under any
gathering, transmission, or any other contract or agreement with respect to any
of the Assets to gather, deliver, process, or transport any gas without then or
thereafter receiving full payment therefor.

Section 5.12 Governmental Authorizations.

To Seller’s knowledge, except as disclosed on Schedule 5.12, Seller has obtained
and is maintaining all material federal, state and local governmental licenses,
permits, franchises, orders, exemptions, variances, waivers, authorizations,
certificates, consents, rights, privileges and applications therefor (the
“Governmental Authorizations”) that are presently necessary or required for the
ownership and operation of the Seller Operated Assets as currently owned and
operated (excluding Governmental Authorizations required by Environmental Law).
To Seller’s knowledge, except as disclosed in Schedule 5.7 or Schedule 5.12,
(i) Seller has operated the Seller Operated Assets in all material respects in
accordance with the conditions and provisions of such Governmental
Authorizations, and (ii) no written notices of material violation have been
received by Seller, and no Proceedings are pending or, to Seller’s knowledge,
threatened in writing that might result in any material modification,
revocation, termination or suspension of any such Governmental Authorizations or
which would require any material corrective or remediation action by Seller.

Section 5.13 Outstanding Capital Commitments.

As of the date hereof, there are no outstanding AFEs or other commitments to
make capital expenditures which are binding on the Assets and which Seller
reasonably anticipates will individually require expenditures by the owner of
the Assets after the Effective Time in excess of $75,000 (net to Seller’s
interest excluding non-consent interests) other than those shown on Schedule
5.13.

Section 5.14 Imbalances.

To Seller’s knowledge, Schedule 5.14 accurately sets forth in all material
respects all of Seller’s Imbalances as of the respective dates set forth
therein, arising with respect to the Assets and, except as disclosed in Schedule
5.14, (i) no Person is entitled to receive any material portion of Seller’s
Hydrocarbons produced from the Assets or to receive material cash or other
payments to “balance” any disproportionate allocation of Hydrocarbons produced
from the Assets under any operating agreement, gas balancing or storage
agreement, gas processing or dehydration agreement, gas transportation
agreement, gas purchase agreement, or other agreements, whether similar or
dissimilar, and (ii) Seller is not obligated to deliver any material quantities
of gas or to pay any material penalties or other material amounts, in connection
with the violation of any of the terms of any gas contract or other agreement
with shippers with respect to the Assets.

Section 5.15 Bankruptcy.

There are no bankruptcy, reorganization, or receivership proceedings pending
against, or, to Seller’s knowledge, being contemplated by or threatened against
Seller.

 

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Section 5.16 Affiliated Contracts.

After Closing, the Assets will not be bound or burdened by any contractual
obligation to Seller or an Affiliate of Seller except pursuant to this
Agreement.

Section 5.17 Foreign Person.

Seller is not a “foreign person” within the meaning of Section 1445 of the Code.

Section 5.18 Preference Rights.

None of the Assets, or any portion thereof, is subject to any Preference Right
which may be applicable to the transactions contemplated by this Agreement,
except for Preference Rights as are set forth on Schedule 7.7.

Section 5.19 Transfer Requirements and Other Consents.

Except for (a) Transfer Requirements set forth in Schedule 7.7, (b) Customary
Post-Closing Consents, (c) consents under Contracts that are terminable upon not
greater than 90 days’ notice without payment of any fee or are otherwise
material, (d) compliance with any applicable requirements of the BOEM and
(e) compliance with any applicable requirements of the HSR Act, there are no
other consents required in connection with the transfer of the Assets or the
consummation of the transactions contemplated by this Agreement.

Section 5.20 No Violation of Laws.

To Seller’s knowledge, except as set forth on Schedule 5.20, Seller has not
violated applicable Laws with respect to the ownership or operation of any
Assets of which Seller is the operator, except where such violation would not
have a Material Adverse Effect. This Section 5.20 does not include any matters
with respect to Environmental Laws.

Section 5.21 Environmental.

To Seller’s knowledge with respect to Seller’s ownership and operation of the
Assets of which Seller is the operator, Seller has not violated, except as set
forth on Schedule 5.21 (a) any Environmental Law or (b) any order, judgment,
injunction, ruling or decree of any court or other Governmental Body to which it
is a party or by which it is bound that relates to any Environmental Law.
Further, there are no Claims relating to the existence of any Environmental
Liabilities affecting the Assets or arising out of Seller’s ownership and
operation of the Assets of which Seller is the operator, which could reasonably
be expected to have a Material Adverse Effect.

Section 5.22 Suspended Funds.

To Seller’s knowledge, Schedule 5.22 sets forth a list of all third party funds
currently being held in suspense or escrow by Seller as of the Effective Time
that are attributable to production from the Assets.

 

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Section 5.23 Non-Consent Operations.

As of the date of this Agreement, there are no outstanding non-consent elections
or ongoing non-consent operations with respect to the Assets, except as set
forth in Schedule 5.23.

Section 5.24 BOEM or BSEE Incidents of Non-Compliance and Suspensions.

To Seller’s knowledge, as of the date of this Agreement, there are no
outstanding suspensions of operations or suspensions of production pertaining to
the Assets that are awaiting approval by a Governmental Body other than those
set forth on Schedule 5.24 and there are no outstanding unresolved incidents of
non-compliance issued by any Governmental Body with respect to any Asset except
to the extent set forth on Schedule 5.24.

Section 5.25 Casualty Losses.

Since the Effective Time, there have been no casualty or condemnation losses as
contemplated by the provisions of Section 3.5 estimated to exceed $200,000.00.

Section 5.26 Third Party Beneficiary.

The consummation of the transactions contemplated by this Agreement will not
provide any direct consideration or direct monetary benefit to the Persons
having managerial responsibilities with respect to Seller nor serve to limit or
reduce any liabilities of such Persons insofar as the Assets are concerned. It
is understood that this representation does not include any of Seller’s company
bonus plans nor any increase in the value of Seller (if any) that would inure to
the benefit of owners of Seller who may also have managerial responsibilities
with respect to Seller.

Section 5.27 Condition of Personal Property.

To Seller’s knowledge, except as set forth in Schedule 5.27, all Personal
Property constituting a part of the Assets are in a state of repair so as to be
adequate for normal operations, except where such state of repair would not have
a Material Adverse Effect. Any Personal Property that is not necessary, in a
material respect, to operate the Assets shall be excluded from this
representation and warranty.

Section 5.28 Bonds, Letters of Credit, Guarantees and Other Securities.

Except as set forth on Schedule 5.28, and except as to any general or area-wide
bonding posted with the BOEM, there are no bonds, letters of credit, guarantees
or other security pertaining to the Assets that have been posted by Seller
and/or any of its Affiliates or by a third Person on its behalf for which, upon
Closing, Purchaser must replace or to which Purchaser will be bound or to which
the Assets will be subject (unless replacement is not required by BOEM due to
the financial condition of Purchaser).

Section 5.29 Idle Iron.

Schedule 5.29 reflects a copy of all written or electronic communication to and
from any Governmental Bodies since the Effective Time with respect to the so
called “idle iron” obligations pertaining to the Assets. From and after the
Effective Date of this Agreement, Seller will advise Purchaser of any further
communications with any Governmental Body with respect to idle iron obligations
or directives pertaining to the Assets.

 

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Section 5.30 Seller’s Insurance Coverage.

Schedule 5.30 sets forth a summary of Seller’s insurance coverages and
associated Property Costs to the extent such Property Costs may serve as an
adjustment to the Purchase Price pursuant to the terms and provisions of
Section 2.3.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller the following:

Section 6.1 Existence and Qualification.

Purchaser is duly organized, validly existing and in good standing under the
laws of the state of its formation; and Purchaser is duly qualified to do
business as a foreign limited liability company in every jurisdiction in which
it is required to qualify in order to conduct its business, except where the
failure to so qualify would not have a material adverse effect on Purchaser; and
Purchaser is or will be as of Closing duly qualified to do business as a foreign
limited liability company in the respective jurisdictions where the Assets are
located.

Section 6.2 Power.

Purchaser has the power and authority to enter into and perform this Agreement
and consummate the transactions contemplated by this Agreement.

Section 6.3 Authorization and Enforceability.

The execution, delivery and performance of this Agreement, and the performance
of the transaction contemplated hereby, have been duly and validly authorized by
all necessary limited liability company action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser (and all documents
required hereunder to be executed and delivered by Purchaser at Closing will be
duly executed and delivered by Purchaser) and this Agreement constitutes, and at
the Closing such documents will constitute, the valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their terms except
as such enforceability may be limited by applicable bankruptcy or other similar
laws affecting the rights and remedies of creditors generally as well as to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

Section 6.4 No Conflicts.

The execution, delivery and performance by Purchaser of this Agreement and the
consummation of the transactions contemplated herein will not conflict with or
result in a breach of any provisions of the organizational or other governing
documents of Purchaser nor will it violate any Laws applicable to Purchaser or
any of its property.

 

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Section 6.5 Liability for Brokers’ Fees.

Seller shall not directly or indirectly have any responsibility, liability or
expense, as a result of undertakings or agreements of Purchaser or its
Affiliates, for brokerage fees, finder’s fees, agent’s commissions or other
similar forms of compensation in connection with this Agreement or any agreement
or transaction contemplated hereby.

Section 6.6 Litigation.

There are no Proceedings pending, or to the actual knowledge of Purchaser,
threatened in writing before any Governmental Body against Purchaser or any
Affiliate of Purchaser which are reasonably likely to materially impair
Purchaser’s ability to perform its obligations under this Agreement.

Section 6.7 Financing.

Purchaser has, or prior to the Closing Date will have, sufficient cash (in
United States dollars) to enable it to pay the Closing Payment to Seller at the
Closing and to otherwise satisfy its obligations under this Agreement.

Section 6.8 Limitation.

Except for the representations and warranties expressly made by Seller in
Article 5 of this Agreement, in the Conveyances or confirmed in any certificate
furnished or to be furnished to Purchaser pursuant to this Agreement, Purchaser
represents and acknowledges that (i) there are no representations or warranties,
express, statutory or implied, as to the Assets or prospects thereof, and
(ii) Purchaser has not relied upon any oral or written information provided by
Seller. Without limiting the generality of the foregoing, subject to Section 5.7
and Section 5.21, Purchaser represents and acknowledges that Seller has not made
and will make no representation or warranty regarding any matter or circumstance
relating to Environmental Laws, Environmental Liabilities, the release of
materials into the environment or protection of human health, safety, natural
resources or the environment or any other environmental condition of the Assets.

Section 6.9 SEC Disclosure.

Purchaser is acquiring the Assets for its own account for use in its trade or
business, and not with a view toward or for sale associated with any
distribution thereof, nor with any present intention of making a distribution
thereof within the meaning of the Securities Act of 1933, as amended, and
applicable state securities laws.

Section 6.10 Bankruptcy.

There are no bankruptcy, reorganization or receivership proceedings pending
against, being contemplated by, or, to Purchaser’s knowledge, threatened against
Purchaser.

 

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Section 6.11 Qualification.

Purchaser is now, and hereafter shall continue to be, qualified to own and
assume operatorship of federal and state oil, gas and mineral leases in all
jurisdictions where the Assets to be transferred to it are located, and the
consummation of the transactions contemplated in this Agreement will not cause
Purchaser to be disqualified as such an owner or operator. To the extent
required by the applicable Law, as of the Closing, Purchaser currently has, and
will continue to maintain, lease bonds, area-wide bonds or any other surety
bonds as may be required by, and in accordance with, such state or federal
regulations governing the ownership and operation of such leases.

Section 6.12 Consents.

Except for Customary Post-Closing Consents and compliance with any applicable
requirements under the HSR Act, there are no consents or other restrictions on
assignment that any Purchaser is obligated to obtain or furnish, including, but
not limited to, requirements for consents from third parties to any assignment
(in each case) that would be applicable in connection with the consummation of
the transactions contemplated by this Agreement by Purchaser.

Section 6.13 Independent Evaluation.

Purchaser is sophisticated in the evaluation, purchase, ownership and operation
of oil and gas properties and related facilities. In making its decision to
enter into this Agreement and to consummate the transactions contemplated
herein, except for the representations and warranties expressly made by Seller
in Article 5 of this Agreement, in the Conveyances or confirmed in any
certificate furnished or to be furnished to Purchaser pursuant to this
Agreement, Purchaser (a) has relied or shall rely solely on its own independent
investigation and evaluation of the Assets and the advice of its own legal, tax,
economic, insurance, environmental, engineering, geological and geophysical
advisors and the express provisions of this Agreement and not on any comments,
statements, projections or other materials made or given by any representatives
or consultants or advisors engaged by Seller and (b) has satisfied or shall
satisfy itself through its own due diligence as to the environmental and
physical condition and state of repair of and contractual arrangements and other
matters affecting the Assets. Purchaser has no knowledge of any fact that
results in the breach of any representation, warranty or covenant of Seller
given hereunder.

Section 6.14 NORM, Wastes and Other Substances.

Purchaser acknowledges that the Assets have been used for exploration,
development and production of oil and gas and that there may be petroleum,
produced water, wastes or other substances or materials located in, on or under
the Assets or associated with the Assets. Equipment and sites included in the
Assets may contain asbestos, NORM or other Hazardous Substances. NORM may affix
or attach itself to the inside of wells, materials and equipment as scale or in
other forms. The wells, materials and equipment located on the Assets or
included in the Assets may contain NORM and other wastes or Hazardous
Substances. NORM containing material and/or other wastes or Hazardous Substances
may have come in contact with various

 

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environmental media, including without limitation, water, soils or sediment.
Special procedures may be required for the assessment, remediation, removal,
transportation or disposal of environmental media, wastes, asbestos, NORM and
Hazardous Substances from the Assets.

ARTICLE 7

COVENANTS OF THE PARTIES

Section 7.1 HSR Act.

If applicable, within five Business Days following the execution by Purchaser
and Seller of this Agreement, Purchaser and Seller will each prepare and
simultaneously file with the DOJ and the FTC, as applicable, the notification
and report form required for the transactions contemplated by this Agreement by
the HSR Act, and request early termination of the waiting period thereunder.
Purchaser and Seller agree to respond promptly to any inquiries from the DOJ or
the FTC concerning such filings and to comply in all material respects with the
filing requirements of the HSR Act. Purchaser and Seller shall cooperate with
each other and, subject to the terms of the Confidentiality Agreement, shall
promptly furnish all information to the other Party that is necessary in
connection with Purchaser’s and Seller’s compliance with the HSR Act. Purchaser
and Seller shall keep each other fully advised with respect to any requests from
or communications with the DOJ or FTC concerning such filings and shall consult
with each other with respect to all responses thereto. Each of Seller and
Purchaser shall use its reasonable efforts to take all actions reasonably
necessary and appropriate in connection with any HSR Act filing to consummate
the transactions contemplated hereby.

Section 7.2 Government Reviews.

Seller and Purchaser shall in a timely manner (a) make all required filings, if
any, with and prepare applications to and conduct negotiations with, each
Governmental Body as to which such filings, applications or negotiations are
necessary or appropriate in the consummation of the transactions contemplated
hereby and (b) provide such information as each may reasonably request to make
such filings, prepare such applications and conduct such negotiations. Each
Party shall cooperate with and use all commercially reasonable efforts to assist
the other with respect to such filings, applications and negotiations.

Section 7.3 Breaches.

If any of Purchaser’s or Seller’s representations or warranties is untrue or
shall become untrue in any material respect between the date of execution of
this Agreement and the Closing Date, or if any of Purchaser’s or Seller’s
covenants or agreements to be performed or observed prior to or on the Closing
Date shall not have been so performed or observed in any material respect, but
if such breach of representation, warranty, covenant or agreement shall (if
curable) be cured by the Closing, then such breach shall be considered not to
have occurred for all purposes of this Agreement.

 

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Section 7.4 Letters-in-Lieu; Transition Agreement; Assignments; Operatorship.

(a) Seller will execute on the Closing Date letters in lieu of division and
transfer orders relating to the Assets, on forms prepared by Seller and
reasonably satisfactory to Purchaser, to reflect the transaction contemplated
hereby.

(b) On the Closing Date, Seller and Purchaser shall execute an agreement (the
“Transition Agreement”) in the form attached hereto as Exhibit G, pursuant to
which Seller shall agree to provide transition services to Purchaser with
respect to the Assets.

(c) Seller will prepare and execute, and Purchaser will execute, on the Closing
Date, all assignments necessary to convey to Purchaser all of the Leases and
other Assets in the form(s) as prescribed by the applicable Governmental Body
and otherwise acceptable to Purchaser and Seller.

(d) Seller makes no representations or warranties to Purchaser as to
transferability or assignability of operatorship of any Seller Operated Assets.
Rights and obligations associated with operatorship of such Properties are
governed by operating and similar agreements covering the Properties and will be
determined in accordance with the terms of such agreements. However, Seller will
assist Purchaser in Purchaser’s efforts to succeed Seller as operator of any
Wells and Units included in the Assets including by voting for Purchaser to
succeed Seller. Purchaser shall, promptly following Closing, file all
appropriate forms and declarations or bonds with federal and state agencies
relative to its assumption of operatorship. For all Seller Operated Assets,
Seller shall execute and deliver to Purchaser, and Purchaser shall promptly file
the appropriate forms with the applicable regulatory agency transferring
operatorship of such Assets to Purchaser.

Section 7.5 Public Announcements.

Until the Closing, neither Seller nor Purchaser shall make any press release or
other public announcement regarding the existence of this Agreement, the
contents hereof or the transactions contemplated hereby without the prior
written consent of the others; provided, however, the foregoing shall not
restrict disclosures by Purchaser or Seller which are required by applicable
securities or other laws or regulations or the applicable rules of any stock
exchange having jurisdiction over the disclosing Party or its Affiliates. At or
after Closing, the content of any press release or public announcement first
announcing the consummation of this transaction shall be subject to the prior
review and reasonable approval of Seller and Purchaser; provided, however, the
foregoing shall not restrict disclosures by Purchaser or Seller which are
required by applicable securities or other laws or regulations or the applicable
rules of any stock exchange having jurisdiction over the disclosing Party or its
Affiliates.

Section 7.6 Operation of Business.

Except as set forth on Schedule 7.6, until the Closing, Seller (i) will operate
the Assets and the business thereof in the ordinary course as a prudent
operator, (ii) will not, without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld, commit to any operation, or series
of related operations thereon, reasonably anticipated to require future

 

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capital expenditures by Purchaser as owner of the Assets in excess of $75,000
(net to Seller’s interest excluding non-consent interests), or make any capital
expenditures in respect of the Assets in excess of $75,000 (net to Seller’s
interest excluding non-consent interests), or terminate, materially amend,
execute or extend any material Contracts affecting the Assets, (iii) will use
commercially reasonable efforts to maintain insurance coverage on the Assets
presently furnished by nonaffiliated third parties in the amounts and of the
types presently in force, (iv) will use commercially reasonable efforts to
maintain in full force and effect all Leases and Easements, (v) will maintain
all material governmental permits and approvals affecting the Assets, (vi) will
not transfer, farmout, sell, encumber or otherwise dispose of any Assets, except
for (A) sales and dispositions of Hydrocarbon production in the ordinary course
of business consistent with past practices or (B) transfers, farmouts,
encumbrances or other dispositions of Assets, in one or more transactions, not
exceeding $75,000 (net to Seller’s interest) of consideration (in any form), in
the aggregate, (vii) will consult with Purchaser prior to conducting any repairs
or work after the date of this Agreement in order to remedy any violation of
Laws, including Environmental Laws, or associated with any activities to respond
to incidents of non-compliance, and provide reasonable advance notice to
Purchaser in order that Purchaser may be present to observe such repair or work
activities, and (viii) will not commit to do any of the foregoing. Purchaser’s
approval of any action restricted by this Section 7.6 shall be considered
granted within ten (10) days (unless a shorter time is reasonably required by
the circumstances and such shorter time is specified in Seller’s written notice)
of Seller’s written notice to Purchaser requesting such consent unless Purchaser
notifies Seller to the contrary in writing during that period. In the event of
an emergency, Seller may take such action as a prudent operator would take and
shall notify Purchaser of such action promptly thereafter.

Notwithstanding anything to the contrary in this Section 7.6, Seller, with
respect to the SS 219 #B-26ST2 well, will consult with Purchaser concerning any
significant decisions or changes with respect to ongoing operations and
activities associated with said well, including drilling, casing, re-drilling or
logging operations, and concerning any expenditures with respect to such well in
excess of those specified on Schedule 5.13.

Purchaser acknowledges that Seller may own an undivided interest in certain of
the Assets, and Purchaser agrees that the acts or omissions of the other working
interest owners who are not affiliated with Seller shall not constitute a
violation of the provisions of this Section 7.6 nor shall any action required by
a vote of working interest owners constitute such a violation so long as Seller
has voted its interest in a manner consistent with the provisions of this
Section 7.6.

Section 7.7 Preference Rights and Transfer Requirements.

(a) The transactions contemplated by this Agreement are expressly subject to all
validly existing and applicable Preference Rights and Transfer Requirements.
Prior to the Closing Date, Seller shall initiate all procedures which are
reasonably required to comply with or obtain the waiver of all Preference Rights
and Transfer Requirements set forth in Schedule 7.7 with respect to the
transactions contemplated by this Agreement. Seller shall use its commercially
reasonable efforts to obtain all applicable consents and to obtain waivers of
applicable Preference Rights; provided, however, neither Seller nor Purchaser
shall be obligated to pay any consideration to (or incur any cost or expense for
the benefit of) the holder of any Preference Right or Transfer Requirement in
order to obtain the waiver thereof or compliance therewith.

 

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(b) If the holder of a Preference Right elects prior to Closing to purchase the
Asset subject to a Preference Right (a “Preference Property”) in accordance with
the terms of such Preference Right, and Seller receives written notice of such
election prior to the Closing, such Preference Property will be eliminated from
the Assets and the Purchase Price shall be reduced by the Allocated Value of the
Preference Property.

(c) If

 

  (i) a third party brings any suit, action or other proceeding prior to the
Closing seeking to restrain, enjoin or otherwise prohibit the consummation of
the transactions contemplated hereby in connection with a claim to enforce a
Preference Right;

 

  (ii) an Asset is subject to a Transfer Requirement that provides that transfer
of such Asset without compliance with such Transfer Requirement will result in
termination or other material impairment of any rights in relation to such
Asset, and such Transfer Requirement is not waived, complied with or otherwise
satisfied prior to the Closing Date; or

 

  (iii) the holder of a Preference Right does not elect to purchase such
Preference Property or waive such Preference Right with respect to the
transactions contemplated by this Agreement prior to the Closing Date and the
time in which the Preference Right may be exercised has not expired,

Seller and Purchaser shall determine whether to (x) extend the Closing Date for
up to fifteen (15) days to attempt to address such suit or Transfer Requirement
or Preference Right, (y) proceed to Closing regardless of (i), (ii), or (iii),
or (z) retain the Asset or portion thereof affected by such Preference Right or
Transfer Requirement (a “Retained Asset”) from the Assets to be transferred and
conveyed to Purchaser at Closing. In the event of (z) the Purchase Price to be
paid at Closing shall be reduced by the Allocated Value of such Retained Asset
pursuant to Section 7.7(b). Any Retained Asset so held back at the initial
Closing will be conveyed to Purchaser at a delayed Closing (which shall become
the new Closing Date with respect to such Retained Asset) within ten (10) days
following the date on which the suit, action or other proceeding, if any,
referenced in clause (i) above is settled or a judgment is rendered (and no
longer subject to appeal) permitting transfer of the Retained Asset to Purchaser
pursuant to this Agreement and Seller obtains, complies with, obtains a waiver
of or notice of election not to exercise or otherwise satisfies all remaining
Preference Rights and Transfer Requirements with respect to such Retained Asset
as contemplated by this Section (or if multiple Assets are Retained Assets, on a
date mutually agreed to by the Parties in order to consolidate, to the extent
reasonably possible, the number of Closings). At the delayed Closing, Purchaser
shall pay Seller a purchase price equal to the amount by which the Purchase
Price was reduced on account of the holding back of such Retained Asset (as
adjusted pursuant to Section 2.3 through the new Closing Date therefor);
provided, however, if all such Preference Rights and Transfer Requirements with
respect to any Retained Asset so held back at the initial Closing are not

 

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obtained, complied with, waived or otherwise satisfied as contemplated by this
Section within one hundred eighty (180) days after the initial Closing has
occurred with respect to any Asset, then at the sole election of Seller such
Retained Asset shall be eliminated from the Assets and shall become an Excluded
Asset. If Seller and Purchaser are unable to agree upon (x), (y), or (z), the
provisions of (y) shall govern.

Section 7.8 Tax Matters.

Subject to the provisions of Section 12.3, from and after Closing, Purchaser
shall be responsible for its proportionate share of all Taxes related to the
Assets (other than ad valorem, property, severance, Hydrocarbon production and
similar Taxes based upon or measured by the ownership or operation of the Assets
or the production of Hydrocarbons therefrom, which are addressed in
Section 1.4). Notwithstanding the foregoing, Seller shall handle payment to the
appropriate Governmental Body of all Taxes with respect to the Assets which are
required to be paid prior to Closing (and shall file all Tax Returns with
respect to such Taxes). If requested by Purchaser, Seller will assist Purchaser
with preparation of all ad valorem and property Tax Returns for periods during
which Seller owned the Properties (including any extensions requested). Seller
shall deliver to Purchaser within thirty (30) days of filing copies of all Tax
Returns to be filed by Seller relating to the Assets and any supporting
documentation to be provided by Seller to Governmental Bodies for Purchaser’s
approval, which shall not be unreasonably withheld, excluding Tax Returns
related to income tax, franchise tax, or other similar taxes. Purchaser shall
file all Tax Returns covering Taxes treated as Property Costs that are required
to be filed after the Closing Date unless covered above.

Purchaser and Seller shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the filing of any Tax Return
and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other Party’s request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Each of Purchaser and Seller agrees (a) to
retain all books and records with respect to Tax matters pertinent to the
acquired Assets relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Purchaser or Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
Taxing Authority, and (b) to give the other Party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other Party so requests, each Party shall allow the other Party the
option of taking possession of such books and records prior to their disposal.
Purchaser and Seller further agree, upon request, to use their commercially
reasonable efforts to obtain any certificate or other document from any Taxing
Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed with respect to the transactions
contemplated.

Section 7.9 Further Assurances.

After Closing, Seller and Purchaser each agrees to take such further actions and
to execute, acknowledge and deliver all such further documents as are reasonably
requested by the other Party for carrying out the purposes of this Agreement or
of any document delivered pursuant to this Agreement.

 

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Section 7.10 Performance Bond.

(a) In order to secure Purchaser’s obligations to comply with Purchaser’s
Performance (as defined in Section 7.10(d)) with respect to the P&A Obligations,
as well as Purchaser’s indemnity obligations under Section 11.4 with respect to
plugging, abandonment, and/or decommissioning of such wells and facilities,
Purchaser shall provide Seller a performance bond in the amount of
$14,195,000.00 (the “Required Bond”), issued by a bonding company satisfactory
to Seller and in form and substance substantially the same as that set forth in
the form of performance bond attached hereto as Exhibit H.

(b) Purchaser shall be entitled to reduce the penal amount of the Required Bond
following Purchaser’s full Performance of P&A Obligations relating to any
particular Asset on a Lease by providing Seller with a copy of the Final Site
Clearance Report submitted to the BOEM with respect to platform, conductor
removal, and pipeline abandonment, or the End of Well Report submitted to the
BOEM with respect to each abandoned well, as applicable, together with a
certificate drafted and executed by Purchaser that the property has been
abandoned with an attached final daily operations report showing completion of
operations from the contractor performing the work (the “Submitted
Documentation”), limited with respect to a particular Asset to the amount
allocated with respect to such Asset on Exhibit H). The reduction in the
Required Bond shall be the allocated amount of the P&A Obligation with respect
to such Asset set forth on Exhibit H. Within twenty (20) days of Seller’s
receipt of the Submitted Documentation, Seller shall either (x) sign a joint
direction with Purchaser directing the bonding company to reduce the Required
Bond by the amount provided for above, or (y) issue written objection to
Purchaser with a reasonable explanation and with such supporting documentation
as is available with respect to some or all of the amount of reduction
identified in Purchaser’s Submitted Documentation.

(c) In the event that (i) Seller receives a written demand for plugging and
abandonment or decommissioning of any Well or Asset from the BOEM or other
applicable governmental authority having jurisdiction over the Assets or a prior
or current owner of a Lease, and (ii) Purchaser fails to commence performance of
its P&A Obligations hereunder with respect to such Well or Asset within sixty
(60) days after its receipt of written demand therefor from Seller, or Purchaser
thereafter fails to diligently perform such P&A Obligation, then Seller may
thereafter draw on the Required Bond in the amount necessary to satisfy such P&A
Obligation as and in accordance with the terms and provisions of the Required
Bond.

(d) “Performance” as used in this Section 7.10 shall mean compliance with and
completion in accordance with Laws, rules, orders, and regulations of all
federal, state or other Governmental Bodies, in connection with plugging,
abandonment, and/or decommissioning of wells and facilities accepted and assumed
hereunder by Purchaser, as well as the complete performance and satisfaction of
Purchaser’s indemnity obligations under Section 11.4 with regard to such
plugging, abandonment, and/or decommissioning.

 

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(e) The Parties acknowledge and agree that the performance obligations of
Purchaser under this Section 7.10 constitute a material portion of the
consideration necessary for the consummation of this transaction.

(f) If Purchaser sells or transfers ownership of any of the Assets after Closing
and requests that Seller accept a bond, escrow deposits, parent guarantee or
letter of credit of the purchaser or transferee of such Assets in substitution
of the Required Bond providing for a penal sum attributable to such Assets,
Seller agrees to consider such request in good faith, provided that Seller is
satisfied with the credit rating of the surety, parent, or issuer of the letter
of credit on such substitute security and with the terms and provisions of such
substitute bond, escrow deposits, guarantee, or letter of credit and receives
security interests and control agreement in form and substance satisfactory to
Seller. In addition, Purchaser may from time to time, in its discretion,
substitute in place of the penal sum of any existing Required Bond, in whole or
in part, with any other combinations and/or amounts equal, in the aggregate to
the penal sum of the Required Bond, of bonds, escrow deposits, guarantee, or
letter of credit provided that Seller is satisfied with the credit rating of the
surety, parent, or issuer of the letter of credit on such substitute security
and with the terms and provisions of such substitute bond, deposits, guarantee,
or letter of credit and receives security interests and control agreement in
form an substance satisfactory to Seller. Purchaser shall provide Seller at
least fifteen (15) days advance written notice of the details of each such
proposed substitution. Following receipt of such written notice, Seller shall
cooperate with Purchaser to expeditiously facilitate such substitution and
replacement and release or termination of the former security. No acceptance of
a substitute bond shall relieve Purchaser of its P&A Obligations to Seller.

Section 7.11 Insurance.

Effective as of the Closing Date, Purchaser shall cause insurance to be carried
and maintained with respect to the Assets in the amounts set forth on
Section 4.1(g).

Section 7.12 No Solicitation of Transactions.

So long as Purchaser is not in default of this Agreement, Seller shall not,
directly or indirectly, through any officer, director, stockholder, employee,
agent, financial advisor, banker or other representative or Affiliate, or
otherwise, solicit, initiate, or encourage the submission of any proposal or
offer from any Person relating to any acquisition or purchase of all or any
material portion of the Assets or participate in any negotiations regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate, or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. Seller shall communicate as soon as reasonably practicable to
Purchaser the material terms of any such proposal (and the identity of the
Person making such proposal) which it may receive and, if such proposal is in
writing, Seller shall promptly deliver a copy of such proposal to Purchaser.
Seller agrees not to release any third party from, or waive any provision of,
any confidentiality agreement relating to the Assets to which Seller or any of
its Affiliates is a party. Seller immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.

 

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Section 7.13 Record Retention.

Purchaser, for a period of seven years following Closing, will (i) retain the
Records, (ii) provide Seller, its Affiliates and its and their officers,
employees and representatives with access to the Records (to the extent that
Seller has not retained the original or a copy) during normal business hours for
review and copying at Seller’s expense and upon reasonable notice, and
(iii) provide Seller, its Affiliates and its and their officers, employees and
representatives with access, during normal business hours, to materials received
or produced after Closing relating to any indemnity claims made under
Section 11.3 and Section 11.4 of this Agreement for review and copying at
Seller’s expense; provided, however, that Purchaser shall not be required to
grant access to Seller or any of its representatives, consultants or advisors,
to any Records that are subject to an attorney/client or attorney work product
privilege or that would cause Purchaser to violate any obligation to any third
party or breach any restriction legally binding on Purchaser. Any such access
shall be at the sole cost and expense of Seller. Unless otherwise consented to
in writing by Seller, for a period of seven (7) years following the Closing
Date, Purchaser shall not and shall cause its Affiliates not to, destroy, alter
or otherwise dispose of the Records, or any portions thereof, without first
giving at least thirty (30) days prior written notice to Seller and offering to
surrender to Seller the Records or such portions thereof. If Purchaser shall
desire to dispose of or transfer any such Records or other materials upon or
after the expiration of such seven-year period, Purchaser shall, prior to any
disposition, give Seller notice and a reasonable opportunity at Seller’s expense
to segregate and remove or copy such Records or other materials as Seller may
select.

Section 7.14 Bonds, Letters of Credit and Guarantees.

Purchaser acknowledges that none of the bonds, letters of credit and guarantees,
if any, posted by Seller or its Affiliates with Governmental Bodies or third
parties and relating to the Assets are transferable to Purchaser. Except to the
extent that Purchaser will, as of Closing, be covered by the bonds of the
operators of the applicable Assets or will be exempt from bonding requirements,
then on or before the Closing Date, Purchaser shall obtain, or cause to be
obtained in the name of Purchaser, replacements for all bonds (exclusive of
general or area-wide bonds in favor of a Governmental Body), letters of credit
and guarantees, to the extent such replacements are necessary to permit the
cancellation as of Closing of the bonds, letters of credit and guarantees posted
by Seller and/or its Affiliates with any Governmental Bodies.

Section 7.15 Cure of Misrepresentations.

If any of the representations and warranties contained in Article 5 or Article 6
hereof are determined (whether by notice from a Party or otherwise) to have been
untrue or incorrect as of the date of this Agreement, then any cure of such
untrue or incorrect representation and warranty shall be at the expense of the
Party that made such representation and warranty.

Section 7.16 Cooperation with Respect to Seller Retained Litigation, Etc.

Purchaser agrees to use reasonable efforts to cooperate with Seller in
connection with Seller’s defense and other actions relating to or arising out of
the litigation and claims set forth on Schedule 5.7. Purchaser agrees to make
available Purchaser’s employees engaged in, or

 

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having information about, the ownership and operation of the Assets, for the
purposes of providing testimony, depositions, information and other related
activities relating to such litigation and claims. Additionally, Purchaser
agrees to use reasonable efforts to cooperate with Seller in connection with any
third party audits pertaining to pre-Effective Time matters.

Section 7.17 Plugging, Abandonment, Decommissioning and Other Costs.

In addition to its other obligations under this Agreement, Purchaser shall
comply with all Laws, Leases, Contracts (including all joint and unit operating
agreements) and prevailing industry standards relating to (i) the plugging,
abandonment and/or replugging of all Wells, including inactive Wells or
temporarily abandoned Wells, included in the Assets, (ii) the dismantling or
decommissioning and removal of any Equipment and other Assets of whatever kind
related to or associated with operations and activities conducted by whomever on
the Properties or otherwise, pursuant to the Leases or Contracts and (iii) the
clean up, restoration and/or remediation of the property covered by the Leases
or related to the Assets (collectively, the “P&A Obligations”).

Section 7.18 Arena Imbalance

Following Closing, Purchaser shall negotiate in good faith with Arena with
respect to the Imbalance as of the Effective Time owed to Seller attributable to
the Assets situated in the Eugene Island 330 field as reflected on Schedule 5.14
(the “Arena Imbalance”). If Purchaser receives payment for the Arena Imbalance
within twelve (12) months of Closing in excess of $2.50 per MMBtu, Purchaser
shall pay the difference to Seller.

ARTICLE 8

CONDITIONS TO CLOSING

Section 8.1 Conditions of Seller to Closing.

The obligations of Seller to consummate the transactions contemplated by this
Agreement are subject, at the option of Seller, to the satisfaction or waiver by
Seller on or prior to Closing of each of the following conditions:

(a) Each of the representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects (other than those
representations and warranties of Purchaser that are qualified by materiality,
which shall be true and correct in all respects) as of the Closing Date as
though made on and as of the Closing Date, except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects (other than those representations and warranties of Purchaser that are
qualified by materiality, which shall be true and correct in all respects) as of
such specified date;

(b) Purchaser shall have performed and observed, in all material respects, all
covenants and agreements to be performed or observed by it under this Agreement
prior to or on the Closing Date;

 

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(c) Subject to the provisions of Section 7.7, no Proceeding by a third party
(including any Governmental Body) seeking to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement
shall be pending before any Governmental Body and no order, writ, injunction or
decree shall have been entered and be in effect by any court or any Governmental
Body of competent jurisdiction, and no statute, rule, regulation or other
requirement shall have been promulgated or enacted and be in effect, that on a
temporary or permanent basis restrains, enjoins or invalidates the transactions
contemplated hereby;

(d) Purchaser shall have delivered (or be ready, willing and able to immediately
deliver) to Seller duly executed counterparts of the Conveyances and all other
documents and certificates to be delivered by Purchaser under Section 9.3 and
shall have performed (or be ready, willing and able to immediately perform) the
other obligations required to be performed by it under Section 9.3 (including,
without limitation, delivery of the Closing Payment); and

(e) The sum of all Title Defects shall be less than fifteen percent (15%) of the
Purchase Price and the sum of all Environmental Defects shall be less than
fifteen percent (15%) of the Purchase Price.

(f) The sum of all Losses from casualties to and takings of the Assets,
determined or asserted in accordance with this Agreement, shall be less than
fifteen percent (15%) of the Purchase Price;

(g) If applicable, the waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired, notice
of early termination shall have been received or a consent order issued by or
from applicable Governmental Bodies.

(h) Purchaser shall have obtained, or caused to be obtained, in the name of
Purchaser, replacements for Seller’s and/or its Affiliates’ bonds, letters of
credit and guaranties, if any, to Governmental Bodies, to the extent required by
Section 7.14.

(i) Purchaser shall have furnished (or be ready, willing, and able to
immediately furnish) Seller with certificates of insurance in amounts equal to
the amounts set forth in Section 4.1(g).

(j) Seller shall have received a release of the Existing Mortgages and related
financing statements from its Existing Mortgagees with respect to the Assets, on
forms or instruments reasonably acceptable to Purchaser.

Section 8.2 Conditions of Purchaser to Closing.

The obligations of Purchaser to consummate the transactions contemplated by this
Agreement are subject, at the option of Purchaser, to the satisfaction or waiver
by Purchaser on or prior to Closing of each of the following conditions:

(a) Each of the representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects (other than those
representations and warranties of Seller that are qualified by materiality or
Material Adverse Effect, which shall be true and

 

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correct in all respects) as of the Closing Date as though made on and as of the
Closing Date, except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall
have been true and correct in all material respects (other than those
representations and warranties of Seller that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all respects) as of
such specified date;

(b) Seller shall have performed and observed, in all material respects, all
covenants and agreements to be performed or observed by it under this Agreement
prior to or on the Closing Date;

(c) Subject to the provisions of Section 7.7, no Proceeding by a third party
(including any Governmental Body) seeking to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement
shall be pending before any Governmental Body and no order, writ, injunction or
decree shall have been entered and be in effect by any court or any Governmental
Body of competent jurisdiction, and no statute, rule, regulation or other
requirement shall have been promulgated or enacted and be in effect, that on a
temporary or permanent basis restrains, enjoins or invalidates the transactions
contemplated hereby;

(d) Seller shall have delivered (or be ready, willing and able to immediately
deliver) to Purchaser duly executed counterparts of the Conveyances and all
other documents and certificates to be delivered by Seller under Section 9.2 and
shall have performed (or be ready, willing and able to immediately perform) the
other obligations required to be performed by it under Section 9.2;

(e) The sum of all Title Defects shall be less than fifteen percent (15%) of the
Purchase Price and the sum of all Environmental Defects shall be less than
fifteen percent (15%) of the Purchase Price;

(f) The sum of all Losses from casualties to and takings of the Assets,
determined or asserted in accordance with this Agreement, shall be less than
fifteen percent (15%) of the Purchase Price;

(g) If applicable, the waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired, notice
of early termination shall have been received or a consent order issued by or
from applicable Governmental Bodies;

(h) Seller shall have received and furnished Purchaser with copies of a release
of the Existing Mortgages and related financing statements from its Existing
Mortgagees with respect to the Assets, executed on forms or instruments
reasonably acceptable to Purchaser; and

(i) Purchaser has not received any information that reasonably suggests that any
of the Closing documents that require the approval of a Governmental Body may
not be readily approved due to reasons beyond the control of Purchaser.

(j) Seller, with Purchaser’s assistance, shall have obtained executed
Designation of Operator forms from all third parties as is necessary in order
that Purchaser, upon approval of such forms by the BOEM or BSEE, may succeed
Seller as the designated operator of the Assets situated in Ship Shoal Block
219.

 

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ARTICLE 9

CLOSING

Section 9.1 Time and Place of Closing.

(a) Unless this Agreement shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to Article 10 or any other
express termination provision set forth in this Agreement, and subject to the
satisfaction or waiver of the conditions set forth in Article 8 (other than
conditions the fulfillment of which by their nature is to occur at the
completion of the transactions contemplated by this Agreement (the “Closing”)),
the Closing shall take place at 10:00 a.m., local time, on or before March 29,
2013, at Seller’s offices in Houston, Texas, unless another date, time or place
is mutually agreed to in writing by Purchaser and Seller. If any of the
conditions (other than conditions the fulfillment of which by their nature is to
occur at the Closing) set forth in Article 8 are not satisfied or waived at the
time the Closing is to occur pursuant to the foregoing sentence of this
Section 9.1(a), then subject to Article 10 the Closing shall occur on a date
thereafter that is the third Business Day after the satisfaction or waiver of
all such conditions.

(b) The date on which the Closing occurs is herein referred to as the “Closing
Date.”

(c) In the event that the condition of Section 8.2(j) is not satisfied at least
two days before the proposed Closing Date, the Assets situated in Ship Shoal
Block 219 shall be retained (the “Ship Shoal Retained Assets”) and the Closing
shall proceed as to all other Assets and the Purchase Price to be paid at
Closing shall be reduced by the Allocated Value of the Ship Shoal Retained
Assets and all Closing documents and deliveries will be revised, as appropriate,
to exclude the Ship Shoal Retained Assets. If, thereafter, the condition of
Section 8.2(j) is satisfied on or before April 30, 2013, the Ship Shoal Retained
Assets shall be conveyed to Purchaser at a delayed Closing (which shall become
the new Closing Date with respect to the Ship Shoal Retained Assets) within ten
(10) days following the satisfaction of the condition of Section 8.2(j). At the
delayed Closing Purchaser shall pay Seller as a purchase price the Closing
Payment attributable to the Ship Shoal Retained Assets. If the condition of
Section 8.2(j) is not satisfied on or before April 30, 2013 (or such later date
as Seller and Purchaser may agree in writing) the Ship Shoal Retained Assets
shall be eliminated from the Assets and shall become an Excluded Asset.

Section 9.2 Obligations of Seller at Closing.

At the Closing, upon the terms and subject to the conditions of this Agreement,
Seller shall deliver or cause to be executed and delivered to Purchaser, or
perform or cause to be performed, the following:

(a) the Conveyances in sufficient multiple originals to allow recording in all
appropriate jurisdictions and offices, duly executed by Seller, together with
such other governmental forms as may be required by any Governmental Body in
order to approve the transfer of the ownership of the Assets and the transfer of
the operatorship of the Seller Operated Assets from Seller to Purchaser;

 

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(b) letters-in-lieu of transfer orders covering the Assets, duly executed by
Seller;

(c) a certificate duly executed by an authorized corporate officer of Seller,
dated as of Closing, certifying on behalf of Seller that the conditions set
forth in Section 8.2(a) and Section 8.2(b) have been fulfilled;

(d) the Preliminary Closing Statement;

(e) an executed statement described in Treasury Regulation 1.1445-2(b)(2)
certifying that Seller is not a foreign person within the meaning of the Code;

(f) the Transition Agreement;

(g) releases of the Existing Mortgages; and

(h) any other agreements, instruments and documents which are required or
contemplated by other terms of this Agreement to be executed and/or delivered at
Closing.

Section 9.3 Obligations of Purchaser at Closing.

At the Closing, upon the terms and subject to the conditions of this Agreement,
Purchaser shall deliver or cause to be executed and delivered to Seller, or
perform or caused to be performed, the following:

(a) a wire transfer of the Closing Payment, in same-day funds;

(b) the Conveyances, duly executed by Purchaser;

(c) the Required Bond;

(d) the Transition Agreement;

(e) letters-in-lieu of transfer orders covering the Assets, duly executed by
Purchaser;

(f) a certificate by an authorized corporate officer of Purchaser, dated as of
Closing, certifying on behalf of Purchaser that the conditions set forth in
Section 8.1(a) and Section 8.1(b) have been fulfilled;

(g) the Preliminary Closing Statement; and

(h) Any other agreements, instruments and documents which are required by other
terms of this Agreement to be executed and/or delivered at Closing.

 

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Section 9.4 Closing Adjustments and Closing Payment.

(a) Not later than five (5) days prior to the Closing Date, Seller shall prepare
and deliver to Purchaser, based upon the best information available to Seller, a
preliminary settlement statement estimating the Adjusted Purchase Price after
giving effect to all adjustments listed in Section 2.3 together with associated
supporting documentation (the “Preliminary Closing Statement”). To the extent
available, actual numbers shall be used in preparing the Preliminary Closing
Statement; however, if actual numbers are not available Seller shall use
reasonable and good faith estimates, which estimates shall be adjusted to take
into account actual numbers in connection with the Final Closing Statement. The
estimate delivered in accordance with this Section 9.4(a) shall constitute the
dollar amount to be paid by Purchaser to Seller at the Closing (the “Closing
Payment”). Until one (1) day before the Closing Date, Purchaser shall have the
opportunity to review and discuss the Preliminary Closing Statement with Seller;
provided, however, if the Parties are unable to agree by that date, Seller’s
estimate shall be used to determine the adjustments in order for Closing to
occur, with final adjustments being set forth in the Final Closing Statement.

(b) Between ninety (90) and one-hundred fifty (150) days following the Closing
Date, Seller shall prepare and deliver to Purchaser a statement (the “Final
Closing Statement”) setting forth the final calculation of the Agreed Purchase
Price and showing the calculation of each adjustment, based, to the extent
possible, on actual credits, charges, receipts and other items before and after
the Effective Time and taking into account all adjustments provided for in this
Agreement (the “Final Purchase Price”). At the request of Purchaser, Seller
shall supply Purchaser with documentation to support any credit, charge, receipt
or other item set forth in the Final Closing Statement in excess of $5,000.00.
Seller shall afford Purchaser and its representatives the opportunity to review
such statement and the supporting schedules, analyses, work papers, and other
underlying records or documentation as are reasonably necessary and appropriate
in Purchaser’s review of such statement. Each Party shall cooperate fully and
promptly with the other and their respective representatives in such examination
with respect to all reasonable requests related thereto. As soon as reasonably
practicable but not later than the 30th day following receipt of Seller’s
statement hereunder, Purchaser shall deliver to Seller a written report
containing any changes that Purchaser proposes be made to such statement. Seller
and Purchaser shall undertake to agree on the final statement of the Final
Purchase Price no later than one hundred eighty (180) days after the Closing
Date (the “Final Settlement Date”). Unless the Parties are unable to reach
agreement on the Final Closing Statement on or before the Final Settlement Date,
then on the Final Settlement Date, (x) Purchaser shall pay to Seller the amount
by which the Final Purchase Price exceeds the Closing Payment or (y) Seller
shall pay to Purchaser the amount by which the Closing Payment exceeds the Final
Purchase Price, as applicable (in either case, the “Final Adjustment”).

In the event that Seller and Purchaser cannot reach agreement by the Final
Settlement Date, either Party may refer the remaining matters in dispute to
Deloitte & Touche, LLC, or such other nationally-recognized independent
accounting firm as may be mutually accepted by Purchaser and Seller, for review
and final determination (the “Agreed Accounting Firm”). If issues are submitted
to the Agreed Accounting Firm for resolution, Seller and Purchaser shall each
enter into a customary engagement letter with the Agreed Accounting Firm at the
time the issues remaining in dispute are submitted to the Agreed Accounting
Firm. The Agreed

 

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Accounting Firm will be directed to (i) review the statement setting forth
Seller’s calculation of the Final Purchase Price and the records relating
thereto only with respect to items identified by Purchaser in its written report
containing changes to such statement that remain disputed immediately following
the Final Settlement Date and (ii) determine the final adjustments. Each Party
shall furnish the Agreed Accounting Firm such work papers and other records and
information relating to the objections in dispute as the Agreed Accounting Firm
may reasonably request and that are available to such Party or its Affiliates
(and such Persons’ independent public accountants). The Parties will, and will
cause their representatives to, cooperate and assist in the conduct of any
review by the Agreed Accounting Firm, including, but not limited to, making
available books, records and, as available, personnel as reasonably required.
The Agreed Accounting Firm shall conduct the arbitration proceedings in Houston,
Texas in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, to the extent such rules do not conflict with the terms
of this Section 9.4. The Agreed Accounting Firm’s determination shall be made
within thirty (30) days after submission of the matters in dispute and shall be
final and binding on both Parties, without right of appeal and such decision
shall constitute an arbitral award upon which a judgment may be entered by a
court having jurisdiction thereof. In determining the proper amount of any
adjustment to the Final Purchase Price, the Agreed Accounting Firm shall not
increase the Final Purchase Price more than the increase proposed by Seller nor
decrease the Final Purchase Price more than the decrease proposed by Purchaser,
as applicable, and may not award damages or penalties to either Party with
respect to any matter. Seller and Purchaser shall each bear its own legal fees
and other costs of presenting its case. Each Party shall bear one-half of the
costs and expenses of the accounting firm. Within ten (10) Business Days after
the date on which the Parties or the Agreed Accounting Firm, as applicable,
finally determines the disputed matters, (x) Purchaser shall pay to Seller the
amount by which the Final Purchase Price exceeds the Closing Payment or
(y) Seller shall pay to Purchaser the amount by which the Closing Payment
exceeds the Final Purchase Price, as applicable.

(c) All payments made or to be made hereunder to Seller shall be by electronic
transfer of immediately available funds to the account of Seller as may be
specified by Seller in writing. All payments made or to be made hereunder to
Purchaser shall be by electronic transfer of immediately available funds to a
bank and account specified by Purchaser in writing to Seller.

(d) The Parties acknowledge that it is not the intent of this Agreement that
either Party be deprived of material amounts of revenue or be burdened by
material amounts of expense until the final adjustment pursuant to
Section 9.4(b). If at any time after Closing either Party believes it is owed
material revenues or material expense reimbursement, which revenues and expense
reimbursement owed shall be netted against revenues and expenses due the other
Party, it may request payment from the other Party, not more frequently than
monthly, and such Party shall make payment of any undisputed amounts within a
commercially reasonable period of time not exceeding five (5) days. For purposes
hereof, material shall mean an amount in excess of $1,000,000.

(e) If one Party received monies belonging to the other, such amount shall
immediately be paid over to the proper Party. If an invoice or other evidence of
an obligation is received which is wholly or partially an obligation of the
other, then the Parties shall consult with each other, and each shall promptly
pay its portion of such obligation to the obligee.

 

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ARTICLE 10

TERMINATION

Section 10.1 Termination.

This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing:

 

  (a) by mutual written consent of Seller and Purchaser;

 

  (b) by either Seller or Purchaser, if:

 

  (i) the Closing shall not have occurred on or before April 30, 2013 (the
“Termination Date”); provided, however, that the right to terminate this
Agreement under this Section 10.1(b)(i) shall not be available (A) to Seller, if
any breach of this Agreement by Seller has been the principal cause of, or
resulted in, the failure of the Closing to occur on or before the Termination
Date or (B) to Purchaser, if any breach of this Agreement by Purchaser has been
the principal cause of, or resulted in, the failure of the Closing to occur on
or before the Termination Date; or

 

  (ii) there shall be any Law that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or a Governmental Body shall
have issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and non appealable; or

 

  (iii) the Allocated Value associated with the Title Defects exceeds, in the
aggregate, fifteen percent (15%) of the Purchase Price; or

 

  (iv) the Allocated Value associated with the Environmental Defects exceeds, in
the aggregate, fifteen percent (15%) of the Purchase Price; or

 

  (v) the sum of all Losses from casualties to and takings of the Assets exceeds
fifteen percent (15%) of the Purchase Price.

(c) by Seller, if (i) any of the representations and warranties of Purchaser
contained in this Agreement shall not be true and correct in all material
respects (provided that any such representation or warranty that is already
qualified by a materiality standard or a Material Adverse Effect qualification
shall not be further qualified); or (ii) Purchaser shall have failed to fulfill
in any material respect any of its obligations under this Agreement; and, in the
case of each of clauses (i) and (ii), such misrepresentation, breach of
warranty, or failure, if curable, has not been cured within ten (10) days after
written notice thereof from Seller to Purchaser; provided that any cure period
shall not extend beyond the Termination Date and shall not extend the
Termination Date; or

 

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(d) by Purchaser, if (i) any of the representations and warranties of Seller
contained in this Agreement shall not be true and correct in all material
respects (provided that any such representation or warranty that is already
qualified by a materiality or Material Adverse Effect qualification shall not be
further qualified); or (ii) Seller shall have failed to fulfill in any material
respect any of its obligations under this Agreement, and, in the case of each of
clauses (i) and (ii), such misrepresentation, breach of warranty or failure, if
curable, has not been cured within ten (10) days after written notice thereof
from Purchaser to Seller; provided that any cure period shall not extend beyond
the Termination Date and shall not extend the Termination Date.

Section 10.2 Effect of Termination.

If this Agreement is terminated pursuant to Section 10.1, this Agreement shall
become void and of no further force or effect (except for the provisions of
Section 4.4, Section 5.6, 0, Section 7.5, Section 11.8, Section 11.9, and
Section 11.10 of this Agreement and this Article 10, the Section entitled
“Definitions,” and Article 12, all of which shall continue in full force and
effect). Notwithstanding the foregoing, nothing contained in this Section 10.2
shall relieve any Party from liability for Losses resulting from its breach of
this Agreement.

Section 10.3 Distribution of Deposit Upon Termination.

(a) If Seller terminates this Agreement (i) because Purchaser has failed to
comply with any provision of Section 8.1(a), Section 8.1(b), Section 8.1(d),
Section 8.1(h), or Section 8.1(i); or (ii) as the result of any default or
breach by Purchaser of Purchaser’s obligations under Section 9.3; then the
Parties shall direct the escrow agent in writing to deliver the Deposit to
Seller, and Seller shall receive the Deposit as its sole and exclusive remedy as
liquidated damages, free of any claims by Purchaser or any other Person with
respect thereto. It is expressly stipulated by the Parties that the actual
amount of damages resulting from such a termination would be difficult if not
impossible to determine accurately because of the unique nature of this
Agreement, the unique nature of the Assets, the uncertainties of applicable
commodity markets and differences of opinion with respect to such matters, and
that the liquidated damages provided for herein are a reasonable estimate by the
Parties of such damages.

(b) If this Agreement is terminated by either Party for any reason other than
the reasons set forth in Section 10.3(a), then the Parties shall direct the
escrow agent in writing to deliver the Deposit to Purchaser and Purchaser shall
receive the Deposit as Purchaser’s sole and exclusive remedy as liquidated
damages free of any claims by Seller or any other Person with respect thereto
after Purchaser has satisfied any remaining obligations hereunder.

(c) Notwithstanding anything to the contrary in this Agreement, neither Party
shall be entitled to receive interest on the Deposit, whether the Deposit is
applied against the Purchase Price or delivered to Seller or Purchaser pursuant
to this Section 10.3.

 

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ARTICLE 11

POST-CLOSING OBLIGATIONS; INDEMNIFICATION;

LIMITATIONS; DISCLAIMERS AND WAIVERS

Section 11.1 Assumed Seller Obligations.

Subject to the indemnification by Seller under Section 11.3, on the Closing
Date, Purchaser shall assume and hereby agrees to fulfill, perform, pay and
discharge (or cause to be fulfilled, performed, paid or discharged) all of the
obligations and liabilities of Seller, known or unknown, with respect to the
Assets, REGARDLESS OF FAULT of Seller or any Seller Indemnified Person and
regardless of whether such obligations or liabilities arose prior to, on or
after the Effective Time, including but not limited to obligations to
(a) furnish makeup gas according to the terms of applicable gas sales, gathering
or transportation contracts, and to satisfy all other gas balancing obligations,
if any, (b) pay working interests, royalties, overriding royalties and other
interests held in suspense, (c) properly plug and abandon any and all wells
(including, without limitation, the Wells), including inactive wells or
temporarily abandoned wells, drilled on the Properties, as required by Law,
(d) replug any well, wellbore, or previously plugged well on the Properties to
the extent required by Governmental Body, (e) dismantle, salvage and remove any
equipment, structures, materials, platforms, flow lines, and property of
whatever kind related to or associated with operations and activities conducted
on the Properties, (f) clean up, restore and/or remediate the premises covered
by or related to the Assets in accordance with applicable agreements and Laws,
(g) pay all Property Costs, (h) perform all obligations applicable to or imposed
on the lessee, owner, or operator under the Leases or Contracts, or as required
by applicable Laws, and (i) otherwise perform any other P&A Obligations not set
forth above (all of said obligations and liabilities, subject to the exclusions
below, herein being referred to as the “Assumed Seller Obligations”); provided,
however, that the Assumed Seller Obligations shall not include, and Purchaser
shall have no obligation to assume, any obligations or liabilities of Seller to
the extent that they are (such excluded obligations and liabilities, the
“Excluded Seller Obligations”):

 

  (i) attributable to or arise out of the Excluded Assets;

 

  (ii) attributable to or arising out of the actions, suits or proceedings, if
any, set forth on Schedule 5.7, except in so far as they are attributable to or
relate to the Assets for periods after the Effective Time; and

 

  (iii) attributable to obligations described in Section 11.3(a) or
Section 11.3(b).

 

  (iv) attributable to the failure to pay or the improper payment of any
production proceeds attributable to the Assets prior to the Effective Time
(including, without limitation, lessor’s royalties, overriding royalties and
payments to working interest owners); or

 

  (v) attributable to damage to property owned by a third Person or for personal
injury, illness or death of any Person, arising out of operations or activities
pertaining to the Assets and attributable to the period prior to the Effective
Time, to the extent and only to the extent that a Claim is asserted with respect
to such matters within one (1) year from the Closing Date.

 

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Section 11.2 Survival.

(a) All representations and warranties of Seller and Purchaser contained herein
shall expire twelve (12) months after Closing Date; provided however, that the
representations and warranties contained in Section 5.2, Section 5.3,
Section 5.4, Section 5.5, Section 5.6, Section 5.7, Section 5.8, Section 6.2,
Section 6.3, Section 6.5, Section 6.9, and Section 6.13 (collectively, the
“Fundamental Representations”) shall survive until the expiration of the
applicable statute of limitations period. Upon the termination of a
representation or warranty in accordance with the foregoing, such representation
or warranty shall have no further force or effect for any purpose under this
Agreement. The covenants and other agreements of Seller and Purchaser set forth
in this Agreement shall survive the Closing Date until fully performed.

(b) No Party hereto shall have any indemnification obligation based on breach of
a representation or warranty pursuant to this Article 11 or otherwise hereunder
unless it shall have received from the Party seeking indemnification a written
notice (a “Claim Notice”) of the existence of the claim for or in respect of
which indemnification is being sought hereunder on or before the expiration of
the applicable survival period set forth in Section 11.2(a). If an Indemnified
Party delivers a Claim Notice with respect to a representation or warranty to an
Indemnifying Party before the expiration of the applicable survival period set
forth in Section 11.2(a), then the applicable representation or warranty shall
survive until, but only for purposes of, the resolution of the matter covered by
such Claim Notice. A Claim Notice shall set forth with reasonable specificity
(1) the basis for such claim under this Agreement, and the facts that otherwise
form the basis of such claim and (2) to the extent reasonably estimable, an
estimate of the amount of such claim (which estimate shall not be conclusive of
the final amount of such claim) and an explanation of the calculation of such
estimate.

Section 11.3 Indemnification by Seller.

From and after the Closing, subject to the terms and conditions of this Article
11 (including, without limitation, the survival and the timing requirement in
Section 11.2), Seller shall indemnify, defend and hold harmless Purchaser and
its directors, officers, employees, stockholders, members, agents, consultants,
advisors and other representatives (including legal counsel, accountants and
financial advisors) and Affiliates and the successors and permitted assigns of
this Agreement of Purchaser (collectively, the “Purchaser Indemnified Persons”)
from and against any and all Losses asserted against, resulting from, imposed
upon, or incurred or suffered by any Purchaser Indemnified Person to the extent
resulting from, arising out of or relating to:

(a) any breach of any Fundamental Representation of Seller contained in this
Agreement or confirmed in any certificate furnished by or on behalf of Seller in
connection with this Agreement REGARDLESS OF FAULT and, subject to the
expiration of the applicable survival period, any breach of any other
representation and warranty of Seller REGARDLESS OF FAULT;

 

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(b) any breach or nonfulfillment of or failure to perform any covenant or
agreement of Seller contained in this Agreement REGARDLESS OF FAULT or confirmed
in any certificate furnished by or on behalf of Seller in connection with this
Agreement; and

(c) any Excluded Seller Obligations REGARDLESS OF FAULT.

Section 11.4 Indemnification by Purchaser.

From and after the Closing, subject to the adjustments to the Purchase Price for
purposes of the Closing Statements contained in Section 2.3 and the terms and
conditions of this Article 11 (including, without limitation, the survival and
timing requirements of Section 11.2) and subject to and except for any Excluded
Seller Obligations, Purchaser shall indemnify, defend and hold harmless Seller,
Seller’s Affiliates, and each of their respective managers, general partners,
directors, officers, employees, agents, consultants, equity owners,
stockholders, advisors and other representatives (including legal counsel,
accountants and financial advisors), and Seller’s predecessors-in-interest (all
such persons referred to collectively as the “Seller Indemnified Persons”) from
and against any and all Losses, asserted against, resulting from, imposed upon,
or incurred or suffered by any Seller Indemnified Person, directly or
indirectly, to the extent resulting from, arising out of, or relating to:

(a) any breach of any Fundamental Representation of Purchaser contained in this
Agreement or confirmed in any certificate furnished by or on behalf of Purchaser
to Seller in connection with this Agreement REGARDLESS OF FAULT;

(b) any breach or nonfulfillment of or failure to perform any covenant or
agreement of Purchaser contained in this Agreement REGARDLESS OF FAULT or
confirmed in any certificate furnished by or on behalf of Purchaser to Seller in
connection with this Agreement;

(c) the ownership, use or operation of the Assets including, without limitation,
any and all Property Costs (other than any Excluded Seller Obligations) whether
before or after the Effective Time REGARDLESS OF FAULT;

(d) the Assumed Seller Obligations REGARDLESS OF FAULT;

(e) Environmental Laws, Environmental Liabilities, the release of materials into
the environment or protection of human health, safety, natural resources or the
environment, or any other environmental condition of the Assets, REGARDLESS OF
FAULT; and

(f) Any other indemnity obligations of Purchaser contained herein, including
without limitation, Section 4.4.

Section 11.5 Indemnification Proceedings.

(a) In the event that any claim or demand for which Seller or Purchaser (such
Person, an “Indemnifying Party”) may be liable to a Purchaser Indemnified Person
under Section 11.3 or to an Seller Indemnified Person under Section 11.4 (an
“Indemnified Person”) is asserted against or sought to be collected from an
Indemnified Person by a Person or entity other than the other Party (a “Third
Party Claim,”) the Indemnified Person shall with reasonable promptness

 

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notify the Indemnifying Party of such Third Party Claim by delivery of a Claim
Notice, provided that the failure or delay to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its obligations under this Article
11, except (and solely) to the extent that the Indemnifying Party demonstrates
that its defense of such Third Party Claim is actually and materially prejudiced
thereby. The Indemnifying Party shall have thirty (30) days from receipt of the
Claim Notice from the Indemnified Person (the “Notice Period”) to notify the
Indemnified Person whether or not the Indemnifying Party desires, at the
Indemnifying Party’s sole cost and expense, to defend the Indemnified Person
against such claim or demand; provided, that the Indemnified Person is hereby
authorized prior to and during the Notice Period, and at the cost and expense of
the Indemnifying Party, to file any motion, answer or other pleading that it
shall reasonably deem necessary to protect its interests or those of the
Indemnifying Party. The Indemnifying Party shall have the right to assume the
defense of such Third Party Claim only if and for so long as the Indemnifying
Party (i) notifies the Indemnified Person during the Notice Period that the
Indemnifying Party is unqualifiedly assuming the defense of such Third Party
Claim and any resulting liability of the Indemnified Person REGARDLESS OF FAULT,
(ii) uses counsel of its own choosing that is reasonably satisfactory to the
Indemnified Person, and (iii) conducts the defense of such Third Party Claim in
an active and diligent manner. If the Indemnifying Party is entitled to, and
does, assume the defense of any such Third Party Claim, the Indemnified Person
shall have the right to employ separate counsel at its own expense and to
participate in the defense thereof; provided, however, that notwithstanding the
foregoing, if the Indemnifying Party would otherwise be entitled to assume the
defense of any such Third Party Claim, but is not willing to do so on an
unqualified basis, REGARDLESS OF FAULT, the Indemnified Person shall have the
right to defend itself and reserve the right to recover its defense costs from
the Indemnifying Party or, at the option of the Indemnified Person, the
Indemnifying Party shall pay the reasonable attorneys’ fees of the Indemnified
Person if the Indemnified Person’s counsel shall have advised the Indemnified
Person that there is a conflict of interest that could make it inappropriate
under applicable standards of professional conduct to have common counsel for
the Indemnifying Party and the Indemnified Person (provided that the
Indemnifying Party shall not be responsible for paying for more than one
separate firm of attorneys and one local counsel to represent all of the
Indemnified Persons subject to such Third Party Claim. If the Indemnifying Party
elects (and is entitled) to assume the defense of such Third Party Claim, (i) no
compromise or settlement thereof or consent to any admission or the entry of any
judgment with respect to such Third Party Claim may be effected by the
Indemnifying Party without the Indemnified Person’s written consent (which shall
not be unreasonably withheld, conditioned or delayed) unless the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party
(and no injunctive or other equitable relief is imposed upon the Indemnified
Person) and there is an unconditional provision whereby each plaintiff or
claimant in such Third Party Claim releases the Indemnified Person from all
liability with respect thereto and (ii) the Indemnified Person shall have no
liability with respect to any compromise or settlement thereof effected without
its written consent (which shall not be unreasonably withheld). If the
Indemnifying Party elects not to assume the defense of such Third Party Claim
(or fails to give notice to the Indemnified Person during the Notice Period or
otherwise is not entitled to assume such defense), the Indemnified Person shall
be entitled to assume the defense of such Third Party Claim with counsel of its
own choice, at the expense and for the account of the Indemnifying Party;
provided, however, that the Indemnified Person shall make no settlement,
compromise, admission, or acknowledgment that would give rise to liability

 

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on the part of any Indemnifying Party without giving ten (10) days’ notice to
Indemnifying Party and allowing Indemnifying Party to unqualifiedly assume the
defense of such Third Party Claim and any resulting liability of the Indemnified
Person within such ten (10) day period.

(b) Notwithstanding the foregoing, the Indemnifying Party shall not be entitled
to control (but shall be entitled to participate at its own expense in the
defense of), and the Indemnified Person, shall be entitled to have sole control
over, the defense or settlement, compromise, admission, or acknowledgment of any
Third Party Claim (i) at the reasonable expense of the Indemnifying Party, as to
which the Indemnifying Party fails to assume the defense during the Notice
Period after the Indemnified Person gives notice thereof to the Indemnifying
Party or (ii) at the reasonable expense of the Indemnifying Party, to the extent
the Third Party Claim seeks an order, injunction, or other equitable relief
against the Indemnified Person which, if successful, could materially adversely
affect the business, condition (financial or other), capitalization, assets,
liabilities, results of operations or prospects of the Indemnified Person. The
Indemnified Person shall make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of the Indemnifying
Party without the prior written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld, conditioned or delayed).

(c) In any case in which an Indemnified Person seeks indemnification hereunder
and no Third Party Claim is involved, the Indemnified Person shall deliver a
Claim Notice to the Indemnifying Party within a reasonably prompt period of time
after an officer of such Indemnified Person has obtained knowledge of the Loss
giving rise to indemnification hereunder. The failure or delay to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Article 11 except to the extent such failure results in insufficient
time being available to permit the Indemnifying Party to effectively mitigate
the resulting Losses or otherwise prejudices the Indemnifying Party.

Section 11.6 Limitations on Indemnities.

(a) Solely for purposes of calculating the amount of Losses Incurred arising out
of or relating to any breach or inaccuracy of a representation or warranty (and
not for determining whether a breach has occurred), the references to “Material
Adverse Effect” or other materiality qualifications (or correlative terms) shall
be disregarded.

(b) Notwithstanding anything to the contrary in this ARTICLE 11 or otherwise,
except with respect to Seller’s obligations for post-closing adjustments to the
Purchase Price and for matters arising out of or relating to breaches of
Fundamental Representations, (i) Seller shall have no liability for any
indemnification under Section 11.3(a) unless and until the amount of the
liability for any individual Claim for which a Claim Notice is delivered by
Purchaser exceeds $75,000.00 (each a “Material Indemnification Matter”),
(ii) Seller shall not be obligated to indemnify the Purchaser Indemnified
Persons pursuant to Section 11.3(a) unless and until the aggregate amount of all
Losses incurred by Purchaser Indemnified Persons with respect to all Material
Indemnification Matters exceeds five percent (5%) of the Purchase Price before
any adjustments (the “Indemnity Deductible”), in which event the Purchaser
Indemnified Persons may recover all Losses Incurred with respect to such
Material Indemnification Matters in excess of the Indemnity Deductible, and
(iii) Seller’s maximum liability for Losses associated with all

 

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Material Indemnification Matters shall be thirty percent (30%) of the Purchase
Price before any adjustments; provided, however, all such monetary limitations
shall not apply to Seller’s indemnification obligations with respect to
Section 11.1(i), Section 11.1(ii), and, solely with respect to the period of
Seller’s ownership of the Assets, Section 11.1(iv).

Section 11.7 Release.

EXCEPT WITH RESPECT TO POST-CLOSING REMEDIATION AGREED TO PURSUANT TO
SECTION 4.3 (IF ANY), AT THE CLOSING PURCHASER HEREBY RELEASES, REMISES AND
FOREVER DISCHARGES THE SELLER INDEMNIFIED PERSONS FROM ANY AND ALL CLAIMS, KNOWN
OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR
OTHERWISE, WHICH PURCHASER MIGHT NOW OR SUBSEQUENTLY MAY HAVE AGAINST THE SELLER
INDEMNIFIED PERSONS, RELATING DIRECTLY OR INDIRECTLY TO THE CLAIMS ARISING OUT
OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL
RESOURCES OR THE ENVIRONMENT, INCLUDING, WITHOUT LIMITATION, RIGHTS TO
CONTRIBUTION UNDER CERCLA, REGARDLESS OF FAULT.

Section 11.8 Disclaimers.

(a) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT, CONFIRMED
IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(C), OR IN
THE CONVEYANCE, (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS,
STATUTORY OR IMPLIED, AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND
RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE
OR COMMUNICATED (ORALLY OR IN WRITING) TO PURCHASER OR ANY OF ITS AFFILIATES,
EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING, WITHOUT
LIMITATION, ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN
PROVIDED TO PURCHASER BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT,
REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF ITS AFFILIATES.

(b) EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 5 OF THIS AGREEMENT, OR
CONFIRMED IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO
SECTION 9.2(C), IN THE CONVEYANCE, AND WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS,
STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE ASSETS, (II) THE CONTENTS,
CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY
PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR
INTERPRETATION, RELATING TO THE ASSETS, (III) THE QUANTITY, QUALITY OR
RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR FROM THE ASSETS, (IV) ANY ESTIMATES
OF

 

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THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (V) THE
PRODUCTION OF HYDROCARBONS FROM THE ASSETS, (VI) THE MAINTENANCE, REPAIR,
CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, (VII)
THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS,
BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, (VIII) ANY OTHER
MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO
PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS,
REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF
MERCHANTABILITY, FREEDOM FROM REDHIBITORY VICES OR DEFECTS (INCLUDING THOSE
CONTEMPLATED IN LOUISIANA CIVIL CODE ARTICLES 2475, AND 2520 THROUGH 2548),
FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS
OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO
THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING THE ASSETS IN THEIR PRESENT
STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS
AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER
DEEMS APPROPRIATE, OR (IX) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM
PATENT OR TRADEMARK INFRINGEMENT.

(c) EXCEPT AS REPRESENTED IN SECTION 5.7, SELLER HAS NOT AND WILL NOT MAKE ANY
REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO
ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE
ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE ASSETS, AND NOTHING IN
THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR
WARRANTY, AND PURCHASER SHALL BE DEEMED TO BE TAKING THE ASSETS “AS IS” AND
“WHERE IS” FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION.

Section 11.9 Waiver of Trade Practices Acts.

(a) It is the intention of the Parties that Purchaser’s rights and remedies with
respect to this transaction and with respect to all acts or practices of Seller,
past, present or future, in connection with this transaction shall be governed
by legal principles other than the Texas Deceptive Trade Practices—Consumer
Protection Act, Tex. Bus. & Com. Code Ann. § 17.41 et seq. (the “DTPA”) or the
Louisiana unfair trade practices and consumer protection law, La. R.S. 51:1402,
et seq. (the “UTPCPL”). As such, Purchaser hereby waives the applicability of
the DTPA and the UTPCPL to this transaction and any and all duties, rights or
remedies that might be imposed by the DTPA and/or the UTPCPL, whether such
duties, rights and remedies are applied directly by the DTPA or the UTPCPL
itself or indirectly in connection with other

 

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statutes; provided, however, Purchaser does not waive § 17.555 of the DTPA.
Purchaser acknowledges, represents and warrants that it is purchasing the goods
and/or services covered by this Agreement for commercial or business use; that
it has assets of $5,000,000.00 or more according to its most recent financial
statement prepared in accordance with GAAP; that it has knowledge and experience
in financial and business matters that enable it to evaluate the merits and
risks of a transaction such as this; and that it is not in a significantly
disparate bargaining position with Seller.

(b) Purchaser expressly recognizes that the price for which Seller has agreed to
perform its obligations under this Agreement has been predicated upon the
inapplicability of the DTPA and this waiver of the DTPA. Purchaser further
recognizes that Seller, in determining to proceed with the entering into of this
Agreement, has expressly relied on this waiver and the inapplicability of the
DTPA.

Section 11.10 Redhibition Waiver.

Purchaser waives all rights in redhibition pursuant to Louisiana Civil Code
Articles 2475 and 2520 through 2548, and acknowledges that this express waiver
shall be considered a material and integral part of this transaction and the
consideration thereof. Purchaser acknowledges that this waiver has been brought
to its attention and has been explained in detail and that Purchaser has
voluntarily and knowingly consented to this waiver of warranty of fitness and
warranty against redhibitory vices and defects for the Assets.

Section 11.11 Recording.

As soon as practicable after Closing, Purchaser shall record the Conveyances in
the appropriate counties and/or parishes and provide Seller with copies of all
recorded or approved instruments. The Conveyances are intended to convey all of
the Properties being conveyed pursuant to this Agreement. Certain Properties or
specific portions of the Properties that are leased from, or require the
approval to transfer by, a Governmental Body are conveyed under the Conveyances
and also are described and covered by other separate assignments made by Seller
to Purchaser on officially approved forms, or forms acceptable to such entity,
in sufficient multiple originals to satisfy applicable statutory and regulatory
requirements. The interests conveyed by such separate assignments are the same,
and not in addition to, the interests conveyed in the Conveyances attached as
Exhibit B, Exhibit B-1, Exhibit B-2, and Exhibit B-3. Further, such assignments
shall be deemed to contain the special warranty of title of Seller and all of
the exceptions, reservations, rights, titles, power and privileges set forth
herein and in the Conveyances as fully and only to the extent as though they
were set forth in each such separate assignment.

Section 11.12 Non-Compensatory Damages.

None of the Purchaser Indemnified Parties nor Seller Indemnified Parties shall
be entitled to recover from Seller or Purchaser, or their respective Affiliates,
any indirect, consequential, punitive or exemplary damages or damages for lost
profits of any kind arising under or in connection with this Agreement or the
transactions contemplated hereby, except to the extent any such Person suffers
such damages (including costs of defense and reasonable attorney’s fees

 

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Incurred in connection with defending of such damages) to a third party, which
damages (including costs of defense and reasonable attorney’s fees Incurred in
connection with defending against such damages) shall not be excluded by this
provision as to recovery hereunder. Subject to the preceding sentence,
Purchaser, on behalf of each of the Purchaser Indemnified Parties, and Seller,
on behalf of each of Seller Indemnified Parties, waive any right to recover
punitive, special, exemplary and consequential damages, including damages for
lost profits, arising in connection with or with respect to this Agreement or
the transactions contemplated hereby.

Section 11.13 Disclaimer of Application of Anti-Indemnity Statutes.

The Parties acknowledge and agree that the provisions of any anti-indemnity
statute relating to oilfield services and associated activities shall not be
applicable to this Agreement and/or the transactions contemplated hereby.

ARTICLE 12

MISCELLANEOUS

Section 12.1 Counterparts.

This Agreement may be executed and delivered in counterparts, each of which
shall be deemed an original instrument, but all such counterparts together shall
constitute but one agreement.

Section 12.2 Notices.

All notices which are required or may be given pursuant to this Agreement shall
be sufficient in all respects if given in writing and delivered personally, by
courier, or by registered or certified mail, postage prepaid, as follows:

 

If to Seller:

  

Black Elk Energy Offshore Operations, LLC

11451 Katy Freeway, Suite 500

Houston, Texas 77079

Attention: J.D. “Joe” Matthews

Telephone: 281-598-8600

Telecopy: 281-598-8601

Email: jmatthews@blackelkenergy.com

If to Purchaser:

  

Renaissance Offshore, LLC

920 Memorial City Way Suite 800

Houston, Texas 77024

Attention: M. J. Koenig

Telephone: 832-333-7700

Telecopy: 832-333-7701

Email: mkoenig@RenaissanceOffshore.com

Either Party may change its address for notice by notice to the other in the
manner set forth above. All notices shall be deemed to have been duly given at
the time of receipt by the Party to which such notice is addressed.

 

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Section 12.3 Sales or Use Tax Recording Fees and Similar Taxes and Fees.

Purchaser shall bear any sales, use, excise, real property transfer, gross
receipts, goods and services, registration, capital, documentary, stamp or
transfer taxes, recording fees and similar taxes and fees other than such fees
and taxes in connection with any title curative materials delivered by Seller
(collectively “Transfer Taxes”) Incurred and imposed upon, or with respect to,
the transactions contemplated by this Agreement. Seller will determine, and
Purchaser will cooperate with Seller in determining the amount of any Transfer
Taxes, if any, that is due in connection with the transactions contemplated by
this Agreement and Purchaser agrees to pay any such Transfer Tax to Seller or to
the appropriate Governmental Body. If any of the transactions contemplated by
this Agreement are exempt from any such Transfer Taxes upon the filing of an
appropriate certificate or other evidence of exemption, Purchaser will timely
furnish to Seller such certificate or evidence.

Section 12.4 Expenses.

Except as otherwise expressly provided in Section 2.4, Section 12.3, or
elsewhere in this Agreement, (a) all expenses Incurred by Seller in connection
with or related to the authorization, preparation or execution of this
Agreement, the Conveyance delivered hereunder and the Exhibits and Schedules
hereto and thereto, and all other matters related to the Closing, including
without limitation, all fees and expenses of counsel, accountants and financial
advisers employed by Seller, shall be borne solely and entirely by Seller, and
(b) all such expenses incurred by Purchaser shall be borne solely and entirely
by Purchaser.

Section 12.5 Change of Name.

As promptly as practicable, but in any case within ninety (90) days after the
Closing Date, Purchaser shall eliminate the name “Black Elk Energy Offshore
Operations, LLC” and any variants thereof and any names of Seller’s Affiliates
and any variants thereof from the Assets acquired pursuant to this Agreement
and, except with respect to such grace period for eliminating existing usage,
shall have no right to use any logos, trademarks or trade names belonging to
Seller or any of its Affiliates.

Section 12.6 Governing Law and Venue.

THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
JURISDICTION AND VENUE WITH RESPECT TO ANY DISPUTES ARISING HEREUNDER SHALL BE
PROPER ONLY IN HARRIS COUNTY, TEXAS, AND THE PARTIES HEREBY IRREVOCABLY WAIVE,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THEY MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY DISPUTE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY BROUGHT IN SUCH COURTS
OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE.

 

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Section 12.7 Captions.

The captions in this Agreement are for convenience only and shall not be
considered a part of or affect the construction or interpretation of any
provision of this Agreement.

Section 12.8 Waivers.

Any failure by any Party or Parties to comply with any of its or their
obligations, agreements or conditions herein contained may be waived in writing,
but not in any other manner, by the Party or Parties to whom such compliance is
owed. No waiver of, or consent to a change in, any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of, or consent to a
change in, other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided. The
rights of Seller and Purchaser under this Agreement shall be cumulative and the
exercise or partial exercise of any such right shall not preclude the exercise
of any other right.

Section 12.9 Assignment.

Prior to Closing, no Party shall assign all or any part of this Agreement, nor
shall any Party assign or delegate any of its rights or duties hereunder,
without the prior written consent of the other Party. Subsequent to the Closing,
any transfer of the Assets by Purchaser, in whole or in part, may be made
subject to this Agreement without Seller’s consent, but such transfer shall not
relieve Purchaser of any liabilities or obligations set forth herein. This
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successors and permitted assigns.

Section 12.10 Entire Agreement.

The Confidentiality Agreement, this Agreement and the Exhibits and Schedules
attached hereto, the documents to be executed hereunder constitute the entire
agreement between the Parties pertaining to the subject matter hereof, and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties pertaining to the subject matter hereof.
Upon Closing or a delayed Closing, the Confidentiality Agreement will terminate
and have no further force and effect as to the Assets transferred at such
Closing or delayed Closing.

Section 12.11 Amendment.

(a) This Agreement may be amended or modified only by an agreement in writing
executed by the Parties hereto.

(b) No waiver of any right under this Agreement shall be binding unless executed
in writing by the Party to be bound thereby.

Section 12.12 No Third-Party Beneficiaries.

Nothing in this Agreement shall entitle any Person other than Purchaser or
Seller to any claims, remedy or right of any kind, except as to those rights
expressly provided to the Seller Indemnified Persons and Purchaser Indemnified
Persons (provided, however, any claim for indemnity hereunder on behalf of an
Seller Indemnified Person or an Purchaser Indemnified Person must be made and
administered by a Party to this Agreement).

 

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Section 12.13 References.

In this Agreement:

(a) References to any gender includes a reference to all other genders;

(b) References to the singular includes the plural, and vice versa;

(c) Reference to any Article or Section means an Article or Section of this
Agreement;

(d) Reference to any Exhibit or Schedule means an Exhibit or Schedule to this
Agreement, all of which are incorporated into and made a part of this Agreement;

(e) Unless expressly provided to the contrary, “hereunder”, “hereof’, “herein”
and words of similar import are references to this Agreement as a whole and not
any particular Section or other provision of this Agreement;

(f) “Include” and “including” shall mean include or including without limiting
the generality of the description preceding such term; and

(g) Capitalized terms used herein shall have the meanings ascribed to them in
this Agreement as such terms are identified and/or defined in the Definitions
section hereof.

Section 12.14 Construction.

Purchaser is a party capable of making such investigation, inspection, review
and evaluation of the Assets as a prudent party would deem appropriate under the
circumstances including with respect to all matters relating to the Assets,
their value, operation and suitability. Each of Seller and Purchaser has had
substantial input into the drafting and preparation of this Agreement and has
had the opportunity to exercise business discretion in relation to the
negotiation of the details of the transactions contemplated hereby. This
Agreement is the result of arm’s-length negotiations from equal bargaining
positions. In the event of a dispute over the meaning or application of this
Agreement, it shall be construed fairly and reasonably and neither more strongly
for nor against either Party.

Section 12.15 Conspicuousness.

The Parties agree that provisions in this Agreement in “bold” type satisfy any
requirements of the “express negligence rule” and any other requirements at law
or in equity that provisions be conspicuously marked or highlighted.

 

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Section 12.16 Severability.

If any term or other provisions of this Agreement is held invalid, illegal or
incapable of being enforced under any rule of law, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in a materially adverse manner with respect to either
Party; provided, however, that if any such term or provision may be made
enforceable by limitation thereof, then such term or provision shall be deemed
to be so limited and shall be enforceable to the maximum extent permitted by
applicable Law.

Section 12.17 Time of Essence.

Time is of the essence in this Agreement. If the date specified in this
Agreement for giving any notice or taking any action is not a Business Day (or
if the period during which any notice is required to be given or any action
taken expires on a date which is not a Business Day), then the date for giving
such notice or taking such action (and the expiration date of such period during
which notice is required to be given or action taken) shall be the next day
which is a Business Day.

Section 12.18 Limitation on Damages.

Notwithstanding any other provision contained elsewhere in this Agreement to the
contrary, the Parties acknowledge that this Agreement does not authorize one
Party to sue for or collect from the other Party its own punitive damages, or
its own consequential or indirect damages in connection with this Agreement and
the transactions contemplated hereby and each Party expressly waives for itself
and on behalf of its Affiliates, any and all Claims it may have against the
other Party for its own such damages in connection with this Agreement and the
transactions contemplated hereby.

Section 12.19 Financial Reporting.

Seller shall use its best efforts to cause its independent auditors, at the
expense of Purchaser, to audit and prepare a report on the direct revenues and
expenses with respect to the Assets for the annual periods 2011-2012. Seller
expressly disclaims all liability and responsibility for the accuracy of any
information received from any prior owner of the Assets.

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, this Agreement has been signed by each of the Parties hereto
on the date first above written.

SELLER:

BLACK ELK ENERGY OFFSHORE OPERATIONS, LLC

 

By:   /s/ J.D. Matthews Name:   J.D. Matthews Title:   Vice President – Land

PURCHASER:

RENAISSANCE OFFSHORE, LLC

 

By:   /s/ Jeffrey R. Soine Name:   Jeffrey R. Soine Title:   Chief Executive
Officer

Schedule 8.1 – Purchase and Sale Agreement