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SALE AND PURCHASE AGREEMENT
 
BETWEEN
 

 
PRYME OIL AND GAS LLC
 
AS SELLER
 

 
AND
 
 
WILLOW CREEK ENTERPRISES INC.
 
AS PURCHASER
 

 
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TABLE OF CONTENTS
 
Article I Assets
 
Section 1.01
Agreement to Sell and Purchase.
Section 1.02
Assets.
Section 1.03
Excluded Assets.
Article II Purchase Price
 
Section 2.01
Purchase Price.
Section 2.02
Effective Time.
Article III Title Matters
 
Section 3.01
Examination Period.
Section 3.02
Defensible Title and Permitted Encumbrances.
Section 3.03
Title Defect.
Section 3.04
Notice of Title Defects.
Section 3.05
Remedies for Title Defects Noticed to Seller under Section 3.04.
Section 3.06
Warranty of Title.
Section 3.07
No Preferential Rights.
Section 3.08
Consents to Assignment.
Section 3.09
Remedies for Title Benefits.
Article IV Environmental Matters
 
Section 4.01
Environmental Review.
Section 4.02
Environmental Definitions.
Article V Representations and Warranties of Seller
 
Section 5.01
Seller’s Existence.
Section 5.02
Legal Power.
Section 5.03
Execution.
Section 5.04
Brokers.
Section 5.05
Bankruptcy.
Section 5.06
Suits.
Section 5.07
Royalties.
Section 5.08
Taxes.

 
 
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Section 5.09
Contracts.
Section 5.10
Liens and Liabilities Existing on or before Effective Date.
Section 5.11
No Conflict or Violation.
Section 5.12
Compliance With Laws.
Section 5.13
Environmental Matters..
Section 5.14
Commitments, Abandonments or Proposals.
Section 5.15
Well Status.
Section 5.16
State and Federal Leases..
Section 5.17
Taxes.
Section 5.18
Sales Agreements.
Section 5.19
Wells.
Section 5.20
Imbalances.
Section 5.21
Insurance.
Article VI Representations and Warranties of Purchaser
 
Section 6.01
PurchaserPurchaser’s Existence.
Section 6.02
Legal Power.
Section 6.03
Execution.
Section 6.04
Brokers.
Section 6.05
Bankruptcy.
Section 6.06
Suits.
Section 6.07
Qualifications.
Section 6.08
Investment.
Article VII Seller’s Conditions to Close
 
Section 7.01
Representations.
Section 7.02
Performance.
Section 7.03
Pending Matters.
Section 7.04
Purchase Price.
Section 7.05
Execution and Delivery of the Closing Documents.
Section 7.06
Consents and Preferential Rights to Purchase.

 
 
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Article VIII Purchaser’s Conditions to Close
 
Section 8.01
Representations.
Section 8.02
Performance.
Section 8.03
Pending Matters.
Section 8.04
Execution and Delivery of the Closing Documents.
Section 8.05
Consents and Preferential Rights to Purchase.
Section 8.06
Unilateral Right of Purchaser to Terminate.
Article IX Tax Matters
 
Section 9.01
Transfer Taxes.
Section 9.02
Ad Valorem and Similar Taxes.
Article X The Closing
 
Section 10.01
Time and Place of the Closing.
Section 10.02
Actions of Seller at the Closing.
Section 10.03
Actions of Purchaser at the Closing.
Article XI Termination
 
Section 11.01
Right of Termination.
Section 11.02
Effect of Termination.
Section 11.03
Termination Damages.
Section 11.04
Attorneys’ Fees, Etc.
Article XII Post Closing Obligations
 
Section 12.01
Allocation of Expense and Revenues.
Section 12.02
Final Accounting Statement.
Section 12.03
Further Cooperation.
Article XIII Operation of the Assets
 
Section 13.01
Operations after Effective Time.
Section 13.02
Limitations on the Operational Obligations and Liabilities of Seller.
Section 13.03
Operation of the Assets After the Closing.
Section 13.04
Casualty Loss.

 
 
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Article XIV Obligations and Indemnification
 
Section 14.01
Retained Obligations.
Section 14.02
Seller’s Indemnification – Third Party Non-Environmental Claims.
Section 14.03
Seller’s Indemnification – Third Party Environmental Claims
Section 14.04
Notices and Defense of Indemnified Matters.
Article XV Limitations on Representations and Warranties
 
Section 15.01
Disclaimers of Representations and Warranties.
Section 15.02
Independent Investigation.
Section 15.03
Survival.
Article XVI Dispute Resolution
 
Section 16.01
General.
Section 16.02
Senior Management.
Section 16.03
Dispute by Independent Expert.
Section 16.04
Limitation on Arbitration.
Article XVII Miscellaneous
 
Section 17.01
Names.
Section 17.02
Expenses.
Section 17.03
Entire Agreement.
Section 17.04
Waiver.
Section 17.05
Publicity.
Section 17.06
Construction.
Section 17.07
No Third Party Beneficiaries.
Section 17.08
Assignment.
Section 17.09
Governing Law.
Section 17.10
Notices.
Section 17.11
Severability.
Section 17.12
Time of the Essence.
Section 17.13
Counterpart Execution.

 
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EXHIBITS AND SCHEDULES
 
Exhibit A – Subject Interests (Listing of Leases)
Exhibit B – Wells and Interests
Exhibit C – Assignment and Bill of Sale
Exhibit D – 2014 Budget for Installation of an Artificial Lift System on the
Rosewood Plantation 21-H well
 
Schedules will be determined by Seller. There are likely to be many of the
schedules referenced herein which will have no information and will be deleted
from the Agreement. Alternatively they can be listed with the statement “none”.
 
 
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SALE AND PURCHASE AGREEMENT
 
This Sale and Purchase Agreement (this “Agreement”) is made and entered into
this 23rd day of May, 2014, by and between Pryme Oil and Gas LLC, a Texas
corporation, (the “Seller”) and Willow Creek Enterprises Inc., a Delaware
corporation (the “Purchaser”).  Purchaser and Seller are collectively referred
to herein as the “Parties”, and are sometimes referred to individually as a
“Party.”
 
W I T N E S S E T H:
 
WHEREAS, Seller is willing to sell to Purchaser, and Purchaser is willing to
purchase from Seller, the working interests and net revenue interests set forth
in Exhibit B in the oil and gas leases set forth in Exhibit A and the working
interest set forth in Exhibit B in the rights, personal property and fixtures
associated with the oil and gas leases as set forth below in Article I all upon
the terms and conditions hereinafter set forth;
 
NOW, THEREFORE, in consideration of the mutual benefits derived and to be
derived from this Agreement by each Party, Seller and Purchaser hereby agree as
follows:
 
Article I
 
Assets
 
Section 1.01                            Agreement to Sell and Purchase.  Subject
to and in accordance with the terms and conditions of this Agreement, Purchaser
agrees to purchase the Assets from Seller, and Seller agrees to sell the Assets
to Purchaser.
 
Section 1.02                            Assets.  Subject to Section 1.03 and
limitations set forth in Exhibits A and B described below, the term “Assets”
shall mean the working interests and net revenue interests set forth in Exhibit
B in the oil and gas leases set forth in Exhibit A and the working interest set
forth in Exhibit B in the rights, personal property, appurtenances and fixtures
associated with the oil and gas leases as set forth below:
 
(a)  
the leasehold estates in and to the oil, gas and mineral leases described or
referred to in Exhibit A (the “Leases”), assignments and other documents of
title described or referred to in Exhibit A, all as more specifically described
in Exhibit A (collectively, the “Subject Interests,” or singularly, a “Subject
Interest”) with Seller warranting that Purchaser is receiving the working
interests and net revenue interests set forth in Exhibit B;

 
(b)  
all rights incident to the Subject Interests, including, without limitation, (i)
all rights with respect to the use and occupation of the surface of and the
subsurface depths under the Subject Interests; (ii) all rights with respect to
any pooled, communitized or unitized acreage by virtue of any Subject Interest
being a part thereof, including all Hydrocarbons (as defined in Subsection (d)
of this Section 1.02) production after the Effective Time (as defined in Section
2.03) attributable to the Subject Interests or any such pool or unit allocated
to any such Subject Interest;

 
(c)  
to the extent assignable or transferable, all easements, rights-of-way, surface
leases, servitudes, permits, licenses, franchises and other estates or similar
rights and privileges directly related to or used solely in connection with the
Subject Interests which are set forth in Schedule 1.02(c) (the “Easements”),
including, without limitation, the Easements described or referred to in Exhibit
A;

 
 
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(d)  
to the extent assignable or transferable, all personal property, equipment,
fixtures, inventory and improvements located on or used in connection with the
Subject Interests and the Easements or with the production, treatment, sale, or
disposal of oil, gas or other hydrocarbons (collectively, “Hydrocarbons”),
byproducts or waste produced therefrom or attributable thereto, including,
without limitation, all wells located on the lands covered by the Subject
Interests or on lands with which the Subject Interests may have been pooled,
communitized or unitized (whether producing, shut in or abandoned, and whether
for production, injection or disposal), including, without limitation, the wells
described in Exhibit B, wellhead equipment, pumps, pumping units, flowlines,
gathering systems, piping, tanks, buildings, treatment facilities, injection
facilities, disposal facilities, compression facilities, and other materials,
supplies, equipment, facilities and machinery which are set forth in Schedule
1.02(d) (collectively, “Personal Property”);

 
(e)  
to the extent assignable or transferable, all contracts, agreements and other
arrangements that directly relate to the Subject Interests, the Leases or the
Easements, including, without limitation, production sales contracts, farmout
agreements, joint operating agreements, service agreements and similar
arrangements which are set forth in Schedule 1.02(e) (collectively, the
“Contracts”);

 
(f)  
to the extent assignable or transferable, copies of all books, records, files,
muniments of title, reports and similar documents and materials, including,
without limitation, lease records, well records, and division order records,
well files, title records (including abstracts of title, title opinions and
memoranda, and title curative documents related to the Assets), contracts and
contract files, correspondence, that relate to the foregoing interests in the
possession of, and maintained by, Seller (collectively, the “Records”); and

 
(g)  
All seismic data relating to the Leases (the Seismic Data), more specifically
known as the Turner Bayou 3D dataset plus all 2D seismic lines (including all
raw, processed and interpreted data and reports) and to the extent transferable,
licenses to Seller’s complete data library pertaining to the Assets including
but not limited to geologic, geophysical, geochemical, engineering, financial,
prior drilling and production histories, legal and cultural information,
reports, studies and data accumulated by Seller in the acquisition and
development of the Assets.

 
(h)  
All other assets used or useful in the forgoing and owned or utilized by the
Seller.

 
Section 1.03                            Excluded Assets.  Notwithstanding the
foregoing, the Assets shall not include, and there is excepted, reserved and
excluded from the sale contemplated hereby (collectively, the “Excluded
Assets”): (a) all credits and refunds and all accounts, instruments and general
intangibles (as such terms are defined in the Texas Uniform Commercial Code)
attributable to the Assets with respect to any period of time prior to the
Effective Time; (b) all claims of Seller for refunds of or loss carry forwards
with respect to (i) ad valorem, severance, production or any other taxes
attributable to any period prior to the Effective Time, (ii) income or franchise
taxes, or (iii) any taxes attributable to the other Excluded Assets, and such
other refunds, and rights thereto, for amounts paid in connection with the
Assets and attributable to the period prior to the Effective Time, including
refunds of amounts paid under any gas gathering or transportation agreement; (c)
all proceeds, income or revenues (and any security or other deposits made)
attributable to (i) the Assets for any period prior to the Effective Time, or
(ii) any other Excluded Assets; (d) all of Seller’s proprietary computer
software, technology, patents, trade secrets, copyrights, names, trademarks,
logos and other intellectual property; (e) all of Seller’s rights and interests
in geological and geophysical data that is interpretive in nature or which
cannot be transferred without the consent of or payment to any Third Party; (f)
all documents and instruments of Seller that may be protected by an
attorney-client privilege; (g) data and other information that cannot be
disclosed or assigned to Purchaser as a result of confidentiality or similar
arrangements under agreements with persons unaffiliated with Seller; (h) all
audit rights arising under any of the Contracts or otherwise with respect to any
period prior to the Effective Time or to any of the other Excluded Assets; (i)
all corporate, partnership, income tax records of Seller; (j) the original of
all Records.
 
Article II
 
Purchase Price
 
Section 2.01                            Purchase Price.  The total consideration
for the purchase, sale and conveyance by Seller of the Assets to Purchaser is as
follows (the “Purchase Price”):
 
(a)  
Purchaser obtaining a release of Seller from the Macquarie Bank debt obligation
of Seller with terms and conditions acceptable to Purchaser. Seller shall be
responsible for making the payments to Macquarie Bank as required under the debt
until Closing.

 
(b)  
Purchaser assuming the third party vendor debt owed by Seller and indemnifying
Seller and Pryme Energy, LLC (Operator) against third party vendor debt
currently itemized, declared and owed by Seller, as set forth in Exhibit D
(“Vendor Debt”), excluding the disputed claims of Signa Engineering
Corp.  Exhibit D shall be a close list and constitute the entire debt to be
assumed by the Purchaser upon closing of this Agreement. Vendor Debt shall not
include operating expenses incurred after November 1, 2013 and prior to closing
under this Agreement which shall remain the responsibility of Seller. To that
end, Seller accepts sole responsibility and liability involving claims by Signa
Engineering Corp and/or its former employee, Mr. John W. Colbert “Signa
Lawsuit”. Seller currently has negotiated a payment plan of US$135,000 per month
(but in any event Sellers share of vendor debt shall not exceed the aggregate
amount of US$1,400,000), for which Purchaser shall accept responsibility upon
the closing of this Agreement.

 
 
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Purchaser granting Seller an option to participate for a 5% of 100% working
interest on any well to be drilled on the Leases, the costs and expenses for
which shall be a 5% share of all actual, out-of-pocket costs and expenses
attributable to each well to be undertaken by Buyer subsequent to the Closing
Date, without any promoted share of costs or added burdens on production from
the well in excess of the burdens on production existing as of the date
hereof.    The option expires as to a well and all subsequent wells on the
Leases if Seller fails to elect to participate in the drilling of any well on
the Leases 15 days prior to the beginning of the actual drilling.  The proposal
of each well that is the subject of the option provided for herein will be made
in accordance with the applicable joint operating agreement among the owners of
the lease(s) on which the proposed well will be located.

Section 2.02                            Effective Time.  If the transactions
contemplated hereby are consummated in accordance with the terms and provisions
hereof, the ownership of the Assets shall be transferred from Seller to
Purchaser on the Closing Date, and effective as of 9:00 a.m. local time where
the Assets are located on April 1, 2014 (the “Effective Time”).
 
Article III
 
Title Matters
 
Section 3.01                            Examination Period.  Following the
execution date of this Agreement until 5:00 p.m., local time in Houston, Texas
July 15, 2014 (the “Closing Examination Period”), Seller shall permit Purchaser
and/or its representatives to examine, at all reasonable times, in the office of
Seller in Houston, Texas, all abstracts of title, title opinions, title files,
ownership maps, lease files, contract files, assignments, division orders,
operating and accounting records and agreements pertaining to the Assets insofar
as same may now be in existence and in the possession of Seller, subject to such
restrictions on disclosure as may exist under confidentiality agreements or
other agreements binding on Seller or such data. “Business Days” means all
calendar days excluding Saturdays, Sundays and U.S. legal holidays. The Closing
Examination Period is solely for purposes of Closing and determining adjustments
to the Purchase Price or exclusion of Assets from the Closing. Seller shall
warrant title to the assets and such warranty shall survive Closing.
 
Section 3.02                            Defensible Title and Permitted
Encumbrances.  For purposes of this Agreement, the term “Defensible Title”
means, with respect to a given Asset, such cumulative ownership by Seller in
such Asset that, subject to and except for the Permitted Encumbrances (as
defined in Subsection (d) of this Section 3.02):
 
(a)  
entitles Seller to receive not less than the percentage set forth in Exhibit B
as Seller’s “Net Revenue Interest” of all Hydrocarbons produced, saved and
marketed from each well or unit as set forth in Exhibit B, all without
reduction, suspension or termination of such interest throughout the productive
life of such well, except for carried interests, production payments,
reversionary interest or other changes in interest in time as specifically set
forth in Exhibit B;

 
(b)  
obligates Seller to bear not greater than the percentage set forth in Exhibit B
as Seller’s “Working Interest” of the costs and expenses relating to the
maintenance, development and operation of each well or unit as set forth in
Exhibit B, all without increase throughout the productive life of such well,
except for carried interests, production payments, reversionary interest or
other changes in interest in time as specifically set forth in Exhibit B; and

 
(c)  
is free and clear of all liens, encumbrances and defects in title.

 
(d)  
The term “Permitted Encumbrances” shall mean any of the following matters to the
extent the same are valid and subsisting and affect the Assets and are disclosed
either in the general schedules or in Schedule 3.02(d):

 
 
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(i)  
the Leases, and Contracts;

 
(ii)  
any (A) undetermined or inchoate liens or charges constituting or securing the
payment of expenses that were incurred incidental to the maintenance,
development, production or operation of the Assets or for the purpose of
developing, producing or processing Hydrocarbons therefrom or therein, and (B)
materialman’s, mechanics’, repairman’s, employees’, contractors’, operators’
liens or other similar liens or charges for liquidated amounts arising in the
ordinary course of business (1) that any Seller has agreed to assume or pay
pursuant to the terms hereof, or (2) for which any Seller is responsible for
paying or releasing at the Closing;

 
(iii)  
any liens for taxes and assessments not yet delinquent or, if delinquent, that
are being contested in good faith in the ordinary course of business and for
which any Seller has agreed to pay pursuant to the terms hereof or which have
been prorated pursuant to the terms hereof;

 
(iv)  
the terms, conditions, restrictions, exceptions, reservations, limitations and
other matters contained in (including any liens or security interests created by
law or reserved in oil and gas leases for royalty, bonus or rental, or created
to secure compliance with the terms of) the agreements, instruments and
documents that create or reserve to any Seller its interest in the Assets,
provided that such matters do not operate to reduce the cumulative Net Revenue
Interests of Seller below those set forth on Exhibit B, or increase the
cumulative Working Interests of Seller above those set forth on Exhibit B
without a corresponding increase in the Net Revenue Interests;

 
(v)  
any obligations or duties affecting the Assets to any municipality or public
authority with respect to any franchise, grant, license or permit and all
applicable laws, rules, regulations and orders of any Governmental Authority (as
defined in Section 4.02(b));

 
(vi)  
any (A) easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations, pipelines, grazing, hunting, lodging,
canals, ditches, reservoirs or the like, and (B) easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other similar
rights-of-way on, over or in respect of property owned or leased by Seller or
over which Seller own rights-of-way, easements, permits or licenses, to the
extent that same do not materially interfere with the oil and gas operations to
be conducted on the Assets;

 
(vii)  
all lessors’ royalties, overriding royalties, net profits interests, carried
interests, production payments, reversionary interests and other burdens on or
deductions from the proceeds of production created or in existence as of the
Effective Time, whether recorded or unrecorded, provided that such matters do
not operate to reduce the cumulative Net Revenue Interests of Seller below those
set forth in Exhibit B or increase the cumulative Working Interests of Seller
above those set forth in Exhibit B without a corresponding increase in the Net
Revenue Interests;

 
(viii)  
preferential rights to purchase or similar agreements with respect to which (A)
waivers or consents are obtained from the appropriate parties for the
transaction contemplated hereby, or (B) required notices have been given for the
transaction contemplated hereby to the holders of such rights and the
appropriate period for asserting such rights has expired without an exercise of
such rights;

 
(ix)  
required Third Party consents to assignments or similar agreements with respect
to which (A) waivers or consents are obtained from the appropriate parties for
the transaction contemplated hereby, or (B) required notices have been given for
the transaction contemplated hereby to the holders of such rights and the
appropriate period for asserting such rights has expired without an exercise of
such rights;

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

 
(xi)  
production sales contracts; division orders; contracts for sale, purchase,
exchange, refining or processing of Hydrocarbons; unitization and pooling
designations, declarations, orders and agreements; operating agreements;
agreements of development; area of mutual interest agreements; gas balancing or
deferred production agreements; processing agreements; plant agreements;
pipeline, gathering and transportation agreements; injection, repressuring and
recycling agreements; carbon dioxide purchase or sale agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements; and any
and all other agreements that have terms that are ordinary and customary to the
oil, gas, sulphur and other mineral exploration, development, processing or
extraction business or in the business of processing of gas and gas condensate
production for the extraction of products therefrom, to the extent the same do
not reduce the Net Revenue Interests of Seller below those set forth in Exhibit
B or increase the Working Interests of Seller above those set forth in Exhibit B
without a corresponding increase in the Net Revenue Interest;

 
 
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(xii)  
rights reserved to or vested in any Governmental Authority to control or
regulate any of the Assets and the applicable laws, rules, and regulations of
such Governmental Authorities; and

 
(xiii)  
all defects and irregularities affecting the Assets which individually or in the
aggregate (A) do not operate to (1) reduce the Net Revenue Interest of Seller as
set forth in Exhibit B, (2) increase the proportionate share of costs and
expenses of leasehold operations attributable to or to be borne by the Working
Interests of Seller as set forth in Exhibit B, or (B) operate to increase the
proportionate share of costs and expenses of leasehold operations attributable
to or to be borne by the Working Interest of Seller, so long as there is a
proportionate increase in Seller’s Net Revenue Interest.

 
Section 3.03                            Title Defect.  The term “Title Defect,”
as used in this Agreement, shall mean: (a) any encumbrance, encroachment,
irregularity, defect in or objection to Seller’s ownership of any Asset
(expressly excluding Permitted Encumbrances) that causes Seller not to have
Defensible Title to such Asset; or (b) any default by Seller under a lease,
farmout agreement or other contract or agreement that would (i) have a adverse
affect on the operation, value or use of such Asset, (ii) prevent Seller from
receiving the proceeds of production attributable to Seller’s interest therein
or (iii) result in cancellation of Seller’s interest therein.
 
Section 3.04                            Notice of Title Defects.  If Purchaser
discovers any Title Defect affecting any Asset, Purchaser shall notify Seller as
promptly as possible of such alleged Title Defect.  To be effective for purposes
of Closing, determination of the Purchase Price or exclusion from the Closing,
such notice must (i) be in writing, (ii) be received by Seller prior to the
expiration of the Closing Examination Period, (iii) describe the Title Defect in
sufficient, specific detail (including any alleged variance in the Net Revenue
Interest), (iv) identify the specific Asset or Assets affected by such Title
Defect, and (v) include the value of such Title Defect as determined by
Purchaser. Any matters that may otherwise constitute Title Defects, but of which
Seller has not been specifically notified by Purchaser in accordance with the
foregoing during the Closing Examination Period, shall be covered by Seller’s
warranty of title to Purchaser.
 
(a)  
The value attributable to each Title Defect (the “Title Defect Value”) that is
asserted by Purchaser in the Title Defect notices shall be determined based upon
the criteria set forth below:

 
(i)  
If the Title Defect is a lien upon any Asset, the Title Defect Value is the
amount necessary to be paid to remove the lien from the affected Asset.

 
(ii)  
If the Title Defect asserted is that the Net Revenue Interest attributable to
any well or unit is less than that stated in Exhibit B or the Working Interest
attributable to any well or unit is greater than that stated in Exhibit B, then
the Title Defect Value shall take into account the relative change in the
interest from Exhibit B and the appropriate Allocated Value attributed to such
Asset.

 
(iii)  
The Title Defect Value of a Title Defect shall be determined without duplication
of any costs or losses included in another Title Defect Value hereunder.

 
(iv)  
Notwithstanding anything herein to the contrary, in no event shall a Title
Defect Value exceed the Allocated Value of the wells, units or other Assets
affected thereby.

 
Section 3.05                            Remedies for Title Defects Noticed to
Seller under Section 3.04.
 
(a)  
Upon the receipt of such effective notice from Purchaser, Seller and Purchaser
shall for a period of five (5) Business Days after the Title Defect Notice
attempt to mutually agree on a resolution including, but if no such resolution
is reached, Seller may, at their sole option (i) attempt to cure such Title
Defect at any time prior to the Closing, or (ii) exclude the affected Asset from
the sale and pay Purchaser the mutually agreed allocated value of such affected
Asset.

 
(b)  
With respect to each Title Defect that is not cured on or before the Closing,
except as otherwise provided in this Section 3.05, the Purchase Price shall be
reduced by an amount equal to the Title Defect Value agreed upon in writing by
Purchaser and Seller.

 
 
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(c)  
If any Title Defect is in the nature of an unobtained consent to assignment or
other restriction on assignability, the provisions of Section 3.08 shall apply.

 
(d)  
If on or before Closing the Parties have not agreed upon the validity of any
asserted Title Defect or have not agreed on the Title Defect Value attributable
thereto, either Party shall have the right to elect to have the validity of such
Title Defect and/or such Title Defect Value determined by an Independent Expert
pursuant to Section 16.03.

 
(e)  
Notwithstanding anything to the contrary in this Agreement, if the value of the
aggregate Title Defects (or aggregate Title Benefit as defined in Section
3.09(a)) does not exceed $25,000, then no adjustment to the Purchase Price shall
be made for such Title Defects (or Title Benefits); however, if the value of a
Title Defects (or Title Benefits) exceeds $25,000, then the total value of such
Title Defects (or Title Benefits) may be asserted.

 
Section 3.06                            Warranty of Title.  Seller hereby agrees
to warrant and defend its title to the Assets unto Purchaser and its assigns
against every person whomsoever lawfully claiming or seeking to claim the same
or any part thereof,  subject, however, to the Permitted Encumbrances and the
other matters set forth herein.
 
Section 3.07                            No Preferential Rights.  Seller
represents that there are no preferential rights to purchase affecting the
Assets.
 
Section 3.08                            Consents to Assignment.   Seller shall
make a good faith effort to obtain all necessary consents from third parties to
assign the Assets prior to Closing (other than governmental approvals that are
customarily obtained after Closing) and Purchaser shall assist Seller with such
efforts.  To the extent such consents are not obtained prior to Closing and
would render the assignment of some or all of the Assets void or voidable or
give rise to a claim for damages as a result of the failure to obtain such
consent, then such failure shall constitute a Title Defect as to that portion of
the Assets affected thereby.
 
Section 3.09                            Remedies for Title Benefits.
 
(a)  
If either Party discovers any Title Benefit during the Closing Examination
Period affecting the Assets, it shall promptly notify the other Party in writing
thereof on or before the expiration of the Closing Examination Period. Subject
to Section 3.05, Seller shall be entitled to an upward adjustment to the
Purchase Price pursuant to Section 10.02(a)(i) with respect to all Title
Benefits, in an amount mutually agreed upon by the Parties. For purposes of this
Agreement, the term “Title Benefit” shall mean Seller’s interest in any Subject
Interest that is greater than or in addition to that set forth in Exhibit B
(including, without limitation, a Net Revenue Interest that is greater than that
set forth in Exhibit B) or Seller’s Working Interest in any Subject Interest
that is less than the Working Interest set forth in Exhibit B (without a
corresponding decrease in the Net Revenue Interest). Any matters that may
otherwise constitute Title Benefits, but of which Purchaser has not been
specifically notified by Seller in accordance with the foregoing, shall be
deemed to have been waived by Seller for all purposes. Purchaser has no
affirmative duty to search for Seller Title Benefits.

 
(b)  
If with respect to a Title Benefit the Parties are not deemed to have agreed on
the amount of the upward Purchase Price adjustment or have not otherwise agreed
on such amount prior to the Closing Date, Seller or Purchaser shall have the
right to elect to have such Purchase Price adjustment determined by an
Independent Expert pursuant to Section 16.03. If the amount of such adjustment
is not determined pursuant to this Agreement by the Closing, the undisputed
portion of the Purchase Price with respect to the Asset affected by such Title
Benefit shall be paid by Purchaser at the Closing and, subject to Section 3.05,
upon determination of the amount of such adjustment, any unpaid portion thereof
shall be paid by Purchaser to Seller.

 
 
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Article IV
 
Environmental Matters
 
Section 4.01                            Environmental Review.
 
(a)  
Purchaser shall have the right to conduct or cause a consultant (“Purchaser’s
Environmental Consultant”) to conduct an environmental review of the Assets
prior to Closing (“Purchaser’s Environmental Review”). The cost and expense of
Purchaser’s Environmental Review, if any, shall be borne solely by
Purchaser.  Purchaser shall (and shall cause Purchaser’s Environmental
Consultant to): (i) consult with Seller before conducting any work comprising
Purchaser’s Environmental Review, (ii) perform all such work in a safe and
workmanlike manner and so as to not unreasonably interfere with Seller’s
operations, and (iii) comply with all applicable laws, rules, and regulations.
Purchaser shall be solely responsible for obtaining any Third Party consents
that are required in order to perform any work comprising Purchaser’s
Environmental Review, and Purchaser shall consult with Seller prior to
requesting each such Third Party consent. Seller shall have the right to have a
representative or representatives accompany Purchaser and Purchaser’s
Environmental Consultant at all times during Purchaser’s Environmental
Review.  With respect to any samples taken in connection with Purchaser’s
Environmental Review, Purchaser shall take split samples, providing one of each
such sample, properly labeled and identified, to Seller. Purchaser hereby agrees
to release, defend, indemnify and hold harmless Seller from and against all
claims, losses, damages, costs, expenses, causes of action and judgments of any
kind or character (INCLUDING THOSE RESULTING FROM SELLER’S SOLE, JOINT,
COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY) arising out of or
relating to Purchaser’s Environmental Review.

 
(b)  
Unless otherwise required by applicable law, Purchaser shall (and shall cause
Purchaser’s Environmental Consultant to) treat confidentially any matters
revealed by Purchaser’s Environmental Review and any reports or data generated
from such review (the “Environmental Information”), and Purchaser shall not (and
shall cause Purchaser’s Environmental Consultant to not) disclose any
Environmental Information to any Governmental Authority or other Third Party
without the prior written consent of Seller. Unless otherwise required by law,
Purchaser may use the Environmental Information only in connection with the
transactions contemplated by this Agreement. If Purchaser, Purchaser’s
Environmental Consultant, or any Third Party to whom Purchaser has provided any
Environmental Information become legally compelled to disclose any of the
Environmental Information, Purchaser shall provide Seller with prompt notice
sufficiently prior to any such disclosure so as to allow Seller to file any
protective order, or seek any other remedy, as it deems appropriate under the
circumstances. If this Agreement is terminated prior to the Closing, Purchaser
shall deliver the Environmental Information to Seller, which Environmental
Information shall become the sole property of Seller. Purchaser shall provide
copies of the Environmental Information to Seller without charge.

 
Section 4.02                            Environmental Definitions.
 
(a)  
Environmental Defects. For purposes of this Agreement, the term “Environmental
Defect” shall mean, with respect to any given Asset, an individual environmental
condition that constitutes a violation of Environmental Laws in effect as of the
date of this Agreement in the jurisdiction in which such Asset is
located.  Environmental Defect shall not be deemed to include an environmental
condition disclosed in writing to Purchaser prior to the execution of this
Agreement and agreed to by Purchaser.

 
(b)  
Governmental Authority. For purposes of this Agreement, the term “Governmental
Authority” shall mean, as to any given Asset, the United States and the state,
county, parish, city and political subdivisions in which such Asset is located
and that exercises jurisdiction over such Asset, and any agency, department,
board or other instrumentality thereof that exercises jurisdiction over such
Asset.

 
(c)  
Environmental Laws. For purposes of this Agreement, the term “Environmental
Laws” shall mean all laws, statutes, ordinances, court decisions, rules and
regulations of any Governmental Authority pertaining to health or the
environment as may be interpreted by applicable court decisions or
administrative orders, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended (“CERCLA”), the Federal Water Pollution Control Act, as amended,
the Occupational Safety and Health Act, as amended, the Resources Conservation
and Recovery Act, as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendment and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and comparable state and local laws.

 
 
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Article V
 
Representations and Warranties of Seller
 
Seller represents and warrants to Purchaser which representations and warranties
shall survive closing that:
 
Section 5.01                            Seller’s Existence.  Seller is a
corporation, duly organized and validly existing under the laws of the State of
Texas and is qualified to conduct business in the State of Texas.  Seller has
full legal power, right and authority to carry on its business as such is now
being conducted.  Seller’s headquarters and principal offices are located in the
State of Texas.
 
Section 5.02                            Legal Power.  Seller has the legal power
and right to enter into and perform this Agreement and the transactions
contemplated hereby. The consummation of the transactions contemplated by this
Agreement will not violate, nor be in conflict with:
 
(a)  
any provision Seller’s governing documents;

 
(b)  
except for any preferential purchase rights and consents to assignment, any
material agreement or instrument to which a Seller is a party or by which a
Seller is bound; or

 
(c)  
any judgment, order, ruling or decree applicable to a Seller as a party in
interest or any law, rule or regulation applicable to a Seller.

 
Section 5.03                            Execution.  The execution, delivery and
performance of this Agreement and the transactions contemplated hereby are duly
and validly authorized by all requisite corporate action on the part of
Seller.  This Agreement constitutes the legal, valid and binding obligation of
Seller enforceable in accordance with its terms.
 
Section 5.04                            Brokers.  No Broker or finder has acted
for or on behalf of Seller or any affiliate of Seller in connection with this
Agreement or the transactions contemplated by this Agreement. No broker or
finder is entitled to any brokerage or finder’s fee, or to any commission, based
in any way on agreements, arrangements or understandings made by or on behalf of
Seller or any affiliate of Seller for which Purchaser have or will have any
liabilities or obligations (contingent or otherwise).
 
Section 5.05                            Bankruptcy.  There are no bankruptcy,
reorganization or arrangement proceedings pending, being contemplated by or to
the knowledge of Seller threatened against Seller.  The term "Knowledge" shall
mean with respect to Seller, the actual knowledge of Seller's current personnel
with a supervisory, or higher, level.
 
Section 5.06                            Suits.  Except the Signa Lawsuithere is
no suit, action, claim, investigation or inquiry by any person or entity or by
any administrative agency or Governmental Authority and no legal, administrative
or arbitration proceeding pending or, to Seller’s Knowledge, threatened against
Seller or any affiliate of Seller or the Assets that has materially affected or
will materially affect Seller’s ability to consummate the transactions
contemplated herein or materially affect the title to or value of the Assets
except as shown on Schedule 5.06.
 
Section 5.07                            Royalties.  To Seller’s Knowledge, all
rentals, royalties and other payments due under the Subject Interests described
in Exhibit A have been paid in all material respects, except those amounts in
suspense. Except as set forth on Schedule 5.07, Seller has not received any
written demand regarding improper royalty payments relating to the Subject
Interests that has not been resolved.
 
Section 5.08                            Taxes.  To each Seller’s Knowledge, all
ad valorem, property, production, severance, excise and similar taxes and
assessments based on or measured by the ownership of the Assets or the
production of Hydrocarbons or the receipt of proceeds therefrom that have become
due and payable have been paid in all material respects.
 
 
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Section 5.09                            Contracts.  To Seller’s Knowledge,
except for Vendor Debt, (a) all material Contracts are in full force and effect,
and (b) Seller is not in default with respect to any of its material obligations
thereunder.
 
Section 5.10                            Liens and Liabilities Existing on or
before Effective Date.  Except for Permitted Encumbrances, the Assets will be
conveyed free and clear of all liens, mortgages and encumbrances. Seller shall
remain responsible for and indemnify Purchaser against any liabilities
associated with the Assets which existed on or before the Effective Date of
Closing.
 
Section 5.11                            No Conflict or Violation.  Neither the
execution and delivery of this Agreement nor the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Seller will (i) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws, limited liability company agreement or
other governing documents of Seller; (ii) be rendered void or ineffective by or
under the terms, conditions or provisions of any agreement, instrument or
obligation to which Seller is a party or is subject; (iii) result in a material
default under the terms, conditions or provisions of any Asset (or of any
material agreement, instrument or obligation relating to or burdening any
Asset); or (iv) subject to the limitations contained in Section 4.1(c), violate
in any material respect or be rendered void or ineffective under any Law or any
judgment, order or decree of a Governmental Authority; provided that the
representations and warranties contained in clauses (ii), (iii) and (iv) of this
Section 4.1(d) are subject to the matters expressly described and set forth in
Schedule 5.11 and the exceptions set forth in clauses (i) and (ii) of Section
4.1(e).
 
Section 5.12                            Compliance With Laws.  Except as set
forth on Schedule 5.12 Seller is not in violation in any material respect of any
Law applicable to the Assets. This Section 5.12 does not apply to environmental
matters (for which Section 5.13 is applicable).
 
Section 5.13                            Environmental Matters.  Except as set
forth on Schedule 5.13, no written notice, demand or complaint has been received
by Seller from any Governmental Authority with respect to any material violation
of any Environmental Law applicable to the Assets and that there are no
Environmental Defects as of the Closing Date.
 
Section 5.14                            Commitments, Abandonments or
Proposals.  Except as set forth in Schedule 5.14 and Exhibit D, to Seller’s
knowledge, (1) Seller has incurred no expenses, and has made no commitments to
make expenditures (including Seller has not entered into any agreements that
would obligate Purchaser to make expenditures), in connection with the ownership
or operation of the Assets after the Effective Time, other than routine expenses
incurred in connection with the ownership and normal operation of the Assets;
(2) Seller has not abandoned any wells (or removed any material items of
equipment, except those replaced by items of materially equal or better
condition, suitability and value) on the Subject Interests since the Effective
Time; and (3) no proposals or authorities for expenditures are currently
outstanding (whether made by Seller or by any other party) to drill additional
wells, or to deepen, plug back or rework existing wells, or to conduct other
operations for which consent is required under the applicable operating or
unitization agreement, or to conduct any other operations other than normal
operation of existing wells on the Subject Interests, or to abandon any wells,
on the Subject Interests.
 
Section 5.15                            Well Status.  Except as set forth on
Schedule 5.15, and except to the extent as would not have a material impact on
the value, use or operation of the Assets, to Seller’s knowledge, there are no
wells located on the Subject Interests that: (a) have been plugged and abandoned
but have not been plugged in accordance with all applicable requirements of each
Regulatory Authority having jurisdiction over the Subject Interests or (b) have
been temporarily abandoned but not yet plugged and abandoned.
 
 
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Section 5.16                            State and Federal Leases.  To Seller’s
knowledge, all state and federal lease accounts, with respect to state and
federal leases included in the Assets, are current and all payments required
thereunder have been made.
 
Section 5.17                            Taxes.  Seller has timely filed or
caused to be filed all federal, state, local and foreign Tax and information
returns required under the Law of such jurisdictions. All Taxes (other than
those being contested in good faith for which adequate provisions will be made)
shown on said returns to be due and additional assessments received prior to the
date hereof that are due and payable have been paid.
 
Section 5.18                            Sales Agreements.  Except as set forth
on Schedule 5.18, (i) all crude oil and condensate sales arrangements and
division orders relating to the Properties have index price or other
market-sensitive price terms and may be terminated by Purchaser upon not more
than 92 days’ notice without penalty or detriment to Purchaser; and (ii) to
Seller’s knowledge, Seller has not received at any time nor is Seller obligated
to receive any advance, take-or-pay or other similar payments under production
sales contracts that entitle the  purchasers thereunder to recoup or otherwise
receive deliveries of oil, gas or other hydrocarbons at any time on or after the
Effective Time without payment therefor.
 
Section 5.19                            Wells. To Seller’s knowledge, (i) all of
the wells in which Seller has an interest by virtue of its ownership in the
Assets have been drilled and completed within the boundaries of the related
Subject Interest or within the limits otherwise permitted by contract, pooling
or unit agreement, and by Law, and (ii) all drilling and completion of the wells
included in each Subject Interest and all development and operations on such
Subject Interest are being conducted in compliance in all material respects with
all applicable Laws and permits, and judgments, orders and decrees of any
Governmental Authority. To Seller’s knowledge, no well included on any Subject
Interest is subject to material penalties on allowables after the date hereof
because of any overproduction or any other violation of applicable Laws or
permits or judgments, orders or decrees of any Governmental Authority that would
prevent in any material respect such well from being entitled to its full legal
and regular allowable from and after the date hereof as prescribed by any
Governmental Authority. Notwithstanding anything herein provided to the
contrary, this Section 5.19 does not apply to environmental matters (for which
Section 5.13 is applicable).
 
Section 5.20                            Imbalances.  There are no wellhead or
pipeline imbalances and there will be none as of the Closing Date.
 
Section 5.21                            Insurance.  Schedule 5.21 sets forth
Seller’s insurance coverages on the Assets and the operation thereof. The
insurance coverages set forth in Schedule 5.21 are in full force and effect and
Seller has paid all premiums associated therewith on a timely basis. To Seller’s
knowledge, there have been no actions or omissions by Seller which violate the
terms of Seller’s insurance coverages set forth on Schedule 5.21.
 
 
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Article VI
 
Representations and Warranties of Purchaser
 
Purchaser represents and warrants to Seller which representations and warranties
shall survive closing that:
 
Section 6.01                            Purchaser’s Existence.  Purchaser is a
corporation, duly organized and validly existing under the laws of Delaware and
is qualified to conduct business in the State of Texas.  Purchaser has full
legal power, right and authority to carry on its business as such is now being
conducted and as contemplated to be conducted. Purchaser’s headquarters and
principal offices are all located in the State of Texas.
 
Section 6.02                            Legal Power.  Purchaser has the legal
power and right to enter into and perform this Agreement and the transactions
contemplated hereby. The consummation of the transactions contemplated by this
Agreement will not violate, nor be in conflict with:
 
(a)  
any provision of Purchaser’s  other governing documents;

 
(b)  
any material agreement or instrument to which Purchaser is a party or by which
Purchaser is bound; or

 
(c)  
any judgment, order, ruling or decree applicable to Purchaser as a party in
interest or any law, rule or regulation applicable to Purchaser.

 
Section 6.03                            Execution.  The execution, delivery and
performance of this Agreement and the transactions contemplated hereby are duly
and validly authorized by all requisite corporate action on the part of
Purchaser. This Agreement constitutes the legal, valid and binding obligation of
Purchaser enforceable in accordance with its terms.
 
Section 6.04                            Brokers.  No Broker or finder has acted
for or on behalf of Purchaser or any affiliate of Purchaser in connection with
this Agreement or the transactions contemplated by this Agreement. No broker or
finder is entitled to any brokerage or finder’s fee, or to any commission, based
in any way on agreements, arrangements or understandings made by or on behalf of
Purchaser or any affiliate of Purchaser for which Seller has or will have any
liabilities or obligations (contingent or otherwise).
 
Section 6.05                             Bankruptcy.  There are no bankruptcy,
reorganization or arrangement proceedings pending, being contemplated by or to
the knowledge of Purchaser threatened against Purchaser or any affiliate of
Purchaser.
 
Section 6.06                            Suits.  There is no suit, action, claim,
investigation or inquiry by any person or entity or by any administrative agency
or Governmental Authority and no legal, administrative or arbitration proceeding
pending or, to Purchaser’s knowledge, threatened against Purchaser or any
affiliate of Purchaser that has materially affected or will materially affect
Purchaser’s ability to consummate the transactions contemplated herein.
 
Section 6.07                            Qualifications.  Purchaser is now, and
after the Closing shall continue to be, qualified with all applicable
Governmental Authorities to own its interest in the Assets.
 
Section 6.08                            Investment.  Prior to entering into this
Agreement, Purchaser was advised by and has relied solely on its own legal, tax
and other professional counsel concerning this Agreement, the Assets and the
value thereof.  Purchaser is acquiring the Assets for its own account and not
for distribution or resale in any manner that would violate any state or federal
securities law, rule, regulation or order.  Purchaser understands and
acknowledges that if any of the Assets were held to be securities, they would be
restricted securities and could not be transferred without registration under
applicable state and federal securities laws or the availability of an exemption
from such registration.
 
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Article VII
 
Seller’s Conditions to Close
 
The obligations of Seller to consummate the transaction provided for herein are
subject, at the option of Seller, to the fulfillment on or prior to the Closing
Date of each of the following conditions:
 
Section 7.01                            Representations.  The representations
and warranties of Purchaser herein contained shall be true and correct in all
material respects on the Closing Date as though made on and as of such date
which representations and warranties shall survive Closing.
 
Section 7.02                            Performance.  Purchaser shall have
performed all material obligations, covenants and agreements contained in this
Agreement to be performed or complied with by it at or prior to the Closing.
 
Section 7.03                            Pending Matters.  No suit, action or
other proceeding shall be pending or threatened that seeks to restrain, enjoin
or otherwise prohibit the consummation of the transactions contemplated by this
Agreement.
 
Section 7.04                            Purchase Price.  Purchaser shall have
delivered to Seller the Purchase Price, as the same may be adjusted hereunder,
in accordance with the provisions of Article II.
 
Section 7.05                            Execution and Delivery of the Closing
Documents.  Purchaser shall have executed, acknowledged and delivered, as
appropriate, to Seller all closing documents described in Section 10.05.
 
Section 7.06                            Consents and Preferential Rights to
Purchase.  Subject to Section 3.07 and 3.08, all appropriate consents have been
obtained and preferential rights to purchase have been either exercised by the
preferential right holder or the time period for election to purchase has
elapsed.
 
Article VIII
 
Purchaser’s Conditions to Close
 
The obligations of Purchaser to consummate the transaction provided for herein
are subject, at the option of Purchaser, to the fulfillment on or prior to the
Closing Date of each of the following conditions:
 
Section 8.01                            Representations.  The representations
and warranties of Seller herein contained shall be true and correct in all
material respects on the Closing Date as though made on and as of such date
which representations and warranties shall survive closing.
 
 
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Section 8.02                            Performance.  Seller shall have
performed all material obligations, covenants and agreements contained in this
Agreement to be performed or complied with by it at or prior to the Closing.
 
Section 8.03                            Pending Matters.  No suit, action or
other proceeding shall be pending or threatened that seeks to restrain, enjoin,
or otherwise prohibit the consummation of the transactions contemplated by this
Agreement.
 
Section 8.04                            Execution and Delivery of the Closing
Documents.  Seller shall have executed, acknowledged and delivered, as
appropriate, to Purchaser all closing documents described in Section 10.04.
 
Section 8.05                            Consents and Preferential Rights to
Purchase.  Subject to Section 3.07 and 3.08, all appropriate consents have been
obtained and preferential rights to purchase have been either exercised by the
preferential right holder or the time period for election to purchase has
elapsed.
 
Section 8.06                            Unilateral Right of Purchaser to
Terminate.  If Purchaser determines in its sole discretion that it is
dissatisfied with the proposed transaction, then Purchaser may elect to
terminate this Agreement without any other reason anytime before Closing.
 
Article IX
 
Tax Matters
 
Section 9.01                            Transfer Taxes.  All sales, use or other
taxes (other than taxes on gross income, net income or gross receipts) and
duties, levies, recording fees or other governmental charges incurred by or
imposed with respect to the property transfers undertaken pursuant to this
Agreement shall be the responsibility of, and shall be paid by, Purchaser.
 
Section 9.02                            Ad Valorem and Similar Taxes.  Ad
valorem, property, severance and similar taxes and assessments based upon or
measured by the value of the Assets shall be divided or prorated between Seller
and Purchaser as of the Effective Time.  Seller shall retain responsibility for
such taxes attributable to the period of time prior to the Effective Time and
Purchaser shall assume responsibility for the period of time from and after the
Effective Time.
 
 
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Article X
 
The Closing
 
Section 10.01                            Time and Place of the Closing.  If the
conditions referred to in Articles VII and VIII of this Agreement have been
satisfied or waived in writing, and subject to any extensions pursuant to
Sections 3.04, 4.03 or 10.02, the transactions contemplated by this Agreement
(the “Closing”) shall take place at a location mutually acceptable between the
Purchaser and Seller on or before July 15, 2014 (the “Closing Date”). The
Effective Time shall be April 1, 2014.
 
Section 10.02                            Actions of Seller at the Closing.  At
the Closing, Seller shall:
 
(a)  
execute, acknowledge and deliver to Purchaser the Assignment (as defined in
Exhibit C of this Agreement) and such other instruments (in form and substance
mutually agreed upon by Purchaser and Seller) as may be reasonably necessary to
convey the Assets to Purchaser;

 
(b)  
execute, acknowledge and deliver to Purchaser division orders for Purchaser’s
interest in the Assets and the joint operating agreements for the Leases;

 
(c)  
execute and deliver to Purchaser an affidavit attesting to its non-foreign
status;

 
(d)  
execute, acknowledge and deliver any other agreements provided for herein or
necessary or desirable to effectuate the transactions contemplated hereby
including the agreement of Seller not to compete with Purchaser in any acreage
covered by the Seismic Data.

 
Section 10.03                            Actions of Purchaser at the
Closing.  At the Closing, Purchaser shall:
 
(a)  
deliver to Seller the release of Seller from the Macquarie Bank debt;

 
(b)  
execute, acknowledge and deliver the Assignment and any other agreements
provided for herein or necessary or desirable to effectuate the transactions
contemplated hereby including the division orders and joint operating agreements
in existence for the Leases including an Assumption of the Vendor Debt and a non
exclusive usage license for the seismic data.

 
 
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Article XI
 
Termination
 
Section 11.01                            Right of Termination.  This Agreement
may be terminated at any time at or prior to the Closing:
 
(a)  
by mutual written consent of the Parties;

 
(b)  
by Seller on the Closing Date if the conditions set forth in Article VII have
not been satisfied in all material respects by Purchaser or waived by Seller in
writing by the Closing Date;

 
(c)  
by Purchaser on the Closing Date if the conditions set forth in Article VIII
have not been satisfied in all material respects by Seller or waived by
Purchaser in writing by the Closing Date;

 
(d)  
by Seller if the Closing shall not have occurred on or before July 15, 2014
through no fault of the Seller;

 
(e)  
by either Party if any Governmental Authority shall have issued an order,
judgment or decree or taken any other action challenging, delaying, restraining,
enjoining, prohibiting or invalidating the consummation of any of the
transactions contemplated herein; or

 
(f)  
by Purchaser if it is dissatisfied with acquisition as determined by Purchaser
in its sole discretion with no reason being required;

 
provided, however, that no Party shall have the right to terminate this
Agreement pursuant to clause (b) or (c) or (d) above if such Party is at such
time in material breach of any provision of this Agreement.
 
Section 11.02                            Effect of Termination.  In the event
that the Closing does not occur as a result of any Party exercising its right to
terminate pursuant to Section 11.01, then except for the rights of Purchaser as
set forth in Section 11.03 for a termination based on Section 11.01(c), this
Agreement shall be null and void and no Party shall have any further rights or
obligations under this Agreement except for the rights of Purchaser under
Section 13.01(i) and provided that nothing herein shall relieve any Party from
any liability for any breach hereof or any liability that has accrued prior to
the date of such termination.
 
Section 11.03                            Termination Damages.  If all conditions
precedent to the obligations of Purchaser to close as set forth in Article VII
have been met and the transactions contemplated by this Agreement are not
consummated on the Closing Date because of the failure of Seller to perform any
of its material obligations hereunder or the breach of any representation herein
by Seller, then in such event, Purchaser shall have the option to (1) enforce
specific performance or (2) elect to be paid (a) $250,000 by Seller as
liquidated damages and (b) the amounts advanced by Purchaser for the
installation of the artificial lift system and lease delay rentals as provided
in Section 13.01, with (a) and (b) as Purchaser’s sole and exclusive remedies
for such default, all other remedies being expressly waived..  Purchaser and
Seller acknowledge and agree that (i) Purchaser’s actual damages upon the event
of such a termination are difficult to ascertain with any certainty, (ii) that
$250,000 is a reasonable estimate of such actual damages and (iii) such
liquidated damages do not constitute a penalty.
 
 
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Section 11.04                            Attorneys’ Fees, Etc.  If either Party
to this Agreement resorts to legal proceedings to enforce this Agreement, the
prevailing Party in such proceedings shall be entitled to recover all costs
incurred by such Party, including reasonable attorneys’ fees, in addition to any
other relief to which such Party may be entitled.  Notwithstanding anything to
the contrary in this Agreement, in no event shall either Party be entitled to
receive any punitive, indirect or consequential damages unless same are a part
of a Third Party claim for which a Party is seeking indemnification hereunder,
REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE
OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF THE OTHER PARTY.
 
Article XII
 
Post Closing Obligations
 
Section 12.01                            Allocation of Expense and Revenues.
 
(a)  
Provided that the Closing occurs, appropriate adjustments shall be made between
Purchaser and Seller so that (i) Purchaser will receive all proceeds from sales
of Hydrocarbons  that have not been distributed to Seller from Operator and any
other revenues arising out of the ownership or operation of the Assets from and
after the Effective Time, net of all applicable production, severance, and
similar taxes, and net of all costs and expenses that are incurred in the
ownership or operation of the Assets from and after the Effective Time,
including, without limitation, all drilling costs, all capital expenditures, all
overhead charges under applicable operating or other agreements (regardless of
whether Seller or an affiliate of Seller serves as operator prior to the
Closing), and (ii) Seller will receive an adjustment for all sales of
Hydrocarbons that are sold, produced and saved prior to the Effective Time and
any other revenues arising out of the ownership or operation of the Assets prior
to the Effective Time, net of all applicable production, severance, and similar
taxes, and net of all costs and expenses that are incurred in the ownership or
operation of the Assets prior to the Effective Time.

 
(b)  
In addition to the foregoing, the Seller will be paid (i) the amount as of the
Effective Time of all prepaid ad valorem, property or similar taxes and
assessments based upon or measured by ownership of the Assets and any prepaid
costs, including rentals and insurance premiums, insofar as such prepaid costs
relate to periods of time after the Effective Time, and (ii) the value of all
merchantable Hydrocarbons produced prior to the Effective Time but in storage
above the inlet connection or upstream of the applicable sales meter on the
Closing Date.

 
(c)  
In addition to the foregoing, the Purchaser will be paid (i) an amount equal to
all unpaid ad valorem, property, production, severance and similar taxes and
assessments based upon or measured by the ownership of the Assets that are
attributable to periods of time prior to the Effective Time, which amounts
shall, to the extent not actually assessed, be computed based on such taxes and
assessments for the preceding tax year (such amount to be prorated for the
period of Seller’s and Purchaser’s ownership before and after the Effective
Time), and (ii) an amount equal to all cash in, or attributable to, suspense
accounts relative to the Assets for which Purchaser has assumed responsibility
under Section 14.02.

 
(d)  
All estimated amounts due under this Section 12.01 will be calculated and
provided to Purchaser two (2) Business Days prior to Closing as a Pre-Closing
Statement to be used at Closing subject to Purchaser’s right to object to
specific amounts.

 
Section 12.02                            Final Accounting Statement.
 
(a)  
On or before sixty (60) days after the Closing Date, Seller shall prepare and
deliver to Purchaser a post-closing statement setting forth a detailed
calculation of all post-Closing adjustments applicable to the period for time
between the Effective Time and Closing (“Accounting Statement”).  The Accounting
Statement shall include any adjustment or payment which was not finally
determined as of the Closing Date and the allocation of revenues and expenses as
determined in accordance with Section 12.01.  To the extent reasonably required
by Seller, Purchaser shall assist in the preparation of the Accounting
Statement. Seller shall provide Purchaser such data and information as Purchaser
may reasonably request supporting the amounts reflected on the Accounting
Statement in order to permit Purchaser to perform or cause to be performed an
audit.  The Accounting Statement shall become final and binding upon the parties
on the thirtieth (30th) day following receipt thereof by Purchaser (the “Final
Settlement Date”) unless Purchaser gives written notice of its disagreement (a
“Notice of Disagreement”) to Seller prior to such date.  Any Notice of
Disagreement shall specify in detail the dollar amount, nature and basis of any
disagreement so asserted.  If a Notice of Disagreement is received by Seller in
a timely manner, then the Parties shall resolve the Dispute (as defined in
Section 16.01) evidenced by the Notice of Disagreement in accordance with
Article XVI.

 
 
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(b)  
Within two (2) Business Days after the Final Settlement Date, Seller shall pay
to Purchaser or Purchaser shall pay to Seller in immediately available funds the
net amount due.  For purposes of this Agreement, the term “Final Statement”
shall mean (i) the revised Statement becoming final pursuant to this Section, or
(ii) upon resolution of any Dispute regarding a Notice of Disagreement, the
revised Statement reflecting such resolutions, which the Parties shall issue, or
cause the Independent Expert or arbitrators to issue, as applicable, following
such resolution.

 
Section 12.03                            Further Cooperation.  Seller and
Operator shall make the Records available to be copied by Purchaser at the
offices of Seller during normal business hours within five (5) Business Days
after the later of the Closing or the end of the Transition Period (as defined
in Section 13.06) to the extent the Records are in the possession of Seller and
are not subject to contractual restrictions on transferability. Seller shall
have the right to retain originals of any of the Records and the rights granted
under Section 17.03.
 
After the Closing Date, each Party, at the request of the other and without
additional consideration, shall execute and deliver, or shall cause to be
executed and delivered, from time to time such further instruments of conveyance
and transfer and shall take such other action as the other Party may reasonably
request to convey and deliver the Assets to Purchaser and to accomplish the
orderly transfer of the Assets to Purchaser in the manner contemplated by this
Agreement. After the Closing, the Parties will cooperate to have all proceeds
received attributable to the Assets be paid to the proper Party hereunder and to
have all expenditures to be made with respect to the Assets be made by the
proper Party hereunder.
 
Article XIII
 
Operation of the Assets
 
Section 13.01                            Operations after Effective Time. Seller
agrees, from and after the date hereof until Closing, except as expressly
contemplated by this Agreement, as expressly consented to in writing by
Purchaser, or in situations wherein emergency action is taken in the face of
risk to life, property or the environment, to:
 
(a)  
operate the Assets in the usual, regular and ordinary manner consistent with
past practice;

 
(b)  
maintain the books of account and records relating to the Assets in the usual,
regular and ordinary manner, in accordance with the usual accounting practices
of each such Person;

 
(c)  
not plug or abandon any well located on the Assets without Purchaser’s prior
written consent;

 
(d)  
not transfer, sell, mortgage, pledge or dispose of any material portion of the
Assets other than the sale and/or disposal of hydrocarbons in the ordinary
course of business and sales of equipment that is no longer necessary in the
operation of the Assets or for which replacement equipment has been obtained;
and

 
(e)  
preserve in full force and effect all oil and gas leases, operating agreements,
easements, rights-of-way, permits, licenses and agreements that relate to the
Assets, save and except those that expire from primary terms.

 
(f)  
submit to Purchaser for prior written approval, all requests for operating or
capital expenditures relating to the Assets that involve individual commitments
of more than $40,000, and

 
(g)  
use commercially reasonable efforts to maintain its relationships with
suppliers, customers and others having material business relations with Seller
with respect to the Assets so that they will be preserved for Purchaser on and
after the Closing Date; and

 
 
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(h)  
maintain all insurance currently maintained by Seller with respect to the Assets
and waive any rights of subrogation against Purchaser with respect thereto and,
upon the request of Purchaser, cause Purchaser to be named as an additional
insured thereunder (except with respect to any such Workers’ Compensation
Insurance) for the period commencing on the date of the execution of this
Agreement through the earlier to occur of the Closing or the termination of this
Agreement pursuant to Section 11.01 and cause the insurance underwriters to
provide a waiver of subrogation against Purchaser with respect thereto;
provided, however, that all costs and expenses associated with the naming of
Purchaser as an additional insured thereunder shall be borne by Purchaser.

 
(i)  
Purchaser hereby consents to the nominated installation of an artificial lift
system on the Rosewood Plantation 21-H well. Expenditure for such operation is
expected to occur prior to closing hereunder. Purchaser makes a binding
commitment to pay Seller’s share of costs associated with such operation.
Additionally, Purchaser agrees to pay Seller’s share of lease delay rentals
which are due before Closing. Buyer’s maximum commitment for the artificial lift
system and lease delay rentals is $260,000. In the unlikely event that such
payment has been made and the parties fail to close under this Agreement for any
reason other than Purchaser’s election under Section 11.01(f), Purchaser shall
be reimbursedfrom a block of unrestricted shares of Pryme Energy Limited
equivalent in value to  the amounts advanced by Purchaser using a VWAP share
price. In the event the sole reason for the transaction not closing is the
election by Purchaser under 11.01(f0 that it is dissatisfied with acquisition as
determined by Purchaser in its sole discretion with no reason being required,
Purchaser shall receive no consideration for the amounts advanced by Purchaser.

 
(j)  
Due to the complications of obtaining the consent of the other working interest
owners for a comprehensive work over of the Deshotel’s 20-H well, Purchaser’s
workover plans, upon closing hereunder, may be limited to, initially,
acidization and/or installation of an artificial lift system. At Purchaser’s
request, Seller agrees to nominate Purchaser’s plan for the Deshotels 20-H well
with the final vote scheduled to occur before the closing hereunder.

 
Section 13.02                            Limitations on the Operational
Obligations and Liabilities of Seller.  From and after the date of execution of
this Agreement and until the Closing, and subject to the provisions of
applicable operating and other agreements, Seller shall use its reasonable
efforts to operate the Assets and use its reasonable efforts to cause any other
operators to operate and administer the Assets in a manner consistent with its
past practices, and shall carry on its business with respect to the Assets in
substantially the same manner as before execution of this Agreement.  Purchaser
acknowledges that Seller owns undivided interests in some or all of the Assets,
and Purchaser agrees that the acts or omissions of the other working interest
owners shall not constitute a violation of the provisions of this Article XIII,
nor shall any action required by a vote of working interest owners constitute
such a violation so long as Seller has voted its interests in a manner that
complies with the provisions of this Article XIII.
 
Section 13.03                            Operation of the Assets After the
Closing.  Purchaser or its nominee shall take over operations of the Assets
pursuant to the terms of the operating agreements effective upon Closing.
 
Section 13.04                            Casualty Loss.
 
(a)  
Purchaser shall assume all risk of loss with respect to, and any change in the
condition of, the Assets from the date of this Agreement until the Closing,
including with respect to the depletion of Hydrocarbons, the watering-out of any
well, the collapse of casing, sand infiltration of wells, and the depreciation
of personal property.

 
 
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(b)  
If after the date of this Agreement and prior to the Closing any part of the
Assets shall be damaged or destroyed by fire or other casualty or if any part of
the Assets shall be taken in condemnation or under the right of eminent domain
or if proceedings for such purposes shall be pending or threatened, this
Agreement shall remain in full force and effect notwithstanding any such
destruction, taking or proceeding, or the threat thereof and the Parties shall
proceed with the transactions contemplated by this Agreement notwithstanding
such destruction or taking without reduction of the Purchase Price, but subject
to Section 13.04(c).

 
(c)  
Notwithstanding Section 13.04(a), in the event of any loss described in Section
13.04(b), at the Closing, Seller shall pay to Purchaser all sums paid to Seller
by third parties by reason of the destruction or taking of such Assets (up to
the Allocated Value thereof), including any sums paid pursuant to any policy or
agreement of insurance or indemnity, and shall assign, transfer and set over
unto Purchaser all of the rights, title and interest of Seller in and to any
claims, causes of action, unpaid proceeds or other payments from third parties,
including any policy or agreement of insurance or indemnity, arising out of such
destruction or taking. Notwithstanding anything to the contrary in this Section
13.04, Seller shall maintain any currently existing insurance coverage with
respect to any of the Assets.

 
Article XIV
 
Obligations and Indemnification
 
Section 14.01                            Retained Obligations.  Provided that
the Closing occurs, Seller shall retain (a) all obligations and liabilities of
Seller for the payment or improper payment of royalties, rentals and other
similar payments under the Leases relating to the Subject Interests accruing
prior to the Effective Time; (b) all obligations of Seller under the Contracts
for (i) overhead charges related to periods prior to the Effective Time, (ii)
costs and expenses incurred prior to the Effective Time for goods and services
provided prior to the Effective Time, and (iii) other payment obligations that
accrue and become due prior to the Effective Time; (c) all liability of Seller
to third parties for personal injury or death to the extent occurring prior to
the Effective Time as a result of the operation of the Assets; (d) ad valorem,
property, severance and similar taxes attributable to the period of time prior
to the Effective Time retained by Seller under Section 9.02; (e) environmental
liabilities incurred prior to the Effective Time  (collectively, the “Retained
Obligations”). This Section does not modify or limit the liability or
obligations of Seller under Section 15.03
 
Section 14.02                            Seller’s Indemnification – Third Party
Non-Environmental Claims.  Provided that the Closing occurs, Seller shall
release, defend, indemnify and hold harmless Purchaser, its partners, and their
respective officers, directors, employees, agents, representatives, members,
shareholders, affiliates and subsidiaries (collectively, the “Purchaser
Indemnitees”) from and against any and all Third Party non-environmental claims
relating to Seller’s ownership or operation of the Assets prior to the Effective
Time or as a result of, arising out of, or related to the Retained Obligations.
 
Section 14.03                            Seller’s Indemnification – Third Party
Environmental Claims.  Provided that the Closing occurs, Seller shall release,
defend, indemnify and hold harmless Purchaser, its partners, and their
respective officers, directors, employees, agents, representatives, members,
shareholders, affiliates and subsidiaries (collectively, the Purchaser
Indemnitees) from and against any and all Third Party environmental claims
relating to Seller’s ownership or operation of the Assets prior to the Effective
Time or as a result of, arising out of, or related to the Retained Obligations.
 
Section 14.04                            Notices and Defense of Indemnified
Matters.  Each Party shall promptly notify the other Party of any matter of
which it becomes aware and for which it is entitled to indemnification from the
other Party under this Agreement. The indemnifying Party shall be obligated to
defend, at the indemnifying Party’s sole expense, any litigation or other
administrative or adversarial proceeding against the indemnified Party relating
to any matter for which the indemnifying Party has agreed to indemnify and hold
the indemnified Party harmless under this Agreement. However, the indemnified
Party shall have the right to participate with the indemnifying Party in the
defense of any such matter at its own expense.
 
 
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Article XV
 
Limitations on Representations and Warranties
 
Section 15.01                            Disclaimers of Representations and
Warranties.  The express representations and warranties of Seller contained in
this Agreement are exclusive and are in lieu of all other representations and
warranties, express, implied or statutory. EXCEPT FOR THE EXPRESS
REPRESENTATIONS OF SELLER IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES THAT SELLER
HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIM AND NEGATE, AND PURCHASER
HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT
COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (a) PRODUCTION RATES,
RECOMPLETION OPPORTUNITIES, DECLINE RATES, OR THE QUALITY, QUANTITY OR VOLUME OF
THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (b) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO PURCHASER
BY OR ON BEHALF OF SELLER. SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND PURCHASER
HEREBY WAIVES, AS TO PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND
FIXTURES CONSTITUTING A PART OF THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF PURCHASER UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE,
(v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR
UNKNOWN, (vi) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, IT
BEING THE EXPRESS INTENTION OF PURCHASER AND SELLER THAT THE PERSONAL PROPERTY,
EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES INCLUDED IN THE ASSETS SHALL BE
CONVEYED TO PURCHASER, AND PURCHASER SHALL ACCEPT SAME, AS IS, WHERE IS, WITH
ALL FAULTS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND PURCHASER
REPRESENTS TO SELLER THAT PURCHASER WILL MAKE OR CAUSE TO BE MADE SUCH
INSPECTIONS WITH RESPECT TO SUCH PERSONAL PROPERTY, EQUIPMENT, INVENTORY,
MACHINERY AND FIXTURES AS PURCHASER DEEMS APPROPRIATE. SELLER AND PURCHASER
AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE
DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE “CONSPICUOUS”
DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
 
Section 15.02                            Independent Investigation.  Purchaser
represents and acknowledges that it is knowledgeable of the oil and gas business
and of the usual and customary practices of producers such as Seller and that it
has had (or will have prior to the Closing) access to the Assets, the officers
and employees of Seller, and the books, records and files of Seller relating to
the Assets, and in making the decision to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser has relied solely on
the basis of its own independent due diligence investigation of the Assets and
upon the representations and warranties made in Article V, and not on any other
representations or warranties of Seller or any other person or entity.
 
Section 15.03                            Survival.  The representations,
warranties, covenants and obligations of Seller and Purchaser under this
Agreement shall indefinitely survive the Closing.
 
Article XVI
 
Dispute Resolution
 
Section 16.01                            General.  Any and all claims, Disputes,
controversies or other matters in question arising out of or relating to title
issues, environmental issues, or calculation of the Statement or revisions
thereto (all of which are referred to herein as “Disputes” which term shall not
include any other disputes claims, disputes, controversies or other matters in
question arising under this Agreement) shall be resolved in the manner
prescribed by this Article XVI.
 
 
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Section 16.02                            Senior Management.  If a Dispute occurs
that the senior representatives of the Parties responsible for the transaction
contemplated by this Agreement have been unable to settle or agree upon within a
period of five (5) days after such Dispute arose, Seller shall nominate and
commit one of its senior officers, and Purchaser shall nominate and commit one
of its senior officers, to meet at a mutually agreed time and place not later
than ten (10) days after the Dispute has arisen to attempt to resolve same. If
such senior management have been unable to resolve such Dispute within a period
of five (5) days after such meeting, or if such meeting has not occurred within
fifteen (15) days following such Dispute arising, then either Party shall have
the right, by written notice to the other, to resolve the Dispute through the
relevant Independent Expert pursuant to Section 16.03.
 
Section 16.03                            Dispute by Independent Expert.
 
(a)  
Each Party shall have the right to submit Disputes regarding title issues,
environmental issues, or calculation of the Statement or revisions thereto, to
an independent expert appointed in accordance with this Section 16.03 (each, an
“Independent Expert”), who shall serve as sole arbitrator. The Independent
Expert shall be appointed by mutual agreement of the Parties from among
candidates with experience and expertise in the area that is the subject of such
Dispute, and failing such agreement, such Independent Expert for such Dispute
shall be selected in accordance with the Rules (as defined in Subsection (b) of
this Section 16.03).

 
(b)  
Disputes to be resolved by an Independent Expert shall be resolved in accordance
with mutually agreed procedures and rules and failing such agreement, in
accordance with the rules and procedures of the Texas Arbitration Act and the
Rules of the American Arbitration Association to the extent such Rules do not
conflict with such Texas Arbitration Act or the provisions of this Agreement The
Independent Expert shall be instructed by the Parties to resolve such Dispute as
soon as reasonably practicable in light of the circumstances. The decision and
award of the Independent Expert shall be binding upon the Parties as an award
under the Federal Arbitration Act and final and nonappealable to the maximum
extent permitted by law, and judgment thereon may be entered in a court of
competent jurisdiction and enforced by any Party as a final judgment of such
court.

 
(c)  
The charges and expenses of the arbitrator shall be shared equally by Seller and
Purchaser.

 
(d)  
Any arbitration hearing held pursuant to Section 16.03 shall be held in Houston,
Texas

 
Section 16.04                            Limitation on Arbitration.  ALL OTHER
DISAGREEMENTS, DIFFERENCES, OR DISPUTES ARISING BETWEEN SELLER AND PURCHASER
UNDER THE TERMS OF THIS AGREEMENT (AND NOT COVERED BY SECTION 16.03) SHALL NOT
BE SUBJECT TO ARBITRATION AND SHALL BE DETERMINED BY A COURT OF COMPETENT
JURISDICTION, UNLESS THE PARTIES OTHERWISE MUTUALLY AGREE.
 
 
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Article XVII
 
Miscellaneous
 
Section 17.01                            Names.  As soon as reasonably possible
after the Closing, but in no event later than 45 days after the Closing,
Purchaser shall remove the names of Seller and its affiliates, and all
variations thereof, from all of the Assets and make the requisite filings with,
and provide the requisite notices to, the appropriate federal, state or local
agencies to place the title or other indicia of ownership, including operation
of the Assets, in a name other than the name of the Seller or any of its
affiliates, or any variations thereof.
 
Section 17.02                            Expenses.  Each Party shall be solely
responsible for all expenses, including due diligence expenses, incurred by it
in connection with this transaction, and neither Party shall be entitled to any
reimbursement for such expenses from the other Party.
 
Section 17.03                            Entire Agreement.  This Agreement, the
documents to be executed hereunder, and the exhibits attached hereto 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.  No supplement, amendment, alteration, modification or waiver of
this Agreement shall be binding unless executed in writing by the Parties and
specifically referencing this Agreement.
 
Section 17.04                            Waiver.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
 
Section 17.05                            Publicity.  Neither Seller nor
Purchaser will issue any public announcement or press release concerning this
transaction without the written consent of the other Party (except as required
by law and in such case with prior written agreement between the Parties on the
wording of the announcement or press release).
 
Section 17.06                            Construction.  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.
The Parties acknowledge that they have participated jointly in the negotiation
and drafting of this Agreement and as such the Parties agree that if an
ambiguity or question of intent or interpretation arises hereunder, this
Agreement shall not be construed more strictly against one Party than another on
the grounds of authorship.
 
Section 17.07                            No Third Party Beneficiaries.  Except
as provided in Sections 14.04 and 14.05, nothing in this Agreement shall provide
any benefit to any Third Party or entitle any Third Party to any claim, cause of
action, remedy or right of any kind, it being the intent of the Parties that
this Agreement shall otherwise not be construed as a Third Party beneficiary
contract.
 
Section 17.08                            Assignment.  This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors, assigns and legal representatives.
 
Section 17.09                            Governing Law.  This Agreement, other
documents delivered pursuant hereto and the legal relations between the Parties
shall be governed and construed in accordance with the laws of the State of
Texas, without giving effect to principles of conflicts of laws that would
result in the application of the laws of another jurisdiction.  The Parties
agree to venue in Harris County, Texas.
 
 
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Section 17.10                            Notices.  Any notice, communication,
request, instruction or other document required or permitted hereunder shall be
given in writing and delivered in person or sent by U.S. Mail postage prepaid,
return receipt requested, overnight courier or facsimile to the addresses of
Seller and Purchaser set forth below. Any such notice shall be effective only
upon receipt.
 
Purchaser:

Willow Creek Enterprises Inc.
P.O. Box 456
Pacific Palisades, CA 90272

Attention:  Larry L. Eastland, Ph. D.
Facsimile: 208-342-8888

Seller:

Pryme Oil and Gas LLC
3500 Washington, Avenue, Suite 200
Houston, Texas 77007

Attention: Ryan Messer
Facsimile: 713-401-9806

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

Section 17.11                            Severability.  If any term or other
provision of this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect and the Parties
shall negotiate in good faith to modify this Agreement so as to effect their
original intent as closely as possible in an acceptable manner to the end that
the transactions contemplated hereby are fulfilled to the extent possible.
 
Section 17.12                            Time of the Essence.  Time shall be of
the essence with respect to all time periods and notice periods set forth in
this Agreement.
 
Section 17.13                            Counterpart Execution.  This Agreement
may be executed in any number of counterparts, and each counterpart hereof shall
be effective as to each party that executes the same whether or not all of such
parties execute the same counterpart.  If counterparts of this Agreement are
executed, the signature pages from various counterparts may be combined into one
composite instrument for all purposes.  All counterparts together shall
constitute only one Agreement, but each counterpart shall be considered an
original.
 
IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered this
Agreement as of the date first set forth above.
 
[remainder of page left blank intentionally]
 

 
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SELLER:

Pryme Oil and Gas LLC

By:_____________________
Ryan Messer, President

PURCHASER:

Willow Creek Enterprises Inc.

By:________________________
Larry L. Eastland, Ph. D., Chairman

Additional signatory as the provision of Section 13.01(i) only:

Pryme Energy Limited

By:_____________________________

 

 
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EXHIBIT A
 
SUBJECT INTERESTS
 
Attached hereto and made a part of that certain Sale and Purchase Agreement
between Pryme Oil and Gas LLC, as Seller, and Willow Creek Enterprises Inc., as
Purchaser
 
Leases described by the following Memorandums and all amendments to such leases:
 

 
 
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EXHIBIT B
 
WELLS AND INTERESTS
 
Attached hereto and made a part of that certain Sale and Purchase Agreement
between Pryme Oil and Gas LLC, as Seller, and Willow Creek Enterprises Inc., as
Purchaser
 
Total Well and Lease Interests From  Seller Delivered to Purchaser
                   
API
Field
Well Name & No.
Status
Classification
WI
RI
Comments

 

 

 

 
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EXHIBIT C
 
ASSIGNMENT AND BILL OF SALE
 
Attached hereto and made a part of that certain Sale and Purchase Agreement
between Pryme Oil and Gas LLC, as Seller, and Willow Creek Enterprises Inc., as
Purchaser

 
THIS ASSIGNMENT AND BILL OF SALE (this “Assignment”), effective as of 9:00 a.m.
on April 1, 2014 (the “Effective Time”), is made by Pryme Oil and Gas, (the
“Assignor”), whose address is 3500 Washington Ave., Suite 200, Houston, Texas
77007 to Willow Creek Enterprises Inc., a Delaware corporation (the “Assignee”),
whose address is 175 Great Neck Road, Suite 403, Great Neck, NY 11021.
 
ARTICLE I
 
Granting and Habendum
 
For Ten Dollars ($10.00) and other good and valuable consideration, the receipt,
and sufficiency of which are hereby acknowledged, Assignor does hereby grant,
bargain, sell, transfer, convey, set over, assign and deliver unto Assignee, its
successors and assigns, effective for all purposes as of the Effective Time and
subject to the matters set forth herein, the working interests and net revenue
interests set forth in Exhibit B in the oil and gas leases set forth in Exhibit
A and the working interest set forth in Exhibit B in the rights, personal
property and fixtures associated with the oil and gas leases as set forth
below.  The term “Assets” shall mean the working interests and net revenue
interests set forth in Exhibit B in the oil and gas leases set forth in Exhibit
A and the working interest set forth in Exhibit B in the rights, personal
property and fixtures associated with the oil and gas leases as set forth below:
 
(a)           the leasehold estates in and to the oil, gas and mineral leases
described or referred to in Exhibit A (the “Leases”), assignments and other
documents of title described or referred to in Exhibit A, all as more
specifically described in Exhibit A (collectively, the “Subject Interests,” or
singularly, a “Subject Interest”);
 
(b)           all rights incident to the Subject Interests, including, without
limitation, (i) all rights with respect to the use and occupation of the surface
of and the subsurface depths under the Subject Interests; (ii) all rights with
respect to any pooled, communitized or unitized acreage by virtue of any Subject
Interest being a part thereof, including all Hydrocarbon production after the
Effective Time attributable to the Subject Interests or any such pool or unit
allocated to any such Subject Interest;
 
(c)           to the extent assignable or transferable, all easements,
rights-of-way, surface leases, servitudes, permits, licenses, franchises and
other estates or similar rights and privileges directly related to or used
solely in connection with the Subject Interests (“Easements”), including,
without limitation, the Easements described on Exhibit A;
 
(d)           to the extent assignable or transferable, all personal property,
equipment, fixtures, inventory and improvements located on or used solely in
connection with the Subject Interests and the Easements or with the production,
treatment, sale, or disposal of oil, gas or other hydrocarbons (collectively,
“Hydrocarbons”), byproducts or waste produced therefrom or attributable thereto,
including, without limitation, all wells located on the lands covered by the
Subject Interests or on lands with which the Subject Interest have been pooled,
communitized or unitized (whether producing, shut in or abandoned, and whether
for production, injection or disposal), including, without limitation, the wells
described in Exhibit B to the Purchase Agreement described below, wellhead
equipment, pumps, pumping units, flowlines, gathering systems, piping, tanks,
buildings, treatment facilities, injection facilities, disposal facilities,
compression facilities, and other materials, supplies, equipment, facilities and
machinery (collectively, “Personal Property”);
 
 
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(e)           to the extent assignable or transferable, all contracts,
agreements and other arrangements that relate to the Subject Interests, the
Leases or the Easements, including, without limitation, production sales
contracts, farmout agreements, operating agreements, service agreements and
similar agreements (collectively, the “Contracts”);
 
(f)           to the extent assignable or transferable, all books, records,
files, muniments of title, reports and similar documents and materials,
including, without limitation, lease records, well records, and division order
records, well files, title records (including abstracts of title, title opinions
and memoranda, and title curative documents related to the Assets), contracts
and contract files, and correspondence, that relate to the foregoing interests
in the possession of, and maintained by, Assignor (collectively, the “Records”);
and
 
(g)           All seismic data relating to the Leases (the Seismic Data), more
specifically known as the  Turner Bayou 3D dataset, plus all 2D seismic lines
(including all raw, processed and interpreted data and reports)  and to the
extent transferable, licenses to Seller’s complete data library pertaining to
the Assets including but not limited to geologic, geophysical, geochemical,
engineering, financial, prior drilling and production histories, legal and
cultural information, reports, studies and data accumulated by Seller in the
acquisition and development of the Assets
 
(h)           NOTWITHSTANDING THE FOREGOING, the Assets shall not include, and
there is excepted, reserved and excluded from the assignment contemplated hereby
(collectively, the “Excluded Assets”): (i) all trade credits and all accounts,
instruments and general intangibles (as such terms are defined in the Texas
Uniform Commercial Code) attributable to the Assets with respect to any period
of time prior to the Effective Time; (ii) all claims and causes of action of
Assignor (A) arising from acts, omissions or events, or damage to or destruction
of property, occurring prior to the Effective Time, (B) arising under or with
respect to any of the Contracts that are attributable to periods of time prior
to the Effective Time (including claims for adjustments or refunds), or (C) with
respect to any of the other Excluded Assets; (iii) all rights and interests of
Assignor (A) under any policy or agreement of insurance or indemnity, (B) under
any bond, or (C) to any insurance or condemnation proceeds or awards arising, in
each case, from acts, omissions or events, or damage to or destruction of
property, occurring prior to the Effective Time; (iv) all Hydrocarbons produced
from or attributable to the Subject Interests with respect to all periods prior
to the Effective Time, together with all proceeds from the sale of such
Hydrocarbons; (v) all claims of Assignor for refunds of or loss carry forwards
with respect to (A) ad valorem, severance, production or any other taxes
attributable to any period prior to the Effective Time, (B) income or franchise
taxes, or (C) any taxes attributable to the other Excluded Assets, and such
other refunds, and rights thereto, for amounts paid in connection with the
Assets and attributable to the period prior to the Effective Time, including
refunds of amounts paid under any gas gathering or transportation agreement;
(vi) all amounts due or payable to Assignor as adjustments to insurance premiums
related to the Assets with respect to any period prior to the Effective Time;
(vii) all proceeds, income or revenues (and any security or other deposits made)
attributable to (A) the Assets for any period prior to the Effective Time, or
(B) any other Excluded Assets; (viii) all vehicles, personal computers and
associated peripherals and all radio, and telephone and other communication
equipment; (ix) all of Assignor’s proprietary computer software, technology,
patents, trade secrets, copyrights, names, trademarks, logos and other
intellectual property; (x) all of Assignor’s rights and interests in geological
and geophysical data which cannot be transferred without the consent of or
payment to any Third Party; (xi) all documents and instruments of Assignor that
may be protected by an attorney-client privilege; (xii) data and other
information that cannot be disclosed or assigned to Assignee as a result of
confidentiality or similar arrangements under agreements with persons
unaffiliated with Assignor; (xiii) all audit rights arising under any of the
Contracts or otherwise with respect to any period prior to the Effective Time or
to any of the other Excluded Assets; (xiv) suspense accounts related to the
Assets; and (xv) all corporate, partnership, income tax and financial records of
Assignor.
 
TO HAVE AND TO HOLD the Assets, together with all and singular the rights,
privileges, contracts and appurtenances, in any way appertaining or belonging
thereto, unto Assignee, its successors and assigns, forever, subject to the
matters set forth herein.
 
 
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ARTICLE II
 
 Warranty of Title and Disclaimers
 
Section 2.01 Warranty of Title. Seller hereby agrees to warrant and defend title
to the Assets unto Purchaser and its successors and assigns against every person
whomsoever lawfully claiming or to claim the same or any part thereof, subject,
however, to the Permitted Encumbrances (as such term is defined in the Purchase
Agreement described below) and the other matters set forth herein. In no event
shall the foregoing warranty extend to or be enforceable by any party other than
Purchaser, and Purchaser’s successors and assigns in all or part of the Assets.
 
Section 2.02                      Disclaimer. ASSIGNEE ACKNOWLEDGES THAT
ASSIGNOR HAS NOT MADE, AND ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND
ASSIGNEE HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS,
IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (a) PRODUCTION
RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR
THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY,
ATTRIBUTABLE TO THE ASSETS; (b) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY
INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR
HEREAFTER FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNOR.NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN THIS ASSIGNMENT, ASSIGNOR EXPRESSLY DISCLAIMS AND
NEGATES, AND ASSIGNEE HEREBY WAIVES, AS TO PERSONAL PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF THE ASSETS (i) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF
PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR
RETURN OF THE PURCHASE PRICE, (v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM
FROM DEFECTS, WHETHER KNOWN OR UNKNOWN, (vi) ANY AND ALL IMPLIED WARRANTIES
EXISTING UNDER APPLICABLE LAW,  IT BEING THE EXPRESS INTENTION OF ASSIGNEE AND
ASSIGNOR THAT THE PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND
FIXTURES INCLUDED IN THE ASSETS SHALL BE CONVEYED TO ASSIGNEE, AND ASSIGNEE
SHALL ACCEPT SAME, AS IS, WHERE IS, WITH ALL FAULTS AND IN THEIR PRESENT
CONDITION AND STATE OF REPAIR AND ASSIGNEE REPRESENTS TO ASSIGNOR THAT ASSIGNEE
HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO SUCH PERSONAL
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS ASSIGNEE DEEMS
APPROPRIATE. ASSIGNOR AND ASSIGNEE AGREE THAT, TO THE EXTENT REQUIRED BY
APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED
IN THIS SECTION ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE
LAW, RULE OR ORDER.
 
ARTICLE III
 
Miscellaneous
 
Section 3.01 Construction. The captions in this Assignment are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Assignment. Assignor and Assignee
acknowledge that they have participated jointly in the negotiation and drafting
of this Assignment and as such they agree that if an ambiguity or question of
intent or interpretation arises hereunder, this Assignment shall not be
construed more strictly against one party than another on the grounds of
authorship.
 
Section 3.02 No Third Party Beneficiaries. Nothing in this Assignment shall
provide any benefit to any Third Party or entitle any thirty party to any claim,
cause of action, remedy or right of any kind, it being the intent of the parties
hereto that this Assignment shall otherwise not be construed as a Third Party
beneficiary contract.
 
Section 3.03 Assignment. This Assignment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
 
Section 3.04 Governing Law. This Assignment, other documents delivered pursuant
hereto and the legal relations between the parties hereto shall be governed and
construed in accordance with the laws of the State of Texas, without giving
effect to principles of conflicts of laws that would result in the application
of the laws of another jurisdiction.
 
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Section 3.05 Counterpart Execution. This Assignment may be executed in any
number of counterparts, and each counterpart hereof shall be effective as to
each party that executes the same whether or not all of such parties execute the
same counterpart. If counterparts of this Assignment are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes. All counterparts together shall constitute only one
Assignment, but each counterpart shall be considered an original.
 
Section 3.06 Recording. To facilitate the recording or filing of this
Assignment, the counterpart to be recorded in a given county may contain only
that portion of the exhibits that describes Assets located in that county. In
addition to filing this Assignment, the parties hereto shall execute and file
with the appropriate authorities, whether federal, state or local, all forms or
instruments required by applicable law to effectuate the conveyance contemplated
hereby. Said instruments shall be deemed to contain all of the exceptions,
reservations, rights, titles and privileges set forth herein as fully as though
the same were set forth in each such instrument. The interests conveyed by such
separate assignments are the same, and not in addition to the Assets conveyed
herein.
 
Section 3.07 Purchase Agreement. This Assignment is subject to all of the terms
and conditions of the Sale and Purchase Agreement dated May ___, 2014 by and
between Assignor and Assignee (the “Agreement”).
 
IN WITNESS WHEREOF, this Assignment is executed by the parties on the date of
their respective acknowledgments below, but shall be effective for all purposes
as of the Effective Time.
 

 
ASSIGNOR: PRYME OIL AND GAS LLC
 
By:                                                                        
Name: Ryan Messer
Title:  President
 
 
ASSIGNEE: WILLOW CREEK ENTERPRISES INC.
 
By:
Name:  Larry L. Eastland, Ph. D.
Title: Chairman
 

[Insert Acknowledgments]

 
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EXHIBIT D
 
2014 BUDGET FOR INSTALLATION OF ARTIFICIAL LIFT SYSTEM ON THE ROSEWOOD
PLANTATION 21-H WELL
 
Attached hereto and made a part of that certain Sale and Purchase Agreement
between Pryme Oil and Gas LLC, as Seller, and Willow Creek Enterprises Inc., as
Purchaser
 

 
 

 
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