Exhibit 10.2

 

PURCHASE AND SALE AGREEMENT

 

BY AND AMONG

 

MIDSTATES PETROLEUM COMPANY LLC

 

(“SELLER”)

 

AND

 

PRESIDIO INVESTMENT HOLDINGS LLC

 

(“BUYER”)

 

DATED AS OF

 

March 29, 2018

 

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TABLE OF CONTENTS

 

 

 

Page

ARTICLE 1

 

 

 

DEFINITIONS

1

 

 

 

ARTICLE 2

 

 

 

PURCHASE AND SALE

9

 

 

 

2.1

Interests

9

2.2

Wells

9

2.3

Equipment

9

2.4

Vehicles

10

2.5

Production

10

2.6

Easements and Surface Agreements

10

2.7

Contract Rights and Permits

10

2.8

Files and Records

10

2.9

Retained Assets

11

 

 

 

ARTICLE 3

 

 

 

PURCHASE PRICE AND ALLOCATION

11

 

 

 

3.1

Base Purchase Price

11

3.2

Equity Commitment Letter

12

3.3

Adjustments to the Base Purchase Price

12

3.4

Allocation of Base Purchase Price

14

 

 

 

ARTICLE 4

 

 

 

ACCESS TO ASSETS AND DATA; DISCLAIMERS; GOVERNMENTAL REVIEWS

14

 

 

 

4.1

Access

14

4.2

Disclaimer

15

4.3

Governmental Reviews

16

 

 

 

ARTICLE 5

 

 

 

SELLER’S REPRESENTATIONS AND WARRANTIES

16

 

 

 

5.1

Existence

17

5.2

Authority

17

5.3

No Conflicts

17

5.4

Compliance

17

5.5

Payment of Royalties

17

5.6

Taxes

17

5.7

Material Contracts

18

 

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5.8

Permits

18

5.9

Litigation and Claims

18

5.10

Sale Contracts

18

5.11

Notices

18

5.12

Take-or-Pay

18

5.13

Timely Payment

18

5.14

Imbalances

19

5.15

Outstanding Obligations

19

5.16

Brokers

19

5.17

Consents

19

5.18

Preferential Purchase Rights

19

5.19

Supplements to Schedules

19

5.20

Condemnation

19

5.21

Payout Balances

19

5.22

Environmental Matters

20

5.23

Audits

20

5.24

Personal Property

20

5.25

Current Plugging Obligations

20

5.26

Easements

20

5.27

No Affiliate Relationship

20

5.28

Oil and Gas Operations

20

5.29

Hedges

20

5.30

Seller’s Credit Obligations

20

5.31

Anti-Corruption and Economic Sanctions

20

 

 

 

ARTICLE 6

 

 

 

BUYER’S REPRESENTATIONS AND WARRANTIES

21

 

 

 

6.1

Information

21

6.2

Knowledge and Experience

21

6.3

No Conflicts

22

6.4

No Warranty

22

6.5

Existence

22

6.6

Authority

22

6.7

Liability for Broker’s Fees

23

6.8

Financial Resources

23

6.9

Qualification to Assume Operatorship

23

6.10

Consents

23

6.11

Litigation

23

6.12

No Known Title Defects

23

6.13

No Known Environmental Defects

23

 

 

 

ARTICLE 7

 

 

 

TITLE

23

 

 

 

7.1

Title Defects

23

7.2

Additional Interests

24

 

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7.3

Notices

25

7.4

Adjustments to Base Purchase Price

25

7.5

Deductible for Title, Environmental, or Casualty Defects

27

7.6

Termination Threshold for Defects

27

 

 

 

ARTICLE 8

 

 

 

ENVIRONMENTAL AND ENVIRONMENTAL INDEMNITY

27

 

 

 

8.1

Acceptance of Environmental Condition

27

8.2

Remedy for Environmental Defects

29

8.3

Acceptance of Environmental Condition

30

8.4

NORM

31

8.5

Environmental Indemnities

31

 

 

 

ARTICLE 9

 

 

 

THIRD-PARTY CONSENTS AND PREFERENTIAL PURCHASE RIGHTS

32

 

 

 

9.1

Third Party Notices

32

9.2

Third-Party Exercise

32

9.3

Third-Party Failure to Purchase

32

9.4

Required Consents

32

 

 

 

ARTICLE 10

 

 

 

CONDITIONS TO CLOSING; SETTLEMENT STATEMENT; CLOSING

33

 

 

 

10.1

Seller’s Conditions to Closing

33

10.2

Buyer’s Conditions to Closing

34

10.3

Closing Settlement Statement

35

10.4

Closing Date and Place

35

10.5

Closing Activities

35

 

 

 

ARTICLE 11

 

 

 

POST-CLOSING OBLIGATIONS

36

 

 

 

11.1

Recordation and Filing of Documents

37

11.2

Records

37

11.3

Final Settlement Statement

37

11.4

Cooperation with Seller’s Retained Assets

37

11.5

Suspense Accounts

37

11.6

Further Assurances

38

11.7

Anti-Corruption and Economic Sanctions

38

 

 

 

ARTICLE 12

 

 

 

TAXES

38

 

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12.1

Property Taxes

38

12.2

Production Taxes

39

12.3

Other Taxes

39

 

 

 

ARTICLE 13

 

 

 

OWNERSHIP OF ASSETS

39

 

 

 

13.1

Distribution of Production

39

13.2

Proration of Income and Expenses

39

13.3

Notice to Remitters of Proceeds

40

13.4

Production Imbalances

40

13.5

Pipeline and Other Non-Wellhead Imbalances

40

 

 

 

ARTICLE 14

 

 

 

INTERIM OPERATIONS

41

 

 

 

14.1

Standard of Care

41

14.2

Liability of Operator

41

14.3

Removal of Signs

41

14.4

Third-Party Notifications

41

14.5

Seller’s Credit Obligations

41

14.6

Employment Matters

42

 

 

 

ARTICLE 15

 

 

 

EXCHANGE PROVISION

43

 

 

 

ARTICLE 16

 

 

 

ASSUMPTION OF LIABILITY AND GENERAL INDEMNIFICATION

43

 

 

 

16.1

Buyer’s Assumption of Obligations

43

16.2

Definitions

45

16.3

Buyer’s General Indemnity

45

16.4

Seller’s General Indemnity

45

16.5

Limitation on Indemnification

46

16.6

Further Limitation on Indemnification

47

16.7

Indemnification Procedures

47

16.8

Remedies

48

 

 

 

ARTICLE 17

 

 

 

CASUALTY LOSS

48

 

 

 

ARTICLE 18

 

 

 

NOTICES

49

 

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ARTICLE 19

 

 

 

TERMINATION

50

 

 

 

19.1

Termination

50

19.2

Liabilities Upon Termination; Termination Fee

51

 

 

 

ARTICLE 20

 

 

 

MISCELLANEOUS

51

 

 

 

20.1

Entire Agreement

51

20.2

Survival

51

20.3

Arbitration

52

20.4

Confidentiality Agreement

52

20.5

Choice of Law

53

20.6

Assignment

53

20.7

No Admissions

53

20.8

Waivers and Amendments

53

20.9

Counterparts

53

20.10

Third-Party Beneficiaries

54

20.11

Specific Performance

54

20.12

Public Communications

54

20.13

Headings

54

20.14

Expenses

54

20.15

No Recourse

54

20.16

References

55

 

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List of Exhibits:

 

Exhibit “A-1”

—

Schedule of Leases

Exhibit “A-2”

—

Schedule of Surface Fee

Exhibit “B”

—

Wells

Exhibit “C-1”

—

Allocation Values for Wells

Exhibit “C-2”

—

Allocation Values for Leases

Exhibit “D”

—

Conveyance

Exhibit “E”

—

Certificate of Non-Foreign Status

Exhibit “F”

—

Form of Transition Services Agreement

 

List of Schedules:

 

Schedule 2.3

—

Equipment

Schedule 2.6

—

Easements and Surface Agreements

Schedule 2.9

—

Retained Assets

Schedule 5.4

—

Compliance

Schedule 5.7

—

Material Contracts

Schedule 5.7(a)

—

Farm-Out Agreements

Schedule 5.7(b)

—

Material Contracts in default

Schedule 5.8

—

Permits

Schedule 5.9

—

Litigation

Schedule 5.11

—

Notices

Schedule 5.15

—

Outstanding Obligations/AFEs

Schedule 5.17

—

Required Consents

Schedule 5.18

—

Preferential Purchase Rights

Schedule 5.21

—

Payout Balances

Schedule 5.22

—

Environmental Matters

Schedule 11.5

—

Suspense Accounts

Schedule 13.4

—

Production Imbalances

Schedule 14.5

—

Seller’s Credit Obligations

 

vi

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PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”) is made and entered into as
of March 29, 2018 (the “Execution Date”) by and among MIDSTATES PETROLEUM
COMPANY LLC, a Delaware limited liability company, whose address is 321 South
Boston Avenue, Suite 1000, Tulsa, Oklahoma 74103 (“Seller”) and PRESIDIO
INVESTMENT HOLDINGS LLC, a Delaware limited liability company, whose address is
500 W 7th St, STE 803, Fort Worth, Texas 76102 (“Buyer”). Buyer and Seller may
sometimes be referred to in this Agreement individually as a “Party” or
collectively as the “Parties”.

 

WHEREAS, Buyer desires to purchase the Assets (as defined below) from Seller,
and Seller desires to sell the Assets to Buyer on the terms and conditions set
forth below; and

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement,
Buyer has delivered a copy of an equity commitment letter, duly executed by
Buyer and Parent (the “Equity Commitment Letter”).

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Buyer and Seller agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

“Access Agreement” has the meaning set forth in Section 4.1.

 

“Additional Interest” has the meaning set forth in Section 7.2.

 

“Affiliate” means when used with respect to any Person, any other Person that,
directly or indirectly, Controls, is Controlled by, or is under common Control
with, such Person in question.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Allocated Values” has the meaning set forth in Section 3.4.

 

“Asset” or “Assets” has the meaning set forth in Article 2.

 

“Asset Taxes” means ad valorem, property, excise, severance, production or
similar taxes (including any interest, fine, penalty or additions to tax imposed
by Governmental Authorities in connection with such taxes) based upon operation
or ownership of the Assets or the production of Hydrocarbons therefrom, but
excluding, for the avoidance of doubt, Transfer Taxes and income, capital gains
and franchise taxes.

 

“Assumed Imbalance” or “Assumed Imbalances” has the meaning set forth in
Section 13.4.

 

“Assumed Obligations” has the meaning set forth in Section 16.1(a).

 

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“Available Employees” has the meaning set forth in Section 14.6.

 

“Available Employees List” has the meaning set forth in Section 14.6.

 

“Base Purchase Price” has the meaning set forth in Section 3.1.

 

“Business Day” means any day, other than Saturday or Sunday, on which commercial
banks are open for commercial business with the public in Tulsa, Oklahoma.

 

“Buyer” has the meaning set forth in the Preamble.

 

“Buyer Group” has the meaning set forth in Section 16.2.

 

“Casualty Defect” has the meaning set forth in Article 17.

 

“Claim Notice” has the meaning set forth in Section 16.7(b).

 

“Claims” means any and all claims, rights, demands, causes of action,
liabilities (including civil fines), damages, losses, fines, penalties,
sanctions of every kind and character including reasonable fees and expenses of
attorneys, technical experts and expert witnesses, judgments or proceedings of
any kind or character whatsoever, whether arising or founded in law, equity,
statute, contract, tort, strict liability or voluntary settlement and all
expenses, costs and fees (including reasonable attorneys’ fees) in connection
therewith.

 

“Cleanup” has the meaning set forth in Section 8.1(d).

 

“Closing” has the meaning set forth in Section 10.4.

 

“Closing Date” has the meaning set forth in Section 10.4.

 

“Closing Settlement Statement” has the meaning set forth in Section 10.3.

 

“Confidentiality Agreement” has the meaning set forth in Section 20.4.

 

“Consent” means any approval, consent, ratification, waiver, or other
authorization from any Person that is required to be obtained in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement.

 

“Contracts” means all contract rights relating to the Assets, including any
operating agreements, joint venture agreements, unit agreements, orders and
decisions of state, tribal and federal regulatory authorities establishing
units, unit operating agreements, farm-in and farmout agreements, pre-pooling
agreements, pooling or unitization or communitization agreements, processing
agreements, transportation agreements, gathering and processing agreements,
enhanced recovery and injection agreements, balancing agreements, options,
division orders, drilling agreements, exploration agreements, area of mutual
interest agreements, oil and gas production sales or marketing agreements, and
assignments of operating rights, working interests, subleases and rights above
or below certain footage depths or geological formations, to the extent the same
are directly related to the Assets; provided, however, the term “Contract” shall
not include

 

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any (a) master service contract, (b) any other contract or agreement which
precludes assignment for which Seller, using its reasonable efforts, cannot
secure a waiver or consent to assignment prior to Closing by the other
party(ies) to such contract or agreement or (c) any Lease, Easement, Surface
Agreement, Permit or other instrument creating or evidencing an interest in the
Assets or any real or immovable property related to or used in connection with
the operation of any Assets.

 

“Control” means the ability to direct the management and policies of a Person
through ownership of voting shares or other equity rights, pursuant to a written
agreement, or otherwise.  The terms “Controls” and “Controlled by” and other
derivatives shall be construed accordingly.

 

“Conveyances” means the one or more conveyances, assignments, deeds, and bills
of sale, in substantially the form attached as Exhibit “D” or applicable
assignment forms required by Governmental Authorities, conveying the Assets from
Seller to Buyer in accordance with the terms of this Agreement, to be executed
and delivered in accordance with the provisions of Section 10.5(b).

 

“Deductible Amount” has the meaning set forth in Section 7.5.

 

“Due Diligence Period” has the meaning set forth in Section 7.1.

 

“Easements” means rights-of-way, easements, permits, licenses, approvals,
servitudes and franchises specifically acquired for, or used in connection with,
operations for the exploration, production and marketing of oil, gas or other
minerals on or from the Interests or otherwise used in connection with the Wells
or Equipment (including any flowlines or gathering lines whether used for the
gathering of Hydrocarbons or non-Hydrocarbon substances produced in association
therewith, including produced water and saltwater).

 

“Effective Time” means 12:00 a.m. central time on January 1, 2018.

 

“Environmental Adjustment” has the meaning set forth in Section 8.2(a).

 

“Environmental Defect” has the meaning set forth in Section 8.1.

 

“Environmental Laws” means any and all present and future Laws, statutes,
regulations, rules, orders, ordinances, codes, plans, requirements, criteria,
standards, decrees, judgments, injunctions, notices, demand letters, permits,
licenses or determinations issued, or promulgated by any Governmental Authority
now or hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable administrative or judicial interpretation
thereof, pertaining to (a) use, storage, emission, discharge, clean-up, release,
or threatened release of pollutants, contaminants, NORM, chemicals, or
industrial, toxic or hazardous substances (collectively, “Pollutants”) on or
into the environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
Pollutants, (b) health, (c) the environment, or (d) wildlife or natural
resources applicable to the Assets and in effect in or for the jurisdiction in
which the Assets are located, including the Clean Air Act (Air Pollution Control
Act), the Clean Water Act (CWA), the Federal Water Pollution Act, the Rivers and
Harbors Act, the Safe Drinking Water Act, the National Environmental Policy Act
of 1969 (NEPA), the Endangered Species Act (ESA), the Fish and Wildlife
Conservation Act of 1980, the Fish and Wildlife Coordination Act (FWCA), the Oil
Pollution Act, the Comprehensive

 

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Environmental Response, Compensation and Liability Act (CERCLA), the Superfund
Amendments and Reauthorization Act of 1986 (SARA), the Resources Conservation
and Recovery Act (RCRA), the Toxic Substance Control Act, the Occupational,
Safety and Health Act (OSHA), the Emergency Planning and Community Right-To-Know
Act (EPCRA), the Hazardous Materials Transportation Act, the Hazardous and Solid
Waste Amendments of 1984 (HSWA), and any and all other applicable present and
future federal, state and local Laws, statutes, regulations, rules, orders,
ordinances, codes, plans, requirements, criteria, standards, decrees, judgments,
injunctions, notices, demand letters, permits, licenses or determinations whose
purpose is to regulate Pollutants or to conserve or protect health, the
environment, wildlife or natural resources as any of the foregoing are now
existing or may hereafter be amended or interpreted.

 

“Environmental Notice” has the meaning set forth in Section 8.1.

 

“Equipment” has the meaning set forth in Section 2.3.

 

“Equity Commitment Letter” has the meaning set forth in the recitals of this
Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, or any
successor statute thereto, as amended.

 

“ERISA Liability” means any Claim attributable to or arising out of (i) Seller’s
employee benefit plans in which the New Employees (and their eligible dependents
or beneficiaries) participated prior to the Closing or (ii) Seller’s
responsibilities under ERISA applicable to such employee benefit plans.

 

“Execution Date” has the meaning set forth in the Preamble.

 

“Final Settlement Statement” has the meaning set forth in Section 11.3.

 

“Final Suspense Account Statement” has the meaning set forth in Section 11.5.

 

“Governmental Authority” or “Governmental Authorities” means any court or
tribunal (including an arbitrator or arbitral panel) in any jurisdiction
(domestic or foreign) or any federal, tribal, state, county, municipal or other
governmental or quasi-governmental body, agency, authority, department, board,
commission, bureau, official or other authority or instrumentality.

 

“Hire Date” has the meaning set forth in Section 14.6.

 

“Hydrocarbons” has the meaning set forth in Section 2.5.

 

“Imbalance Adjustment” has the meaning set forth in Section 13.4.

 

“Interests” has the meaning set forth in Section 2.1.

 

“Indemnified Party” has the meaning set forth in Section 16.7(a).

 

“Indemnifying Party” has the meaning set forth in Section 16.7(a).

 

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“Knowledge” (whether or not capitalized) of a specified Person means, (a) in the
case of Seller, the present actual knowledge of Terry Leeper — Drilling and
Completions Manager, Rich McCullough — Vice President & Chief Accounting
Officer, Ky Nichols — Vice President — Health, Safety & Environmental and Scott
Weatherholt - Executive Vice President; and (b) in the case of Buyer, the
present actual knowledge of Will Ulrich — Co-Founder, Chris Hammack - Co-founder
and Brett Barnes — Vice President, Land, Legal and Regulatory.

 

“Laws” means any and all laws, statutes, codes, ordinances, permits, licenses,
authorizations, agreements, decrees, writs, orders, awards, judgments,
principles of common law, rules or regulations (including, for the avoidance of
doubt, Environmental Laws) that are promulgated, issued or enacted by a
Governmental Authority having jurisdiction.

 

“Leases” has the meaning set forth in Section 2.1.

 

“Loss” has the meaning set forth in Section 8.1(e).

 

“Lowest Cost Response” has the meaning set forth in Section 8.1(e).

 

“Material Contracts” means (a) all area of mutual interests agreements (other
than customary area of mutual interest provisions in operating agreements),
partnership (other than tax partnerships), joint venture and exploration or
development program agreements, farm-in or farm-out agreements for which
drilling obligations have not been fully satisfied, or participation agreements
relating to Wells, Leases or Surface Fee Interests or otherwise included in the
Assets, (b) all of the oil and gas production sales, gathering, transportation,
treating, marketing and processing agreements relating to the Wells, Leases or
Surface Fee Interests, other than such agreements which are terminable by Seller
without penalty on 30 or fewer days’ notice, (c) any Contract that constitutes a
lease (other than a Lease) under which Seller is the lessor or the lessee of
real or personal property which lease (i) cannot be terminated without penalty
upon thirty (30) days’ or less notice and (ii) involves an annual base rental of
more than $50,000, (d) any Contract with any Affiliate of Seller or among two or
more Sellers, (e) any Contract related to seismic data, (f) any Contract
relating to salt water disposal or compression that would reasonably be expected
to result in an annual expenditure of more than $50,000 in any calendar year,
(g) any Contract that constitutes a non-competition agreement or any other
similar agreement that purports to restrict, limit, or prohibit the manner in
which, or the locations in which, Seller conducts business, and (h) any Contract
containing “tag along” or similar rights allowing a third party to participate
in future sales of any of the Assets or Interests therein.

 

“Net Mineral Acres” means, as calculated separately with respect to each Lease,
(a) the number of gross acres in the lands covered by such Lease, multiplied by
(b) the lessor’s undivided percentage interest in oil, gas or other minerals
covered by such Lease in such lands, multiplied by (c) Seller’s working interest
in such Lease; provided, that if items (b) or (c) vary as to different areas of
such lands (including depths) covered by such Lease, a separate calculation
shall be done for each such area as if it were a separate Lease.

 

“New Employees” has the meaning set forth in Section 14.6.

 

“NORM” means naturally occurring radioactive material.

 

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“Notice Period” has the meaning set forth in Section 16.7(c).

 

“Open Matter” has the meaning set forth in Section 7.4(c).

 

“Organizational Documents” means, with respect to any Person, collectively and,
in each case, together with any modification of any term thereof, (a) the
articles of incorporation, certificate of incorporation, constitution or
certificate of formation of such Person, (b) the bylaws, partnership agreement,
operating agreement or joint venture agreement of such Person and (c) any other
similar constitutive, organizational or governing document of such Person.

 

“Parent” means, collectively, North Haven Energy Capital Fund LP, a Delaware
limited partnership, North Haven Energy Capital Fund-A LP, a Delaware limited
partnership, and North Haven Energy Capital Fund-CP LP, a Delaware limited
partnership.

 

“Party” or “Parties” has the meaning set forth in the Preamble.

 

“Party Affiliate” has the meaning set forth in Section 20.15.

 

“Permits” has the meaning set forth in Section 2.7.

 

“Permitted Encumbrances” means (a) rights-of-way, easements, permits, licenses,
approvals, servitudes, franchises and other rights in respect of surface
operations which do not materially interfere with (or are not reasonably
required in connection with) the use, operation or development of the Assets;
(b) rights reserved to or vested in any Governmental Authority to control or
regulate any of the Assets in any manner, and all obligations and duties under
all applicable Laws, rules and orders of any such Governmental Authority or
under any franchise, grant, license or permit issued by any such Governmental
Authority; (c) materialmen’s, mechanics’, repairmen’s, employees’, contractors’,
operators’, tax and other similar liens or charges arising in the ordinary
course of business incidental to the construction, maintenance or operation of
any of the Assets which have not yet become due and payable or payment is being
withheld as provided by Law or are being contested in good faith in the ordinary
course of business by appropriate action; (d) defects and irregularities arising
out of the lack of a survey; (e) defects or irregularities arising out of the
lack of recorded powers of attorney from any Person to execute and deliver
documents on their behalf; (f) defects arising out of a lack of evidence of
corporate authorization; (g) defects in the chain of title consisting of failure
to recite marital status or the omission of succession of heirship or estate
proceedings; (h) defects or irregularities arising out of improper or incomplete
acknowledgement, witness, or attestation; (i) defects or irregularities of title
as to which the relevant statute(s) of limitations or prescription would bar any
attack or claim against a Seller’s title (or, after the Closing, Buyer’s title);
(j) the terms and conditions of all Leases, including all “free gas”
arrangements under the terms of a Lease, and Material Contracts set forth on
Schedule 5.7, in each case that do not operate to (i)  reduce the Net Mineral
Acres set forth on Exhibit “C-2” for a Lease, (ii) reduce the net revenue
interest for a Well set forth on Exhibit “B” hereto or the net revenue interest
for a Lease set forth on Exhibit “C-2” hereto or (iii) increase the working
interest for a Well above that set forth on Exhibit “B” hereto without a
proportionate increase in the corresponding net revenue interest; (k) defects
based on lack of information in Seller’s files; (l) defects or irregularities
arising out of prior oil and gas leases which by their terms and on their face,
expired more than five (5) years prior to the Effective Time, and

 

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which have not been released of record; (m) defects or irregularities arising
out of liens, mortgages or deeds of trust which, by their terms and on their
face, expired and terminated more than five (5) years prior to the Effective
Time but which remain unreleased of record; (n) defects and irregularities cured
by possession under applicable statutes of limitation or statutes relating to
prescription; (o) all approvals or rights to consent by, required notices to,
filings with or other actions by Governmental Authorities in connection with the
sale or conveyance of oil and gas leases or interests therein if they are
customarily obtained subsequent to the sale or conveyance; (p) Preferential
Purchase Rights and Consents (including consents and approvals that are
customarily obtained after a Closing in connection with a transfer of title to
assets or interests similar to the Assets), in each case which are subject to
Article 9; (q) nonexistent contracts, outside of the operator’s rights under the
terms of any applicable operating agreement(s), for the purchase of production
from third-party shippers or the gathering, transportation, treatment, injection
or disposal of such third-party shipper’s proportionate share of production on
any gathering system(s); (r) any maintenance of uniform interest provision;
(s) royalties, overriding royalties, non-participating royalty interests, net
profits interests, production payments, reversionary interests and other similar
burdens on production, to the extent that such burdens do not (i)  reduce the
Net Mineral Acres set forth on Exhibit “C-2” for a Lease, (ii) reduce the net
revenue interest for a Well set forth on Exhibit “B” hereto or the net revenue
interest for a Lease set forth on Exhibit “C-2” hereto or (iii) increase the
working interest for a Well above that set forth on Exhibit “B” hereto without a
proportionate increase in the corresponding net revenue interest; (t) failure to
record state or federal leases; (u) Assumed Imbalances and (v) such other
defects or irregularities of title as Buyer may have waived in writing.

 

“Person” means any individual, partnership, joint venture, corporation, trust,
limited liability company, unincorporated organization, government or department
or agency thereof, or any other entity.

 

“Pipeline Imbalances” has the meaning set forth in Section 13.5.

 

“Pollutants” has the meaning set forth in the definition of Environmental Laws.

 

“Preferential Purchase Right” has the meaning set forth in Section 9.1.

 

“Property Taxes” has the meaning set forth in Section 12.1.

 

“Records” has the meaning set forth in Section 2.6.

 

“Retained Assets” has the meaning set forth in Section 2.9.

 

“Required Consent” means a Consent that, if not obtained prior to the transfer
of an Interest or Well, either (a) expressly prohibits, voids, nullifies, or
grants a third party the right to void, an assignment of such Interest or Well
or (b) expressly terminates (or grants a third party the right to terminate) the
assignor’s interest in such Interest or Well subject to such Consent; provided,
however, “Required Consent” does not include any Consent (A) that is customarily
obtained after Closing or (B) which by its terms cannot be unreasonably withheld
(provided such Consent does not fall within the descriptions in clauses (a) or
(b) above).

 

“Sanction” has the meaning set forth in Section 5.31(a).

 

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“Sanctioned Country” has the meaning set forth in Section 5.31(c).

 

“Sanctioned Person” has the meaning set forth in Section 5.31(c).

 

“Seller” has the meaning set forth in the Preamble.

 

“Seller’s Credit Obligations” has the meaning set forth in Section 5.32.

 

“Seller Fundamental Representations” means the representations and warranties in
Section 5.1 (Existence), Section 5.2 (Authority), Section 5.3(b) (No Conflicts),
Section 5.16 (Brokers) and the special warranty of title contained in the
Conveyances.

 

“Seller Group” has the meaning set forth in Section 16.2.

 

“Seller Employer Liabilities” means any Claims related to (i) employees retained
by Seller after Closing, including ERISA Liability or WARN Obligations related
to such employees or (ii) severance expenses with respect to any New Employee to
the extent arising from any commitments or obligations made by Seller.

 

“Surface Agreements” means any contracts, rights, permits, permissions or
licenses to use of the surface estate as related to the Assets, including any
surface leases, surface use rights or agreements or any similar surface rights,
agreements or licenses relating to the Assets.

 

“Surface Fee Interests” has the meaning set forth in Section 2.1.

 

“Suspense Accounts” has the meaning set forth in Section 11.5.

 

“Tax Deferred Exchange” has the meaning set forth in Article 15.

 

“Tax Return” means any report, return, election, document, estimated tax filing,
declaration, claim for refund, information returns, or other filing filed or
required to be filed with any Governmental Authority, including any schedules or
attachments thereto and any amendment thereof.

 

“Termination Fee” means Five Million dollars ($5,000,000).

 

“Termination Threshold” has the meaning set forth in Section 7.6.

 

“Title Defect” has the meaning set forth in Section 7.1.

 

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

 

“Transition Services Agreement” means a transition services agreement to be
executed and delivered at Closing, in substantially the form attached hereto as
Exhibit “F”, pursuant to which Seller will provide certain services to Buyer as
described therein.

 

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

 

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“WARN Obligations” means any Claim under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq., or under any similar Laws.

 

“Wells” has the meaning set forth in Section 2.2.

 

ARTICLE 2

 

PURCHASE AND SALE

 

Subject to the terms and conditions of this Agreement, Seller agrees to sell to
Buyer and Buyer agrees to buy from Seller, effective as of the Effective Time
for the consideration recited and subject to the terms and conditions set forth
in this Agreement, all of Seller’s right, title and interest in the following
(each individually referred to as an “Asset” and all collectively referred to as
the “Assets”):

 

2.1                               Interests - All of those certain oil, gas or
mineral leases and fee mineral interests (if any), described on the attached
Exhibit “A-1” and any other oil, gas or mineral leases and fee mineral interests
(if any) that are associated with the Wells (as defined below) and lands
associated therewith or pooled, unitized or communitized therewith (the
“Leases”); in each case together with all other rights, titles and interests of
Seller insofar as the same pertain to the right to explore for, develop, or
produce oil or gas, in the Leases and any other lands or interests covered
thereby, associated therewith or pooled, unitized or communitized therewith,
including all working interests, royalty interests, overriding royalty
interests, net profits interests, production payments, forced pooled interests,
and interests pertaining to the right to explore for, develop, or produce oil or
gas acquired under contracts or otherwise in the lands covered by the Leases or
Fee Interests, and any other lands or interests pooled, unitized or communitized
therewith; and the surface fee interests described on the attached Exhibit “A-2”
(the “Surface Fee Interests”); provided, however, that all of the foregoing are
subject to the limitations described in Exhibits “A-1” and “A-2”, as applicable
(the Leases, Surface Fee Interests and the lands covered thereby and other
interests therein, as limited in Exhibits “A-1,” and “A-2,” are collectively
referred to in this Agreement as the “Interests”).

 

2.2                               Wells - All of the oil and gas wells, salt
water disposal wells, CO2 wells, injection wells, water source wells, monitoring
wells and any other wells and wellbores located on or attributable to the
Interests or on lands pooled, unitized or communitized with any portion thereof,
or on lands located within any governmental drilling or spacing unit (if
applicable) which includes any portion thereof, or on portions thereof
associated with proved undeveloped reserves whether producing, plugged or
unplugged, shut-in, or permanently or temporarily abandoned and identified on
the attached Exhibit “B” (the “Wells”).

 

2.3                               Equipment - All personal property, fixtures
and improvements and facilities, spare parts and inventory (including those
items identified on Schedule 2.3), equipment, pipelines, pipeline laterals, well
pads, tank batteries, well heads, treating equipment, compressors, power lines,
casing, tubing, pumps, motors, gauges, meters, valves, heaters, treaters, and
separators appurtenant to the Interests or Wells or used in connection with the
ownership or operation of the Interests or Wells or the production, gathering,
transportation, storage, treatment, sale or disposal of Hydrocarbons
attributable to the Interests or Wells, including facilities, plants, treating
and

 

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processing systems, casing, pipelines and flow lines; in each case insofar as
the same are located on the Interests or to the extent the same are primarily
used or held for use in connection with the operations of the Assets or the
production of Hydrocarbons therefrom (collectively, the “Equipment”).

 

2.4                               Vehicles - All vehicles associated with New
Employees, which will include any currently owned or leased vehicles (the
“Vehicles”).

 

2.5                               Production - All of the oil, natural gas,
condensate, casinghead gas, products or other minerals (“Hydrocarbons”),
produced from, attributable or allocable to the Interests or Wells (i) from and
after the Effective Time or (ii) which are in storage above the pipeline
connection as of the Effective Time and for which Seller receives an upward
adjustment to the Base Purchase Price, or (iii) with regard to any over-produced
or under-produced volumes of Seller attributable to the Assumed Imbalances and
Pipeline Imbalances.

 

2.6                               Easements and Surface Agreements  — All
Easements and Surface Agreements, including those identified and described on
the attached Schedule 2.6.

 

2.7                               Contract Rights and Permits  — All Contracts
and all environmental and other governmental (whether federal, tribal, state or
local) permits, permissions, licenses, orders, authorizations, franchises and
related instruments or rights to the extent the aforementioned can be assigned
and to the extent relating to the ownership, operation or use of the Interests,
Wells, Equipment, Hydrocarbons attributable to the Interests or Wells, Easements
and Surface Agreements (“Permits”).

 

2.8                               Files and Records - All of the files, records
and data in their present form and in the possession of Seller directly relating
to the items and interests described in Section 2.1 through Section 2.7 above
including land and lease files, well files, title records including abstracts of
title, title opinions, title insurance reports/policies, property ownership
reports, division order and right-of-way files, contracts, production records,
all logs including electric logs, core data, pressure data and decline curves
and graphical production curves, operational records, technical records,
production and processing records, and contract files, and all related materials
in the possession of Seller, less and except (i) the general corporate files and
records of Seller insofar as they relate to Seller’s business generally and are
not required for the future ownership or operation of the Assets, (ii) all legal
files and records (other than legal files and records included in, or are part
of, the above-referenced general corporate files and records), (iii) Seller’s
federal or state income, franchise or margin tax files and records,
(iv) employee files, (v) reserve evaluation information or economic projections
(other than reserve evaluation or economic projection materials and files
previously made available to Buyer), (vi) records relating to the sale of the
Assets, including competing bids, (vii) proprietary data, information and data
under contractual restrictions on assignment or disclosure, (viii) privileged
information, (ix) intellectual property, (x) seismic, geophysical, geological or
other similar information or data not owned by Seller and not transferrable
without payment of a fee or other penalty to a third party under any Contract
and which Buyer has not separately agreed to pay, or (xi) any other files or
records to the extent constituting Retained Assets, as defined below (subject to
the above exclusions, the “Records”).

 

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2.9                               Retained Assets - Notwithstanding anything to
the contrary in Section 2.1 through Section 2.8 or elsewhere herein, the Assets
do not include the following (collectively, the “Retained Assets”):

 

(a)                                 All rights and interests of Seller (i) under
any policy or agreement of insurance or indemnity, (ii) under any bond or
(iii) to any insurance or condemnation proceeds or awards arising, in each case,
from acts, omissions or events related to, or damage to or destruction of, the
Assets occurring or accrued prior to the Effective Time;

 

(b)                                 All claims of Seller for refunds or loss
carry forwards with respect to (i) Asset Taxes for any period prior to the
Effective Time, (ii) income, franchise or similar taxes or (iii) any taxes
attributable to the Retained Assets;

 

(c)                                  All proceeds, income, revenues, claims,
refunds or other benefits (including any benefit attributable to any current or
future Laws or regulations in respect of “royalty relief” or other similar
measures) not otherwise enumerated above, attributable to periods prior to the
Effective Time as well as any security or other deposits made, attributable to
(i) the Assets for any period prior to the Effective Time, or (ii) any Retained
Assets; provided, however, that, for the purposes of this Section 2.9(c),
Retained Assets shall not include any such proceeds, income, revenues, claims,
refunds or other benefits insofar and only insofar as related to any Assumed
Obligation;

 

(d)                                 All documents and instruments of Seller
relating to the Assets that may be protected by an attorney-client or
attorney-work product privilege, other than title opinions relating to the
Assets;

 

(e)                                  All audit rights arising under any of the
Contracts or otherwise with respect to any period prior to the Effective Time or
to any Retained Assets; provided, however, that, for the purposes of this
Section 2.9(e), Retained Assets shall not include any such audit rights insofar
and only insofar as related to any Assumed Obligation;

 

(f)                                   originals of all data, information and
records relating to tax and accounting matters and copies of all other Records;
and

 

(g)                                  Those items more particularly identified
and described on Schedule 2.9 hereto.

 

ARTICLE 3

 

PURCHASE PRICE AND ALLOCATION

 

3.1                               Base Purchase Price - Buyer agrees to pay
Seller for the Assets the total sum of fifty eight million Dollars ($58,000,000)
(“Base Purchase Price”) to be paid by direct bank deposit

 

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or wire transfer in same day funds at Closing, subject only to the price
adjustments set forth in this Agreement.

 

3.2                               Equity Commitment Letter - As evidence of good
faith, Buyer has delivered to Seller at the time of the execution of this
Agreement the Equity Commitment Letter, which obligates Parent to provide Buyer
the funds necessary to pay, as applicable (i) the Base Purchase Price at
Closing, subject to the adjustments to the Base Purchase Price as set forth in
this Agreement, or (ii) the Termination Fee pursuant to Section 19.2, in each
case subject to the provisions of the Equity Commitment Letter.

 

3.3                               Adjustments to the Base Purchase Price - The
Base Purchase Price shall be adjusted as follows:

 

(a)                                 Upward Adjustments - The Base Purchase Price
shall be adjusted upward for the following, without duplication:

 

(i)                                    all production expenses, operating
expenses, operated and non-operated overhead charges (excluding any corporate
overhead charges that would not be reimbursable pursuant to COPAS under a joint
operating agreement or similar charges under an applicable pooling order) and
capital expenditures paid by Seller in connection with the ownership and
operation of the Assets, including lease option, extension or rental  payments,
attributable to the production periods from and after the Effective Time
(including pre-paid royalties and taxes attributable to Hydrocarbons that are
attributable to the Interests or Wells produced and saved from and after the
Effective Time, and all other pre-paid charges attributable to the periods from
and after the Effective Time);

 

(ii)                                 all proceeds attributable to the sale of
Hydrocarbons from the Interests or Wells and all other income and benefits
received by Buyer attributable to production, ownership and operation of the
Assets for production periods prior to the Effective Time (net of royalties,
overriding royalties and other burdens on Seller’s share of production not
otherwise accounted for hereunder);

 

(iii)                              all positive adjustments, if any, regarding
Additional Interests, as provided in Section 7.2;

 

(iv)                             an amount equal to the Imbalance Adjustment to
the extent such amount represents an underbalanced (or under-produced or
under-received balance) as provided in the provisions of Section 13.4;

 

(v)                                adjustments for all oil in storage above the
pipeline connection, as provided in Section 13.1;

 

(vi)                             adjustments for over-delivered Pipeline
Imbalances (volumes owed to Seller) as provided in Section 13.5;

 

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(vii)                          all royalty overpayment amounts and future
deductions as royalty offsets associated with the Assets as of the Effective
Time; and

 

(viii)                       any other upward adjustments to the Base Purchase
Price specified in this Agreement.

 

(b)                                 Downward Adjustments - The Base Purchase
Price shall be adjusted downward for the following, without duplication:

 

(i)                                    except as otherwise provided in this
Agreement, all production expenses, operating expenses, operated and
non-operated overhead charges (excluding any corporate overhead charges that
would not be reimbursable pursuant to COPAS under a joint operating agreement or
similar charges under an applicable pooling order) and other costs under
applicable operating agreements (or other contracts, pooling orders, or other
similar agreements) and other expenses, costs and charges paid by Buyer in
connection with the Assets and attributable to production periods prior to the
Effective Time, including taxes, capital expenses and other costs;

 

(ii)                                 except as otherwise provided in this
Agreement, all proceeds attributable to the sale of Hydrocarbons attributable to
the Interests or Wells and all other income and benefits received by Seller and
attributable to the production, operation or ownership of the Assets for
production periods on or after the Effective Time (net of royalties, overriding
royalties (other than royalties and overriding royalties that are conveyed as
part of the Assets) and other burdens on Buyer’s share of production not
otherwise accounted for hereunder);

 

(iii)                              all adjustments regarding Title Defects, in
accordance with the provisions of Article 7;

 

(iv)                             all adjustments regarding Environmental
Defects, in accordance with the provisions of Article 8;

 

(v)                                all adjustments regarding exercised
Preferential Purchase Rights or the failure to obtain any Required Consents, as
contemplated in Article 9;

 

(vi)                             all adjustments regarding Casualty Defects, in
accordance with the provisions of Article 17;

 

(vii)                          an amount equal to the Imbalance Adjustment to
the extent such amount represents an overbalanced (or over-produced or
over-received balance) as provided in the provisions of Section 13.4;

 

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(viii)                       adjustments for under-delivered Pipeline Imbalances
(volumes owed by Seller), as provided in Section 13.5; and

 

(ix)                             any other downward adjustments to the Base
Purchase Price as specifically provided for under the terms of this Agreement.

 

3.4                               Allocation of Base Purchase Price - Seller and
Buyer agree that the Base Purchase Price shall be allocated among the Assets as
set forth on the attached Exhibit “C-1 — Wells” and Exhibit “C-2 — Leases” (the
“Allocated Values”) for the purpose of (i) providing notices, or obtaining
waivers, of any Preferential Purchase Rights or Required Consents affecting any
Asset(s), (ii) determining the value of a Title Defect and (iii) handling those
instances for which the Base Purchase Price is to be adjusted.

 

ARTICLE 4

 

ACCESS TO ASSETS AND DATA; DISCLAIMERS; GOVERNMENTAL REVIEWS

 

4.1                               Access - Pursuant and subject to the terms and
provisions of that certain Access Agreement entered into by and between Seller
and Presidio Petroleum LLC dated February 22, 2018 (the “Access Agreement”),
Seller shall provide Buyer, its Affiliates and Buyer’s authorized
representatives, at any reasonable time(s) before the Closing, (i) reasonable
physical access, at Buyer’s sole risk, cost and expense, to the Assets that are
operated by Seller to allow Buyer to conduct on-site visual and ASTM Phase I
environmental site assessments of the Assets (which assessments shall not
include testing, sampling, boring, drilling or other investigation activities,
the operation of any equipment by Buyer or Buyer’s authorized representatives or
any “Phase II” environmental assessment, without Seller’s prior written consent,
which consent may be withheld at Seller’s sole discretion), to the extent Seller
has the right to grant such access for such purpose; and (ii) access to the
Records and other Assets, to the extent the same are in Seller’s or its
representatives’ possession and relate to the Assets; provided, however, Seller
shall have no obligation to provide Buyer access to any interpretative or
predictive data or information which Seller considers confidential or
proprietary or which Seller believes in good faith they cannot provide Buyer
because of third-party restrictions.

 

In connection with any on-site inspections, Buyer agrees to not unreasonably
interfere with the normal operation of the Assets and further agrees that under
no circumstances shall it perform any tests, sampling, boring, drilling or other
investigation activities of any nature on the Assets without the prior express
written consent of Seller, which consent may be withheld at Seller’s sole
discretion.  IN CONNECTION WITH GRANTING SUCH ACCESS, AND EXCEPT TO THE EXTENT
THAT SUCH CLAIMS ARE CAUSED BY THE GROSS NEGLIGENCE OF SELLER, BUYER WAIVES AND
RELEASES ALL CLAIMS AGAINST SELLER GROUP (AS DEFINED IN SECTION 16.2) FOR INJURY
TO, OR DEATH OF PERSONS, OR DAMAGE TO PROPERTY INCURRED, HOWSOEVER CAUSED, IN
CONNECTION WITH THE PERFORMANCE OF THIS DILIGENCE AND BUYER SHALL INDEMNIFY,
DEFEND AND HOLD HARMLESS SELLER GROUP FROM AND AGAINST ALL SUCH CLAIMS, EXCEPT
IN EACH CASE TO THE EXTENT ATTRIBUTABLE TO SELLER’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

 

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4.2                               Disclaimer - Buyer specifically understands
and acknowledges the following:

 

(a)                                 Title - Subject to the other provisions
contained in this Agreement, title to the Assets shall be transferred and
conveyed from Seller to Buyer at Closing with a “by, through and under” warranty
of title through the Effective Time, continuing until the second (2nd)
anniversary of the Closing, and shall otherwise be conveyed in accordance with
the terms of this Agreement and the Conveyances.

 

(b)                                 Disclaimer of Warranty - EXCEPT AS EXPRESSLY
PROVIDED FOR OTHERWISE IN THIS AGREEMENT, OR IN THE CONVEYANCES, SELLER
EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION, COVENANT OR WARRANTY,
EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, RELATING TO THE
TITLE OR CONDITION OF THE ASSETS AND ANY PERSONAL PROPERTY, EQUIPMENT, FIXTURES
AND ITEMS OF MOVABLE PROPERTY COMPRISING ANY PART OF THE ASSETS, INCLUDING
(i) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR ANY PARTICULAR PURPOSE OR
WARRANTY OF MERCHANTABILITY; (ii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS; (iii) ANY RIGHTS OF BUYER UNDER APPLICABLE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE;
(iv) ANY CLAIM BY BUYER FOR DAMAGES BECAUSE OF DEFECTS OR OTHER VICES, WHETHER
KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, LATENT OR PATENT; (v) ANY IMPLIED OR
EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR
INFRINGEMENT OF ANY OTHER INTELLECTUAL PROPERTY RIGHT; (vi) ANY IMPLIED OR
EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT INCLUDING NORM OR ASBESTOS, OR PROTECTION OF THE ENVIRONMENT OR
HEALTH; OR (vii) ANY IMPLIED OR EXPRESS WARRANTY REGARDING TITLE TO ANY OF THE
ASSETS.  UPON CLOSING, IT IS THE EXPRESS INTENTION OF BUYER AND SELLER THAT,
EXCEPT AS EXPRESSLY PROVIDED FOR OTHERWISE IN THIS AGREEMENT, OR IN THE
CONVEYANCES, THE PERSONAL PROPERTY, EQUIPMENT, FIXTURES AND ITEMS AND THE
CONDITION OF THE ASSETS ARE BEING CONVEYED TO BUYER “AS IS, WHERE IS,” WITH ALL
FAULTS, AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND BUYER WAIVES ANY
CLAIM(S) FOR BREACH OF WARRANTY UNDER THE CONVEYANCES, WHICH WERE NOT ASSERTED
BY BUYER IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.  AS ONE
OF ITS CONDITIONS TO CLOSING, BUYER ACKNOWLEDGES, AGREES AND REPRESENTS TO
SELLER THAT AS OF CLOSING BUYER WILL

 

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HAVE BEEN GIVEN THE OPPORTUNITY TO MAKE OR CAUSE TO BE MADE SUCH INSPECTIONS AS
BUYER DEEMS APPROPRIATE.  FURTHERMORE, SELLER EXPRESSLY DISCLAIMS AND NEGATES
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AND IN NO WAY GUARANTEES ANY
RATES, FEES OR PRICING RECEIVED OR BARGAINED FOR BY SELLER WITH ANY THIRD-PARTY
RELATED TO THE KEY FACILITIES.

 

(c)                                  Additional Disclaimer - EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED FOR IN THIS AGREEMENT OR IN THE CONVEYANCES, SELLER HEREBY
EXPRESSLY NEGATES AND DISCLAIMS, AND BUYER HEREBY WAIVES AND ACKNOWLEDGES THAT
SELLER HAS NOT MADE AND BUYER HAS NOT RELIED UPON, ANY WARRANTY, REPRESENTATION
OR COVENANT, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OR
MATERIALITY OF ANY FILES, RECORDS, DATA, INFORMATION, OR MATERIALS (WHETHER
WRITTEN, ORAL OR OTHERWISE) HERETOFORE OR HEREAFTER FURNISHED TO BUYER IN
CONNECTION WITH THE ASSETS, OR AS TO THE QUALITY OR QUANTITY OF HYDROCARBON
RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OF THE ASSETS TO
PRODUCE HYDROCARBONS.  ANY AND ALL SUCH FILES, RECORDS, DATA, INFORMATION, AND
OTHER MATERIALS FURNISHED BY SELLER, WHETHER MADE AVAILABLE PURSUANT TO THIS
ARTICLE 4 OR OTHERWISE, ARE PROVIDED TO BUYER AS A CONVENIENCE AND
ACCOMMODATION, AND ANY RELIANCE UPON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE
RISK.

 

4.3                               Governmental Reviews - Seller and Buyer shall
each in a timely manner make (or cause its applicable Affiliate or
representative(s) to make) (i) all required filings, including filings required
under the Hart-Scott-Rodino Act, and prepare applications to and conduct
negotiations with, each Governmental Authority as to which such filings,
applications or negotiations are necessary or appropriate in the consummation of
the transaction contemplated hereby, and (ii) provide such information as the
other may reasonably request in order to make such filings, prepare such
applications and conduct such negotiations.  Each Party shall cooperate with and
use all reasonable efforts to assist the other with respect to such filings,
applications and negotiations.  Buyer shall bear the cost of all filing or
application fees payable to any Governmental Authority with respect to the
transaction contemplated by this Agreement, regardless of whether Buyer, Seller,
or any Affiliate of either of them is required to make the payment.

 

ARTICLE 5

 

SELLER’S REPRESENTATIONS AND WARRANTIES

 

Seller represents the following to Buyer as of the Execution Date:

 

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5.1                               Existence - It is an entity duly organized and
validly existing and in good standing under the Laws of its state of formation,
and is duly qualified to carry on its business and to own and operate oil and
gas properties in each jurisdiction in which the Assets owned by it are located.

 

5.2                               Authority - Seller has all requisite power and
authority to carry on its business as presently conducted, to enter into this
Agreement and to perform its obligations under this Agreement.  Furthermore, as
of the Execution Date, Seller has obtained all necessary board of directors and
such other internal approvals as are required under its own corporate governance
requirements to close this transaction.  This Agreement constitutes the legal,
valid and binding obligation of Seller and is enforceable against Seller in
accordance with its terms, subject to (a) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar Laws of general application with
respect to creditors, b) general principles of equity, and (c) the power of a
court to deny enforcement of remedies generally based upon public policy.

 

5.3                               No Conflicts

 

(a)         Neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby will result in any material default under any
agreement or instrument to which Seller is a party or by which the Assets are
bound, or materially violate any order, writ, injunction, statute, rule, decree
or regulation applicable to Seller, except for (a) Required Consent
requirements, (b) approvals or Required Consents from Governmental Authorities
and (c) as would not be reasonably expected to have a material adverse effect on
the ownership, operation or value of the Assets, taken as a whole.

 

(b)         Neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby will result in any material default under any
of Seller’s Organizational Documents.

 

5.4                               Compliance - Except as set forth on Schedule
5.4, all of the Assets, as owned and operated by Seller, are in material
compliance with all applicable Laws, rules, regulations, ordinances and orders
of all Governmental Authorities having jurisdiction.

 

5.5                               Payment of Royalties - All royalties and
in-lieu royalties with respect to the Assets which accrued or are attributable
to the period prior to the Effective Time have been paid, or are included within
the Suspense Accounts being conveyed to Buyer pursuant to Section 11.5.

 

5.6                               Taxes - As to the Assets operated by Seller
(and to Seller’s Knowledge, all other Assets), (i) all Tax Returns with respect
to Asset Taxes required to be filed have been timely filed, (ii) all such Tax
Returns are true and correct in all material respects, (iii) all Asset Taxes for
which Seller remits payment have been timely paid and to Seller’s Knowledge, all
Asset Taxes remitted by third parties have been timely paid, (iv) there is not
in force any waiver of any statute of limitations with respect to material Asset
Taxes or any extension of time with respect to a material Tax assessment or
deficiency, and (v) none of the Assets is subject to a tax partnership agreement
or any other agreement requiring the filing of partnership Tax Returns for U.S.
federal income tax purposes.

 

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5.7                               Material Contracts - Schedule 5.7 sets forth,
as of the Execution Date, all Material Contracts.  Schedule 5.7(a) sets forth,
as of the Execution Date, any Material Contract that is a farm-out agreement for
which drilling obligations have not been fully satisfied.  Except as set forth
on Schedule 5.7(b), as of the Execution Date, (a), each Material Contract is in
full force and effect, (b) Seller has not received written notice of its breach
or default under any Material Contract, (c) to Seller’s Knowledge, no other
party to any such Material Contract is in breach thereof or in default
thereunder, (d) and no event has occurred that with notice or lapse of time, or
both, would constitute any default under any Material Contract by Seller or, to
Seller’s Knowledge, any other party to any Material Contract.  Prior to the
Execution Date, Seller has made available to Buyer copies of each Material
Contract and all material amendments thereto that are in Seller’s possession and
control, and such copies are true and complete in all material respects.  Seller
has not received or given any resolved written notice of termination or default
with regards to any Material Contract.

 

5.8                               Permits - Except as set forth on Schedule 5.8,
as of the Execution Date, (a) Seller has not received written notice of its
default under any Permit, and (b) as to Wells (i) operated by Seller, each
Permit is in full force and effect and (ii) not operated by Seller, to Seller’s
Knowledge, each Permit is in full force and effect.

 

5.9                               Litigation and Claims - Except as set forth on
Schedule 5.9, no suit, action, proceeding, lawsuit or other litigation is
pending, or, to Seller’s Knowledge, threatened against Seller with respect to
any of the Assets.

 

5.10                        Sale Contracts - Except for (a) contracts governing
Seller’s sale of Hydrocarbons attributable to the Interests or Wells in the
ordinary course, (b) the disposition in the ordinary course of equipment no
longer suitable for oil and gas field operations or replaced with equipment of
equivalent value, or (c) this Agreement, there are no contracts or options
outstanding for the sale, exchange or transfer of Seller’s interest in the
Assets or any portion thereof.

 

5.11                        Notices - Except as set forth on Schedule 5.11,
(a) Seller’s operation of the Assets is not the subject of any pending material
regulatory compliance or enforcement actions, and (b) Seller has not received
written notice with respect to Seller’s operation of the Assets, which (i) has
not heretofore been complied with, in all material respects, regarding any
material violation of applicable Laws, rules or regulations of any Governmental
Authority with jurisdiction therein, or (ii) that remains uncured, and that
would, individually or in the aggregate, have a material adverse effect on the
Assets (taken as a whole).

 

5.12                        Take-or-Pay - Seller is not obligated, under a
take-or-pay or similar arrangement, to allow its Hydrocarbons attributable to
the Interests or Wells to be sold, without receiving full payments at the time
of delivery in an amount that corresponds to the net revenue interest in the
Hydrocarbons attributable to any Well described in Exhibit “B” (other than with
regard to certain obligations relative to Assumed Imbalances or Pipeline
Imbalances, as contemplated under Sections 13.4 and 13.5, respectively).

 

5.13                        Timely Payment and Leases In Effect - Seller has
paid its share of all costs payable by it under the relevant Leases and the
Material Contracts as of the Effective Time, except

 

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those included in the Suspense Accounts or being contested in good faith. 
Seller is not in default with respect to any of its material obligations under
the Leases.

 

5.14                        Imbalances - Except as set forth on Schedule 13.4,
there are no gas or other Hydrocarbon production imbalances existing as of the
Effective Time with respect to any of the Wells.

 

5.15                        Outstanding Obligations - Except as otherwise
described in Schedule 5.15, as of the Execution Date, there are no outstanding
authorizations for expenditures or capital commitments in excess of fifty
thousand U.S. Dollars ($50,000), individually, net to Seller’s interest, or
other written commitments or proposals to conduct operations on the Assets.

 

5.16                        Brokers - Seller has incurred no liability,
contingent or otherwise, for broker’s or finder’s fees in respect of this
Agreement or the transaction contemplated hereby for which Buyer shall have any
responsibility whatsoever.

 

5.17                        Consents - Except (a) as set forth in Schedule 5.17,
(b) for Preferential Purchase Rights and (c) for those waivers, consents to
assign, approvals or other similar rights customarily obtained from Governmental
Authorities after Closing, there are no Consents required in connection with the
conveyance of the Assets from Seller to Buyer under the terms of this Agreement.

 

5.18                        Preferential Purchase Rights - Except as set forth
in Schedule 5.18, there are no Preferential Purchase Rights to which the Assets
are subject, which would be triggered by this Agreement, and to which a notice
would be required under the terms thereof due to the Parties entering into this
Agreement.

 

5.19                        Supplements to Schedules - With respect to the
Schedules corresponding to the representations and warranties of Seller
contained in this Article 5, Seller may update and supplement such Schedules as
to facts and matters first arising after the Execution Date by providing
promptly, but in no event any later than ten (10) Business Days prior to the
Closing Date, any such updates and supplements to Buyer.  Only those Schedules
delivered by Seller on the Execution Date shall be considered for the purposes
of determining whether the condition to Buyer’s obligation to close the
transaction pursuant to Section 10.2(a) has been satisfied, and, for the
avoidance of doubt, any update or supplement delivered pursuant to this
Section 5.19 shall be disregarded for the purposes thereof.  If Closing occurs,
Seller shall be deemed not to have breached or violated any of its
representations and warranties contained in this Article 5 with respect to the
information disclosed in any such supplement or update.  From and after the
Closing, references to the Schedules shall be references thereto as so
supplemented or updated.

 

5.20                        Condemnation.  — As of the Execution Date, there is
no actual or, to Seller’s Knowledge, threatened, taking (whether permanent,
temporary, whole or partial) of any part of Seller’s Assets by reason of eminent
domain, condemnation or the threat of condemnation.

 

5.21                        Payout Balances.   — Schedule 5.21 contains a
complete list of the status of any “payout” balance, as of the dates shown in
such Schedule, with respect to Wells subject to a reversion or other adjustment
at some level of cost recovery or payout (or passage of time or other event
other than termination of a Lease by its terms).

 

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5.22                        Environmental Matters.  — Except as described on
Schedule 5.22, Seller has not received any written notice of violation of any
Environmental Laws relating to the Assets where such violation has not been
previously cured or otherwise resolved to the satisfaction of the relevant
Governmental Authority.

 

5.23                        Audits.  — There are no audits currently being
conducted by Seller and Seller is not currently being audited by third parties
of joint accounts under any operation agreements to the Assets.

 

5.24                        Personal Property.  — Seller has defensible title
to, or a valid contractual right to use, all personal property included in the
Assets, free and clear of any encumbrances, except for Permitted Encumbrances.

 

5.25                        Current Plugging Obligations.   — Seller has not
received any notices or demands from any Governmental Authority or, to Seller’s
Knowledge, any other Person to plug any Wells or wells on the Lands.

 

5.26                        Easements.  — To Seller’s Knowledge, each of the
Easements used or held primarily for use in connection with the ownership or
operation of the Assets is legal, valid, binding, enforceable and in full force
and effect and Seller is not in material breach of or material default under any
such Easement, and no event has occurred or circumstance exists that, with the
delivery of notice, the passage of time or both, would constitute such a breach
or default, or permit the termination, modification or acceleration of rent
under any such Easement.

 

5.27                        No Affiliate Relationship. — The Equipment and the
Vehicles are owned or held for use by Seller and not owned or held for use by
any Affiliate of Seller.

 

5.28                        Oil and Gas Operations.  — All Wells drilled and
currently operated by Seller have been drilled, completed, operated and produced
in compliance in all material respects with applicable leases, pooling and unit
agreements, joint operating agreements and Laws.

 

5.29                        Hedges.   — There are no futures, hedges, swaps,
collars, puts, calls, floors, caps, options, or any other Contracts intended to
benefit from, relate to or reduce or eliminate the risk of fluctuations in the
price of commodities, including Hydrocarbons of Seller with respect to the
Assets that would continue to bind Buyer with respect to the Assets after
Closing.

 

5.30                        Seller’s Credit Obligations.  Schedule 14.5 sets
forth a true and correct list of all material bonds, letters of credit,
guarantees and insurance, if any, posted or owned by Seller with any
Governmental Authority or third party and relating to the Assets.

 

5.31                        Anti-Corruption and Economic Sanctions.

 

(a)                                 Seller has conducted its business and
operated the Assets in compliance with applicable (i) anti-corruption Laws,
including the Foreign Corrupt Practices Act of 1977 and (ii) economic sanctions
Laws, regulations and programs administered and enforced by the U.S. Department
of the Treasury’s Office of Foreign Assets Control (“Sanctions”).

 

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(b)                                 Seller is not and has not been the subject
of any investigation, inquiry, or enforcement proceedings by any governmental,
administrative, or regulatory body or any customer regarding any offense or
alleged offense under any applicable (i) anti-corruption Laws, including the
Foreign Corrupt Practices Act of 1977, or (ii) Sanctions, and no such
investigation, inquiry, or proceedings have been threatened or are pending and
there are no circumstances likely to give rise to any such investigation,
inquiry, or proceedings.

 

(c)                                  Neither Seller nor any of its directors,
managers or executive officers is an individual or entity that is (i) the
subject of any Sanctions (a “Sanctioned Person”), or (ii) located, organized, or
resident in a country or territory that is the subject of comprehensive
territorial Sanctions (a “Sanctioned Country”, currently including the Crimea
region of the Ukraine, Cuba, Iran, North Korea, Sudan and Syria).

 

ARTICLE 6

 

BUYER’S REPRESENTATIONS AND WARRANTIES

 

Buyer represents the following to Seller as of the Execution Date:

 

6.1                               Information - Buyer represents that it is a
sophisticated purchaser, knowledgeable in the evaluation of oil and gas
properties of the nature being acquired by Buyer hereunder and has performed
preliminary due diligence on the Assets and performed all necessary tasks
involved in evaluating the Assets, to Buyer’s complete satisfaction.  EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT, BUYER REPRESENTS AND WARRANTS THAT PRIOR
TO CLOSING IT SHALL HAVE FULLY INSPECTED THE ASSETS AND UPON CLOSING, BUYER WILL
ACCEPT THE ASSETS AT CLOSING IN THEIR PRESENT CONDITION, “AS IS AND WHERE IS AND
WITH ALL FAULTS.”  BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE SET
FORTH IN THIS AGREEMENT AND IN THE CONVEYANCES, SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN, ORAL, OR
OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF THE BACKGROUND MATERIALS OR ANY
OTHER INFORMATION RELATING TO THE ASSETS FURNISHED BY OR ON BEHALF OF SELLER OR
TO BE FURNISHED TO BUYER OR ITS REPRESENTATIVES, INCLUDING SELLER’S INTERNAL
APPRAISALS AND INTERPRETIVE DATA.  Buyer acknowledges and affirms that it has
relied and will rely solely upon Seller’s representations, warranties or
covenants in this Agreement and on its own independent analysis, evaluation and
investigation of, and judgment with respect to, the business, economic, legal,
tax or other consequences of this transaction, including its own estimate and
appraisal of the extent and value of the Hydrocarbons, and other reserves
associated with the Assets.

 

6.2                               Knowledge and Experience - Buyer (a) is
engaged in the business of exploring for and producing oil and gas or other
valuable minerals as an ongoing business and (b) is purchasing the Assets for
its own account for investment purposes and not with the intent to resell the
Assets in violation of any federal or state securities Laws.  Buyer is an
experienced and

 

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knowledgeable investor in oil and gas properties, is knowledgeable with respect
to the tax ramifications associated therewith and herewith, and has the
financial and business expertise to fully evaluate the merits and risks of the
transactions covered by this Agreement and has relied and will continue to rely
solely upon the basis of its own independent investigation of the Assets for all
purposes (including the geologic and geophysical characteristics of the Assets,
the estimated Hydrocarbon reserves recoverable therefrom, and the price and
expense assumptions applicable thereto).  In acquiring the Assets, Buyer is
acting in the conduct of its own business and not under any specific contractual
commitment to any third party, or any specific nominee agreement with any third
party, to transfer to, or to hold title on behalf of, such third party, with
respect to all or any part of the Assets.  Buyer acknowledges that it has had
the opportunity to seek the advice of Persons it deemed appropriate concerning
the consequences of the provisions of this Agreement and hereby waives any and
all rights to claim that it is an unsophisticated investor in oil and gas
properties.

 

6.3                               No Conflicts - Neither the execution of this
Agreement, nor the consummation of the transactions contemplated hereby will
result in any material default under any agreement or instrument to which Buyer
is a party, or materially violate any order, writ, injunction, statute, rule,
decree or regulation applicable to Buyer, except as would not be reasonably
expected to have a material adverse effect on Buyer’s ability to consummate the
transactions contemplated or to satisfy its continuing obligations hereunder.

 

6.4                               No Warranty - Buyer acknowledges that, except
as expressly provided for otherwise in this Agreement or in the Conveyances,
Seller has not made any representation, covenant or warranty, express or
implied, at common law, by statute or otherwise, relating to the title or
condition of the Assets, including any implied or express warranty of
merchantability, of fitness for any particular purpose, or of conforming to
models or samples of materials as to any personal property, fixtures or
structures conveyed pursuant to this Agreement.  Buyer further acknowledges that
no Claim(s) may be asserted nor may any proceeding be commenced by Buyer against
Seller arising out of or related to a Title Defect for which Buyer failed to
deliver a written notice to Seller in accordance with the terms and conditions
of this Agreement, and that any such Claim(s) shall be deemed to have been
waived by Buyer under the terms of Section 7.3.

 

6.5                               Existence - Buyer is a limited liability
company duly formed, validly existing and in good standing under the Laws of the
state of Delaware, and is duly qualified to carry on its business in the
State(s) where the Assets are located.

 

6.6                               Authority - Buyer has all requisite power and
authority to carry on its business as presently conducted, to enter into this
Agreement and to perform its obligations under this Agreement.  Furthermore, as
of the Execution Date, Buyer has obtained all necessary board of directors and
such other internal approvals as may be required under its own corporate
governance requirements to close this transaction, subject to the terms of this
Agreement.  This Agreement constitutes the legal, valid and binding obligation
of Buyer and is enforceable against Buyer in accordance with its terms, subject
to (a) applicable bankruptcy, insolvency, reorganization, moratorium and other
similar Laws of general application with respect to creditors, (b) general
principles of equity, and (c) the power of a court to deny enforcement of
remedies generally based upon public policy.  The execution, delivery and
performance of this Agreement and the documents entered into pursuant to this
Agreement and the consummation of the transactions

 

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contemplated hereby and thereby do not violate, or conflict with, any material
provision of Buyer’s governing documents or any material provisions of any
agreement or instrument to which it is a party or by which it is bound.

 

6.7                               Liability for Broker’s Fees - Buyer has not
incurred any liability, contingent or otherwise, for broker’s or finder’s fees
relating to the transactions contemplated by this Agreement for which Seller
shall have any responsibility whatsoever.

 

6.8                               Financial Resources - At Closing and in
accordance with the Equity Commitment Letter, Buyer will have all funds
necessary to pay the Base Purchase Price and any other amounts as required by
this Agreement.  Buyer’s ability to consummate the transactions contemplated
hereby is not contingent on its ability to secure financing or to complete any
public or private placement of securities prior to or upon Closing.

 

6.9                               Qualification to Assume Operatorship - At
Closing, Buyer or an Affiliate will be qualified to own and assume operatorship
of all Leases, including the Assets, in all jurisdictions where the Assets are
located, and the consummation of the transactions contemplated in this Agreement
will not cause Buyer to be disqualified as such an owner or operator.  To the
extent required by the applicable state, tribal and federal governmental bodies
or agencies, Buyer or an Affiliate will have at Closing, and will continue to
maintain, lease bonds, area-wide bonds, or any other surety bonds or insurance
policies as may be required by, and in accordance with, any Governmental
Authorities with jurisdiction over the ownership or operation of such Assets or
under any operating agreement listed on Schedule 5.7 or Schedule 5.7(a).

 

6.10                        Consents - No consent, approval, authorization or
permit of, or filing with or notification to, any Person is required for or in
connection with the execution and delivery of this Agreement by Buyer or for or
in connection with the consummation of the transactions and performance of the
terms and conditions contemplated hereby by Buyer.

 

6.11                        Litigation - There is no suit, action, demand,
proceeding, lawsuit or other litigation by any Person or Governmental Authority
pending or, to Buyer’s Knowledge, threatened against Buyer that impedes or is
likely to impede Buyer’s ability to consummate the transactions contemplated by
this Agreement and to assume the Assumed Obligations.

 

6.12                        No Known Title Defects - As of the Execution Date,
Buyer has no Knowledge of any Title Defects against the Assets for which it
(i) has not previously disclosed to Seller, and (ii) will submit a Title Defect
notice.

 

6.13                        No Known Environmental Defects - As of the Execution
Date, Buyer has no Knowledge of any Environmental Defects against the Assets for
which it will submit an Environmental Defect notice.

 

ARTICLE 7

 

TITLE

 

7.1                               Title Defects - Buyer shall notify Seller in
writing of any Title Defect in any Well or Lease promptly after discovering the
Title Defect but in no event later than on or before May

 

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14, 2018 (the “Due Diligence Period”).  For purposes of this Agreement, a “Title
Defect” shall mean a deficiency which individually per Well exceeds Fifty
Thousand U.S. Dollars ($50,000) or individually per Lease exceeds Fifty Thousand
U.S. Dollars ($50,000) in one (or more) of the following respects (other than
Permitted Encumbrances):

 

(a)                                 Adverse Claims — Seller’s title as to all or
part of a Well or Lease is subject to (i) an outstanding mortgage which is not
released on or before Closing; (ii) a deed of trust which is not released on or
before Closing; (iii) any other lien or similar encumbrance which is not
released on or before Closing; or (iv) a pending claim or cause of action in
which a competing ownership interest in a Well or Lease is claimed or implied;

 

(b)                                 Decreased Net Revenue Interest - Seller owns
less than the net revenue interest shown on Exhibit “B” for a particular Well as
to the producing formation set forth on Exhibit “B” for such Well, or
Exhibit “C-2” for a Lease, except for decreases (A) in connection with those
operations in which Seller, with Buyer’s consent, may from and after the
Execution Date become a non-consenting co-owner, (B) resulting from pooling,
unitization, communitization or spacing matters or (C) in connection with any
third party payouts of non-consent penalties;

 

(c)                                  Increased Working Interest - Seller owns
more than the working interest shown on Exhibit “B” for a particular Well as to
the producing formation set forth on Exhibit “B” for such Well, without a
proportionate increase in the corresponding net revenue interest shown on
Exhibit “B”; and

 

(d)                                 Fewer Net Mineral Acres — Seller owns fewer
Net Mineral Acres than shown on Exhibit “C-2” for a given Lease except for
decreases (A) in connection with those operations in which Seller, with Buyer’s
consent, may from and after the Execution Date become a non-consenting co-owner,
or (B) resulting from pooling, unitization, communitization or spacing matters;

 

provided, however, that no Title Defect shall be deemed to exist or shall be
asserted by Buyer with respect to (i) any Well operated by Buyer (or any of its
Affiliates), or (ii) any Lease in which Buyer (or any of its Affiliates) owns an
interest, in each case, as of the Execution Date or at any point during the Due
Diligence Period.

 

7.2                               Additional Interests - During the Due
Diligence Period, Buyer shall promptly notify Seller in writing if Buyer
determines (or is made aware of the possibility) that Seller has (i) a lesser
working interest (without a proportionate decrease in the corresponding net
revenue interest) with respect to all or any part of any Well than shown on
Exhibit “B”, (ii) a greater net revenue interest with respect to all or any part
of any Well than that set forth in Exhibit “B” or all or any part of any Lease
than that set forth in Exhibit “C-2,” as applicable, or (iii) a greater number
of Net Mineral Acres in any given Lease shown on Exhibit “C-2” (collectively,
such items shall be referred to as an “Additional Interest”).  At any point
during the Due Diligence Period, Seller may notify Buyer in writing of any
Additional Interest.

 

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7.3                               Notices - Any Title Defect notice pursuant to
Section 7.1 or Additional Interest notice pursuant to Section 7.2 shall include
appropriate documentation to substantiate the applicable position and the
estimated value of the Title Defect or Additional Interest.  To be effective,
Buyer’s Title Defect and Additional Interest notices (or Seller’s Additional
Interest notice) must be asserted in good faith, delivered in writing, and
include (i) a description of the alleged Title Defect or Additional Interest as
to the affected Lease or Well, (ii) the Allocated Value of the affected Lease or
Well as well as the alleged amount of the Title Defect or Additional Interest
being claimed in good faith, (iii) a brief description of the matter
constituting the asserted Title Defect or Additional Interest and the basis for
such Title Defect or Additional Interest, (iv) the computations for such Title
Defect amount or Additional Interest amount, (v) to the extent then known by the
claiming Party, the necessary curative for each Title Defect or documentation or
evidence verifying such Additional Interest, and (vi) supporting documentation
reasonably necessary for the Party to whom such notice has been delivered to
verify the existence of such asserted Title Defect or Additional Interest.  If
any such notice is not timely delivered, the claimant shall thereafter be deemed
to have forever waived and shall have no right to assert such Title Defect or
Additional Interest as the basis for an adjustment to the Base Purchase Price or
make a Claim for any indemnity hereunder or breach of warranty pursuant to the
Conveyances.

 

7.4                               Adjustments to Base Purchase Price - Upon
timely delivery of a notice pursuant to Sections 7.1 or 7.2, either by Buyer or
by Seller, Buyer and Seller shall meet on or before May 21, 2018 and use their
reasonable commercial efforts to agree upon the validity of any claims for Title
Defects or Additional Interests and the amount of any Base Purchase Price
adjustment using the following criteria:

 

(a)                                 Liquidated Charges - If the adjustment is
based upon a lien, encumbrance, or other charge upon a Well or Lease which is
liquidated in amount or which can be estimated with reasonable certainty, then
the adjustment shall be the sum necessary to be paid to the obligee to remove
the encumbrance from the affected Well or Lease, but in no event will such
adjustment exceed the Allocated Value of the affected Asset(s).

 

(b)                                 Ownership Variance - If the adjustment is
based upon Seller owning a lesser or greater net revenue interest with a
corresponding proportionate lesser or greater working interest in a Well than
that shown on Exhibit “B”, then the adjustment shall be proportionate to the
amount allocated to the affected Well on Exhibit “C-1.”  If the adjustment is
based upon a lesser or greater net revenue interest without a corresponding
proportionate lesser or greater working interest in a Well than that shown on
Exhibit “B,” then the Parties shall use their best efforts to agree upon a
mutually acceptable Base Purchase Price adjustment based upon the Allocated
Value for such Well as set forth on Exhibit “C-1.”  If the adjustment is based
upon a lesser or greater net revenue interest in a given Lease than that shown
on Exhibit “C-2,” then the Parties shall use their best efforts to agree upon a
mutually acceptable Base Purchase Price adjustment based upon the Allocated
Value for such Lease as set forth on Exhibit “C-2.” Likewise, if the adjustment
is based upon Seller owning a fewer or greater number of Net Mineral Acres in a
Lease than that shown on Exhibit “C-2”, then the adjustment shall be

 

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proportionate to the amount allocated to the affected Lease on Exhibit “C-2”.

 

(c)                                  Valuation of Title Defects and Additional
Interests - If the adjustment is for an item other than as set forth in (a) or
(b) above, Buyer and Seller shall endeavor to mutually agree on the amount of
the Base Purchase Price adjustment.  If the Parties cannot agree to the
existence of a Title Defect or Additional Interests or the applicable
adjustment, the matter shall be resolved in accordance with the dispute
resolution provisions in Section 20.3.  Any such item shall be referred to as an
“Open Matter”.  Notwithstanding any of the preceding provisions of this
Article 7, all adjustments applicable to Title Defects or Additional Interests
shall be made prior to Closing which Closing shall be extended until resolution
of any disputes relating to the Title Defects or Additional Interests; provided,
however, that if adjustments for Title Defects, Environmental Defects, Casualty
Defects and Open Matters (excluding Additional Interests), in each case that are
alleged in good faith, do not, in the aggregate, exceed twenty-five percent
(25%) of the Base Purchase Price, then Closing shall occur as to the other
Assets that are not subject to the dispute (with the portion of the Assets
subject to the dispute being excluded, and the Base Purchase Price reduced for
the entire Allocated Values thereof) and Closing shall subsequently occur with
respect to the Assets made the subject of the dispute within thirty (30) days
following the final resolution of the dispute unless Seller elects exclusion of
the affected Assets; provided that the Closing may also be delayed at Seller’s
election in the event that Buyer seeks to terminate this Agreement in accordance
with Section 7.6.

 

Notwithstanding anything to the contrary herein, the amount of any Base Purchase
Price adjustment for any Title Defect shall be determined without duplication of
any costs or losses included in any other adjustments for Title Defects
hereunder, or for which Buyer otherwise receives a downward adjustment in the
Base Purchase Price.  For all Title Defects and Additional Interests, subject to
the provisions of Section 7.1, Seller shall (i) in the case of Title Defects,
elect to either: (1) sell to Buyer the entire Well(s) or Lease(s) affected by
the Title Defect but reduce the Base Purchase Price by the agreed upon amount
associated with such Title Defect or (2) if, and only if, the amount of the
Title Defect exceeds fifty percent (50%) of the Allocated Value of the
Lease(s) or Well(s) subject to such Title Defect, exclude from this transaction
any Well or Lease affected by the Title Defect and reduce the Base Purchase
Price for the entire Allocated Value of the Well(s) or Lease(s) so excluded;
provided, however, that if any such Well or Lease affected by the Title Defect
is excluded from this transaction pursuant to this clause (2) and Seller cures
the Title Defect to Buyer’s reasonable satisfaction prior to one hundred eighty
(180) days after Closing, Buyer shall purchase the said excluded Asset for its
Allocated Value as of the Effective Time; or (ii) in the case of an Additional
Interest, sell to Buyer the entire Well(s) or Lease(s) affected by the
Additional Interest at the

 

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original Allocated Value set forth on Exhibit “C-1” or Exhibit “C-2”
attributable to such Wells or Leases as applicable, increased by the agreed upon
amount associated with such Additional Interest.  If, after the end of the one
hundred eighty (180) day cure period, Seller and Buyer are unable to agree on
the existence or extent of any Title Defect (or cure thereof), Additional
Interest or the amounts to be attributable thereto, such dispute(s) shall be
exclusively and finally resolved in accordance with the provisions of
Section 20.3.

 

7.5                               Deductible for Title, Environmental, or
Casualty Defects - Notwithstanding the provisions set forth above, no individual
Title Defect, Environmental Defect, or Casualty Defect shall result in an
adjustment to the Base Purchase Price unless the aggregate net value of the sum
(as a deductible and not a threshold) of (a) all Title Defects agreed to by the
Parties, (b) all Environmental Defects agreed to by the Parties, and
(c) Casualty Defects are greater than three percent (3%) of the Base Purchase
Price (the “Deductible Amount”).  In such event, the Base Purchase Price on the
Closing shall be adjusted by the aggregate net value of the sum of (a) all Title
Defects agreed to by the Parties, (b) all Environmental Defects agreed to by the
Parties and (c) Casualty Defects, which collectively exceed the Deductible
Amount.

 

7.6                               Termination Threshold for Defects - If,
because of agreed Title Defects and Environmental Defects, Open Matters
(excluding Additional Interests), Casualty Defects alleged in good faith, and
removed or excluded Assets due to exercised Preferential Purchase Rights or
un-obtained Required Consents, in the aggregate, the Base Purchase Price would
be adjusted downward by an amount exceeding twenty-five percent (25%) of the
Base Purchase Price (the “Termination Threshold”) either Party may, upon written
notice to the other Party, terminate this Agreement; provided that in the event
the Termination Threshold is met, subject to Seller’s right to exclude an Asset
under Sections 7.4(c) or 8.2(b), Seller may elect to delay Closing for a period
of up to thirty (30) days and elect to cure Open Matters during such 30-day
period or submit Open Matters to arbitration in accordance with Section 20.3. 
Such arbitration shall be conducted by a single arbitrator, who shall be a title
attorney with at least ten (10) years’ experience reviewing oil and gas titles
involving properties in any of the regional areas in which the Assets are
located.  The arbitrator’s determination shall be made within fifteen (15) days
after submission of Open Matters and shall be final and binding upon both
Parties.

 

ARTICLE 8

 

ENVIRONMENTAL AND ENVIRONMENTAL INDEMNITY

 

8.1                               Acceptance of Environmental Condition - Buyer
shall give Seller notice (an “Environmental Notice”) of any fact or circumstance
that (i) causes a Well or any other Asset to be in violation of a currently
existing Environmental Law as of the Execution Date, and (ii)  requires or would
require a Lowest Cost Response, individually per Well or Asset, that exceeds
Fifty Thousand U.S. Dollars ($50,000) (“Environmental Defect”). Each
Environmental Defect will be addressed as a single incident or condition, and
the Environmental Defects shall not be aggregated on a per condition basis or
otherwise (i.e., a condition found at all of the Wells shall not be aggregated,
but instead, shall be evaluated on a site-by-site basis). For the purpose of
this

 

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Agreement, an Environmental Notice, in each case, must comply with all of the
following conditions precedent:

 

(a)                                 The Environmental Notice must be received by
Seller promptly after discovery of the Environmental Defect by Buyer, but in any
event on or before the end of the Due Diligence Period, and thereafter any such
claim shall be deemed to have been waived;

 

(b)                                 The Environmental Notice must be based on
credible and probative evidence substantiated in good faith by Buyer’s
environmental experts (which may include internal employees or personnel of
Buyer, its Affiliates or third parties) that shows it is more likely than not
that there exists an Environmental Defect;

 

(c)                                  The evidence referred to in
Section 8.1(b) must be fully described, substantiated in good faith by Buyer’s
environmental experts, and in the case of documentary evidence, enclosed;

 

(d)                                 The Environmental Notice must reasonably
describe the remediation and restoration required to remedy the Environmental
Defect, or the potential damages claimed or likely to be claimed by a third
party (the “Cleanup”), each as recommended or estimated in good faith by Buyer’s
environmental experts; and

 

(e)                                  The Environmental Notice must state Buyer’s
good faith estimate of the Lowest Cost Response.  For purposes of this
Agreement, the term “Lowest Cost Response” means the response required or
allowed under Environmental Laws that cures, remediates, removes or remedies the
applicable Environmental Defect at the lowest cost sufficient to comply with the
applicable Environmental Laws as compared to any other response that is required
or allowed under Environmental Laws.  The Lowest Cost Response may include
taking no action, leaving the condition unaddressed, periodic monitoring or the
recording of notices in lieu of remediation, if such responses are allowed under
Environmental Laws.  Notwithstanding the foregoing, the Lowest Cost Response
shall not include (and Seller shall have no liability for) (i) the costs of
Buyer’s or its Affiliates’ employees, (ii) overhead costs of Buyer or its
Affiliates, (iii) costs and expenses that would not have been required under
Environmental Laws as they exist at the Execution Date, (iv) Losses, costs or
expenses incurred in connection with remedial or corrective action that is
designed to achieve standards that are more stringent than those required for
similar facilities or that fails to reasonably take advantage of applicable risk
reduction or risk assessment principles allowed under applicable Environmental
Laws.  For purposes of this Agreement, the term “Loss” shall include any
estimated Cleanup, costs, losses, expenses, liabilities (including civil fines),
damages, demands, suits, sanctions, reasonable fees and expenses of attorneys,
technical experts, consultants, and expert witnesses.

 

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If Buyer does not provide Seller with an Environmental Notice within the period
set forth above, then at Closing, Buyer shall be deemed to have accepted such
Well(s) in their current condition and to have forever waived Buyer’s right to
assert an Environmental Defect with respect thereto.

 

8.2                               Remedy for Environmental Defects - If Buyer
gives a valid Environmental Notice in accordance with Section 8.1, Seller may
provide for one of the remedies in Section 8.2(a) with respect to the
Environmental Defect that is subject to such Environmental Notice, but each such
remedy, and the aggregate of all remedies, shall be limited in accordance with
Section 7.5.

 

(a)                                 If Buyer delivers a valid Environmental
Notice to Seller, then (i) Seller, at its election, shall have the option of
(A) remediating the Environmental Defect and completing the Lowest Cost Response
arising from such Environmental Defect, (B) contesting the existence of an
Environmental Defect or Buyer’s estimate of the Lowest Cost Response associated
with the Environmental Defect pursuant to Section 8.2(c), or (C) paying Buyer’s
good faith estimate of the Lowest Cost Response associated with the
Environmental Defect in the form of a reduction to the Purchase Price (an
“Environmental Adjustment”), and (ii) if, and only if, Buyer’s estimate of the
Lowest Cost Response exceeds fifty percent (50%) of the Allocated Value of the
Well subject to such Environmental Notice, either Party, at its election, shall
have the option of excluding the affected Well pursuant to Section 8.2(b).

 

(b)                                 Exclusion of Affected Well - Subject to the
limitations of Section 8.2(a)(ii), at either Party’s option, an exclusion
adjustment may be made in an amount equal to the Allocated Value of the affected
Well which is the subject of a valid Environmental Notice.  In such event Seller
shall retain the affected Well and the Base Purchase Price shall be reduced by
the Allocated Value of such affected Well.

 

(c)                                  Contested Environmental Defects - If Seller
contests the existence of any Environmental Defect or Buyer’s estimate of the
Lowest Cost Response associated with such Environmental Defect, Seller shall
notify Buyer no later than three (3) Business Days after Seller’s receipt of the
Environmental Notice.  The notice shall state the basis for Seller’s contest of
the Environmental Defect or the Lowest Cost Response.  By no later than four
(4) Business Days before Closing, representatives of Seller and Buyer,
knowledgeable in environmental matters, shall meet in person or otherwise, and,
at least two (2) Business Days prior to Closing, either: (i) agree to reject the
Environmental Defect, in which case Buyer shall waive the Environmental Defect,
or (ii) agree on the validity of the Environmental Defect and the estimated
Lowest Cost Response, in which case Seller shall have the options described in
Section 8.2(a) (except the right to contest) and Section 8.2(b).  If Seller and
Buyer cannot agree on either option (i) or (ii) in the preceding sentence, the
Environmental Defect or the estimated Lowest Cost Response subject to the
Environmental Notice shall be

 

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resolved in accordance with the dispute resolution provisions set forth in
Section 20.3.  Notwithstanding any of the preceding provisions of this
Section 8.2(c), all Environmental Adjustments shall be made prior to Closing,
which Closing shall be extended until resolution of any disputes relating to the
Environmental Defects; provided, however, that if adjustments for alleged Title
Defects, Environmental Defects, Casualty Defects, Open Matters, and removed or
excluded Assets due to exercised Preferential Purchase Rights or un-obtained
Required Consents do not, in the aggregate, exceed the Termination Threshold,
then Closing shall occur as to the other Assets that are not subject to the
dispute (with the portion of the Assets subject to the dispute being excluded,
and the Base Purchase Price reduced for the entire Allocated Values thereof) and
Closing shall subsequently occur with respect to the Assets made the subject of
the dispute within thirty (30) days following the final resolution of the
dispute unless Seller elects exclusion of the affected Assets.  IT IS
SPECIFICALLY UNDERSTOOD AND AGREED THAT ONCE AN ENVIRONMENTAL DEFECT HAS BEEN
REMEDIATED AND THE LOWEST COST RESPONSE RELATED TO SUCH ENVIRONMENTAL DEFECT HAS
BEEN COMPLETED OR AN ENVIRONMENTAL ADJUSTMENT HAS BEEN MADE, BUYER SHALL ASSUME
ANY AND ALL FUTURE ENVIRONMENTAL OBLIGATIONS ASSOCIATED WITH SUCH ASSET.

 

(d)                                 Implementing Cleanup - If Seller elects to
Cleanup or remediate an Environmental Defect pursuant to Section 8.2(a)(i),
Seller shall select the means and methods of effecting the Cleanup or
remediation to achieve the Lowest Cost Response for such Environmental Defect,
provided, however, that Seller shall not be required to plug and abandon any
currently unplugged wells unless required as part of the Lowest Cost Response. 
Seller’s responsibility for remediation under this Section 8.2 shall be limited
to a standard appropriate for the use of an Asset for oil and gas activities and
in accordance with all applicable Laws.

 

8.3                               Acceptance of Environmental Condition -
SUBJECT TO THE OTHER TERMS AND PROVISIONS SET FORTH IN THIS AGREEMENT, UPON
CLOSING, BUYER AGREES TO ACCEPT THE ENVIRONMENTAL CONDITION OF THE
ASSETS, INCLUDING COSTS TO CLEAN UP OR REMEDIATE; AND SUBJECT TO THE OTHER TERMS
AND PROVISIONS SET FORTH IN THIS AGREEMENT, BUYER HEREBY AGREES TO RELEASE
SELLER FROM ANY AND ALL LIABILITY AND RESPONSIBILITY THEREFOR AND AGREES TO
INDEMNIFY, DEFEND, AND HOLD SELLER HARMLESS FROM ANY AND ALL CLAIMS, CAUSES OF
ACTION, FINES, EXPENSES, COSTS, LOSSES, AND LIABILITIES WHATSOEVER (INCLUDING
REASONABLE ATTORNEYS’ FEES AND COSTS) IN CONNECTION WITH THE ENVIRONMENTAL
CONDITION OR BUYER’S FAILURE TO PROPERLY REMEDIATE THE CONDITION.  BUYER
ACKNOWLEDGES AND AFFIRMS THAT THE ASSETS HAVE BEEN UTILIZED FOR THE PURPOSE OF
EXPLORATION, PRODUCTION AND DEVELOPMENT OF OIL AND GAS, AND EXCEPT AS OTHERWISE
SET FORTH IN THIS

 

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AGREEMENT, AT CLOSING, THE ASSETS WILL BE ACQUIRED IN THEIR “AS IS, WHERE IS”
ENVIRONMENTAL CONDITION.  BY CLOSING, BUYER SHALL HAVE CONDUCTED AN INDEPENDENT
INVESTIGATION OF THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSETS, TO THE
EXTENT BUYER DEEMS NECESSARY OR APPROPRIATE.

 

8.4                               NORM - Buyer acknowledges that the Assets have
been used for exploration, development and production of oil, gas and water and
that there may be petroleum, produced water, wastes or other materials located
on, under or associated with the Interests.  Equipment and sites included in the
Assets may contain NORM.  NORM may affix or attach itself to the inside of
wells, materials and equipment as scale, or in other forms; the wells, materials
and equipment located on or included in the Assets may contain NORM and other
wastes or hazardous substances/materials; and NORM-containing material and other
wastes or hazardous substances/materials may have been buried, come in contact
with the soil or otherwise been disposed of on or around the Assets.  Special
procedures may be required for the remediation, removal, transportation or
disposal of wastes, asbestos, hazardous substances/materials, including hydrogen
sulfide gas and NORM from the Assets.  From and after the Closing, Buyer shall
assume responsibility for the control, storage, handling, transporting and
disposing of or discharge of all materials, substances and wastes from the
Assets (including produced water, hydrogen sulfide gas, drilling fluids, NORM
and other wastes), whether present before or after the Effective Time, in a safe
and prudent manner and in accordance with all applicable Environmental Laws (as
defined below).  The presence of NORM or asbestos-containing materials that are
non-friable cannot be claimed as an Environmental Defect, except to the extent
constituting a violation of Environmental Laws.

 

8.5                               Environmental Indemnities - EXCEPT AS
OTHERWISE SET FORTH IN THIS ARTICLE 8, THIS SALE IS MADE ON AN “AS IS, WHERE IS”
BASIS AND BUYER RELEASES SELLER FROM ANY LIABILITY WITH RESPECT TO THE
ENVIRONMENTAL CONDITION OF THE ASSETS, WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE
TO SELLER’S NEGLIGENCE.  FROM AND AFTER CLOSING, SUBJECT TO THE OTHER TERMS AND
PROVISIONS SET FORTH IN THIS AGREEMENT, BUYER SHALL BE LIABLE TO SELLER FOR AND
SHALL, IN ADDITION, INDEMNIFY, DEFEND, RELEASE AND HOLD SELLER HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS, IN FAVOR OF ANY THIRD PARTY OR ENTITY FOR
INJURY, ILLNESS OR DEATH OF ANY PERSON(S) OR FOR DAMAGE, LOSS, POLLUTION OR
CONTAMINATION OF ANY REAL OR PERSONAL PROPERTY, GROUNDWATER OR THE ENVIRONMENT
ATTRIBUTABLE TO THE ENVIRONMENTAL CONDITION OF THE ASSETS, INCLUDING CLAIMS
ARISING UNDER ENVIRONMENTAL LAWS OR, FOR ANY OTHER CLAIMS ARISING DIRECTLY OR
INDIRECTLY FROM, OR INCIDENT TO, THE USE, OCCUPATION, OWNERSHIP, OPERATION,
CONDITION (WHETHER LATENT OR PATENT), MAINTENANCE OR ABANDONMENT OF ANY OF THE
ASSETS AND WHETHER ARISING FROM OR CONTRIBUTED TO BY THE ACTIVE, PASSIVE, JOINT,
SOLE OR CONCURRENT NEGLIGENCE, OR STRICT LIABILITY OF SELLER, OR SELLER’S
CONTRACTORS OR SUBCONTRACTORS OR THE OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES OF
SELLER’S CONTRACTORS OR SUBCONTRACTORS, INCLUDING ANY STRICT LIABILITY UNDER
ENVIRONMENTAL LAWS, REGARDLESS OF WHETHER ANY SUCH CLAIMS RESULT FROM ANY
CONDITIONS, EVENTS, ACTIONS OR INACTIONS ARISING, OCCURRING OR ACCRUING PRIOR
TO,

 

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ON OR AFTER THE EFFECTIVE TIME.  Buyer and Seller shall treat all information
regarding any environmental conditions as confidential and shall not make any
contact with any Governmental Authority or third party regarding same without
the prior express written consent from the other Party unless such contact is
required by applicable Law.

 

ARTICLE 9

 

THIRD-PARTY CONSENTS AND PREFERENTIAL PURCHASE RIGHTS

 

9.1                               Third Party Notices - Seller shall
(i) request, from the appropriate parties (and in accordance with the Contracts
creating such rights or requirements), any Consents, and (ii) send notices to
all Persons or parties to whom such notices may be required for all options,
rights of first refusal, or similar preferential purchase rights burdening any
Asset(s) (each a “Preferential Purchase Right”), in compliance with the terms of
the Contract(s) providing for or creating such Preferential Purchase Rights
against the applicable Asset(s).  Seller agrees to use commercially reasonable
efforts, but without obligation to incur any unreasonable cost or expense, to
obtain waivers of, or to comply with, any such Preferential Purchase Right and
Consents prior to Closing.

 

9.2                               Third-Party Exercise - Subject to Section 9.3,
if a third-party (a) exercises a Preferential Purchase Right on any Asset(s) or
(b) fails to respond to a notice of Preferential Purchase Right and the time
period for election under such Preferential Purchase Right has not expired prior
to the Closing Date, then the affected Asset(s) shall be removed from this
Agreement and the Base Purchase Price shall be adjusted by the dollar amount
allocated to the affected Asset(s) as set forth on Exhibits “C-1” or “C-2”.

 

9.3                               Third-Party Failure to Purchase - If an Asset
is subject to a Preferential Purchase Right, and (a) such Asset was removed from
this Agreement pursuant to Section 9.2(b) and the Preferential Purchase Right is
waived or deemed waived after Closing or (b) a third-party that has exercised
such Preferential Purchase Right (x) fails to close the purchase for any reason
within sixty (60) days after Closing (or such longer period as may be provided
for under the applicable Contract(s) creating such Preferential Purchase Right)
and as a result such third-party no longer has any rights with respect to such
Asset(s) or (y) otherwise forfeits its Preferential Purchase Right, Seller shall
give written notice to Buyer of such waiver, failure to close, or forfeiture, as
applicable, and Buyer shall purchase such Asset(s) for the Allocated Value
therefor as set forth on Exhibits “C-1” or “C-2” and on the terms and conditions
set forth in this Agreement (including the Effective Time as set forth in this
Agreement).

 

9.4                               Required Consents - If Seller fails to obtain
a Required Consent set forth in Schedule 5.17 prior to Closing, then the
Interest (or portion thereof) or Well (or portion thereof) affected by such
un-obtained Required Consent shall be excluded from the Assets to be assigned to
Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value
of such Interest (or portion thereof) or Well (or portion thereof) so excluded. 
In the event that any such Required Consent that was not obtained prior to
Closing is obtained within 120 days following the Closing Date, then, within ten
(10) Business Days after such Consent is obtained, (a) Buyer shall purchase the
Interest (or portion thereof) or Well (or portion thereof) that was so excluded
as a result of such previously un-obtained Required Consent and pay to Seller
the amount by which the Purchase Price was reduced at Closing with respect to
the Interest (or portion thereof) or Well (or portion

 

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thereof) so excluded and (b) Seller shall assign to Buyer the Interest (or
portion thereof) or Well (or portion thereof) so excluded at Closing pursuant to
an instrument in substantially the same form as the Conveyances.  In the event
that any such Required Consent that was not obtained prior to Closing is still
outstanding 120 days following the Closing Date, then, within ten (10) Business
Days after the end of such 120 day period, (x) Buyer shall purchase the Interest
(or portion thereof) or Well (or portion thereof) that was so excluded as a
result of such un-obtained Required Consent and pay to Seller the amount by
which the Purchase Price was reduced at Closing with respect to the Interest (or
portion thereof) or Well (or portion thereof) so excluded, (y) Seller shall
assign to Buyer the Interest (or portion thereof) or Well (or portion thereof)
so excluded at Closing pursuant to an instrument in substantially the same form
as the Conveyances, and (z) Seller shall indemnify Buyer pursuant to
Section 16.4(g).  Prior to Closing, Seller and Buyer shall use their respective
commercially reasonable efforts to obtain all Required Consents listed in
Schedule 5.17; provided, however, that neither Party shall be required to incur
any liability or pay any money in order to obtain any such Required Consent. 
Subject to the foregoing, Buyer agrees to provide Seller with any information or
documentation that may be reasonably requested by Seller or the third party
holder(s) of such Required Consents in order to facilitate the process of
obtaining such Required Consents.

 

ARTICLE 10

 

CONDITIONS TO CLOSING; SETTLEMENT STATEMENT; CLOSING

 

10.1                        Seller’s Conditions to Closing - The obligations of
Seller at the Closing are subject to the satisfaction at or prior to the
Closing, or waiver in writing by Seller, of the following conditions:

 

(a)                                 All representations and warranties of Buyer
contained in this Agreement, to the extent qualified with respect to
materiality, shall be true and correct in all respects, and to the extent not so
qualified, shall be true and correct in all material respects, in each case as
if such representations and warranties were made at and as of the Closing Date
(except to the extent such representations and warranties are made as of a
specified date, in which case such representations and warranties shall be true
and correct as of the specified date); and Buyer shall have performed and
satisfied in all material respects all covenants and agreements required to be
performed and satisfied by it under this Agreement at or prior to the Closing.

 

(b)                                 On the Closing Date, no injunction, order or
award enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement shall have been issued by a Governmental
Authority and remain in force.

 

(c)                                  All material consents and approvals
required of Governmental Authorities in order to sell and transfer the Assets to
Buyer and otherwise close and consummate the transaction contemplated herein,
except consents and approvals of assignments by Governmental Authorities that
are customarily obtained after Closing, shall have been received or waived in
writing, or the

 

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necessary waiting period shall have expired, or early termination of the waiting
period shall have been granted.

 

(d)                                 Buyer shall have provided Seller evidence
satisfactory to Seller that Buyer or an Affiliate, as of Closing (i) is
qualified to do business and to own and operate the Assets in all jurisdictions
in which the Assets are located and (ii) has posted bonds and obtained insurance
required by any Governmental Authority or other body to own and operate the
Assets or by any applicable operating agreement as replacements to those held by
Seller and specifically listed on Schedule 14.5.

 

(e)                                  The aggregate adjustments to the Base
Purchase Price attributable to finally resolved Title Defects and alleged
Environmental Defects, Open Matters, Casualty Defects, and removed or excluded
Assets due to un-obtained Required Consents shall not have exceeded the
Termination Threshold.

 

(f)                                   Buyer shall have performed its obligations
set forth in Section 10.5.

 

(g)                                  Buyer shall have executed the Closing
Settlement Statement defined under Section 10.3.

 

10.2                        Buyer’s Conditions to Closing - The obligations of
Buyer at the Closing are subject to the satisfaction at or prior to the Closing,
or waiver in writing by Buyer, of the following conditions:

 

(a)                                 All representations and warranties of Seller
contained in this Agreement, to the extent qualified with respect to
materiality, shall be true and correct in all respects, and to the extent not so
qualified, shall be true and correct in all material respects, in each case as
if such representations and warranties were made at and as of the Closing Date
(except to the extent such representations and warranties are made as of a
specified date, in which case such representations and warranties shall be true
and correct as of the specified date), and Seller shall have performed and
satisfied in all material respects all covenants and agreements required to be
performed and satisfied by it under this Agreement at or prior to the Closing.

 

(b)                                 On the Closing Date, no injunction, order or
award enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement shall have been issued by a Governmental
Authority and remain in force.

 

(c)                                  All material consents and approvals
required of Governmental Authorities in order to sell and transfer the Assets to
Buyer and otherwise close and consummate the transaction contemplated herein,
except consents and approvals of assignments by Governmental Authorities that
are customarily obtained after Closing, shall have been received or waived in
writing, or the necessary waiting period shall have expired, or early
termination of the waiting period shall have been granted.

 

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(d)                                 The aggregate adjustments to the Base
Purchase Price attributable to finally resolved Title Defects and alleged
Environmental Defects, Open Matters, Casualty Defects, and removed or excluded
Assets due to exercised Preferential Purchase Rights or un-obtained Required
Consents shall not have exceeded the Termination Threshold.

 

(e)                                  Seller shall have performed its obligations
set forth in Section 10.5.

 

(f)                                   Seller shall have executed the Closing
Settlement Statement defined under Section 10.3.

 

10.3                        Closing Settlement Statement - Three (3) Business
Days prior to Closing, Seller shall provide Buyer with a closing settlement
statement covering the adjustments, without duplication, to the Base Purchase
Price to be made at Closing under this Agreement (the “Closing Settlement
Statement”).  To the extent available, actual numbers shall be used.  If not
available, Seller shall use reasonable and good faith estimates of the same,
which estimates shall be adjusted to take into account actual numbers in
connection with the Final Settlement Statement described in Section 11.3 below. 
In preparing the Closing Settlement Statement, Seller shall have no obligation
to make an accrual for revenues not received as of Closing.

 

10.4                        Closing Date and Place - The closing of the
transaction contemplated by this Agreement shall be held on the third Business
Day after the satisfaction or waiver of the latest to occur of the conditions
set forth in Sections 10.1 and 10.2 (other than those conditions that by their
nature are to be satisfied by actions taken at the Closing, but subject to their
satisfaction) (the “Closing Date”), which the Parties intend to occur on or
before May 30, 2018, at the office of Seller at 321 South Boston Avenue,
Suite 1000, Tulsa, Oklahoma 74103 or at such other time and place as the Parties
mutually agree (the “Closing”).

 

10.5                        Closing Activities - The following actions shall
take place at Closing:

 

(a)                                 Certificates - Each Party shall deliver to
the other Party a certificate in a form reasonably satisfactory to the other
Party, dated as of the Closing, and executed by a duly authorized officer,
partner, attorney-in-fact or owner, as appropriate, of such Party, certifying
that the conditions to Closing as set forth in Sections 10.1(a) or 10.2(a), as
the case may be, have been met.

 

(b)                                 Conveyances — Seller and Buyer shall
execute, acknowledge and deliver two (2) counterpart copies of each of the
Conveyances (substantially in the form set forth as Exhibit “D” attached hereto)
to be filed in each respective County where the Assets are located, assigning
and conveying the Assets to Buyer, as well as the requisite number of applicable
governmental assignment forms.

 

(c)                                  Payment - Buyer shall deliver to an account
designated in writing by Seller by wire transfer of same day funds the amount as
set forth on the Closing Settlement Statement.

 

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(d)                                 Additional Documents - Buyer shall
(i) furnish to Seller such evidence (including evidence of satisfaction of
applicable bonding or insurance requirements as described in Section 10.1(d)) as
Seller may reasonably require demonstrating that Buyer or an Affiliate is
qualified with the applicable Governmental Authorities  or pursuant to any
operating agreement to succeed Seller as the owner and, where applicable, the
operator of the Assets, (ii) with respect to Assets operated by Seller where
Buyer or an Affiliate is to succeed Seller as operator, execute and deliver to
Seller appropriate evidence reflecting change of operator as required by
applicable Governmental Authorities, and (iii) execute and deliver to Seller
such forms as Seller may reasonably request for filing with applicable
Governmental Authorities to reflect Buyer’s assumption of plugging and
abandonment liabilities with respect to all of the Assets, including copies of
any credit support instruments posted by Buyer in support of such liabilities.

 

(e)                                  Possession - Seller shall (subject to the
terms of any applicable operating agreements and to the other provisions hereof)
deliver to Buyer possession of the Assets to be conveyed at the Closing.

 

(f)                                   Letters-in-Lieu - Seller shall prepare and
Seller and Buyer shall execute and deliver to Buyer the Letters-in-Lieu of
Transfer Orders provided for in Section 13.3.

 

(g)                                  Release of Mortgages, Deeds of Trusts,
Liens, Encumbrances and Financing Statements - Seller shall deliver to Buyer
duly executed releases of any mortgages, deeds of trust, liens, encumbrances and
financing statements, if any, placed by Seller or its Affiliates upon and
encumbering Seller’s interest in the Assets, other than Permitted Encumbrances.

 

(h)                                 Vehicle Titles — To the extent Buyer elects
to acquire the same, Seller shall deliver, or cause to be delivered, to Buyer
the original titles to each of the Vehicles being transferred hereunder,
executed by an authorized officer of Seller, if necessary under applicable Law
to convey such Vehicles to Buyer.

 

(i)                                     Certificate of Non-Foreign Status. 
Seller shall deliver to Buyer a certification of Seller’s (or, if Seller is an
entity disregarded as separate from its owner, its regarded owner’s) non-foreign
status under U.S. Treasury Regulations Section 1.1445-2(b)(2) substantially in
the form attached hereto as Exhibit “E”.

 

(j)                                    Transition Services Agreement.  Seller
and Buyer shall each deliver duly executed counterparts of the Transition
Services Agreement.

 

ARTICLE 11

 

POST-CLOSING OBLIGATIONS

 

Seller and Buyer agree to the following post-Closing obligations:

 

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11.1                        Recordation and Filing of Documents - After the
Closing, Buyer shall file or record the Conveyances in the appropriate county
and governmental records.  Buyer shall provide a copy of same, including
recording date, to Seller, all at the sole cost of Buyer.  Buyer shall pay all
documentary stamp taxes and recording fees incident to recording the Conveyances
in the appropriate county and governmental offices.

 

11.2                        Records - Immediately upon Closing, Seller shall
furnish and make available to Buyer the Records.  Seller shall make the Records
available at Seller’s office during normal business hours.  If requested by
Buyer, Seller shall deliver the Records to Buyer with all costs associated with
delivering the Records borne solely by Buyer.  Insofar as Seller reasonably
believes the Records may be needed or useful in connection with federal, tribal,
state or local regulatory or tax matters or resolution of disputes, litigation,
or contract compliance issues, Buyer (for a period of three (3) years after the
Closing) shall further make available to Seller or its Affiliates (at the
location of such Records in Buyer’s organization) access to the Records during
normal business hours, upon not less than two (2) Business Days prior written
request by Seller, and Seller shall have the right to copy at its own expense
and retain such copies of the Records as Seller, in good faith, believes may be
useful or needed in connection with the above-described matters.  If, however,
Buyer elects to destroy any of the Records prior to the expiration of the three
(3) year period, Buyer shall give to Seller written notice of such intent at
least thirty (30) days prior to such destruction and Seller shall have the
option, at its expense, of having such Records delivered to it.

 

11.3                        Final Settlement Statement - Seller shall issue a
final settlement statement covering all adjustments, without duplication, to the
Base Purchase Price that were not included in the Closing Settlement Statement
(the “Final Settlement Statement”) within one hundred twenty (120) days after
Closing.  Buyer shall respond with objections and proposed corrections within
thirty (30) days of the issuance of the Final Settlement Statement.  If Buyer
does not respond with objections and the support therefor to the Final
Settlement Statement in writing within thirty (30) days of the issuance of the
Final Settlement Statement, said Statement shall be deemed approved by Buyer. 
In the event that Buyer does respond and objects within the prescribed time
period, the Parties shall meet within fifteen (15) days following Seller’s
receipt of Buyer’s objections and attempt to resolve the disputed items.  If the
Parties are unable to resolve the disputed items by the end of such fifteen-day
period, the dispute shall be resolved in accordance with the dispute resolution
provisions set forth in Section 20.3.  After approval by both Parties (or after
final resolution of the same under Section 20.3), the net adjustment due
pursuant to the Final Settlement Statement for the Assets conveyed shall be sent
to Buyer or Seller, as the case may be.  Buyer or Seller, as the case may be,
agree to promptly pay any such amount due within three (3) Business Days after
finalizing the Final Settlement Statement.

 

11.4                        Cooperation with Seller’s Retained Assets - Buyer
agrees to use reasonable efforts to cooperate in connection with Seller’s
removal of all personal property associated with the Retained Assets (to the
extent applicable), including the equipment and personal property identified on
Schedule 2.9 (if any).  Seller shall remove such retained personal property
within thirty (30) days after Closing.

 

11.5                        Suspense Accounts - As set forth and itemized on
Schedule 11.5 attached hereto, Seller currently maintains suspense accounts
pertaining to oil and gas heretofore produced

 

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comprising monies payable to royalty owners, mineral owners and other Persons
with an interest in production associated with the Assets that Seller has been
unable to pay (the “Suspense Accounts”).  As identified in the Closing
Settlement Statement, a downward adjustment to the Base Purchase Price will be
made at Closing to reflect the Suspense Accounts as of the Closing Date and the
Suspense Accounts shall be further adjusted, if necessary, in the Final
Settlement Statement.  Subject to the other provisions hereof, Buyer shall
assume full and complete responsibility and liability for proper payment of the
funds comprising the Suspense Accounts as set forth on the “Final Suspense
Account Statement,” which shall be provided by Seller to Buyer with the Final
Settlement Statement required in Section 11.3 (including any liability under any
unclaimed property law or escheat statute).  Subject to Seller’s representations
and warranties and indemnification obligations contained in this Agreement,
Buyer agrees to indemnify, defend and hold Seller, its parent, subsidiary and
affiliated entities, together with their respective officers, directors,
employees, agents and their respective successors and assigns, harmless from and
against any and all liabilities, claims, demands, interest, penalties and
expenses (including reasonable attorneys’ fees) arising out of or pertaining to
the proper payment and administration of the Suspense Accounts in accordance
with the Final Suspense Account Statement.

 

11.6                        Further Assurances - Buyer and Seller further agree
that each shall, from time to time and upon reasonable request, use reasonable
efforts to execute, acknowledge, and deliver in proper form, any instrument of
conveyance, assignment, transfer, or other instruments reasonably necessary for
transferring title in the Assets to Buyer or otherwise to implement the
transactions contemplated herein.

 

11.7                        Anti-Corruption and Economic Sanctions - Seller
represents and covenants that it will not, directly or indirectly, use, lend,
contribute or otherwise make available funds to, directly or indirectly,
(i) fund or facilitate any activities or business of or with any Sanctioned
Person or any Person in a Sanctioned Country; (ii) fund or facilitate any money
laundering or terrorist financing activities or business; or (iii) in any other
manner that will result in a violation of any applicable anti-money laundering
and counter terrorism financing Laws, anti-corruption Laws, including the
Foreign Corrupt Practices Act of 1977, or Sanctions by Seller.

 

ARTICLE 12

 

TAXES

 

12.1                        Property Taxes - All ad valorem taxes, property
taxes, and similar Asset Taxes (“Property Taxes”) applicable to the Assets with
respect to the calendar 2017 tax year shall be apportioned to Seller, whereas
all Property Taxes applicable to the Assets with respect to the calendar 2018
tax period shall be apportioned to Buyer.  In the event that Property Taxes for
any jurisdiction are determined with reference to a taxable year other than the
calendar year, then such Property Taxes shall be apportioned between Seller and
Buyer by means of an allocation based on the number of days the Assets were
owned by such Party.  The amount apportioned to Seller shall be based on the
number of days the Assets were owned by them during the tax period in question
in the calendar 2018 period, while the amount apportioned to Buyer shall be
based on the number of days the Assets were owned by it in the calendar 2018
period.  Within ten (10) Business Days from receipt of notice, (i) Seller shall
reimburse Buyer for any and all Property Taxes apportioned

 

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to Seller under this Section 12.1 but paid by Buyer, and (ii) Buyer shall
reimburse Seller for any and all Property Taxes apportioned to Buyer under this
Section 12.1 but paid by Seller.

 

12.2                        Production Taxes - All Asset Taxes (other than
Property Taxes) shall be apportioned between the Parties based upon the date on
which the transaction giving rise to the imposition of such Asset Taxes
occurred, with Seller being liable for all such Taxes with respect to
transactions occurring prior to the Effective Time and Buyer being responsible
for all such Taxes with respect to transactions occurring at and after the
Effective Time. For the avoidance of doubt, all production, severance and
similar taxes based on or measured by the production of oil, natural gas, or
other Hydrocarbons or minerals, or the receipt of proceeds therefrom, shall be
considered imposed on the date such production was produced.  Within ten
(10) business days from receipt of notice, (i) Seller shall reimburse Buyer for
any and all Taxes apportioned to Seller under this Section 12.2 but paid by
Buyer, and (ii) Buyer shall reimburse Seller for any and all Property Taxes
apportioned to Buyer under this Section 12.2 but paid by Seller.

 

12.3                        Other Taxes - Buyer shall be responsible for the
payment of all applicable state and local sales tax, use tax, gross receipts
tax, business license tax, and other taxes attributable to the consummation of
the transactions under this Agreement (except income, franchise, or similar
Taxes which shall be the responsibility of the Party upon whom such Taxes are
assessed) (“Transfer Taxes”).  Any state or local tax specified above, inclusive
of any penalty and interest, assessed at a future date against Seller with
respect to the transaction covered herein shall be paid by Buyer or, if paid by
Seller, Buyer shall promptly reimburse Seller therefor.  Any documentary stamp
tax which may be due shall be paid by Buyer.  Seller shall reasonably cooperate
with Buyer to obtain any exemption or reduction in Taxes described in this
Section 12.3.

 

ARTICLE 13

 

OWNERSHIP OF ASSETS

 

13.1                        Distribution of Production - All oil in storage
above the pipeline connection at the Effective Time shall be credited to Seller,
less applicable royalties, overriding royalties and severance taxes.  For
Seller-operated Assets, Seller has gauged the oil in storage as of the Effective
Time.  For Seller non-operated Assets, the quantity of such oil in storage shall
be determined on the same basis as that used for Seller-operated Assets based on
operator reports or applicable state regulatory agency production reports or
records.  As part of the Closing Settlement Statement, the price for such oil in
storage shall be at the price that Seller has contracted to sell the oil at the
Effective Time.  If there is no such price, the price shall be the average of
the two (2) highest prices that are posted at the Effective Time (plus any
premium) by other purchasing companies, as determined by Seller in the field or
locality where the Assets are located for oil of like grade and gravity. 
Subject to the occurrence of the Closing, title to the oil in storage for both
Seller-operated and Seller non-operated Assets shall pass to Buyer as of the
Effective Time, and an upward adjustment shall be made to the Base Purchase
Price due at Closing, less applicable royalties, overriding royalties and
severance taxes.

 

13.2                        Proration of Income and Expenses - Except as
otherwise provided in this Agreement, all proceeds (including proceeds held in
suspense or escrow), receipts, credits, and income attributable to the Assets
for all production periods prior to the Effective Time shall belong

 

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to Seller, and all proceeds, receipts, credits, and income attributable to the
Assets for all production periods from and after the Effective Time shall belong
to Buyer.  Except as otherwise provided in this Agreement, all costs, expenses,
disbursements, and obligations attributable to the Assets for all production
periods prior to the Effective Time shall be the obligation of Seller, and
Seller shall promptly pay, or if paid by Buyer, promptly reimburse Buyer for and
hold Buyer harmless from and against same.  Except as otherwise provided in this
Agreement, all costs, expenses, disbursements and obligations attributable to
the Assets for all production periods from and after the Effective Time shall be
the obligation of Buyer, and Buyer shall promptly pay, or if paid by Seller,
promptly reimburse Seller for and hold Seller harmless from and against same.

 

13.3                        Notice to Remitters of Proceeds - Buyer shall be
responsible for informing all purchasers of production or other remitters to pay
Buyer and obtain from the remitter revenues accrued and attributable to
production periods after the Effective Time.  The remitter shall be informed by
Seller and Buyer via Letters-in-Lieu of Transfer Order or such other reasonable
documents which remitter may require.

 

13.4                        Production Imbalances - Set forth on Schedule 13.4
is a listing of all gas imbalance volumes known by Seller to exist as of the
Effective Time derived from the most recent imbalance statement from the
operator of each Well where a known imbalance exists measured in thousand cubic
feet (“MCFs”) and the aggregate net volume of overproduction or underproduction,
as applicable, with respect to the Assets.  As part of the Final Settlement
Statement, the Base Purchase Price shall be adjusted, upward or downward as
appropriate, to reflect the value of the difference between (a) the aggregate
net volume of overproduction or underproduction associated with the Assets set
forth on Schedule 13.4 and (b) the aggregate net volume of overproduction or
underproduction associated with the Assets as of the Effective Time (the
“Assumed Imbalances”).  The value of said difference between the aggregate net
volume (less royalties, excess royalties and overriding royalties) of
overproduction or underproduction, as applicable, shall be the product obtained
by multiplying $2.00 by the volume of such difference in MCFs (such value, the
“Imbalance Adjustment”).  Buyer shall not be entitled to any other Base Purchase
Price adjustments with respect to the Assumed Imbalances and shall be solely
responsible for any liability and solely entitled to any benefit from such
production imbalances relating to the Assets, whether occurring before, on, or
after the Effective Time.

 

13.5                        Pipeline and Other Non-Wellhead Imbalances - To the
extent there exists any imbalances attributable to Hydrocarbons produced from
the Assets as of the Effective Time with respect to any gas pipeline, storage or
processing facility (the “Pipeline Imbalances”), at Closing the Base Purchase
Price shall be adjusted upward or downward, as appropriate, to reflect the value
of said Pipeline Imbalance.  The value of said Pipeline Imbalance shall be
calculated by summing the product(s) obtained by multiplying the volume of each
net over-position or under-position, as the case may be, measured in the same
manner as it is measured by the pipeline, storage or processing facility, as
applicable, by the value at which the Pipeline Imbalance was either cashed out,
made up or sold, or if otherwise undeterminable then using existing fair market
value of, or price for, said Hydrocarbons.  Buyer shall be solely responsible
for any liability and solely entitled to any benefit from such pipeline
imbalances relating to the Assets from and after the Effective Time; provided,
that Buyer shall not be liable for any penalties or surcharges payable to the
pipeline transport for periods prior to the Effective Time.  If the Pipeline
Imbalance cannot be determined by Closing or if the pipeline storage or
processing facility makes any adjustments

 

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attributable to any period prior to the Effective Time after Closing but before
the Final Settlement Statement, then the value adjustment associated with any
imbalance will be made in connection with the Final Settlement Statement.

 

ARTICLE 14

 

INTERIM OPERATIONS

 

14.1                        Standard of Care - During the period from the
Execution Date to Closing, Seller shall use commercially reasonable efforts to
(i) except for emergency action taken in the face of risk to life, property or
the environment, not, without the prior written consent of Buyer,  approve or
authorize any AFEs or capital expenditures over Fifty Thousand and No/100 U.S.
Dollars ($50,000.00) net to the interest of Seller which are received by Seller
with respect to any Assets, incur costs for discretionary expenditures for
operations in excess of Fifty Thousand and No/100 U.S. Dollars ($50,000.00) net
to the interest of Seller for which AFEs are not prepared; (ii) not transfer,
sell, hypothecate, encumber, abandon or otherwise dispose of any portion of the
Assets (other than the replacement or disposition of Equipment or the sale of
Hydrocarbons attributable to the Interests or Wells, in each case, in the
ordinary course of business or as required in connection with the exercise by
third-parties of Preferential Purchase Rights); (iii) assist Buyer (without
incurring any third party expenses) in preserving the present relationships
related to the Assets with Persons having significant business relations
therewith, such as suppliers, customers, brokers, agents or otherwise; and
(iv) not waive, compromise or settle any material right or claim if such waiver,
compromise or settlement would adversely affect the use, ownership or operation
of any of the Assets in any material respect.

 

14.2                        Liability of Operator - Notwithstanding
Section 14.1, Seller shall not be liable to Buyer for any claims, demands,
causes of action, damages, or liabilities arising out of Seller’s operation of
the Assets after the Effective Time, insofar as Seller continues to operate and
maintain the Assets in accordance with applicable Law and contracts and
reasonably prudent industry practice in the area in which the Assets are
located, as well as in compliance with the terms of this Agreement (including
Section 14.1 above), and insofar as no such Claims, demands, causes of action,
damages, or liabilities relating to such interim operation are attributable to
the gross negligence or willful misconduct of Seller.

 

14.3                        Removal of Signs - Buyer shall promptly, but no
later than required by applicable rules and regulations or thirty (30) days
after Closing, whichever is earlier, remove any signs and references to Seller
and shall erect or install all signs complying with any applicable governmental
rules and regulations, including those showing Buyer or its Affiliates as
operator of the Assets.

 

14.4                        Third-Party Notifications - Buyer shall make all
notifications to all Governmental Authorities, “one call services” and similar
groups associated with the operation of the Assets within ten (10) Business Days
of Closing.  A copy of all such notifications shall be provided to Seller
pursuant to the notice provisions contained in Article 18 hereof.

 

14.5                        Seller’s Credit Obligations - The Parties understand
that none of the bonds, letters of credit, guarantees and insurance, if any,
posted or owned by Seller with any Governmental Authority or third party and
relating to the Assets, including those listed on Schedule 14.5,

 

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(“Seller’s Credit Obligations”) are to be transferred to Buyer.  On or before
the Closing Date, Buyer shall obtain, or cause to be obtained in the name of
Buyer, replacements for Seller’s Credit Obligations described on Schedule 14.5. 
If any Seller’s Credit Obligations remain outstanding as of the Closing Date,
Buyer shall indemnify each member of the Seller Group and hold them harmless
against any Losses that the Seller Group may incur under any such Seller’s
Credit Obligations from and after the Effective Time.

 

14.6                        Employment Matters - From and after the Execution
Date, Seller will assist Buyer in Buyer’s efforts to hire Seller’s field level
employees whose duties relate to the operation of Assets to effectuate a smooth
transition of the operation of the Assets by Buyer.  Within five (5) Business
Days from the Execution Date, Seller will provide Buyer with a list (the
“Available Employees List”) of all field level employees of Seller (the
“Available Employees”), whose duties related to the operation of Assets as of
the Execution Date, which list will include name, job title and start date, and
to the extent permitted by applicable Law, salary ranges.  For the avoidance of
doubt, if Seller does not include an employee of Seller in the Available
Employees List, then Buyer shall be prohibited from hiring any such employee not
listed in the Available Employees List for a period of twelve (12) months after
Closing.  Buyer or its Affiliates shall provide offers of employment to the
Available Employees on the Available Employees List that Buyer desires to hire,
with each offer stipulating the date for commencement of work (the “Hire
Date”).  Buyer shall provide Seller with notice of the names of those Available
Employees to whom Buyer has made employment offers and who has accepted such
offers contemporaneously with the making and acceptance of such offers.  The
Available Employees that Buyer hires as of the Hire Date are referred to as the
“New Employees.”  Any offers made by Buyer to any Available Employee shall be
contingent upon the occurrence of the Closing. If the Closing does not occur and
this Agreement is terminated, all such offers shall automatically terminate, and
Buyer will not, unless acting in accordance with Seller’s prior written consent,
hire any Available Employee for a period of two (2) years following such
termination.  Furthermore, no Available Employee shall become a New Employee
unless he or she (a) accepts Buyer’s offer of employment under the terms
provided in Buyer’s offer, (b) passes any required pre-employment screening
required by Buyer and (c) on the Hire Date, is actively at work.  Nothing in
this Agreement shall require or be construed or interpreted as requiring Buyer
to offer employment to any employee of Seller or to continue the employment of
any employee of Seller (including any New Employees) following their respective
Hire Date, or to prevent Buyer from changing the terms and conditions of
employment (including compensation and benefits) of any of its employees
(including any New Employees) following their respective Hire Dates.  Prior to
the Hire Date of an Available Employee, Seller shall have the right to control
and direct such Available Employee as to the performance of duties and as to the
means by which such duties are performed, including the right to terminate the
employment of any Available Employee.  Concurrently with Seller’s delivery of
the Available Employees List, Seller shall inform Buyer of all employment and
benefit matters relating to Available Employees prior to the Available
Employees’ respective Hire Dates that, in the reasonable judgment of Seller’s
management, could have a material impact on Buyer prior to taking any actions or
making any decisions with respect to such matters, subject to applicable Law. 
Notwithstanding any other provisions of this Agreement, the provisions of this
Section 14.6 are not intended to and shall not create or confer any third-party
beneficiary rights respecting any Available Employee or New Employee.

 

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In the event Buyer hires New Employees, Buyer shall have the option to purchase
from Seller or assume the vehicle lease from Seller of any Vehicle(s) directly
associated with such New Employees.  In such event the Parties shall work
together to agree upon a mutually acceptable sale price or assumption of lease
price for such Vehicle(s) and any such amounts shall be included as an upward
adjustment in the Closing Settlement Statement or Final Settlement Statement as
applicable.

 

ARTICLE 15

 

EXCHANGE PROVISION

 

Each of Seller and Buyer, respectively, shall have the right, prior to Closing,
to elect to effect a tax-deferred exchange under Internal Revenue Code
Section 1031 (a “Tax Deferred Exchange”) for the Assets at any time prior to
Closing.  If such Party elects to effect a Tax-Deferred Exchange, the other
Party agrees to execute escrow instructions, documents, agreements or
instruments to effect the exchange; provided, however, that the other Party
shall incur no additional costs, expenses, fees or liabilities as a result of or
connected with the exchange.  Each of Seller and Buyer, as the case may be, may
assign any of its rights and delegate performance of any of its duties under
this Agreement in whole or in part to a third party in order to effect such an
exchange; provided, however, that each of Seller and Buyer shall remain
responsible to the other Party for the full and prompt performance of its
respective delegated duties.  The electing Party shall indemnify and hold the
other Party and its Affiliates harmless from and against all claims, expenses
(including reasonable attorneys’ fees), loss and liability resulting from its
participation in any exchange undertaken pursuant to this Article 15 pursuant to
the request of the electing Party.

 

ARTICLE 16

 

ASSUMPTION OF LIABILITY AND GENERAL INDEMNIFICATION

 

16.1                        Buyer’s Assumption of Obligations

 

(a)                                 Subject to the Closing occurring, and
further subject to Seller’s indemnification provisions of Section 16.4, and
unless expressly provided for otherwise hereunder, Buyer hereby assumes and
agrees to fulfill, perform, pay and discharge (or cause to be fulfilled,
performed, paid or discharged) all of the obligations and liabilities of Seller,
known or unknown, with respect to the Assets, insofar as the same arise before,
on or after, and are attributable to actions, occurrences and operations
conducted either before, on or after, the Effective Time, together with,
following the expiration of Seller’s indemnity obligations as set forth in
Section 16.4, any and all duties and obligations or claims which would fall
under Sections 16.4(a) through (e), inclusive, whether arising before, on or
after the Effective Time REGARDLESS OF WHETHER ANY OF SUCH OBLIGATIONS,
LIABILITIES OR CLAIMS MAY BE ATTRIBUTABLE, IN WHOLE OR IN PART, TO THE STRICT
LIABILITY OR NEGLIGENCE OF SELLER GROUP, BUYER OR THIRD PARTIES, WHETHER SUCH
NEGLIGENCE IS ACTIVE OR

 

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PASSIVE, JOINT, CONCURRENT OR SOLE (collectively, the “Assumed Obligations”). 
The Assumed Obligations include the payment and performance of all taxes,
leasehold and equipment rentals and release payments, royalties, excess
royalties, in-lieu royalties, overriding royalty interests, production payments,
net profit obligations, carried working interests, the matters disclosed on
Schedule 5.9 and any other matters with which the Assets may be burdened,
insofar as the same are attributable to the periods before, on or after the
Effective Time.  Subject to Seller’s indemnification provisions of Section 16.4:

 

(i)                                     THE ASSUMED OBLIGATIONS SHALL INCLUDE,
AND BUYER, FROM AND AFTER THE CLOSING ACCEPTS SOLE RESPONSIBILITY FOR AND AGREES
TO PAY, ALL COSTS AND EXPENSES INCURRED FROM AND AFTER THE EFFECTIVE TIME AND
ASSOCIATED WITH PLUGGING AND ABANDONMENT OF ALL WELLS, DECOMMISSIONING OF ALL
FACILITIES (INCLUDING THE KEY FACILITIES) AND PLATFORMS, AND CLEARING AND
RESTORATION OF ALL SITES, IN EACH CASE INCLUDED IN, OR ASSOCIATED WITH, THE
ASSETS, AND BUYER MAY NOT CLAIM THE FACT THAT PLUGGING AND ABANDONMENT,
DECOMMISSIONING, SITE CLEARANCE OR RESTORATION OPERATIONS ARE NOT COMPLETE OR
THAT ADDITIONAL COSTS AND EXPENSES ARE REQUIRED TO COMPLETE ANY SUCH OPERATIONS
AS A BREACH OF SELLER’S REPRESENTATIONS OR WARRANTIES MADE HEREUNDER OR THE
BASIS FOR ANY OTHER REDRESS AGAINST SELLER.

 

(ii)                                  SUBJECT TO ARTICLE 8, THE ASSUMED
OBLIGATIONS SHALL INCLUDE, AND BUYER, FROM AND AFTER THE CLOSING ACCEPTS SOLE
RESPONSIBILITY FOR AND AGREES TO PAY, ANY AND ALL COSTS AND EXPENSES ARISING OUT
OF ENVIRONMENTAL LAWS (INCLUDING ANY COMPLIANCE OR NON-COMPLIANCE THEREWITH, ANY
ADVERSE ENVIRONMENTAL CONDITIONS, AND THE DISPOSAL, RELEASE, DISCHARGE OR
EMISSION OF HYDROCARBONS, HAZARDOUS SUBSTANCES, HAZARDOUS WASTES, HAZARDOUS
MATERIALS, SOLID WASTES OR POLLUTANTS INTO THE ENVIRONMENT), KNOWN OR UNKNOWN,
WITH RESPECT TO THE ASSETS, REGARDLESS OF WHETHER SUCH OBLIGATIONS OR
LIABILITIES AROSE PRIOR TO, ON, OR AFTER THE EFFECTIVE TIME.  BUYER EXPRESSLY
AGREES TO ASSUME THE RISK THAT THE ASSETS MAY CONTAIN WASTE MATERIALS, INCLUDING
NORM, HAZARDOUS

 

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SUBSTANCES, HAZARDOUS WASTES, HAZARDOUS MATERIALS, SOLID WASTES, OR OTHER
POLLUTANTS.

 

(b)                                 Buyer covenants and agrees that it shall not
attempt to avoid the effect of the indemnification made by it above by later
arguing that at the time of the indemnification it did not fully appreciate the
extent of any such claims.

 

16.2                        Definitions - For purposes of this Article 16 and
all other provisions of this Agreement which contain an indemnification
provision, the term “Buyer Group” shall be deemed to include Buyer and its
Affiliates, all successors, heirs and assigns of Buyer and its Affiliates, and
the officers, directors, shareholders, employees, representatives, co-owners,
contractors, subcontractors, or agents of any of the foregoing.  For purposes of
this Article 16 and all other provisions of this Agreement which contain an
indemnification provision, the term “Seller Group” shall be deemed to include
Seller and its respective Affiliates, all successors, heirs and assigns of any
of the foregoing, and each of their respective officers, directors,
shareholders, employees, owners, representatives, co-owners, contractors,
subcontractors, or agents of any of the foregoing.

 

16.3                        Buyer’s General Indemnity - Buyer shall, after
Closing, defend, indemnify, release and hold Seller Group harmless from and
against any and all Claims in favor of any Person arising from or relating to:

 

(a)                                 Buyer’s breach of any of its representations
and warranties in this Agreement;

 

(b)                                 Buyer’s breach of any of its covenants in
and under this Agreement; and

 

(c)                                  the Assumed Obligations.

 

16.4                        Seller’s General Indemnity - Seller shall, after
Closing, defend, indemnify, release and hold Buyer Group harmless from and
against any and all Claims in favor of any Person arising from or related to:

 

(a)                                 Seller’s breach of any of its
representations and warranties in this Agreement;

 

(b)                                 Seller’s breach of any of its covenants in
and under this Agreement;

 

(c)                                  the disposal or transportation prior to
Closing of any Pollutants generated or used by or on behalf of Seller and taken
from the Assets to any location that is not an Asset;

 

(d)                                 subject to the provisions of Article 8 and
except as otherwise provided in this Agreement, any Claims for damage to or
property owned by a third party or for personal injury, illness, bodily injury,
or death of any Person arising before the Effective Time;

 

(e)                                  the failure of Seller to properly pay when
due all Asset Taxes, royalties, overriding royalties, production payments,
working interest payments,

 

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relating to the Assets and attributable to periods prior to the Effective Time,
other than amounts included in Suspense Accounts which shall be assumed by Buyer
upon Buyer’s receipt of said amounts and for which Seller shall have no further
liability associated therewith;

 

REGARDLESS OF WHETHER ANY OF SUCH CLAIMS MAY BE ATTRIBUTABLE, IN WHOLE OR IN
PART, TO THE STRICT LIABILITY OR NEGLIGENCE OF BUYER GROUP, SELLER OR THIRD
PARTIES, WHETHER SUCH NEGLIGENCE IS ACTIVE OR PASSIVE, JOINT, CONCURRENT OR
SOLE; PROVIDED, HOWEVER, THAT SELLER’S OBLIGATION TO INDEMNIFY BUYER PURSUANT TO
SECTIONS 16.4(A) THROUGH (E) ABOVE (OTHER THAN OBLIGATIONS WITH RESPECT TO
SELLER FUNDAMENTAL REPRESENTATIONS) SHALL APPLY ONLY FOR A PERIOD OF TWELVE (12)
MONTHS FOLLOWING THE CLOSING DATE, THEREAFTER, BUYER SHALL, PURSUANT TO SECTIONS
16.1 AND 16.3, ASSUME RESPONSIBILITY FOR, AND SHALL ALSO AGREE TO PROTECT,
DEFEND, INDEMNIFY AND HOLD SELLER GROUP HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS ARISING IN FAVOR OF ANY PERSON FOR PERSONAL INJURY, ILLNESS, BODILY
INJURY, DEATH, DAMAGE TO PROPERTY OR FOR ANY OTHER CLAIMS ARISING DIRECTLY OR
INDIRECTLY FROM, OR INCIDENT TO, THE USE, OCCUPATION, OPERATION OR MAINTENANCE
OF ANY OF THE ASSETS OR ANY OTHER CLAIMS WHICH WOULD OTHERWISE BE SUBJECT TO
SELLER’S GENERAL INDEMNITY UNDER SECTIONS 16.4(A) THROUGH (E); AND

 

(f)                                   any Claims relating to the Retained Assets
or Seller Employer Liabilities.

 

(g)                                  any Claims arising from the assignment of
any Interest or Well subject to an un-obtained Required Consent pursuant to
Section 9.4, provided, however, that Seller’s obligation to indemnify Buyer
pursuant to this Section 16.4(g) shall only apply to those Claims arising out of
the consenting party’s failure to grant such Required Consent and shall further
only apply for a period of two (2) years following the Closing Date, thereafter,
Buyer shall assume responsibility for and indemnify Seller Group from any and
all Claims associated therewith.

 

16.5                        Limitation on Indemnification

 

(a)         Notwithstanding anything to the contrary contained herein, Seller
shall have no obligation to indemnify Buyer pursuant to Section 16.4(a) unless,
and then only to the extent that, (i) any individual claim exceeds Fifty
Thousand U.S. Dollars ($50,000) per item and (ii) the aggregate Losses to which
Buyer would be entitled to indemnification (but for the provision of this
Section 16.5) exceed a deductible

 

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(and not a threshold) equal to five percent (5%) of the Base Purchase Price. 
Notwithstanding anything to the contrary contained herein, Seller’s aggregate
liability for the indemnification under Sections 16.4(a), (c) and (d) above
shall not exceed fifty percent (50%) of the Base Purchase Price.

 

(b)         Notwithstanding any provision of this Agreement to the contrary,
Section 16.5(a) shall not apply to Seller’s indemnification obligations for any
breach of a Seller Fundamental Representation or any indemnification obligations
related to any breach of the representations and warranties in Section 5.6
(Taxes) or the covenants in Article 12 (Taxes).

 

16.6                        Further Limitation on Indemnification - Neither
Party shall have any obligation under this Article 16 with respect to any amount
which has already been taken into account and applied to or against the Base
Purchase Price in the Closing Settlement Statement or the Final Settlement
Statement, provided such Party has paid all amounts due pursuant to this
Agreement.

 

16.7                        Indemnification Procedures

 

(a)                                 General - All claims for indemnification
under this Agreement shall be asserted and resolved pursuant to this
Section 16.7.  Any Person claiming indemnification hereunder is hereinafter
referred to as the “Indemnified Party” and any Person against whom such claims
are asserted hereunder is hereinafter referred to as the “Indemnifying Party.”

 

(b)                                 Claim Notice - In the event that a Party
wishes to assert a claim for indemnity hereunder, such Party shall with
reasonable promptness provide to the Indemnifying Party a written notice of the
indemnity claim it wishes to assert on behalf of itself or another Indemnified
Party, including the specific details of and specific basis under this Agreement
for its indemnity claim (a “Claim Notice”).  To the extent any Losses for which
indemnification is sought are asserted against or sought to be collected from an
Indemnified Party by a third party, such Claim Notice shall include a copy of
all papers served on the applicable Indemnified Party with respect to such
claim.

 

(c)                                  Notice Period - The Indemnifying Party
shall have thirty (30) days from the personal delivery or receipt of the Claim
Notice (the “Notice Period”) to notify the Indemnified Party (i) whether or not
it disputes its liability hereunder with respect to such Losses and (ii) with
respect to any Losses arising out of, associated with, or relating to third
party claims, whether or not it desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against any such Losses.  In
the event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such
Losses, the Indemnifying Party shall have the right to defend all appropriate
proceedings with counsel of its own choosing.  If the Indemnified Party

 

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desires to participate in, but not control, any such defense or settlement it
may do so at its sole cost and expense.

 

(d)                                 Cooperation - If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that the
Indemnifying Party elects to contest, provided, that the Indemnifying Party will
not be required to submit any counterclaim or cross-complaint on the Indemnified
Party’s behalf.  Such cooperation shall include the retention and provision to
the Indemnifying Party of all records and other information that are reasonably
relevant to the Losses at issue.

 

(e)                                  Settlement - No third party claim that is
the subject of indemnification hereunder may be settled or otherwise compromised
without the prior written consent of the Indemnifying Party.  No such claim may
be settled or compromised by the Indemnifying Party without the prior written
consent of the Indemnified Party unless such settlement or compromise
(i) entails a full and unconditional release of the Indemnified Party (and any
other members of the Indemnified Party’s group, i.e., all Seller Indemnified
Parties or all Buyer Indemnified Parties) without any admission or finding of
fault or liability and (ii) does not impose on the Indemnified Party any
material non-financial obligation or any financial obligation that is not fully
paid by the Indemnifying Party.

 

16.8                        Remedies.  The Parties agree that the sole and
exclusive post-Closing remedy of any Party to this Agreement, any Indemnified
Party or their respective Affiliates with respect to this Agreement or any other
claims relating to the events giving rise to this Agreement and the transactions
provided for in this Agreement or contemplated by this Agreement or by any other
such claims relating to the Assets shall be limited to the indemnification
provisions set forth in this Article 16 and the special warranty of title
contained in the Conveyances.

 

ARTICLE 17

 

CASUALTY LOSS

 

If prior to Closing any of the Assets are substantially damaged or destroyed by
fire or other casualty (“Casualty Defect”), Seller shall notify Buyer promptly
after Seller learns of such event.  Seller shall have the right, but not the
obligation, to cure any such Casualty Defect by repairing such damage or, in the
case of Equipment, replacing the damaged Equipment with equivalent items, no
later than the Closing, insofar as the same are done to Buyer’s reasonable
satisfaction.  Subject to Section 7.6, if any Casualty Defect exists at Closing,
at Seller’s option, Buyer shall proceed to purchase the damaged Assets, and the
Base Purchase Price shall be reduced by the aggregate reduction in value of all
affected Assets on account of such Casualty Defect.  In the event the Parties
cannot agree on the value, the dispute shall be resolved in accordance with the
dispute resolution provisions set forth in Section 20.3.  Notwithstanding any of
the preceding provisions of this Article 17, all adjustments applicable to
Casualty Defects shall be made prior to Closing, and Closing shall be extended
until resolution of any disputes relating to the Casualty

 

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Defects; provided, however, that if adjustments for agreed Title Defects and
Environmental Defects, Casualty Defects, Open Matters (excluding Additional
Interests) alleged in good faith, and removed or excluded Assets due to
exercised Preferential Purchase Rights or un-obtained Required Consents do not,
in the aggregate, exceed the Termination Threshold, then Closing shall occur
(subject to Section 7.6) as to the other Assets that are not subject to the
dispute (with the portion of the Assets subject to the dispute being excluded,
and the Base Purchase Price reduced for the entire Allocated Values thereof) and
Closing shall subsequently occur as to the Assets made the subject of the
dispute within thirty (30) days following the final resolution of the dispute. 
Notwithstanding anything to the contrary contained in this Article 17, Seller
shall be entitled to retain all insurance proceeds, if any, and claims against
other parties relating to any such Casualty Defect.  For purposes of this
provision, normal wear and tear shall not be considered a Casualty Defect.

 

ARTICLE 18

 

NOTICES

 

All communications between Buyer and Seller required or permitted under this
Agreement shall be in writing and addressed as set forth below.  Any
communication or delivery hereunder must be given by personal delivery (if
signed for receipt), by certified or registered United States mail (postage
prepaid, return receipt requested), by a nationally recognized overnight
delivery service for next day delivery, transmitted via electronic mail or by
facsimile transmission shall be deemed to have been made and the receiving Party
charged with notice, when received except that if received after 5:00 p.m. (in
the recipient’s time zone) on a Business Day or if received on a day that is not
a Business Day, such notice, request or communication will not be effective
until the next succeeding Business Day.  All notices shall be addressed as
follows:

 

BUYER

 

SELLER

 

 

 

PRESIDIO INVESTMENT HOLDINGS LLC

500 W. 7th Street
Suite 803

 

MIDSTATES PETROLEUM COMPANY LLC

321 South Boston Avenue, Suite 1000
Tulsa, Oklahoma 74103

Fort Worth, Texas 76102
Attention: Vice President, Land and Legal
Phone: 817-907-2534

 

Attention: Vice President & General Counsel
Phone: 918-947-8550
Fax: 918-947-8592

Email: brett@presidiopetroleum.com

 

Email: scott.weatherholt@midstatespetroleum.com

 

with a copy (which shall not constitute notice) to:

Morgan Stanley Legal and Compliance

 

 

 

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1221 Avenue of the Americas
5th Floor
New York, NY 10020
Attention: Daniel Bleeker

 

 

 

ARTICLE 19

 

TERMINATION

 

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

 

(a)                                 by the mutual written agreement of Buyer and
Seller;

 

(b)                                 by written notice from either Buyer or
Seller if Closing has not occurred on or before June 28, 2018; provided,
however, that no Party may terminate this Agreement pursuant to this
Section 19.1(b) if such Party’s breach of its representations and warranties or
its failure to comply with its obligations or covenants under this Agreement
caused the Closing not to occur on or before the above date;

 

(c)                                  by Buyer, upon written notice to Seller, if
there has been a material breach by Seller of any representation, warranty or
covenant contained in this Agreement that has prevented the satisfaction of any
condition to the Closing in Section 10.2 (or is of such a magnitude or effect
that it will not be possible for any such condition to be satisfied) and, if
such breach is of a character that it is capable of being cured, such breach has
not been cured by Seller on or prior to the earlier of the date 10 Business Days
after notice thereof from Buyer and the Closing Date;

 

(d)                                 by Seller, upon written notice to Buyer, if
there has been a material breach by Buyer of any representation, warranty or
covenant contained in this Agreement that has prevented the satisfaction of any
condition to the Closing in Section 10.1 (or is of such a magnitude or effect
that it will not be possible for any such condition to be satisfied) and, if
such breach is of a character that it is capable of being cured, such breach has
not been cured by Buyer on or before the earlier of the date 10 Business Days
after notice thereof from Seller and the Closing Date;

 

(e)                                  by either Buyer or Seller, upon written
notice to the other Party, if any Governmental Authority having competent
jurisdiction has issued a final, non-appealable order, decree, ruling or
injunction (other than a temporary restraining order) or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such injunction shall have become final and
non-appealable; or

 

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(f)                                   by written notice from either Buyer or
Seller if the aggregate sum of (i) the Title Defect amounts for all Title
Defects timely and properly asserted in good faith pursuant to Article 7,
(ii) the Environmental Defect amounts for all Environmental Defects timely and
properly asserted in good faith pursuant to Article 8, (iii) the Casualty Defect
amounts pursuant to Article 17, and the (iv) removed or excluded Assets due to
exercised Preferential Purchase Rights or un-obtained Required Consents pursuant
to Article 9 exceed the Termination Threshold in Section 7.6.

 

19.2                        Liabilities Upon Termination; Termination Fee - If
this Agreement terminates, as described in Section 19.1, then all obligations of
the Parties under this Agreement and the Equity Commitment Letter shall
thereafter terminate and be of no further force and effect, except that the
provisions of Sections 4.1, 20.3, 20.4, 20.5, 20.9, 20.10, 20.13, 20.15 and
20.16 shall survive and, in the case of termination pursuant to
Section 19.1(c) or (d) only, the Parties shall remain liable for any prior
breach of this Agreement; provided, however, that if this Agreement is
terminated because of a willful or intentional breach of this Agreement by Buyer
or because Seller’s conditions to Closing are not satisfied as a result of
Buyer’s willful or intentional failure to comply with its obligations under this
Agreement (and, as a result, Seller elects to terminate this Agreement under
Section 19.1(d)), then, no later than ten (10) Business Days after such
termination, Buyer shall deliver via wire transfer to an account specified by
Seller, in immediately available funds, the Termination Fee, in which event the
Termination Fee shall constitute liquidated damages hereunder and shall be the
sole and exclusive remedy available to Seller for any such failure to perform at
Closing or other uncured material breach of this Agreement by Buyer.  Seller and
Buyer acknowledge and agree that if Seller exercises its right to termination
pursuant to Section 19.1(d)) and receives the Termination Fee pursuant to this
Section 19.2, then (a) Seller’s actual damages are difficult to ascertain with
any certainty, (b) the Termination Fee is a fair and reasonable estimate by the
Parties of such actual damages of Seller, (c) such liquidated damages do not
constitute a penalty and (d) the Equity Commitment Letter and all obligations of
Buyer, Parent and any of their Affiliates thereunder shall terminate in
accordance with the terms of the Equity Commitment Letter.

 

ARTICLE 20

 

MISCELLANEOUS

 

20.1                        Entire Agreement - This Agreement, all Exhibits and
Schedules attached hereto and incorporated herein, the Access Agreement and the
Confidentiality Agreement constitute the entire agreement between the Parties. 
Any previous negotiations or communications between the Parties are merged
herein.

 

20.2                        Survival - This Agreement shall be binding upon and
shall inure to the benefit of the undersigned, their successors, heirs, assigns
and corporate successors and may be supplemented, altered, amended, modified, or
revoked by writing only, signed by both Parties.  The representations made by
Seller and Buyer under Article 5 and Article 6 (other than Seller Fundamental
Representations) shall continue in full force and effect for a period of twelve
(12) months from and after the Closing Date.

 

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20.3                        Arbitration - All disputes arising out of, or in
connection with, this Agreement or any determination required to be made by
Buyer and Seller as to which the Parties cannot reach an agreement shall be
settled by arbitration in Houston, Texas.  Any matter to be submitted to
arbitration shall be determined by a panel of three (3) arbitrators, unless
otherwise agreed by the Parties.  Each arbitrator shall be a Person experienced
in both the oil and gas industry and the subject matter of the dispute and shall
be appointed:

 

(a)                                 by mutual agreement of Buyer and Seller; or

 

(b)                                 failing such agreement, within sixty (60)
days of the request for arbitration, each Party shall appoint one arbitrator,
and the third arbitrator shall be appointed by the other two (2) arbitrators,
or, if they cannot agree, by a Judge of the United States District Court,
Southern District of Texas.

 

In the event of the failure of refusal of the Parties to appoint the
arbitrator(s) within one hundred twenty (120) days of the request for
arbitration, the arbitrator remaining to be named shall be selected in
accordance with the Rules of the American Arbitration Association.  The
arbitration shall be conducted in accordance with reasonable rules established
by the arbitrators.  Any award by the arbitrator shall be final, binding and
non-appealable, and judgment may be entered thereon in any court of competent
jurisdiction; provided that the arbitrators’ decision with respect to each
Disputed Matter shall be limited to the selection of the single proposal for the
resolution of such Disputed Matter proposed by a Party that best reflects the
terms and provisions of this Agreement (i.e., the arbitrators must select either
Buyer’s proposal or Seller’s proposal for resolution of the applicable Disputed
Matter). The fees charged by the arbitrators for the arbitration shall be paid
one-half by Buyer and one-half by Seller.  Notwithstanding anything herein to
the contrary, (i) for disputes related to the nature, existence or value of an
Environmental Defect, including any and all claims and causes of action arising
under Article 8, each such arbitrator shall be an environmental consultant with
at least ten (10) years’ experience in environmental corrective actions
involving oil and gas properties in the regional area in which the Assets are
located, and (ii) for disputes related to the nature, existence or value of a
Title Defect or Additional Interest, including any and all claims and causes of
action arising under Article 7, each such arbitrator shall be a title attorney
with at least ten (10) years’ experience reviewing oil and gas titles involving
properties in any of the regional areas in which the Assets are located.

 

20.4                        Confidentiality Agreement - The Parties understand
and agree that the terms and provisions of that certain Confidentiality
Agreement dated September 28, 2017 by and between Seller and Presidio Petroleum
LLC (the “Confidentiality Agreement”) shall remain in full force and effect
until the Closing of this transaction and shall expire and be of no further
force or effect thereafter, subject to the remaining provisions of this
Section 20.4.  In the event of termination of this Agreement pursuant to
Article 19, Buyer agrees to keep all of the terms of this transaction
confidential for a period equal to two (2) years following termination of this
Agreement.  Furthermore, any additional information obtained as a result of
Buyer’s access to the Assets which does not specifically relate to the Assets
shall continue to be treated as confidential for a period of two (2) years
following the Execution Date and shall not be disclosed by Buyer without the
prior written consent of Seller.  The above restrictions on disclosure and use
of information obtained pursuant to this Agreement shall not apply to
information to the extent it:

 

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(a)                                 is or becomes publicly available through no
act or omission of Buyer or any of its consultants or advisors;

 

(b)                                 is subsequently obtained lawfully from a
third party, where Buyer has made reasonable efforts to insure that such third
party is not a party to or bound by any confidentiality agreement with Seller;
or

 

(c)                                  is already in Buyer’s possession at the
time of disclosure, without restriction on disclosure.

 

If Buyer employs consultants, advisors or agents to assist in its review of the
Assets, Buyer shall be responsible to Seller for ensuring that such consultants,
advisors and agents comply with the restrictions on the use and disclosure of
information set forth in this Section 20.4.

 

20.5                        Choice of Law - EXCEPT FOR REAL PROPERTY MATTERS
ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHICH SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH SUCH REAL PROPERTY
IS LOCATED, THIS AGREEMENT AND ITS PERFORMANCE SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF TEXAS.

 

20.6                        Assignment - The rights and obligations under this
Agreement may not be assigned by any Party without the prior written consent of
the other Party.  Notwithstanding the preceding sentence, Buyer will, without
the obligation to obtain the prior written consent of Seller but with the
obligation to provide contemporaneous or prior notice to Seller, be entitled to
assign this Agreement or all or any part of its respective rights and delegate
its respective performance obligations under this Agreement to one or more
Affiliates of Buyer, but no such assignment will release or discharge Buyer from
any of its obligations as the “Buyer” under this Agreement or any certificate,
document, instrument or writing delivered pursuant hereto.

 

20.7                        No Admissions - Neither this Agreement, nor any part
hereof, nor any performance under this Agreement shall constitute or be
construed as a finding, evidence of, or an admission or acknowledgment of any
liability, fault, or past or present wrongdoing, or violation of any Law, rule,
regulation, or policy, by either Seller or Buyer or by their respective
officers, directors, employees, or agents.

 

20.8                        Waivers and Amendments - Except for waivers
specifically provided for in this Agreement, this Agreement may not be amended
nor any rights hereunder waived except by an instrument in writing signed by the
Party to be charged with such amendment or waiver and delivered by such Party to
the other Party claiming the benefit of such amendment or waiver.

 

20.9                        Counterparts - This Agreement may be executed by
Buyer and Seller in any number of counterparts, each of which shall be deemed an
original instrument, but all of which together shall constitute one and the same
instrument.  Execution can be evidenced by facsimile or email transmission of
signature pages with original signature pages to promptly follow in due course.

 

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20.10                 Third-Party Beneficiaries - Neither this Agreement nor any
performances hereunder by Seller or Buyer shall create any right, claim, cause
of action, or remedy on behalf of any Person not a party hereto.

 

20.11                 Specific Performance - Buyer and Seller acknowledge and
agree that Buyer would be irreparably damaged if any of the provisions of this
Agreement are not performed in accordance with their specific terms and that any
breach of this Agreement by Seller could not be adequately compensated in all
cases by monetary damages alone.  Accordingly, in addition to any other right or
remedy to which Buyer may be entitled, at law or in equity, Buyer shall be
entitled to enforce any provision of this Agreement by a decree of specific
performance. Buyer shall not be required to provide any bond or other security
in connection with seeking an injunction or injunctions to enforce specifically
the terms and provisions of this Agreement.

 

20.12                 Public Communications - After the Execution Date, either
Party may make a press release or public communication concerning this
transaction with the exception that any such communication shall not include the
name of the non-disclosing Party without their prior written consent; provided,
however, that, notwithstanding the foregoing, prior to or after Closing, if
Buyer (including any of its parent entities), on the one hand, or Seller
(including any of its parent entities), on the other is required to make any
statement, declaration, or public announcement regarding this Agreement or the
transactions contemplated hereunder pursuant to (i) Law, (ii) applicable
rules or regulations of any national securities exchange, or (iii) the terms of
such Party’s (including such Party’s respective parent entities) indentures,
loan agreements, credit agreements or other similar debt agreements or financial
instruments, then the same may be made without the approval of the other Party,
but only to the extent the name of the non-disclosing Party is omitted from such
statement, declaration, or announcement if permitted by such Law, rules,
regulations or terms.

 

20.13                 Headings - The headings of the Articles and Sections of
this Agreement are for guidance and convenience of reference only and shall not
limit or otherwise affect any of the terms or provisions of this Agreement.

 

20.14                 Expenses - Except as otherwise provided in this Agreement,
each of the Parties hereto shall pay its own fees and expenses incident to the
negotiation and preparation of this Agreement and consummation of the
transaction contemplated hereby, including brokers’ fees.  Buyer shall be
responsible for the cost of all fees for the recording of the Conveyances
relating to the Assets.  All other costs shall be borne by the Party incurring
them.

 

20.15                 No Recourse - Notwithstanding anything that may be
expressed or implied in this Agreement or any document, agreement, or instrument
delivered contemporaneously herewith, and notwithstanding the fact that any
Party may be a partnership or limited liability company, each Party, by its
acceptance of the benefits of this Agreement, covenants, agrees and acknowledges
that no Persons other than the Parties shall have any obligation hereunder and
that it has no rights of recovery hereunder against, and no recourse hereunder
or under any documents, agreements, or instruments delivered contemporaneously
herewith or in respect of any oral representations made or alleged to be made in
connection herewith or therewith shall be had against, any former, current or
future director, officer, agent, Affiliate, manager, assignee, incorporator,
controlling Person, fiduciary, representative or employee of any Party (or any
of their successors or permitted assignees), against any former, current, or
future general or limited partner, manager, stockholder

 

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or member of any Party (or any of their successors or permitted assignees) or
any Affiliate thereof or against any former, current or future director,
officer, agent, employee, Affiliate, manager, assignee, incorporator,
controlling Person, fiduciary, representative, general or limited partner,
stockholder, manager or member of any of the foregoing, but in each case not
including the Parties (each, but excluding for the avoidance of doubt, the
Parties, a “Party Affiliate”), whether by or through attempted piercing of the
corporate veil, by or through a claim (whether in tort, contract or otherwise)
by or on behalf of such party against the Party Affiliates, by the enforcement
of any assessment or by any legal or equitable proceeding, or by virtue of any
statute, regulation or other applicable Law, or otherwise; it being expressly
agreed and acknowledged that no personal liability whatsoever shall attach to,
be imposed on, or otherwise be incurred by any Party Affiliate, as such, for any
obligations of the applicable party under this Agreement or the transactions
contemplated hereby, under any documents or instruments delivered
contemporaneously herewith, in respect of any oral representations made or
alleged to be made in connection herewith or therewith, or for any claim
(whether in tort, contract or otherwise) based on, in respect of, or by reason
of, such obligations or their creation.

 

20.16                 References.

 

In this Agreement:

 

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

 

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

 

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

 

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

 

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

 

(f)                                   unless expressly provided to the contrary,
the word “or” is not exclusive;

 

(g)                                  references to “$” or “dollars” means United
States dollars; and

 

(h)                                 “include” and “including” shall mean include
or including without limiting the generality of the description preceding such
term.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the Execution
Date.

 

“BUYER”

 

 

 

 

 

PRESIDIO INVESTMENT HOLDINGS LLC, a Delaware limited liability company

 

 

 

 

 

By: NH Presidio Investments LLC, its member

 

 

 

By: North Haven Energy Capital Fund LP, NHECF Splitter LP, and North Haven
Energy Capital Fund-CP LP, its members

 

 

 

By: MS Energy Partners GP LP, their general partner

 

 

 

By: MS Energy Partners GP Inc., its general partner

 

 

 

 

 

 

By:

/s/ Robert Richard Lee

 

Name:

Robert Richard Lee

 

Title:

Manager

 

 

 

 

 

“SELLER”

 

 

 

 

 

MIDSTATES PETROLEUM COMPANY LLC, a Delaware limited liability company

 

 

 

 

 

By:

/s/ David J. Sambrooks

 

Name:

David J. Sambrooks

 

Title:

President & CEO

 

 

Signature Page

Purchase and Sale Agreement Effective as of January 1, 2018

by and among

Midstates Petroleum Company LLC, as Seller

and

Presidio Investment Holdings LLC, as Buyer

 

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