Exhibit 10.1
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
DIAMOND “M” PRODUCTION COMPANY
AS SELLER
AND
PARALLEL PETROLEUM CORPORATION
AND
TED COLLINS, JR.
AS BUYER

 

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INDEX

              PAGE  
ARTICLE 1. DEFINITIONS
    1  
 
       
ARTICLE 2. SALE AND PURCHASE
    7  
 
       
ARTICLE 3. PURCHASE PRICE
    7  
 
       
3.1 Purchase Price
    7  
3.2 Earnest Money Deposit
    7  
3.3 Allocation
    7  
3.4 Preferential Rights
    7  
3.5 Consents
    8  
 
       
ARTICLE 4. REVIEW BY BUYER
    8  
 
       
4.1 Review of Records
    8  
4.2 Adjustment of Purchase Price for Title Defects
    8  
4.3 Waiver
    10  
 
       
ARTICLE 5. INSPECTION OF PROPERTIES
    10  
 
       
5.1 Physical and Environmental Inspection
    10  
5.2 Environmental Defects
    11  
 
       
ARTICLE 6. ACCOUNTING
    13  
 
       
6.1 Revenues, Expenses and Capital Expenditures
    13  
6.2 Taxes
    13  
6.3 Obligations and Credits
    14  
6.4 Gas Imbalances
    14  
6.5 Miscellaneous Accounting
    14  
6.6 Final Accounting Settlement
    15  
6.7 Post-Final Accounting Settlement
    15  
6.8 Audit Rights
    15  
 
       
ARTICLE 7. CASUALTY AND CONDEMNATION
    15  
 
       
ARTICLE 8. INDEMNITIES
    16  
 
       
8.1 Seller’s Indemnity Obligations (excluding Environmental Claims)
    16  
8.2 Buyer’s Indemnity Obligations (excluding Environmental Claims)
    16  
8.3 Environmental Claims
    17  
8.4 Asbestos and NORM
    17  

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              PAGE  
8.5 Notice and Cooperation
    17  
8.6 Defense of Claims
    18  
8.7 Waiver of Certain Damages
    18  
8.8. Limitation on Indemnities
    18  
 
       
ARTICLE 9. WARRANTIES AND DISCLAIMERS
    19  
 
       
9.1 Special Warranty of Title
    19  
9.2 Disclaimer — Representations and Warranties
    19  
9.3 Disclaimer — Statements and Information
    19  
 
       
ARTICLE 10. SELLER’S REPRESENTATIONS
    19  
 
       
10.1 Organization and Good Standing
    19  
10.2 Corporate Authority; Authorization of Agreement
    20  
10.3 No Violations
    20  
10.4 Absence of Certain Changes
    20  
10.5 Operating Costs
    21  
10.6 Litigation and Other Disputes
    21  
10.7 Bankruptcy
    21  
10.8 Leases
    21  
10.9 Hydrocarbon Sales; Imbalances
    21  
10.10 Existing Commitments
    21  
10.11 Compliance With Law
    22  
10.12 Availability of Records
    22  
10.13 Material Contracts
    22  
10.14 Preferential Rights
    22  
10.15 Environmental
    22  
10.16 Suspense Accounts
    22  
10.17 Expenses and Costs and Payments Out of Production
    22  
10.18 Payout Balances
    22  
10.19 Use of Surface
    22  
10.20 Statements
    23  
10.21 Limitation on Representations
    23  
 
       
ARTICLE 11. BUYER’S REPRESENTATIONS
    23  
 
       
11.1 Organization and Good Standing
    23  
11.2 Corporate Authority; Authorization of Agreement
    23  
11.3 No Violations
    23  
11.4 SEC Disclosure
    24  
11.5 Statements
    24  
11.6 Independent Evaluation
    24  
11.7 Buyer’s Reliance
    24  
11.8 Qualified Buyer
    24  

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              PAGE  
ARTICLE 12. ADDITIONAL AGREEMENTS
    25  
 
       
12.1 Covenants of Seller
    25  
12.2 Notice of Loss
    25  
12.3 Subsequent Operations
    25  
12.4 Buyer’s Assumption of Obligations
    25  
12.5 Records
    26  
 
       
ARTICLE 13. CONDITIONS PRECEDENT TO CLOSING
    26  
 
       
13.1 Conditions Precedent to Seller’s Obligation to Close
    26  
13.2 Conditions Precedent to Buyer’s Obligation to Close
    26  
 
       
ARTICLE 14. TERMINATION
    27  
 
       
14.1 Grounds for Termination
    27  
14.2 Effect of Termination
    27  
14.3 Return of Documents
    28  
14.4 Confidentiality
    28  
 
       
ARTICLE 15. THE CLOSING
    29  
 
       
15.1. Preliminary Closing Statement
    29  
15.2 Obligations of Seller at Closing
    29  
15.3 Obligations of Buyer at Closing
    29  
15.4 Site of Closing
    30  
 
       
ARTICLE 16. MISCELLANEOUS
    30  
 
       
16.1 Notices
    30  
16.2 Conveyance Costs
    31  
16.3 Brokers’ Fees
    31  
16.4 Further Assurances
    31  
16.5 Survival of Representations and Warranties
    31  
16.6 Amendments and Severability
    31  
16.7 Successors and Assigns
    32  
16.8 Headings
    32  
16.9 Governing Law
    32  
16.10 No Partnership Created
    32  
16.11 Public Announcements
    32  
16.12 No Third Party Beneficiaries
    32  
16.13 Deceptive Trade Practices
    32  
16.14 Tax Deferred Exchange Election
    32  
16.15 Not to be Construed Against Drafter
    33  
16.16 Entire Agreement
    33  
16.17 Conspicuousness of Provisions
    33  
16.18 Execution in Counterparts
    33  

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SCHEDULES
SCHEDULE 10.6 — LITIGATION AND CLAIMS
SCHEDULE 10.10 — CAPITAL COMMITMENTS
SCHEDULE 10.11 — VIOLATIONS OF LAW
SCHEDULE 10.13 — MATERIAL CONTRACTS
SCHEDULE 10.14 — PREFERENTIAL RIGHTS
SCHEDULE 10.15 — ENVIRONMENTAL
SCHEDULE 10.16 — SUSPENSE ACCOUNTS
SCHEDULE 10.18 — PAYOUT BALANCES
SCHEDULE 10.19 — SURFACE
EXHIBITS
EXHIBIT A — ASSIGNMENT AND BILL OF SALE
EXHIBIT B — CERTIFICATE
EXHIBIT C — DESCRIPTION OF LANDS
EXHIBIT C-1 — DESCRIPTION OF LEASES
EXHIBIT C-2 — DESCRIPTION OF WELLS
EXHIBIT D — MATERIAL CONTRACTS
EXHIBIT E — NON-FOREIGN AFFIDAVIT
EXHIBIT F — EXCLUDED PROPERTIES
EXHIBIT G — ALLOCATION OF PURCHASE PRICE
EXHIBIT H — ENVIRONMENTAL ASSESSMENTS
EXHIBIT I — GAS IMBALANCES

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PURCHASE AND SALE AGREEMENT
     THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is dated effective
May 1, 2008, by and between DIAMOND “M” PRODUCTION COMPANY, a Delaware
corporation, with an office at 2350 N. Sam Houston Parkway East, Suite 125,
Houston, Texas 77032 (hereinafter referred to as “Seller”) and PARALLEL
PETROLEUM CORPORATION, a Delaware corporation, whose address is 1004 North Big
Spring, Suite 400, Midland, Texas 79701, and TED COLLINS, JR., an individual,
whose address is 508 W. Wall Street, Suite 1200, Midland, Texas 79701
(hereinafter referred to as “Buyer”), and is based on the following premises:
     WHEREAS, Seller desires to sell, assign and convey to Buyer and Buyer
desires to purchase and accept certain oil and gas properties and related
interests; and
     WHEREAS, the parties have reached agreement regarding such sale and
purchase.
     NOW, THEREFORE, for valuable consideration and the mutual covenants and
agreements herein contained, Seller and Buyer agree as follows:
ARTICLE 1. DEFINITIONS
     Definitions. In this Agreement, capitalized terms have the meanings
provided in this Article 1, unless expressly provided otherwise in other
Articles. All defined terms include both the singular and the plural. All
references to Articles or Sections refer to Articles or Sections in this
Agreement, and all references to Exhibits refer to the Exhibits attached to this
Agreement. The Exhibits which are attached hereto are incorporated in and made a
part of this Agreement.
     “Accounting Referee” has the meaning set forth in Section 6.8.
     “Affiliate” means and includes any entity that, directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with the entity specified.
     “Alleged Title Defect” means a Title Defect (as hereinafter defined) which
is asserted by Buyer in accordance with Section 4.2.
     “Assignment and Bill of Sale” means a document in the form of Exhibit A.
     “Assumed Contracts” means all operating agreements, unit agreements, unit
operating agreements, exploration agreements, farmout agreements, farm-in
agreements, Hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements, surface leases,
and other contracts and agreements respecting the Subject Interests if the same
are either of record in the counties where the Properties are located, or are
reflected or referenced in Seller’s files.

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     “Business Day” means a Day (as hereinafter defined) excluding Saturdays,
Sundays and U.S. legal holidays.
     “Casualty Loss” means any loss, damage or reduction in value resulting from
mechanical failure or defects, catastrophic occurrences, acts of God and any
other losses which are not the result of normal wear and tear or of natural
reservoir changes.
     “Certificate” means a document in the form of Exhibit B.
     “Claim” means any and all claims, demands, suits, causes of action,
investigations, administrative proceedings, or other legal proceedings, losses,
damages, liabilities, judgments, assessments, settlements, fines, notices of
violation, penalties, interest, obligations and costs (including attorneys’ fees
and costs of litigation) of any kind or character (whether or not asserted prior
to the date hereof, and whether known or unknown, fixed or unfixed, conditional
or unconditional, based on negligence, strict liability or otherwise, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise) which are brought by or owed to a Third Party (as
hereinafter defined).
     “Close” or “Closing” means the consummation of the transfer of title to the
Subject Interests to Buyer, including execution and delivery of all documents
provided herein.
     “Closing Date” means August 15, 2008, or such other date as may be mutually
agreed upon by the parties or on which Closing occurs in accordance with the
terms of this Agreement.
     “Day” means a calendar day consisting of twenty-four (24) hours from
midnight to midnight.
     “Defensible Title” means, as to the Leases and Wells, such title held by
Seller that, subject to and except for the Permitted Encumbrances (as
hereinafter defined):
     (a) Entitles Seller to own and receive payment of revenues for not less
than the “Net Revenue Interests” set forth on Exhibit C-1 or
Exhibit C-2 of all oil, gas and associated liquid and gaseous hydrocarbons
produced, saved and marketed from the Leases or Wells;
     (b) Obligates Seller to bear costs and expenses relating to the ownership,
operation, maintenance and repair of the wells and facilities located on or
attributable to the Leases or Wells in an amount not greater than the “Working
Interests” set forth on Exhibit C-1 or
Exhibit C-2, unless there is a corresponding proportionate increase in the Net
Revenue Interests; and
     (c) Is free and clear of all liens, encumbrances, burdens and defects that
a reasonable and prudent person engaged in the business of ownership,
development and operation of oil and gas properties with knowledge of all
applicable facts and circumstances and the understanding of their legal
significance would not be willing to accept with respect to portions of the
Leases or Wells affected thereby.

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     “Earnest Money Deposit” has the meaning set forth in Section 3.2.
     “Effective Time” means May 1, 2008, at 7:00 a.m., local time where the
Properties are located.
     “Environmental Claims” means all Claims for pollution or environmental
damages of any kind, including without limitation, those relating to:
(a) remediation and/or clean-up thereof, (b) damage to and/or loss of any
property or resource, and/or (c) injury or death of any person(s) whomsoever,
including without limitation Claims relating to breach of Environmental Laws,
common law causes of action such as negligence, gross negligence, strict
liability, nuisance or trespass, or fault imposed by statute, rule, regulation
or otherwise (but specifically excluding any Claims relating to asbestos or NORM
(as hereinafter defined), which are covered by Section 8.4 hereof), and
including all costs associated with remediation and clean up, and fines and
penalties associated with any of the foregoing.
     “Environmental Defect” has the meaning set forth in Section 5.2.2.
     “Environmental Laws” means all laws, statutes, ordinances, permits, orders,
judgments, rules or regulations which are promulgated, issued or enacted by a
governmental entity having appropriate jurisdiction that, (a) relate to the
prevention of pollution or environmental damage, (b) the remediation of
pollution or environmental damage, or (c) the protection of the environment
generally; including without limitation, the Clean Air Act, as amended, the
Clean Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Federal Water Pollution
Control Act, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Safe Drinking Water Act, as amended, the Toxic Substance and
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous and the Solid Waste Amendments Act of 1984, as
amended, and the Oil Pollution Act of 1990, as amended.
     “Final Accounting Settlement” has the meaning set forth in Section 6.6.
     “Final Settlement Date” has the meaning set forth in Section 6.6.
     “Hydrocarbons” has the meaning given to such term in the definition of
Properties.
     “Interest Adjustment” has the meaning set forth in Section 4.2.
     “Laws” means any and all applicable laws, statutes, ordinances, permits,
decrees, orders, judgments, rules or regulations (including, without limitation,
Environmental Laws) which are promulgated, issued or enacted by a governmental
entity having appropriate jurisdiction.
     “Leases” has the meaning given to such term in the definition of
Properties.
     “Material Contracts” shall mean those Assumed Contracts identified on
Exhibit D.

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     “Non-Foreign Affidavit” means a document in the form of Exhibit E.
     “NORM” means naturally occurring radioactive materials.
     “Permitted Encumbrances” means:
     (a) Royalties, overriding royalties, production payments, reversionary
interests, convertible interests, net profits interests, division orders and
similar burdens encumbering the Leases and Wells as of the Effective Time to the
extent the net cumulative effect of such burdens do not operate to (i) reduce
the net revenue interests of Seller in the Leases or Wells to less than the net
revenue interests set forth on
Exhibit C-1 or Exhibit C-2 or (ii) cause an increase in the working interest of
Seller in any Lease or Well from that shown on Exhibit C-1 or
Exhibit C-2 without a proportionate increase in the net revenue interest of
Seller for such Lease or Well;
     (b) Preferential purchase rights and consents to assignment and similar
contractual provisions encumbering the Subject Interests with respect to which,
prior to Closing, (i) waivers or consents are obtained from the appropriate
parties, or (ii) the appropriate time period for asserting such rights have
expired without an exercise of such rights;
     (c) Preferential purchase rights encumbering the Subject Interests which
are exercised by a Third Party, if the affected Subject Interests are withdrawn
from this sale transaction and handled in accordance with Section 3.4;
     (d) All rights to consent by, required notices to, filings with, or other
actions by governmental entities in connection with the sale or conveyance of
the Subject Interests, if the same are customarily obtained subsequent to the
transfer of title;
     (e) Rights reserved to or vested in any governmental entity having
appropriate jurisdiction to control or regulate the Properties in any manner
whatsoever, and all Laws of any such governmental entity;
     (f) Easements, rights-of-way, servitudes, surface leases, sub-surface
leases, pipelines, platforms, facilities, utility lines, telephone lines, power
lines, and structures on, over and through the Properties, to the extent such
rights, interests or structures do not materially interfere with the operation
of the Properties;
     (g) Liens for taxes or assessments not yet due or not yet delinquent or, if
delinquent, that are being contested by Seller in good faith in the normal
course of business;
     (h) Liens of operators relating to obligations not yet due or not yet
delinquent or, if delinquent, that are being contested by Seller in good faith
in the normal course of business;

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     (i) The Material Contracts;
     (j) Title Defects that Buyer has waived under Section 4.3, but not those
claimed by Buyer under Seller’s special warranty of title contained in the
Assignment and Bill of Sale, and
     (k) Such encumbrances or burdens on, or defects or irregularities in the
title to, the Subject Interests that do not materially interfere with the
operation, value or use of the Subject Interests affected thereby and that would
be considered not material by a reasonable person engaged in the business or
ownership, development and operation of oil and gas properties when applying
general industry standards.
     “Properties” means the following properties (real, personal or mixed) and
rights (contractual or otherwise):
     (a) The oil and gas leasehold interests, fee interests and mineral
interests in the lands described on Exhibit C, including, but not limited to
those interests created or described in the instruments described in Exhibit C-1
(collectively, the “Leases”);
     (b) The oil and gas wells located on the Leases and described on
Exhibit C-2 (the “Wells”);
     (c) All of the presently existing and valid unitization and pooling
agreements and units (including all units formed by voluntary agreement and
those formed under the rules, regulations, orders or other official acts of any
governmental entity having appropriate jurisdiction) to the extent they relate
to any of the interests in the Leases or the Wells;
     (d) All oil, gas and/or other liquid or gaseous hydrocarbons (collectively,
the “Hydrocarbons”) produced from or attributable to the Leases or the Wells and
attributable to the period from and after the Effective Time;
     (e) All of the presently existing and valid oil sales contracts, casinghead
gas sales contracts, gas sales contracts, processing contracts, gathering
contracts, transportation contracts, easements, rights-of-way, servitudes,
surface leases and other contracts (including the Assumed Contracts), to the
extent the same are assignable and relate to the Leases or the Wells;
     (f) All personal property and improvements (collectively, the “Equipment”),
including without limitation, wells (whether producing, plugged and abandoned,
shut-in, injection, disposal or water supply), tanks, boilers, platforms,
buildings, fixtures, machinery, equipment, pipelines, utility lines, power
lines, telephone lines, telegraph lines and other appurtenances located on, in,
under and about the Leases or Wells, to the extent the same are situated upon
and used or held for use by Seller in connection with the ownership, operation,
maintenance and repair of the Leases or the Wells, subject to the reservations
stated below;

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     (g) All franchises, licenses, permits, approvals, consents, certificates
and other authorizations and other rights granted by governmental authorities
and all certificates of convenience or necessity, immunities, privileges, grants
and other rights that relate to the Properties or the ownership or operation of
any thereof, to the extent the same are assignable (the “Permits”); and
     (h) All of Seller’s “Records” (hereinafter defined).
Seller EXCEPTS, RESERVES AND RETAINS unto itself, its successors and assigns,
and specifically excludes from the Properties, those properties (real, personal
or mixed) and rights (contractual or otherwise) more particularly described on
Exhibit F attached hereto.
     “Purchase Price” has the meaning set forth in Section 3.1.
     “Records” means all of Seller’s books, records and files related to the
Properties, including all (i) abstracts, title opinions, title reports,
environmental site assessments, environmental compliance reports, lease and land
files, surveys, analyses, compilations, correspondence, filings with and reports
to regulatory agencies and other documents, contracts, agreements and
instruments that in any manner relate to the Properties, (ii) computer databases
that are owned by or licensed to Seller that relate to the Properties,
(iii) geophysical, geological, engineering, exploration, production and other
technical data, magnetic field recordings, digital processing tapes, field
prints, summaries, reports and maps, whether written or in electronically
reproducible form, that are in the possession of Seller and relate to the
Properties and (iv) all other books, records, files and magnetic tapes
containing title or other information that are in the possession of Seller and
relate to the Properties (the “Data”), but specifically excluding (i) previous
offers and economic analyses associated with the acquisition, sale or exchange
of the Subject Interests, (ii) interpretive information, (iii) personnel
information, (iv) corporate, legal, financial and tax information,
(v) information covered by a non-disclosure obligation, (vi) information covered
by a legal privilege and (vii) any other Data or information that Seller does
not have the right to assign to Buyer.
     “Subject Interests” means all of Seller’s right, title and interest in and
to, or derived from, the Properties.
     “Title Defect” means any lien, encumbrance, encroachment or defect
associated with Seller’s title to the Leases (excluding Permitted Encumbrances)
that would cause Seller not to have Defensible Title.
     “Third Party” means any person or entity, governmental or otherwise, other
than Seller and Buyer or their Affiliates.
     “Wells” has the meaning given to such term in the definition of Properties.

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ARTICLE 2. SALE AND PURCHASE
     On the Closing Date, effective as of the Effective Time, and upon the terms
and conditions herein set forth, Seller agrees to sell and assign the Subject
Interests to Buyer and Buyer agrees to buy and accept the Subject Interests in
the respective percentages set forth below.
     2.1. Percentages.

         
Parallel Petroleum Corporation
  89% of 8/8ths
Ted Collins, Jr.
  11% of 8/8ths

ARTICLE 3. PURCHASE PRICE
     3.1 Purchase Price. Subject to adjustments as set forth herein, the total
purchase price for the Subject Interests shall be Thirty Nine Million Nine
Hundred Thousand and No/100 Dollars (US $39,900,000.00) (the “Purchase Price”),
payable in full at Closing in immediately available funds.
     3.2 Earnest Money Deposit. Within one (1) Business Day of the execution of
this Agreement, Buyer shall pay to Seller a deposit in the amount of One Million
Nine Hundred Ninety Five Thousand and No/100 Dollars (US $1,995,000.00) (the
“Earnest Money Deposit”). If Closing occurs, the Purchase Price shall be
credited by the amount of the Earnest Money Deposit. If Closing does not occur,
the Earnest Money Deposit shall be refunded to Buyer, unless (a) Closing does
not occur because of Buyer’s failure or refusal to Close in breach of this
Agreement or (b) because the conditions precedent to Seller’s obligation to
Close provided in Sections 13.1.1 and 13.1.2 are unmet at the time set for
Closing, in which case Seller shall retain the Earnest Money Deposit as
liquidated damages and not as a penalty. If, however, in the case of either
(a) or (b) above, any conditions precedent to Buyer’s obligation to Close
provided in Section 13.2 are unmet at the time set for Closing, Seller shall not
be entitled to retain the Earnest Money Deposit as hereinabove provided.
     3.3 Allocation. Attached hereto as Exhibit G is Buyer’s good faith
allocation of the Purchase Price which shall be used in providing any required
preferential purchase right notifications and in determining any Purchase Price
adjustments pursuant to this Agreement.
     3.4 Preferential Rights. If any of the Subject Interests are burdened with
preferential purchase rights, the assignment of the Subject Interests subject to
such preferential rights shall be conditioned upon Seller obtaining the
necessary waiver or expiration of such right; and this Agreement shall not
constitute an assignment or attempted assignment thereof without such waiver or
expiration. If the time for exercising any preferential purchase right has not
expired and the holder thereof has not waived the same prior to the Closing
Date, the parties shall postpone Closing until that date which is five
(5) Business Days after the date on which the rights have expired or on which
notice of waiver has been received. If, prior to Closing, a holder of a
preferential purchase right notifies Seller that it intends to exercise its
rights with respect to

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any of the Subject Interests to which its preferential purchase right applies,
the Subject Interests covered by said preferential purchase right shall be
excluded from the Subject Interests to be conveyed to Buyer, and the Purchase
Price shall be reduced by the value allocated to said Subject Interests by Buyer
in accordance with Section 3.3. If the holder of the preferential purchase right
fails to consummate the purchase of the Subject Interests that are the subject
of any notice of an intent to exercise such right received by Seller before or
after Closing, Seller shall promptly notify Buyer in writing. In such event, the
Closing Date shall be extended to the first Business Day following the sixtieth
(60th) day after Seller gives Buyer such notice, at which time Seller shall sell
to Buyer, and Buyer shall purchase from Seller, such Subject Interests under the
terms of this Agreement for a price equal to the aforesaid value allocated to
such Subject Interests. Notwithstanding the foregoing, Buyer shall have no
obligation to purchase such Subject Interests if Buyer does not receive such
notice within ninety (90) Days after August 15, 2008.
     3.5 Consents. If any of the Leases require the consent of a Third Party to
assign Seller’s interest therein, the assignment of the Subject Interests in and
to such Lease(s) subject to consent requirements shall be conditioned upon
Seller obtaining such consent prior to Closing (except for consents from
governmental bodies customarily obtained after assignment which shall not be
required to be obtained prior to Closing). With respect to any leasehold
interest for which consent is not obtained prior to Closing, such interest shall
not be conveyed to Buyer at Closing and the Purchase Price shall be reduced by
the value allocated to said Subject Interest by Buyer in accordance with
Section 3.3. If Seller obtains the required consent(s) within ninety (90) days
following Closing, Seller shall sell and Buyer shall purchase the interest(s)
affected thereby under the terms of this Agreement for a price equal to the
Purchase Price adjustment made therefor at Closing.
ARTICLE 4. REVIEW BY BUYER
     4.1 Review of Records. Seller shall make available to Buyer after execution
of this Agreement Records in Seller’s possession relating to the Properties
including, without limitation all environmental site assessments and
environmental compliance reports in Seller’s possession relating to the
Properties which are listed on Exhibit H. Buyer shall be entitled to review said
Records during normal business hours or other mutually agreeable time and shall
have a right to request a reasonable number of copies of such Records, at
Buyer’s expense.
     4.2 Adjustment of Purchase Price for Title Defects. As soon as reasonably
practicable after Buyer’s review of the Records in accordance with Section 4.1,
but in no event later than eight (8) Business Days prior to the Closing Date,
Buyer shall notify Seller in writing of any Leases or Wells which are subject to
Alleged Title Defects and/or whose net revenue interest and/or working interest
is/are less than or greater than that amount specified on Exhibit C-1 or
Exhibit C-2 (collectively, the “Interest Adjustments”). Notice of Title Defects
or Interest Adjustments shall include a description and full explanation of each
Title Defect and Interest Adjustment being claimed and a value which Buyer in
good faith attributes to each. With respect to Alleged Title Defects, Seller may
undertake to satisfy some, all or none of those raised by Buyer, at Seller’s
sole cost and expense. Buyer and Seller shall meet at least three (3)

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Business Days prior to the Closing Date in an attempt to mutually agree on a
resolution with respect to any Alleged Title Defects or Interest Adjustments
which by such time have not been agreed between the parties in writing. It is
recognized that good faith differences of opinion may exist between Buyer and
Seller in connection with Alleged Title Defects or Interest Adjustments,
including without limitation, disputes as to (i) whether or not the alleged
defect constitutes a Title Defect within the meaning of this Agreement,
(ii) whether or not the magnitude of such defect is great enough that Buyer is
contractually entitled to assert such Title Defect, (iii) whether or not the
Title Defect was properly and timely asserted by Buyer pursuant to this Article,
and (iv) the appropriate upward or downward adjustment, if any, to be made to
the Purchase Price on account of such Title Defect. In determining whether a
portion of a Lease contains a Title Defect, it is the intent of the parties to
include, when possible, only that portion of the Lease adversely affected. If
the value properly allocated to a Title Defect cannot be determined directly
from Exhibit G because the Title Defect is included within, but does not totally
comprise, the Lease to which the allocated value relates, Seller and Buyer shall
attempt to proportionately reduce the allocated value on Exhibit G. To the
extent that an Alleged Title Defect being asserted is failure of Seller to have
in whole or in part Defensible Title to any portion(s) of the Leases or Wells (a
“Material Defect”) which remains on the scheduled Closing Date uncured or
otherwise unresolved by the parties, such affected portion(s) of the Leases or
Wells shall be excluded from the Leases and Wells conveyed to Buyer at Closing
and the Purchase Price shall be reduced accordingly. If the parties cannot
mutually agree on a Purchase Price adjustment for a Material Defect, Buyer shall
have the right to (i) proceed to Closing and accept the Lease with the Material
Defect with no Purchase Price adjustment or (ii) terminate this Agreement as to
the Lease or Well affected by the Material Defect and receive a Purchase Price
adjustment for such Lease or Well as set forth on Exhibit G or, where
applicable, the proportionate allocated value. If any difference of opinion
regarding an Alleged Title Defect (excluding any Material Defect) or Interest
Adjustment or value of the Title Defect (excluding any Material Defect)
(collectively, the “Title Defect Dispute”) is not resolved by mutual agreement
of Buyer and Seller prior to the Closing Date, then either party has the right,
exercisable within sixty (60) days after the Closing Date, to refer the same to
arbitration in accordance with the following procedure.
     ANY SUCH ARBITRATION SHALL BE BINDING ARBITRATION HELD IN HOUSTON, TEXAS
BEFORE ONE (1) MUTUALLY AGREEABLE ARBITRATOR WHO IS AN ATTORNEY LICENSED IN THE
STATE IN WHICH THE PROPERTIES ARE LOCATED AND WHO HAS AT LEAST FIFTEEN
(15) YEARS OIL AND GAS TITLE EXPERIENCE IN SUCH STATE. THE ARBITRATION SHALL BE
CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION; AND, TO THE MAXIMUM EXTENT APPLICABLE, THE FEDERAL
ARBITRATION ACT (TITLE 9 OF THE UNITED STATES CODE). IF THERE IS ANY
INCONSISTENCY BETWEEN THIS SECTION AND ANY STATUTE OR RULES, THIS SECTION SHALL
CONTROL. ARBITRATION SHALL BE INITIATED BY ONE PARTY (“CLAIMANT”) GIVING WRITTEN
NOTICE TO THE OTHER OR ADVERSARIAL PARTY (“RESPONDENT”) AND TO THE HOUSTON
REGIONAL OFFICE OF THE AMERICAN ARBITRATION ASSOCIATION (“AAA”), ATTENTION:
REGIONAL VICE PRESIDENT, WITH A COPY TO THE ADMINISTRATOR OF THE AAA, THAT

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THE CLAIMANT ELECTS TO REFER THE ARBITRABLE DISPUTE TO ARBITRATION, AND THAT THE
PARTIES HAVE APPOINTED AN ARBITRATOR, WHO SHALL BE IDENTIFIED IN SUCH NOTICE. IF
THE PARTIES FAIL TO AGREE ON AN ARBITRATOR WITHIN SUCH SIXTY (60) DAY PERIOD, AN
ARBITRATOR SHALL BE APPOINTED BY THE ADMINISTRATOR’S DESIGNEE. SELLER AND BUYER
SHALL EACH PAY ONE-HALF OF THE COMPENSATION AND EXPENSES OF THE ARBITRATOR,
PROVIDED HOWEVER THAT ALL COSTS CAN BE ASSESSED AGAINST THE LOSING PARTY, IF THE
ARBITRATORS SO DECIDE. IN ADDITION TO THE FOREGOING QUALIFICATION THE ARBITRATOR
MUST BE A NEUTRAL PARTY WHO HAS NEVER BEEN AN OFFICER, DIRECTOR OR EMPLOYEE OF
THE PARTIES OR ANY OF THEIR AFFILIATES. THE HEARING SHALL BE COMMENCED WITHIN
THIRTY (30) DAYS AFTER NOTICE OF THE ARBITRATION IS GIVEN TO THE ADMINISTRATOR.
THE PARTIES AND THE ARBITRATOR SHALL PROCEED DILIGENTLY AND IN GOOD FAITH IN
ORDER THAT THE ARBITRAL AWARD SHALL BE MADE AS PROMPTLY AS POSSIBLE. THE
DECISION OF THE ARBITRATOR REGARDING TITLE DEFECT DISPUTE(S) SHALL BE FINAL AS
BETWEEN THE PARTIES.
     Notwithstanding anything herein to the contrary, in no event shall either
party have any obligations hereunder with respect to any Title Defects or
Interest Adjustments except to the extent that (i) each such Title Defect or
Interest Adjustment exceeds Fifty Thousand Dollars ($50,000) and (ii) all such
Title Defects and Interest Adjustments exceed in the aggregate Three Hundred
Ninety Nine Thousand and No/100 Dollars (US $399,000.00), and each party hereby
waives all upward or downward adjustments to the Purchase Price for Title
Defects and/or Interest Adjustments the individual value of which is $50,000 or
less and the cumulative value of which is $399,000.00 or less.
     4.3 Waiver. Except for claims Buyer asserts under Seller’s special warranty
of title described in Section 9.1, all Alleged Title Defects and Interest
Adjustments which are not raised by Buyer within the time period provided in
Section 4.2 or which are raised and not thereafter submitted to arbitration in
accordance with such Section shall be deemed waived by Buyer for all purposes,
and Buyer shall have no right to seek an adjustment to the Purchase Price, make
a claim against Seller or seek indemnification from Seller on account of the
same. All upward Interest Adjustments which are not raised by Seller within the
time period provided in Section 4.2 or which are raised and not thereafter
submitted to arbitration in accordance with such Section shall be deemed waived
by Seller for all purposes, and Seller shall have no right to seek an adjustment
to the Purchase Price, make a claim against Buyer or seek indemnification from
Buyer on account of the same.
ARTICLE 5. INSPECTION OF PROPERTIES
     5.1 Physical and Environmental Inspection. After execution of this
Agreement, Seller shall permit Buyer and its authorized representatives
reasonable physical access to the Properties, at times approved by Seller and at
Buyer’s sole cost, risk and expense, for the

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purposes of inspecting the same and conducting such tests, examinations,
investigations and assessments as may be reasonable and necessary to evaluate
the physical and environmental condition of the Properties. Buyer shall repair
any damage to the Properties resulting from its inspection, and releases the
“Seller Group” (hereinafter defined) from, and shall defend and indemnify the
Seller Group from any and all losses, liabilities, damages, expenses, costs,
obligations and claims of whatsoever nature arising from Buyer inspecting the
Properties, including, without limitation, (i) all claims for personal injury to
or death of employees of Buyer, its agents, contractors, subcontractors or
invitees and/or damage to the property of Buyer or others acting on behalf of
Buyer, REGARDLESS OF WHETHER SUCH CLAIMS ARE CAUSED BY THE SOLE OR CONCURRENT
NEGLIGENCE OF SELLER OR THE CONDITION OF THE PROPERTIES but excluding claims
caused by the gross negligence or willful misconduct of the Seller, and (ii) all
claims for personal injury to or death of Third Parties and damage to the
property of Third Parties, to the extent caused by the negligence, gross
negligence or willful misconduct of Buyer, or its employees, agents,
contractors, subcontractors or invitees.
     5.2 Environmental Defects.
     5.2.1 Inspection and Test Results. Buyer agrees to provide Seller with a
copy of any and all environmental inspections and assessments, including,
without limitation, all written reports, data and conclusions. Buyer and Seller
shall keep any and all data or information acquired by all such examinations and
results of all analysis of such data and information strictly confidential and
not disclose same to any person or agency other than each party’s employees,
consultants, lenders and partners, without the prior written approval of the
other party, unless required to do so by applicable Law or by the order of a
court or regulatory agency. Each party shall be responsible for insuring that
the employees, consultants, lenders and partners to whom it discloses such
information (i) use such information solely for the purposes of evaluating,
negotiating, entering into and performing this Agreement and the transaction
contemplated hereby and (ii) hold the such information in strictest confidence
and observe the confidentiality obligations set forth herein. The foregoing
obligation of confidentiality shall survive for one (1) years after the Closing
and shall survive the termination of this Agreement without closing.
     5.2.2 Notice of Environmental Defects. Prior to Closing, Buyer shall review
the inspection and testing results of the Properties and determine if any
“Environmental Defect” (hereinafter defined) exists with respect to the
Properties. An “Environmental Defect” shall mean an Environmental Claim
attributable to or arising out of a violation of any Environmental Law, such
Environmental Claim being (i) in effect on or before the Effective Time and
applicable to conditions prior to the Closing Date, (ii) made known to Buyer
prior to Closing and (iii) one which a prudent operator of oil and gas
properties would expect to be resolved, remediated or corrected by Seller prior
to such operator’s acquisition of the Properties. No later than eight
(8) Business Days prior to the Closing Date, Buyer shall notify Seller in
writing of any Environmental Defects with respect to the Properties, and the
estimated value of any such Environmental Defects (e.g. the estimated cost of
remediating or correcting such Environmental Defects). In the event such notice
is not timely delivered, all Environmental Defects of which Buyer has notice

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as of such date shall be deemed waived for all purposes and Buyer shall
thereafter have no right to claim Environmental Defects; and in the event the
Environmental Defect notice is timely delivered, all Environmental Defects of
which Buyer has notice as of such date and are not claimed in such notice shall
be deemed waived for all purposes.
     5.2.3 Rights and Remedies for Environmental Defects. (a) With respect to
any Environmental Defect affecting the Properties, Buyer may (i) request Seller
to cure the Environmental Defect to Buyer’s reasonable satisfaction, but Seller
shall have no obligation to cure the Environmental Defect (if Seller elects not
to cure the Environmental Defect to Buyer’s reasonable satisfaction or fails to
do so for any reason prior to five (5) Business Days before Closing, Buyer shall
be deemed to have elected the following subparagraph (ii)), or (ii) request an
adjustment to the Purchase Price equal to the estimated value of the
Environmental Defect.
     (b) The rights and remedies of the parties with respect to any
Environmental Defects for which the Buyer requests a Purchase Price adjustment
are as follows:
     (i) If the aggregate of Buyer’s good faith estimated value of all
Environmental Defects is less than or equal to Three Hundred Ninety Nine
Thousand and No/100 Dollars (US $399,000.00), the parties shall be obligated to
proceed with Closing as to all of the Properties without curative action by
Seller for all such Environmental Defects and without an adjustment to the
Purchase Price.
     (ii) If the aggregate of Buyer’s good faith estimated value of the
Environmental Defects exceeds Three Hundred Ninety Nine Thousand and No/100
Dollars (US $399,000.00), and the parties agree with respect to the existence of
such Environmental Defects and the value thereof, the Purchase Price shall be
reduced by the positive difference between the agreed upon value of the
Environmental Defects and Three Hundred Ninety Nine Thousand and No/100 Dollars
(US $399,000.00), and the parties shall be obligated to proceed with Closing,
subject to the termination rights of the parties under subpart (iv) of this
Section 5.2.3(b).
     (iii) If the aggregate of Buyer’s good faith estimated value of all
Environmental Defects exceeds Three Hundred Ninety Nine Thousand and No/100
Dollars (US $399,000.00) and the parties cannot agree with respect to the
existence of and/or the value of the Environmental Defects, the parties shall
refer the matter to a mutually agreed upon third party expert for determination
of the existence of and/or the value of the Environmental Defects. The
determination of such expert shall be binding on the parties, and the Purchase
Price shall be reduced by the positive difference between the determined value
of the Environmental Defects and Three Hundred Ninety Nine Thousand and No/100
Dollars (US $399,000.00). The parties shall be obligated to proceed with Closing
after such determination of such expert, subject to the termination rights of
the parties under subpart (iv) of this Section 5.2.3(b).

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     (iv) If the aggregate value of the Environmental Defects equals or exceeds
ten percent (10%) of the Purchase Price, or the aggregate value of the
Environmental Defects and the Alleged Title Defects equals or exceeds twenty
percent (20%) of the Purchase Price, either party may terminate this Agreement,
and neither party shall have any further obligation to conclude the transfer of
the Properties under this Agreement. However, the right of termination under
this subpart (iv) must be exercised no later than three (3) Business Days before
Closing (or, in the case of a determination under (iii), within five
(5) Business Days after the determination of the expert), after which both
parties shall be deemed to have waived their termination rights under this
subpart (iv) in connection with Environmental Defects.
     (c) Notwithstanding any agreement by Buyer and Seller to cure an
Environmental Defect or to reduce the Purchase Price due to an Environmental
Defect with respect to the Properties, or any other provision of this Agreement,
if the terms and conditions of this Article 5 are satisfied and the
Environmental Defect is cured or the Purchase Price is reduced as provided
herein, then at Closing Buyer shall assume all environmental obligations with
respect to the Properties, as provided in Sections 8.3 and 12.4 hereof.
ARTICLE 6. ACCOUNTING
     6.1 Revenues, Expenses and Capital Expenditures. All Hydrocarbons produced
prior to the Effective Time (irrespective of whether payment for the same has
been made or received) which are attributable to the Subject Interests shall
belong to Seller, and all such Hydrocarbons produced from and after the
Effective Time shall belong to Buyer. Seller shall be entitled to all revenues
and related accounts receivable attributable to the ownership or operation of
the Subject Interests, and shall be responsible for all costs and expenses and
related accounts payable attributable to the ownership or operation of the
Subject Interests, to the extent they relate to the time prior to the Effective
Time. Buyer shall be entitled to all revenues and related accounts receivable
attributable to the ownership of the Subject Interests, and shall be responsible
for all costs and expenses and related accounts payable attributable to the
ownership or operation of the Subject Interests, to the extent they relate to
the time from and after the Effective Time. The actual amounts or values
associated with the above shall be accounted for in the preliminary Closing
statement and the Final Accounting Settlement. Buyer shall assume Seller’s
suspense funds associated with the acquired Subject Interests as of the
Effective Time, and these funds shall be accounted for in the Final Accounting
Settlement.
     6.2 Taxes. All taxes and assessments, including without limitation, excise,
ad valorem, property, production and severance taxes and any other federal,
state and local taxes and assessments attributable to the ownership or operation
of the Subject Interests prior to the Effective Time shall remain Seller’s
responsibility, and all deductions, credits and refunds pertaining to the
aforementioned taxes and assessments, no matter when received, shall belong to
Seller. All taxes and assessments, including without limitation, excise, ad
valorem, property,

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production and severance taxes and any other federal, state and local taxes and
assessments attributable to the ownership or operation of the Subject Interests
after the Effective Time shall be Buyer’s responsibility, and all deductions,
credits and refunds pertaining to the aforementioned taxes and assessments, no
matter when received, shall belong to Buyer. The actual amounts or values
associated with the above, if any, shall be accounted for in the preliminary
Closing statement and the Final Accounting Settlement. The parties agree that
the transaction contemplated herein is an occasional sale of assets by Seller in
which Seller does not trade in the ordinary course of its business. Accordingly,
the parties will take commercially reasonable actions to establish the
occasional sale exemption from any sales tax associated with the transaction
contemplated herein. Notwithstanding the foregoing, Buyer shall be solely
responsible for all transfer, sales, use or similar taxes resulting from or
associated with the transaction contemplated under this Agreement.
     6.3 Obligations and Credits. Any and all prepaid insurance premiums,
utility charges, taxes, rentals and any other prepays, to the extent applicable
to periods of time after the Effective Time and to the extent attributable to
the Subject Interests shall be reimbursed to Seller by Buyer; and accrued
payables applicable to periods of time prior to the Effective Time, if any, and
attributable to the Subject Interests shall be the responsibility of Seller. The
actual amounts or values associated with the above shall be accounted for in the
preliminary Closing statement and the Final Accounting Settlement.
     6.4 Gas Imbalances. Seller’s estimate of the aggregate gas imbalance as of
the Effective Time for all the Subject Interests is zero (0) mcf over/under
produced (cumulative working interests), as more particularly set forth for each
of the Subject Interests on Exhibit I. In the event such gas imbalance estimate
is revised by Seller prior to Closing, Seller shall provide Buyer with a revised
gas imbalance schedule for all the Subject Interests as of the Effective Time.
There shall be a Purchase Price adjustment at Closing for the volumetric
difference in the estimated and revised imbalance calculated on Seller’s net
revenue interest at a price of $8 per mcf. To the extent that there is any
difference between Seller’s actual aggregate gas imbalance as of the Effective
Time and the imbalance position settled at Closing, then an adjustment shall be
made at the $8 per net mcf rate in the Final Accounting Settlement. There shall
be no further gas imbalance adjustments after the Final Settlement Date. In the
event of a Title Defect affecting all or a portion of the Subject Interests, the
aggregate gas imbalance shown above shall be adjusted to take into account the
affected Subject Interests. Any Purchase Price adjustments for gas imbalances
shall be made only on those Subject Interests purchased by Buyer.
     6.5 Miscellaneous Accounting.
      6.5.1 A preliminary Closing statement will be prepared for Closing, as
provided in Section 15.1.
      6.5.2 In addition to the items set forth in Sections 6.1 and 6.2, any
other amounts due between Buyer and Seller related to the ownership or operation
of the Subject Interests shall be accounted for in the Final Accounting
Settlement.

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     6.6 Final Accounting Settlement. As soon as reasonably practicable, but in
no event later than ninety (90) Days after Closing, Seller shall deliver to
Buyer a post-Closing statement setting forth a detailed final calculation of all
post-Closing adjustments applicable to the period between the Effective Time and
the Closing Date (“Final Accounting Settlement”). As soon as reasonably
practicable, but in no event later than thirty (30) Days after Buyer receives
the post-Closing statement, Buyer shall deliver to Seller a written report
containing any changes Buyer proposes to be made to such statement. As soon as
reasonably practicable, but in no event later than thirty (30) Days after Seller
receives Buyer’s proposed changes to the post-Closing statement, the parties
shall meet and undertake to agree on the post-Closing adjustments. If the
parties fail to agree on the post-Closing adjustments, resolution shall be
handled in accordance with Section 6.8. The date upon which all amounts
associated with the Final Accounting Settlement are agreed to by the parties,
whether by decision of the Accounting Referee or otherwise, shall be herein
called the “Final Settlement Date”. Any amounts owed by either party to the
other as a result of such post-Closing adjustments shall be paid within five
(5) Business Days after the Final Settlement Date.
     6.7 Post-Final Accounting Settlement. Any revenues received or costs and
expenses paid by Buyer after the Final Accounting Settlement which are
attributable to the ownership or operation of the Subject Interests prior to the
Effective Time shall be billed to or reimbursed to Seller, as appropriate. Any
revenues received or costs and expenses paid by Seller after the Final
Accounting Settlement which are attributable to the ownership or operation of
the Subject Interests after the Effective Time shall be billed to or reimbursed
by Buyer, as appropriate.
     6.8 Audit Rights. In order to verify the information provided by the
parties under this Article 6, Buyer and Seller shall each have the right to
conduct, at such party’s sole expense, an audit of the other party’s records
relating thereto for a period of one hundred eighty (180) days after the Closing
Date. Objections or exceptions which are not raised within such audit period
shall be conclusively deemed to be waived by the parties for all purposes, and
neither party shall have the right to make a claim against the other party or
seek indemnification or reimbursement from the other party associated with the
same. If within such fifteen (15) Days after receiving the results of a party’s
audit conducted in accordance with this Article, the parties still cannot reach
agreement, the disputed items shall be resolved by submitting the same to
PricewaterhouseCoopers, or if such firm declines to act in such capacity, by
such other firm of independent nationally recognized accountants mutually
acceptable to the parties (the “Accounting Referee”). The Accounting Referee
shall be instructed to resolve the accounting dispute(s) within thirty (30) Days
after having the relevant materials submitted to it for review. The decision of
the Accounting Referee shall be binding and non-appealable by the parties. The
fees and expenses associated with the Accounting Referee shall be borne equally
by Buyer and Seller.
ARTICLE 7. CASUALTY AND CONDEMNATION
     If a substantial part of the Properties shall be (a) destroyed prior to
Closing by a Casualty Loss, or (b) taken in condemnation or if proceedings for
such purposes shall be pending (collectively referred to as a “Taking”), then
either Buyer or Seller may terminate this

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Agreement prior to the Closing. For the purpose of this Article 6, the term
“substantial” shall be defined as ten percent (10%) of the unadjusted Purchase
Price. If either party terminates this Agreement in accordance with this
Section, neither party shall have any further obligations, except as provided in
this Article and in Section 14.2.1.
     If neither party terminates this Agreement, this Agreement shall remain in
full force and effect, and Seller and Buyer shall attempt to agree on a
reduction in the Purchase Price, reflecting the reduction in the value of the
Subject Interests affected by the Casualty Loss and/or Taking. If the parties
cannot agree on a reduction, the Buyer’s reasonable good faith calculation shall
be used for purposes of Closing. Notwithstanding anything herein to the
contrary, in no event shall either party have any obligations hereunder with
respect to any Casualty Loss and/or Taking except to the extent that the value
of all such Casualty Losses and/or Takings exceed in the aggregate Three Hundred
Ninety Nine Thousand and No/100 Dollars (US $399,000.00), and Buyer hereby
waives all downward adjustments to the Purchase Price for all Casualty Losses
and/or Takings the cumulative value of which is $399,000.00 or less. Unless
otherwise agreed by the parties, Seller shall retain any and all sums paid to
Seller, unpaid awards, insurance proceeds and other payments associated with or
attributable to Casualty Losses and/or Takings to the extent that Buyer receives
a downward adjustment to the Purchase Price attributable to such Casualty Losses
and/or Takings. Otherwise, Buyer shall receive any and all sums paid to Seller,
unpaid awards, insurance proceeds and other payments attributable to such
Casualty Losses and/or Takings.
ARTICLE 8. INDEMNITIES
     8.1 Seller’s Indemnity Obligations (excluding Environmental Claims). EXCEPT
FOR ENVIRONMENTAL CLAIMS WHICH SHALL BE HANDLED IN ACCORDANCE WITH SECTION 8.3,
SELLER SHALL RELEASE BUYER AND BUYER’S AFFILIATES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS AND EMPLOYEES (COLLECTIVELY, THE “BUYER GROUP”) FROM AND SHALL FULLY
PROTECT, INDEMNIFY, AND DEFEND BUYER GROUP FROM AND AGAINST ANY AND ALL CLAIMS
AND ANY AND ALL OCCURRENCES AND CONDITIONS WHICH WOULD CONSTITUTE CLAIMS BUT
WHICH ARE ASSERTED BY SELLER, RELATING TO, ARISING OUT OF, OR CONNECTED WITH
SELLER’S OWNERSHIP OR OPERATION OF THE PROPERTIES PRIOR TO THE EFFECTIVE TIME,
REGARDLESS OF ANY NEGLIGENCE OF ACT OR OMISSION BY BUYER GROUP; PROVIDED,
HOWEVER, THAT PROPER NOTICE UNDER SECTION 8.5 SHALL HAVE BEEN SUBMITTED TO
SELLER WITHIN EIGHTEEN (18) MONTHS AFTER THE CLOSING DATE, AND FURTHER PROVIDED
THAT BUYER SHALL BEAR SOLE RESPONSIBILITY FOR THE COSTS ASSOCIATED WITH ALL SUCH
CLAIMS (IN AGGREGATE) UP TO THREE HUNDRED NINETY NINE THOUSAND AND NO/100DOLLARS
(US $399,000.00).
     8.2 Buyer’s Indemnity Obligations (excluding Environmental Claims). EXCEPT
FOR ENVIRONMENTAL CLAIMS WHICH SHALL BE HANDLED IN ACCORDANCE WITH SECTION 8.3,
BUYER SHALL RELEASE SELLER AND

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SELLER’S AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS AND EMPLOYEES
(COLLECTIVELY, THE “SELLER GROUP”) FROM AND SHALL FULLY PROTECT, INDEMNIFY, AND
DEFEND THE SELLER GROUP FROM AND AGAINST ANY AND ALL CLAIMS AND ANY AND ALL
OCCURRENCES AND CONDITIONS WHICH WOULD CONSTITUTE CLAIMS BUT WHICH ARE ASSERTED
BY BUYER RELATING TO, ARISING OUT OF, OR CONNECTED WITH THE OWNERSHIP OR
OPERATION OF THE PROPERTIES (i) PERTAINING TO THE PERIOD AFTER THE EFFECTIVE
TIME, AND (ii) PERTAINING TO THE PERIOD PRIOR TO THE EFFECTIVE TIME, UNLESS SUCH
CLAIMS OR OCCURRENCES AND CONDITIONS SHALL HAVE BEEN SUBMITTED TO SELLER IN
ACCORDANCE WITH THE NOTICE PROVISIONS HEREOF WITHIN EIGHTEEN (18) MONTHS AND ARE
IN THE AGGREGATE GREATER THAN THREE HUNDRED NINETY NINE THOUSAND AND NO/100
DOLLARS (US $399,000.00). THIS INDEMNITY SHALL APPLY REGARDLESS OF ANY
NEGLIGENCE OF ACT OR OMISSION BY SELLER GROUP.
     8.3 Environmental Claims. BUYER SHALL RELEASE SELLER GROUP AND SHALL FULLY
PROTECT, INDEMNIFY, AND DEFEND SELLER GROUP FROM AND AGAINST ANY AND ALL
ENVIRONMENTAL CLAIMS AND ANY AND ALL OCCURRENCES AND CONDITIONS WHICH WOULD
CONSTITUTE ENVIRONMENTAL CLAIMS BUT WHICH ARE ASSERTED BY BUYER PERTAINING TO
THE PROPERTIES, NO MATTER WHEN THE SAME ARISE OR TO WHAT PERIOD OF TIME THEY
PERTAIN AND REGARDLESS OF ANY NEGLIGENCE OR ACT OR OMISSION OF SELLER GROUP.
     8.4 Asbestos and NORM. The parties acknowledge that the Properties may
contain asbestos and/or NORM, and that special procedures may be required for
the assessment, remediation, removal, transportation or disposal of asbestos and
NORM. Buyer agrees to assume any and all liability associated with or
attributable to the assessment, remediation, removal, transportation and
disposal of the asbestos or NORM associated with or attributable to the
Properties and shall conduct said activities in accordance with all applicable
Laws.
     8.5 Notice and Cooperation. If a Claim is asserted against a party for
which the party would be liable under the provisions of this Agreement, it is a
condition precedent to the indemnifying party’s obligations hereunder that the
indemnified party gives the indemnifying party written notice of such Claim
setting forth full particulars of the Claim, as known by the indemnified party,
including a copy of the Claim (if it was a written Claim.) The indemnified party
shall make a good faith effort to notify the indemnifying party within one
(1) month of receipt of a Claim and shall in all events effect such notice
within such time as will allow the indemnifying party to defend against such
Claim and no later than three (3) calendar months after receipt of the Claim by
the indemnified party. The notice of a Claim given hereunder is referred to as a
“Claim Notice.”

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     8.6 Defense of Claims.
      8.6.1 Counsel. Upon receipt of a Claim Notice, the indemnifying party may
assume the defense thereof with counsel selected by the indemnifying party and
reasonably satisfactory to the indemnified party. The indemnified party shall
cooperate in all reasonable respects in such defense. If any Claim involves
Claims with respect to which Buyer indemnifies Seller and also Claims for which
Seller indemnifies Buyer, each party shall have the right to assume the defense
of and hire counsel for that portion of the Claim for which it has liability.
The indemnified party shall have the right to employ separate counsel in any
Claim and to participate in the defense thereof, provided the fees and expenses
of counsel employed by an indemnified party shall be at the expense of the
indemnified party unless otherwise agreed between the parties.
      8.6.2 Settlement. If the indemnifying party does not notify the
indemnified party within the earlier to occur of: (a) the time a response is due
in the relevant litigation matter, or (b) three (3) calendar months after
receipt of the Claim Notice, that the indemnifying party elects to undertake the
defense thereof, the indemnified party has the right to defend, at the sole
expense of the indemnifying party, the Claim with counsel of its own choosing,
subject to the right of the indemnifying party to assume the defense of any
Claim at any time prior to settlement or final determination thereof at the
indemnifying party’s sole expense. In such event, the indemnified party shall
send a written notice to the indemnifying party of any proposed settlement of
any Claim, which settlement the indemnifying party may accept or reject, in its
reasonable judgment, within thirty (30) Days of receipt of such notice, unless
the settlement offer is limited to a shorter period of time in which case the
indemnifying party shall have such shorter period of time in which to accept or
reject the proposed settlement. Failure of the indemnifying party to accept or
reject such settlement within the thirty (30) Day period, or such shorter period
of time, if applicable, shall be deemed to be its rejection of such settlement.
The indemnified party may settle any matter over the objection of the
indemnifying party but shall in so doing be deemed to have waived any right to
indemnity therefor as to (and only as to) liabilities with respect to which the
indemnifying party has recognized its liability.
     8.7 Waiver of Certain Damages. Each of the parties hereby waives, and
agrees not to seek, indirect, consequential, punitive, exemplary or special
damages of any kind with respect to any Claim, occurrence, condition or dispute,
arising out of or relating to this Agreement or breach hereof; provided,
however, that this provision does not diminish or affect in any way the parties’
rights and obligations under any indemnities provided for in this Agreement.
     8.8. Limitation on Indemnities. In no event shall an indemnifying party
have any obligation of indemnification to the other party, if the Claim,
occurrence, condition or dispute for which indemnity is sought was caused by the
gross negligence or willful misconduct on the part of the indemnified party
and/or its officers, directors, employees, agents, contractors, subcontractors
or Affiliates.

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ARTICLE 9. WARRANTIES AND DISCLAIMERS
     9.1 Special Warranty of Title. Seller shall warrant and defend title to the
Properties conveyed to Buyer against every person whomsoever lawfully claiming
the same or any part thereof by, through or under Seller, but not otherwise, and
subject to the Permitted Encumbrances.
     9.2 Disclaimer — Representations and Warranties. BUYER ACKNOWLEDGES AND
AGREES THAT THE SUBJECT INTERESTS ARE BEING SOLD, ASSIGNED AND CONVEYED FROM
SELLER TO BUYER “AS-IS, WHERE-IS”, AND WITH ALL FAULTS IN THEIR PRESENT
CONDITION AND STATE OF REPAIR, WITHOUT RECOURSE. EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, SELLER HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND
WARRANTIES CONCERNING THE SUBJECT INTERESTS, EXPRESS, STATUTORY, IMPLIED OR
OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF TITLE, THE QUALITY OF
HYDROCARBON RESERVES, THE QUANTITY OF HYDROCARBON RESERVES, THE AMOUNT OF
REVENUES, THE AMOUNT OF OPERATING COSTS, CONDITION (PHYSICAL OR ENVIRONMENTAL),
QUALITY, COMPLIANCE WITH APPLICABLE LAWS, ABSENCE OF DEFECTS (LATENT OR PATENT),
SAFETY, STATE OF REPAIR, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
AND BUYER EXPRESSLY RELEASES SELLER FROM THE SAME.
     9.3 Disclaimer — Statements and Information. EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, SELLER DISCLAIMS ANY AND ALL LIABILITY AND RESPONSIBILITY FOR
AND ASSOCIATED WITH THE QUALITY, ACCURACY, COMPLETENESS OR MATERIALITY OF THE
RECORDS AND ANY OTHER INFORMATION PROVIDED AT ANY TIME (WHETHER ORAL OR WRITTEN)
TO BUYER, ITS OFFICERS, AGENTS, EMPLOYEES AND REPRESENTATIVES IN CONNECTION WITH
THE TRANSACTION CONTEMPLATED HEREIN, INCLUDING WITHOUT LIMITATION, QUALITY OF
HYDROCARBON RESERVES, QUANTITY OF HYDROCARBON RESERVES, AMOUNT OF REVENUES,
AMOUNT OF OPERATING COSTS, FINANCIAL DATA, CONTRACT DATA, ENVIRONMENTAL
CONDITION OF THE PROPERTIES, PHYSICAL CONDITION OF THE PROPERTIES AND CONTINUED
FINANCIAL VIABILITY OF THE SUBJECT INTERESTS, AND BUYER EXPRESSLY RELEASES
SELLER FROM THE SAME.
ARTICLE 10. SELLER’S REPRESENTATIONS
     Seller represents to Buyer that on the date hereof and as of the Closing
Date:
     10.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and has all requisite

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corporate power and authority to own and lease the Properties. Seller is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the Properties are located.
     10.2 Corporate Authority; Authorization of Agreement. Seller has all
requisite corporate power and authority to execute and deliver this Agreement,
to consummate the transactions contemplated herein and to perform all of the
terms and conditions to be performed by it as provided for in this Agreement.
The execution and delivery of this Agreement by Seller, the performance by
Seller of all of the terms and conditions to be performed by it and the
consummation of the transactions contemplated herein have been duly authorized
and approved by all necessary corporate action. This Agreement has been duly
executed and delivered by Seller and constitutes the valid and binding
obligation of Seller, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency or other
Laws relating to or affecting the enforcement of creditors’ rights and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
     10.3 No Violations. The execution and delivery of this Agreement by Seller
does not, and the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated herein, will not:
        (a) Conflict with or require the consent of any person or entity under
any of the terms, conditions or provisions of the certificate of incorporation
or bylaws of Seller;
        (b) Violate any provision of, or require any filing, consent or approval
under any Law applicable to or binding upon Seller (assuming receipt of all
consents and approvals of governmental entities customarily obtained subsequent
to the transfers of title);
        (c) Conflict with, result in a breach of, constitute a default under or
constitute an event that with notice or lapse of time, or both, would constitute
a default under, accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under, (i) any
mortgage, indenture, loan, credit agreement or other agreement, evidencing
indebtedness for borrowed money to which Seller is a party or by which Seller is
bound or (ii) any order, judgment or decree of any governmental entity or tribal
authority; or
        (d) Result in the creation or imposition of any lien or encumbrance upon
the Subject Interests.
     10.4 Absence of Certain Changes. Between the Effective Time and the
execution date hereof, there has not been:
        (a) A sale, lease or other disposition of any material part of the
Subject Interests, other than the sale of Hydrocarbons in the ordinary course of
business, consistent with prior practices of Seller;

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        (b) A mortgage, pledge or grant of a lien or security interest in any of
the Subject Interests; or
        (c) A contract or commitment to do any of the foregoing.
     10.5 Operating Costs. To the best of Seller’s knowledge, all costs incurred
in connection with the operation of the Subject Interests have been fully paid
and discharged by Seller, except normal expenses incurred in operating the
Subject Interests within the previous sixty (60) Days or as to which Seller has
not yet been billed or as to which Seller is disputing in good faith.
     10.6 Litigation and Other Disputes. Seller shall retain liability for the
matters listed on Schedule 10.6 and shall indemnify, defend and hold harmless
the Buyer Group from and against any and all Claims related to such matters.
Except for the matters listed on Schedule 10.6, there is no action, suit or
proceeding pending or, to the best of Seller’s knowledge, threatened against the
Properties or Seller’s interest in the Properties.
     10.7 Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to the best of Seller’s
knowledge, threatened against Seller.
     10.8 Leases. To the best of Seller’s knowledge, (i) the Leases have been
maintained in material compliance with their terms, are valid, binding and in
full force and effect, (ii) there are no defaults by Seller in the performance
of any of the material terms and conditions of the Leases and (iii) no event has
occurred that with the lapse of time or action or inaction by any party would
result in a material violation of the Leases or a default thereunder. To the
best of Seller’s knowledge, all royalties (including shut-in payments), rental,
deposits and other amounts due on the Leases have been properly and timely paid.
     10.9 Hydrocarbon Sales; Imbalances. Except as otherwise provided in
Section 6.4, Seller has not been nor will Buyer after the Effective Time be
obligated by virtue of any prepayment made under any gas transportation,
production sales contract or any other contract containing a “take or pay”
clause, or under any gas balancing, deferred production or similar arrangement
to deliver oil, gas or other minerals produced from or allocated to any of the
Subject Interests at such future time without receiving full payment therefor at
the time of delivery.
     10.10 Existing Commitments. Except as described on Schedule 10.10 and
except for any commitment for expenditures of less than $50,000, there are no
existing commitments or obligations to pay costs or expenses for drilling,
completing, equipping, deepening, side tracking, reworking or other similar
costs or expenses arising from or relating to the ownership of the Properties.
Except as otherwise provided in the Assumed Contracts, there are no obligations
or commitments presently existing under which Seller’s interest in the
Properties will be altered due to the passage of time, the collection of a
specified sum of money (including, for example, non-consent operations and
back-in obligations) or other reason.

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     10.11 Compliance with Law. Except for those matters disclosed on
Schedule 10.11 and such other matters as would not have a material adverse
effect on the value of the Properties, to the best of Seller’s knowledge, Seller
(i) is in material compliance with all Laws applicable to Seller or the
Properties and (ii) has not received notice of and is not aware of any facts,
conditions or circumstances relating to the ownership or operation of the
Properties that could reasonably be expected to give rise to any claim or
assertion that Seller, the Properties or the ownership or operation thereof is
not in material compliance with any Law applicable to Seller or the Properties.
     10.12 Availability of Records. To the best of Seller’s knowledge, Seller
has provided Buyer with access to all Records in Seller’s possession in
connection with Buyer’s due diligence title review of the Leases.
     10.13 Material Contracts. Exhibit D sets forth, to the best of Seller’s
knowledge after reasonable investigation, all contracts and agreements that have
a material effect on the use, value or operation of the Properties. Except as
set forth on Schedule 10.13, the Material Contracts are in full force and effect
in accordance with their respective terms, there exist no defaults thereunder by
Seller or, to the best of Seller’s knowledge after reasonable investigation, by
any other party to such Material Contracts and no event has occurred that with
notice or lapse of time or both would constitute any default under any such
contract by Seller or, to the best of Seller’s knowledge after reasonable
investigation, any other party to such Material Contracts.
     10.14 Preferential Rights. Except as set forth on Schedule 10.14, to the
best of Seller’s knowledge there are no preferential rights to purchase that are
applicable to the transaction contemplated hereby.
     10.15 Environmental. Except as set forth on Schedule 10.15, to the best of
Seller’s knowledge, neither Seller nor the Properties are in violation of any
Environmental Laws and there are no existing Environmental Claims relating to
the Properties.
     10.16 Suspense Accounts. As of the Effective Time, to the best of Seller’s
knowledge and except as set forth in Schedule 10.16, with respect to the
Properties operated by Seller, Seller is not holding any funds in suspense.
     10.17 Expenses and Costs and Payments Out of Production. All expenses and
costs (including all bills for labor, materials and supplies used or furnished
for use in connection with the Properties) and payments out of production of
hydrocarbons from the Properties, including all royalties, have been, and are
being, properly and timely paid.
     10.18 Payout Balances. Schedule 10.18 contains the true and correct payout
balances as of the most recent period in Seller’s possession for each of the
Properties that have varying interests depending on payout or other occurrence.
     10.19 Use of Surface. Except as set forth on Schedule 10.19, to the best of
Seller’s knowledge after reasonable investigation there is no material
limitation on the use of the surface contained in any of the Leases that would
have a material adverse effect on the value, use or

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operation of the Properties. The Assumed Contracts are sufficient for reasonable
access to all of the Properties.
     10.20 Statements. No representation made by Seller in this Agreement, and
no statement of Seller or Seller’s agents or representatives contained in any
document, certificate, or other writing furnished or to be furnished to Buyer by
Seller pursuant hereto or in connection herewith, intentionally contains or will
intentionally contain, at the time of delivery, any untrue statement of a
material fact or intentionally omit or will intentionally omit, at the time of
delivery, to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading. Seller knows of no matter which has not been disclosed to Buyer
pursuant to this Agreement which has or, so far as Seller can now reasonably
foresee, will have a material adverse effect on the value, use or operation of
the Assets. Seller has delivered or made available to Buyer accurate and
complete copies of all agreements, documents, and other writings referred to or
listed in this Agreement.
     10.21. Limitation on Representations. The representations contained in
Sections 10.5 through 10.20 shall survive Closing for a period of twelve
(12) months after the Closing Date and shall thereupon terminate.
ARTICLE 11. BUYER’S REPRESENTATIONS
     Buyer represents to Seller that on the date hereof and as of the Closing
Date:
     11.1 Organization and Good Standing. Parallel Petroleum Corporation is a
corporation duly organized validly existing and in good standing under the Laws
of the State of Delaware and has all requisite corporate power and authority to
own and lease the Properties. Parallel Petroleum Corporation is duly licensed or
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions in which the Properties are located.
     11.2 Corporate Authority; Authorization of Agreement. Parallel Petroleum
Corporation has all requisite corporate power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated herein and
to perform all the terms and conditions to be performed by it as provided for in
this Agreement. The execution and delivery of this Agreement by Parallel
Petroleum Corporation, the performance by Parallel Petroleum Corporation of all
the terms and conditions to be performed by it and the consummation of the
transactions contemplated herein have been duly authorized and approved by all
necessary corporate action. This Agreement has been duly executed and delivered
by Buyer and constitutes the valid and binding obligation of Buyer, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or other Laws relating to or affecting the
enforcement of creditors’ rights and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
     11.3 No Violations. The execution and delivery of this Agreement by Buyer
does not, and the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated herein, do not:

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        (a) Conflict with or require the consent of any person or entity under
any of the terms, conditions or provisions of the certificate of incorporation
or bylaws of Buyer;
        (b) Violate any provision of, or require any filing, consent or approval
under any Law applicable to or binding upon Buyer; or
        (c) Conflict with, result in a breach of, constitute a default under or
constitute an event that with notice or lapse of time, or both, would constitute
a default under, accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under, (i) any
mortgage, indenture, loan, credit agreement or other agreement evidencing
indebtedness for borrowed money to which Buyer is a party or by which Buyer is
bound, or (ii) any order, judgment or decree of any governmental entity or
tribal authority.
     11.4 SEC Disclosure. Buyer is an experienced and knowledgeable investor and
operator in the oil and gas business. Buyer is acquiring the Subject Interests
for its own account for use in its trade or business, and not with a view toward
or for sale in connection with any distribution thereof, nor with any present
intention of making a distribution thereof within the meaning of the Securities
Act of 1933, as amended.
     11.5 Statements. No representation made by Buyer in this Agreement, and no
statement of Buyer or Buyer’s agents or representatives contained in any
document, certificate, or other writing furnished or to be furnished to Seller
by Buyer pursuant hereto or in connection herewith, intentionally contains or
will intentionally contain, at the time of delivery, any untrue statement of a
material fact or intentionally omit or will intentionally omit, at the time of
delivery, to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading. Buyer knows of no matter which has not been disclosed to Seller
pursuant to this Agreement which has or, so far as Buyer can now reasonably
foresee, will have a material adverse effect on the value, use or operation of
the Assets.
     11.6 Independent Evaluation. As of Closing, Buyer represents that it is
sophisticated in the evaluation, purchase, operation and ownership of oil and
gas properties and that in making its decision to enter into this Agreement and
to consummate the transaction contemplated herein, Buyer has relied and shall
rely solely on its own independent knowledge, investigation and evaluation of
the Subject Interests and has satisfied itself as to the physical condition and
environmental condition of the Subject Interests.
     11.7 Buyer’s Reliance. Buyer acknowledges and agrees that it is entitled to
rely only on the express representations and warranties set forth in this
Agreement.
     11.8 Qualified Buyer. Buyer possesses all required governmental licenses,
permits, bonds, certificates, orders and authorizations necessary to own the
Subject Interests, except those customarily obtained after the sale or
conveyance of the Subject Interests.

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ARTICLE 12. ADDITIONAL AGREEMENTS
     12.1 Covenants of Seller. From the date hereof until Closing, without first
obtaining the consent of Buyer, Seller has not and will not:
        (a) waive any right of material value relating to the Properties;
        (b) convey, encumber, mortgage or pledge any of the Properties nor
dispose of any of the Properties, other than the sale of production in the
ordinary course of business and except as may be required in connection with the
exercise of preferential rights affecting the Properties;
        (c) enter into, modify or terminate any contracts relating to the
Properties including any agreement creating a tax partnership, other than in the
ordinary course of business;
        (d) vote to commit to any material project or material expenditure under
any operating agreement affecting the Properties or elect to participate in any
operation on the Properties requiring an expenditure of greater than Fifty
Thousand Dollars (US $50,000) to Seller’s interest, except to the extent
required in an emergency to protect life or property from immediate harm or
destruction; or
        (e) contract or commit itself to do any of the foregoing.
     12.2 Notice of Loss. From the date hereof until Closing, Seller shall
promptly notify Buyer of any loss or damage to the Properties, or any part
thereof, known to Seller and in the aggregate exceeding Ten Thousand Dollars (US
$10,000) net to Seller’s interest.
     12.3 Subsequent Operations. Seller makes no representations or warranties
to Buyer as to the transferability or assignability of operatorship of the
Properties. Buyer acknowledges that the rights and obligations associated with
operatorship of the Properties are governed by the applicable agreement(s) and
that operatorship of the Properties shall be decided in accordance with the
terms of said agreement(s); provided, however, Seller agrees to provide
reasonable assistance to Buyer (at no expense to Seller) in connection with
Buyer’s effort to be designated as operator of the Properties.
     12.4 Buyer’s Assumption of Obligations. Subject to Closing, Buyer agrees to
assume and shall timely perform and discharge all duties and obligations of
Seller relating to or arising out of the ownership of the Properties from and
after the Effective Time, including, without limitation, all duties and
obligations of Seller under all the Assumed Contracts, and Buyer shall indemnify
and hold Seller harmless from and against any and all liabilities of whatsoever
nature arising out of Buyer’s failure to properly perform or discharge such
duties and obligations. Buyer agrees to accept full responsibility for Seller’s
proportionate share of the costs and expenses associated with or attributable to
the plugging and abandonment of all wells, and the

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removal of all equipment, platforms and facilities conveyed to Buyer under this
Agreement and the remediation, restoration and clean up of the Properties. In
conducting the duties and obligations contained in this Section 12.4, Buyer
shall comply with the applicable Laws of all governmental entities and tribal
authorities having appropriate jurisdiction.
     12.5 Records. Within thirty (30) Days after Closing, Seller shall furnish
to Buyer all Records which are maintained by Seller, provided, however, that
Seller is entitled to retain copies of any or all such Records. Buyer agrees to
maintain the Records received from Seller, and any other records that Buyer may
receive from the current operators of any of the Properties, in accordance
herewith for a period of six (6) years after the Closing Date and to afford
Seller reasonable access to as requested by Seller. If Buyer desires to dispose
of any such records prior to the end of the six (6) year period, Buyer shall
offer in writing to Seller to deliver such records to Seller; if Seller elects
not to receive such records or fails to respond to Buyer’s notice within thirty
(30) Business Days after receipt thereof, then Buyer may dispose of such records
within its discretion.
ARTICLE 13. CONDITIONS PRECEDENT TO CLOSING
     13.1 Conditions Precedent to Seller’s Obligation to Close. Seller shall be
obligated to consummate the sale of the Subject Interests as contemplated by
this Agreement on the Closing Date, provided the following conditions precedent
have been satisfied or have been waived by Seller:
     13.1.1 All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of
Closing as though such representations and warranties were made at and as of
such time;
     13.1.2 Buyer shall have complied in all material respects with all
obligations and conditions contained in this Agreement to be performed or
complied with by Buyer at or prior to the Closing; and
     13.1.3 No suit, action or other proceedings shall be pending before any
court or governmental entity in which it is sought by a person or entity (other
than the parties hereto or any of their Affiliates, officers, directors, or
employees) to restrain, enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, or to obtain substantial damages in
connection with the transaction contemplated herein, nor shall there be any
investigation by a governmental entity pending which might result in any such
suit, action or other proceedings seeking to restrain, enjoin or otherwise
prohibit the consummation of the transaction contemplated by this Agreement.
     13.2 Conditions Precedent to Buyer’s Obligation to Close. Buyer shall be
obligated to consummate the purchase of the Subject Interests as contemplated by
this Agreement on the Closing Date, provided that the following conditions
precedent have been satisfied or have been waived by Buyer:

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     13.2.1 All representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects at and as of
Closing as though such representations and warranties were made at and as of
such time;
     13.2.2 Seller shall have complied in all material respects with all
obligations and conditions contained in this Agreement to be performed or
complied with by Seller at or prior to the Closing; and
     13.2.3 No suit, action or other proceedings shall be pending before any
court or governmental entity in which it is sought by a person or entity (other
than the parties hereto or any of their Affiliates, officers, directors, or
employees) to restrain, enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, or to obtain substantial damages in
connection with the transaction contemplated herein, nor shall there be any
investigation by a governmental entity pending which might result in any such
suit, action or other proceedings seeking to restrain, enjoin or otherwise
prohibit the consummation of the transaction contemplated by this Agreement.
ARTICLE 14. TERMINATION
     14.1 Grounds for Termination. This Agreement may be terminated at any time
prior to Closing:
     14.1.1 By the mutual written agreement of Seller and Buyer;
     14.1.2 By Seller if Buyer fails or refuses to Close in breach of this
Agreement or if the conditions precedent to Seller’s obligation to Close are
unmet at the time set for Closing;
     14.1.3 By Buyer if Seller fails or refuses to Close in breach of this
Agreement or if the conditions precedent to Buyer’s obligation to Close are
unmet at the time set forth Closing;
     14.1.4 By either Seller or Buyer pursuant to Article 5; or
     14.1.5 By either party (provided the terminating party is not then in
breach of any provisions of this Agreement), if Closing shall not have occurred
within sixty (60) days following the originally scheduled Closing Date.
     14.2 Effect of Termination.
     14.2.1 Except as provided in Section 14.2.2 below, if this Agreement is
terminated in accordance with Section 14.1, such termination shall be without
liability of either party or any Affiliate, officer, director, or employee of
such party, except for

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Seller’s obligation (if applicable) to return the Earnest Money Deposit, as
provided in Article 3, and the obligations provided in Sections 14.4 and 16.3.
       14.2.2 If this Agreement is terminated because of Buyer’s failure or
refusal to Close in breach of this Agreement or because the conditions precedent
to Seller’s obligation to Close provided in Sections 13.1.1 and 13.1.2 are unmet
at the time set for Closing, Seller shall be entitled to retain the Earnest
Money Deposit as liquidated damages to reimburse Seller for its out-of-pocket
fees and expenses incurred in connection with the transactions contemplated by
this Agreement, unless any of the conditions precedent to Buyer’s obligation to
Close provided in Section 13.2 are also unmet at the time set for Closing. The
liquidated damages referenced above shall be in addition to and not exclusive of
any other remedies which may be available to Seller at law or in equity. If this
Agreement is terminated because of Seller’s failure or refusal to Close in
breach of this Agreement or because the conditions precedent to Buyer’s
obligation to Close provided in Sections 13.2.1 and 13.2.2 are unmet at the time
set for Closing, Buyer shall be entitled to all remedies which may be available
to Buyer at law or in equity.
     14.3 Return of Documents. If this Agreement is terminated, each party shall
return to the party which owns or is otherwise entitled thereto all books,
records, maps, files, papers and other property in such party’s possession
relating to the transaction contemplated by this Agreement.
     14.4 Confidentiality. Buyer acknowledges that the books, records, maps,
files, papers and other property to be disclosed to Buyer in the performance of
its title due diligence hereunder may contain non-public confidential
information and that Seller considers the terms of the sale and purchase of the
Subject Interests to be confidential information. Buyer agrees that it will use
such confidential information solely for the purpose of performing such due
diligence and that such information will be kept confidential by Buyer for a
period of one (1) year from the date hereof in the event that Closing does not
occur..
     This Section 14.4 shall be inoperative as to such portions of the
information furnished Buyer that (i) are or become generally available to the
public other than as a result of a disclosure by Buyer or its representatives in
breach of the terms hereof; (ii) are or become available to Buyer from a source
other than the Seller, if such source has represented to Buyer (and which Buyer
has no reason to disbelieve after due inquiry) that it is entitled to disclose
such information; (iii) are developed independently by Buyer without reference
to such information; (iv) were known to Buyer prior to their disclosure by the
Companies or one of their representatives; or (v) which Buyer had a prior
independent contractual right to receive, with or without an obligation of
confidentiality.
     In the event that Buyer is requested or becomes legally compelled (by oral
question, interrogatory, request for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the confidential
information, Buyer will (i) provide Seller with prompt written notice so that
Seller may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this letter agreement, and (ii) cooperate with
Seller in pursuing any reasonable measures that Seller determines to pursue to
resist or narrow any such disclosure request or requirement. In the event that
such protective order or other

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remedy is not obtained, or Seller waives compliance with the provisions of this
letter agreement, Buyer will furnish only that portion of the confidential that
is legally required and will exercise all reasonable efforts to obtain
confidential treatment therefor and will cooperate with Seller’s efforts to
obtain such confidential treatment.
ARTICLE 15. THE CLOSING
     15.1. Preliminary Closing Statement. Prior to the Closing Date, Seller
shall provide Buyer with a preliminary Closing statement setting forth the
adjusted Purchase Price, the amounts required in Sections 6.1-6.3 hereof, and
wiring instructions designating the account or accounts to which the adjusted
Purchase Price is to be delivered in accordance with Section 15.3.2. After
receipt of the preliminary Closing statement from Seller and prior to the
Closing Date, Buyer shall furnish Seller with Buyer’s requested adjustments to
such statement. Seller and Buyer shall attempt in good faith to resolve any
differences between them, but if the parties are unable to agree, Seller’s
preliminary Closing statement shall be used for Closing.
     15.2 Obligations of Seller at Closing. At the Closing, Seller shall deliver
to Buyer, unless waived by Buyer, the following:
        15.2.1 Documents substantially in the form of the Assignment and Bill of
Sale attached hereto as Exhibit A, conveying all of Seller’s right, title and
interest in and to the Properties. The Assignment and Bill of Sale shall be
executed and acknowledged in two (2) multiple originals or such greater number
as agreed between the parties;
        15.2.2 Evidence that all consents and approvals prerequisite to the sale
and conveyance of the Subject Interests (except for consents and approvals of
governmental entities customarily obtained subsequent to the transfer of title
or with respect to Properties which have been withdrawn from the transaction in
accordance with the terms hereof) have been obtained, as well as evidence of
waiver or lapse of any unexercised preferential purchase rights applicable to
the Properties;
        15.2.3 A Certificate substantially in the form of Exhibit B, executed by
an authorized officer of Seller, certifying as to the matters specified in
Section 13.2.1;
        15.2.4 A Non-Foreign Affidavit substantially in the form of Exhibit E,
executed by an authorized officer of Seller;
        15.2.5 Executed copies of mutually agreeable transfer orders or
letters-in-lieu, government approved assignment forms to be prepared by Buyer;
and
        15.2.6 Such other instruments as are necessary to carry out Seller’s
obligations under this Agreement.
     15.3 Obligations of Buyer at Closing. At the Closing, Buyer shall deliver
to Seller, unless waived by Seller, the following:

29

--------------------------------------------------------------------------------

 

     15.3.1 The Assignment and Bill of Sale referred to in Section 15.2.1,
executed and properly acknowledged;
     15.3.2 The adjusted Purchase Price, less the Earnest Money Deposit, by wire
transfer in accordance with Article 3;
     15.3.3 A Certificate substantially in the form of Exhibit B, executed by an
authorized representative of Buyer, certifying as to the matters specified in
Section 13.1.1; and
     15.3.4 Such other instruments as are necessary to carry out Buyer’s
obligations under this Agreement.
     15.4 Site of Closing. Closing shall be held in Seller’s offices in Houston,
Texas or any other location mutually agreed in writing by Seller and Buyer.
ARTICLE 16. MISCELLANEOUS
     16.1 Notices. All notices and other communications required, permitted or
desired to be given hereunder must be in writing and sent by U.S. mail, properly
addressed as shown below, and with all postage and other charges fully prepaid
or by hand delivery or by facsimile transmission. Date of service by mail and
hand delivery is the date on which such notice is received by the addressee and
by facsimile is the date sent (as evidenced by fax machine confirmation of
receipt), or if such date is not on a Business Day, then on the next date which
is a Business Day. Each party may change its address by notifying the other
party in writing.

     
If to Seller by mail or hand delivery:
  Diamond “M” Production Company
2350 N. Sam Houston Pkwy. E., Suite 125
Houston, Texas 77032
Attention: Jim Dewbre       If to Seller by facsimile:   Diamond “M” Production
Company
Number: 281-618-4885
Attention: Jim Dewbre       If to Buyer by mail or hand delivery:   Parallel
Petroleum Corporation
1004 North Big Spring, Suite 400
Midland, Texas 79701
Attention: John Rutherford           Ted Collins, Jr.
508 W. Wall Street, Suite 1200
Midland, Texas 79701

30

--------------------------------------------------------------------------------

 

     
If to Buyer by facsimile:
  Parallel Petroleum Corporation
Number: 432-684-7867
Attention: John Rutherford
 
   
 
  Ted Collins, Jr.
Number: 432-686-0302
Attention: Ted Collins, Jr.

     16.2 Conveyance Costs. Buyer shall be solely responsible for filing and
recording documents related to the transfer of the Properties from Seller to
Buyer and for all costs and fees associated therewith, including filing the
assignment of the Properties with appropriate federal, state and local
authorities as required by applicable Law. Promptly following Buyer’s receipt of
the recorded documents, Buyer shall furnish Seller with all recording data and
evidence of all required filings.
     16.3 Brokers’ Fees. Neither party has retained any brokers, agents or
finders in connection with this transaction that would result in any liability
on the other party for any fees or commission. Each party agrees to release,
protect, indemnify, defend and hold the other harmless from and against any and
all Claims with respect to any commissions, finders’ fees or other remuneration
due to any broker, agent or finder claiming by, through or under such party.
     16.4 Further Assurances. From and after Closing, at the request of Seller
but without further consideration, Buyer will execute and deliver or use
reasonable efforts to cause to be executed and delivered such other instruments
of conveyance and take such other actions as Seller reasonably may request to
more effectively put Seller in possession of any property which was not intended
by the parties to be conveyed by Buyer. From and after Closing, at the request
of Buyer but without further consideration, Seller shall execute and deliver or
use reasonable efforts to cause to be executed and delivered such other
instruments of conveyance and take such other actions as Buyer reasonably may
request to more effectively put Buyer in possession of the Subject Interests. If
any of the Properties are incorrectly described, the description shall be
corrected upon proof of the proper description.
     16.5 Survival of Representations and Warranties. Unless otherwise expressly
limited herein, all representations, warranties, indemnities, covenants and
agreements contained in this Agreement, to the extent not fully performed or
waived prior to Closing, shall survive the Closing indefinitely. The parties
have made no representations or warranties except those expressly set forth in
this Agreement.
     16.6 Amendments and Severability. No amendments or other changes to this
Agreement shall be effective or binding on either of the parties unless the same
shall be in writing and signed by both Seller and Buyer. The invalidity of any
one or more provisions of this Agreement shall not affect the validity of this
Agreement as a whole, and in case of any such invalidity, this Agreement shall
be construed as if the invalid provision had not been included herein.

31

--------------------------------------------------------------------------------

 

     16.7 Successors and Assigns. This Agreement shall not be assigned, either
in whole or in part, without the prior express written consent of the
non-assigning party. Assignment of this Agreement by either party shall not
relieve the assigning party of liability hereunder in the event of
non-performance or breach of this Agreement by such party’s assignee. The terms,
covenants and conditions contained in this Agreement shall be binding upon and
shall inure to the benefit of Seller and Buyer and their respective successors
and assigns, and such terms, covenants and conditions shall be covenants running
with the land and with each subsequent transfer or assignment of the Subject
Interests.
     16.8 Headings. The titles and headings set forth in this Agreement have
been included solely for ease of reference and shall not be considered in the
interpretation or construction of this Agreement.
     16.9 Governing Law. This Agreement shall be governed by and construed under
the Laws of the State of Texas, excluding any choice of law rules which may
direct the application of the Laws of another jurisdiction. This provision
survives termination of this Agreement.
     16.10 No Partnership Created. It is not the purpose or intention of this
Agreement to create (and it shall not be construed as creating) a joint venture,
partnership or any type of association, and the parties are not authorized to
act as agent or principal for each other with respect to any matter related
hereto.
     16.11 Public Announcements. Neither the Seller Group nor the Buyer Group
(as defined in Article 8) shall issue a public statement or press release with
respect to the transaction contemplated herein (including the price and other
terms) without the prior written consent of the other party, except as required
by Law or listing agreement with a national security exchange and then only
after prior consultation with the other party.
     16.12 No Third Party Beneficiaries. Nothing contained in this Agreement
shall entitle anyone other than Seller or Buyer or their authorized successors
and assigns to any claim, cause of action, remedy or right of any kind
whatsoever.
     16.13 Deceptive Trade Practices. As partial consideration for the parties
agreeing to enter into this Agreement, the parties each can and do expressly
waive the provisions of all consumer protection Laws of the State of Texas, or
any other state, applicable to this transaction that may be waived by the
parties; it is not the intent of the parties to waive and the parties shall not
waive any applicable Law or provision thereof which is prohibited by Law from
being waived. Each party represents to the other that such party has had an
adequate opportunity to review the preceding waiver provision, including the
opportunity to submit the same to legal counsel for review and comment, and
understands the rights being waived herein.
     16.14 Tax Deferred Exchange Election. Either party may elect to structure
the conveyance of the Subject Interests as part of an exchange under
Article 1031 of the Internal Revenue Code of 1986, as amended. The parties agree
to execute all documents, conveyances or

32

--------------------------------------------------------------------------------

 

other instruments necessary to effectuate an exchange. The party requesting that
the transaction be structured as a tax free exchange shall be responsible for
all additional costs associated with so structuring the transaction.
     16.15 Not to be Construed Against Drafter. The parties acknowledge that
they have had an adequate opportunity to review each and every provision
contained in this Agreement and to submit the same to legal counsel for review
and comment, including expressly but without limitation the waivers and
indemnities in Articles 4, 5, 7, 8, and 16. Based on said review and
consultation, the parties agree with each and every term contained in this
Agreement. Based on the foregoing, the parties agree that the rule of
construction that a contract be construed against the drafter, if any, shall not
be applied in the interpretation and construction of this Agreement.
     16.16 Entire Agreement. This Agreement supersedes all prior negotiations,
understandings, letters of intent and agreements (whether oral or written) and
any contemporaneous oral agreements between the parties relating to the Subject
Interests and constitutes the entire understanding and agreement between the
parties with respect to the sale and purchase of the Subject Interests.
     16.17 Conspicuousness of Provisions. The parties acknowledge that the
provisions contained in this Agreement that are set out in “bold” satisfy the
requirement of the express negligence rule and any other requirement at law or
in equity that provisions contained in a contract be conspicuously marked or
highlighted.
     16.18 Execution in Counterparts. This Agreement may be executed in
counterparts, which shall when taken together constitute one valid and binding
agreement.
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the dates of their respective acknowledgments set forth below, to be
effective, however, as of the Effective Time.

              DIAMOND “M” PRODUCTION COMPANY
 
       
 
  By:            /s/ Richard F. Lane
 
       
 
  Name:   Richard F. Lane
 
  Title:   President

33

--------------------------------------------------------------------------------

 

              PARALLEL PETROLEUM CORPORATION
 
       
 
  By:            /s/ John S. Rutherford
 
       
 
  Name:   John S. Rutherford
 
  Title:   Vice President
 
            TED COLLINS, JR.
 
       
 
  By:            /s/ J. Randy Turner
 
       
 
  Name:   J. Randy Turner, as Agent and Attorney-in-Fact for
 
      Ted Collins, Jr.

34

--------------------------------------------------------------------------------

 

SCHEDULE 10.6
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
LITIGATION AND CLAIMS
None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.10
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
CAPITAL COMMITMENTS
None.
SCHEDULE 10.11
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
VIOLATIONS OF LAW
None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.13
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
MATERIAL CONTRACTS
None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.14
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
PREFERENTIAL RIGHTS

                      CONTRACT   DATE   ORIGINAL PARTIES   WELL   COUNTY   STATE
JOA to Trade Agreement
  12/10/2001   Diamond M/Parallel et al   LDMU Deep   Scurry   TX  
JOA to Trade Agreement
  12/10/2001   Diamond M/Parallel et al   LDMU Deep-Retained   Scurry   TX  
JOA to Trade Agreement
  12/10/2001   Diamond M/Parallel et al   GCW Shallow   Scurry   TX  
JOA to Trade Agreement
  12/10/2001   Diamond M/Parallel et al   GCW Shallow-Retained   Scurry   TX

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.15
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
ENVIRONMENTAL
None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.16
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
SUSPENSE ACCOUNTS
None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.18
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
PAYOUT BALANCES

                 
Property
  Operator   Month   Balance
Diamond M
  Parallel Petroleum Corporation, et al   Mar-08   $ 25,598,714  

 

--------------------------------------------------------------------------------

 

SCHEDULE 10.19
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
SURFACE
None.

 

--------------------------------------------------------------------------------

 

EXHIBIT A
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

         
STATE OF TEXAS
  §    
 
  §    
COUNTY OF SCURRY
  §    

ASSIGNMENT AND BILL OF SALE
     THIS ASSIGNMENT AND BILL OF SALE (“Assignment”) executed by DIAMOND “M”
PRODUCTION COMPANY, a Delaware corporation (“Assignor”), whose address is 2350
N. Sam Houston Parkway East, Suite 125, Houston, Texas 77032, to PARALLEL
PETROLEUM CORPORATION, a Delaware corporation, whose address is 1004 North Big
Spring, Suite 400, Midland, Texas 79701, and TED COLLINS, JR., an individual,
whose address is 508 W. Wall Street, Suite 1200, Midland, Texas 79701
(collectively the “Assignees”), dated effective at 7:00 a.m., local time, on
May 1, 2008 (said hour and day being hereinafter called the “Effective Time”).
     All capitalized terms not defined herein shall have the meanings ascribed
to them in that certain Purchase and Sale Agreement dated effective May, 1,
2008, executed by and between Assignor and Assignee.
ARTICLE I
Assignment of Oil and Gas Properties
     Assignor, for Ten and No/100 Dollars ($10.00) and other good and valuable
consideration in hand paid by Assignees, the receipt and sufficiency of which
consideration are hereby acknowledged and confessed, by these presents does
hereby ASSIGN, TRANSFER, SET OVER and DELIVER unto Assignees, in the respective
percentages set forth below, all of Assignor’s right, title and interest in and
to the following properties described below in Section 1.2.

1.1.   Percentages.

     
Parallel Petroleum Corporation
  89% of 8/8ths
Ted Collins, Jr.
  11% of 8/8ths

A-1

--------------------------------------------------------------------------------

 

1.2 Properties. The interests granted, bargained, sold, conveyed, assigned and
delivered to Assignees pursuant to this Article I and described in this
Section 1.2 are hereinafter sometimes collectively called the “Properties”:
     (a) All of Assignor’s right, title and interest in, to and under or derived
from the oil and gas leasehold interests, fee interests and mineral interests in
the lands described on Exhibit A, including, but not limited to those interests
created or described in the instruments described in Exhibit A-1 (collectively,
the “Leases”);
     (b) All of Assignor’s right, title and interest in, to and under or derived
from the oil and gas wells located on the Leases and described on Exhibit A-2
(the “Wells”);
     (c) All of Assignor’s right, title and interest in and to, or derived from,
all of the presently existing and valid unitization and pooling agreements and
units (including all units formed by voluntary agreement and those formed under
the rules, regulations, orders or other official acts of any governmental entity
having appropriate jurisdiction) to the extent they relate to any of the
interests in the Leases or the Wells;
     (d) All of Assignor’s right, title and interest in and to all oil, gas
and/or other liquid or gaseous hydrocarbons (collectively, the “Hydrocarbons”)
produced from or attributable to the Leases or the Wells and attributable to the
period from and after the Effective Time;
     (e) All of Assignor’s right, title and interest in and to, or derived from,
all of the presently existing and valid oil sales contracts, casinghead gas
sales contracts, gas sales contracts, processing contracts, gathering contracts,
transportation contracts, easements, rights-of-way, servitudes, surface leases
and other contracts (including the Assumed Contracts), to the extent the same
are assignable and relate to the Leases or the Wells;
     (f) All of Assignor’s right, title and interest in and to all personal
property and improvements (collectively, the “Equipment”), including without
limitation, wells (whether producing, plugged and abandoned, shut-in, injection,
disposal or water supply), tanks, boilers, platforms, buildings, fixtures,
machinery, equipment, pipelines, utility lines, power lines, telephone lines,
telegraph lines and other appurtenances located on, in, under and about the
Leases or the Wells, to the extent the same are situated upon and used or held
for use by Assignor in connection with the ownership, operation, maintenance and
repair of the Leases or the Wells, subject to the reservations stated below;
     (g) All franchises, licenses, permits, approvals, consents, certificates
and other authorizations and other rights granted by governmental authorities
and all certificates of convenience or necessity, immunities, privileges, grants
and other rights that relate to the Properties or the ownership or operation of
any thereof, to the extent the same are assignable (the “Permits”); and
     (h) All of Assignor’s books, records and files related to the any of the
properties described in (a) through (f) above, including all (i) abstracts,
title opinions, title reports, environmental site assessments, environmental
compliance reports, lease and land files, surveys,

A-2

--------------------------------------------------------------------------------

 

analyses, compilations, correspondence, filings with and reports to regulatory
agencies and other documents, contracts, agreements and instruments that in any
manner relate to such properties, (ii) computer databases that are owned by or
licensed to Assignor that relate to such properties, (iii) geophysical,
geological, engineering, exploration, production and other technical data,
magnetic field recordings, digital processing tapes, field prints, summaries,
reports and maps, whether written or in electronically reproducible form, that
are in the possession of Assignor and relate to such properties and (iv) all
other books, records, files and magnetic tapes containing title or other
information that are in the possession of Assignor and relate to such properties
(the “Data”), but specifically excluding (i) previous offers and economic
analyses associated with the acquisition, sale or exchange of such properties,
(ii) interpretive information, (iii) personnel information, (iv) corporate,
legal, financial and tax information, (v) information covered by a
non-disclosure obligation, (vi) information covered by a legal privilege and
(vii) any other Data or information that Assignor does not have the right to
assign to Assignees.
     TO HAVE AND TO HOLD the Properties unto Assignees, their respective
successors and assigns forever, subject, however, to the matters set forth
herein.
ARTICLE II
Warranty of Title; Permitted Encumbrances
     2.1 Warranty of Title. Assignor does hereby bind itself to warrant and
forever defend, all and singular, the Properties unto Assignees, against every
person whomsoever lawfully claiming or to claim the same or any part thereof,
by, through or under Assignor, but not otherwise, and subject to the Permitted
Encumbrances (as defined below).
     2.2 Disclaimer of Representations and Warranties. THE PROPERTIES ARE
ASSIGNED TO ASSIGNEES “AS IS, WHERE IS” AND WITH ALL FAULTS IN THEIR PRESENT
CONDITION AND STATE OF REPAIR, WITHOUT RECOURSE. EXCEPT AS EXPRESSLY SET FORTH
IN SECTION 2.1 HEREOF, ASSIGNOR HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND
WARRANTIES CONCERNING THE PROPERTIES, EXPRESS, STATUTORY, IMPLIED OR OTHERWISE,
INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF TITLE, THE QUALITY OF
HYDROCARBON RESERVES, THE QUANTITY OF HYDROCARBON RESERVES, THE AMOUNT OF
REVENUES, THE AMOUNT OF OPERATING COSTS, CONDITION (PHYSICAL OR ENVIRONMENTAL),
QUALITY, COMPLIANCE WITH APPLICABLE LAWS, ABSENCE OF DEFECTS (LATENT OR PATENT),
SAFETY, STATE OF REPAIR, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
AND ASSIGNEES EXPRESSLY RELEASE ASSIGNOR FROM THE SAME. ASSIGNOR DISCLAIMS ANY
AND ALL LIABILITY AND RESPONSIBILITY FOR AND ASSOCIATED WITH THE QUALITY,
ACCURACY, COMPLETENESS OR MATERIALITY OF THE RECORDS AND ANY OTHER INFORMATION
PROVIDED AT ANY TIME (WHETHER ORAL OR WRITTEN) TO ASSIGNEES, THEIR OFFICERS,
AGENTS, EMPLOYEES AND REPRESENTATIVES IN CONNECTION WITH THE PROPERTIES,
INCLUDING WITHOUT LIMITATION, QUALITY OF HYDROCARBON RESERVES, QUANTITY OF
HYDROCARBON RESERVES, AMOUNT OF REVENUES, AMOUNT OF OPERATING COSTS,

A-3

--------------------------------------------------------------------------------

 

FINANCIAL DATA, CONTRACT DATA, ENVIRONMENTAL CONDITION OF THE PROPERTIES,
PHYSICAL CONDITION OF THE PROPERTIES AND CONTINUED FINANCIAL VIABILITY OF THE
PROPERTIES, AND ASSIGNEES EXPRESSLY RELEASE ASSIGNOR FROM THE SAME.
     2.3 Subrogation. Assignees shall be and are hereby subrogated to all
covenants and warranties of title by parties (other than Assignor) heretofore
given or made to Assignor or its predecessors in title in respect of any of the
Properties.
     2.4 Purchase and Sale Agreement. The Properties are assigned by Assignor
and accepted by Assignees expressly subject to the following:
     (a) the terms and conditions of that certain Purchase and Sale Agreement
dated effective May 1, 2008, executed by and between Assignor and Assignee (the
“P&S Agreement”); and
     (b) those “Permitted Encumbrances” more particularly described and defined
in the P&S Agreement.
ARTICLE III
Miscellaneous
     3.1 Further Assurances. Assignor covenants and agrees to execute and
deliver to Assignees all such other and additional instruments and other
documents and will do all such other acts and things as may be necessary more
fully to assure to Assignees or their successors or assigns, all of the
respective properties, rights and interests herein and hereby assigned or
intended to be assigned, including without limitation, executing separate
assignments of individual oil, gas and mineral leases or interests therein,
which are included in the Properties and which are necessary to facilitate the
recognition of Assignees’ ownership of the Properties.
     3.2 Successors and Assigns. All of the provisions hereof shall inure to the
benefit of and be binding upon the respective successors and assigns of Assignor
and Assignees. All references herein to either Assignor or Assignees shall
include their respective successors and assigns.
     3.3 Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts shall
constitute but one and the same assignment.
     IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
executed on the dates of their respective acknowledgments set forth below, to be
effective, however, as of the Effective Time.

A-4

--------------------------------------------------------------------------------

 

              Assignor
 
            DIAMOND “M” PRODUCTION COMPANY
 
       
 
  By:    
 
       
 
  Name:   Richard F. Lane
 
  Title:   President
 
            Assignee
 
            PARALLEL PETROLEUM CORPORATION
 
       
 
  By:    
 
       
 
  Name:   John S. Rutherford
 
  Title:   Vice President
 
            Assignee
 
            TED COLLINS, JR.
 
       
 
  By:    
 
       
 
  Name:   J. Randy Turner, as Agent and Attorney-in-Fact for
 
      Ted Collins, Jr.

A-5

--------------------------------------------------------------------------------

 

         
THE STATE OF TEXAS
  §    
 
  §    
COUNTY OF HARRIS
  §    

     This instrument was acknowledged before me on the 26th day of June, 2008,
by Richard F. Lane, President of Diamond “M” Production Company, a Delaware
corporation, on behalf of said corporation.

     
 
   
 
  Notary Public in and for the State of Texas

         
THE STATE OF TEXAS
  §    
 
  §    
COUNTY OF HARRIS
  §    

     This instrument was acknowledged before me on the 26th day of June, 2008,
by John S. Rutherford, Vice President of Parallel Petroleum Corporation, a
Delaware corporation, on behalf of said corporation.

     
 
   
 
  Notary Public in and for the State of Texas

         
THE STATE OF TEXAS
  §    
 
  §    
COUNTY OF MIDLAND
  §    

     This instrument was acknowledged before me on the 25th day of June, 2008,
by J. Randy Turner, as Agent and Attorney-in-Fact for Ted Collins, Jr., an
individual.

     
 
   
 
  Notary Public in and for the State of Texas

A-6

--------------------------------------------------------------------------------

 

EXHIBIT B
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
CERTIFICATE
     I,                                         ,                       of
            [Seller/Buyer]             , a                      corporation
(“                    ”), do hereby certify pursuant to Section [15.2.3/15.3.3]
of the Purchase and Sale Agreement by and between Diamond “M” Production Company
and                     , dated                     , 2008 (the “Agreement”),
that the representations and warranties of
            [Seller/Buyer]             made in the Agreement are true and
correct on and as of the date hereof, except for inaccuracies which in the
aggregate are not material when considering the transaction as a whole.

         
 
  Signed:    
 
       
 
  Name:    
 
       
 
  Date:    
 
       

B-1

--------------------------------------------------------------------------------

 

EXHIBIT “C”
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
DESCRIPTION OF LANDS
*The following-described lands in Scurry County, Texas:
Block 25, H&TC RR Co. Survey:
Section 170: SE/4/SE/4
Section 147: All except the West 80 acres of the North 140 acres
Block 97, H&TC RR Co. Survey:
Section 199: All except the N/2 N/2 and S/2 NW/4
Section 198: All
Section 181: All
Section 200: S/2
Section 197: All
Section 182: N/2 and SE/4
Section 201: S/2
Section 196: All
Section 183: All
Section 178: NW/4, W/2 NE/4, W/2 SW/4, NE/4 SW/4
 

*   It being the intent of SELLER hereof to sell all rights to leases and wells
situated on or covered by the above-described lands.

C-1

--------------------------------------------------------------------------------

 

EXHIBIT C-1
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
DESCRIPTION OF LEASES
To be attached.

C-2

--------------------------------------------------------------------------------

 

EXHIBIT “C-1” — LEASES
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                  LEASE ID   LESSOR   LESSEE  
LSE EFF DATE     COUNTY   ST   BOOK / PAGE
TX-001311-00337A-001
  J A BYNUM ET AL   CANNON DRILLING COMPANY     12       24       1946    
SCURRY   TX   31   573
TX-001311-00337A-002
  JODIE BYNUM   CANNON DRILLING COMPANY     2       17       1947     SCURRY  
TX   31   571
TX-001311-00338A-000
  C T MCLAUGHLIN ET UX   LION OIL REFINING COMPANY     7       7       1944    
SCURRY   TX   26   124
TX-001311-00339A-001
  CLEATUS LOVELESS ET UX   BEN HARWIT     8       18       1948     SCURRY   TX
  41   105
TX-001311-00339A-002
  W S GUTHRIE ET UX   W P THURMAN     10       24       1944     SCURRY   TX  
26   313
TX-001311-00339A-003
  C T MCLAUGHLIN ET UX   W P THURMAN     10       24       1944     SCURRY   TX
  26   315
TX-001311-00340A-001
  J C WILSON ET UX   J W SCOTT     7       8       1944     SCURRY   TX   26  
117
TX-001311-00341A-000
  W P DOUGLAS ET UX   LION OIL REFINING COMPANY     7       7       1944    
SCURRY   TX   25   442
TX-001311-00342A-000
  FRANK STROM ET UX   LION OIL REFINING COMPANY     7       7       1944    
SCURRY   TX   26   120
TX-001311-00343A-000
  FRANK STROM ET UX   RUSSELL C CONKLING     5       4       1946     SCURRY  
TX   29   322
TX-001311-00344A-001
  J R CANNING ET UX   C R CRAIG     10       5       1949     SCURRY   TX   73  
311
TX-001311-00345A-001
  MARGARET MOGERLEY   LION OIL COMPANY     7       27       1948     SCURRY   TX
  42   413
TX-001311-00345A-002
  MRS CHARLES W BRADLEY   LION OIL COMPANY     8       2       1948     SCURRY  
TX   42   421
TX-001311-00345A-003
  LESTER THOMPKINS   LION OIL COMPANY     7       22       1948     SCURRY   TX
  42   409
TX-001311-00345A-004
  HARRY J MANTIA   LION OIL COMPANY     7       20       1948     SCURRY   TX  
42   407
TX-001311-00345A-005
  J C WILSON ET UX   LION OIL REFINING COMPANY     7       8       1944    
SCURRY   TX   26   253
TX-001311-00345A-006
  GLEN N W MCNAUGHTON   LION OIL COMPANY     7       20       1948     SCURRY  
TX   42   401
TX-001311-00345A-007
  MARY CARDONE ET AL   LION OIL COMPANY     7       27       1948     SCURRY  
TX   51   87
TX-001311-00345A-008
  R E MEINERT   LION OIL COMPANY     2       17       1949     SCURRY   TX   48
  233
TX-001311-00345A-009
  JOHN H BIRD   LION OIL COMPANY     7       26       1948     SCURRY   TX   47
  267
TX-001311-00345A-010
  HELEN L DESERRAS ET VIR   LION OIL COMPANY     10       19       1948    
SCURRY   TX   45   211
TX-001311-00345A-011
  DENNIS R HORGAN ET AL   LION OIL COMPANY     10       19       1948     SCURRY
  TX   42   435
TX-001311-00345A-012
  BRADLEY GEORGE   LION OIL COMPANY     8       2       1948     SCURRY   TX  
42   419
TX-001311-00345A-013
  COMMONWEALTH TRUST COMPANY   LION OIL REFINING COMPANY     1       23      
1945     SCURRY   TX   27   114
TX-001311-00345A-014
  J H FRENCH   LION OIL COMPANY     8       2       1948     SCURRY   TX   42  
429
TX-001311-00345A-015
  HARRY W LEOPOLD ET UX   LION OIL REFINING COMPANY     3       1       1945    
SCURRY   TX   27   194
TX-001311-00345A-016
  ARTHUR C ATTAWAY   LION OIL COMPANY     7       26       1948     SCURRY   TX
  42   431
TX-001311-00345A-017
  SARAH JARET ET VIR   LION OIL COMPANY     7       26       1948     SCURRY  
TX   42   415
TX-001311-00345A-018
  ISAAC L DAY   LION OIL COMPANY     7       23       1948     SCURRY   TX   42
  425
TX-001311-00345A-019
  NELSON LITTELL   LION OIL COMPANY     7       27       1948     SCURRY   TX  
42   417
TX-001311-00345A-020
  ALBERT MELTSNER   LION OIL COMPANY     7       27       1948     SCURRY   TX  
42   423
TX-001311-00345A-021
  LESTER CORNELL   LION OIL COMPANY     7       26       1948     SCURRY   TX  
42   405
TX-001311-00345A-022
  ELLA MCCASLIN   LION OIL COMPANY     7       22       1948     SCURRY   TX  
42   433
TX-001311-00345A-023
  WILLIAM C NASH   LION OIL COMPANY     7       22       1948     SCURRY   TX  
42   427
TX-001311-00345A-024
  SPENCER A NORRIS   LION OIL COMPANY     7       20       1948     SCURRY   TX
  42   403
TX-001311-00345A-025
  VICTOR PERRY   LION OIL COMPANY     7       26       1948     SCURRY   TX   42
  411
TX-001311-00345A-026
  R W GUTZIER   LION OIL COMPANY     9       8       1950     SCURRY   TX   97  
199
TX-001311-00345A-027
  R W GUTZIER   LION OIL COMPANY     9       24       1951     SCURRY   TX   111
  199
TX-001311-00345A-028
  RAY W GUTZIER   LION OIL COMPANY     11       4       1949     SCURRY   TX  
70   357
TX-001311-00345A-029
  R W GUTZIER   LION OIL COMPANY     8       2       1952     SCURRY   TX   123
  81
TX-001311-00345A-030
  R W GUTZIER   LION OIL COMPANY     9       8       1950     SCURRY   TX   123
  83
TX-001311-00345A-031
  DAVID DARCY   LION OIL COMPANY     12       5       1952     SCURRY   TX   128
  215
TX-001311-00345A-032
  SUNRAY MID-CONTINENT OIL COMPANY   MONSANTO CHEMICAL COMPANY     12       1  
    1960     SCURRY   TX   208   625
TX-001311-00345A-033
  SUNRAY MID-CONTINENT OIL COMPANY   BHP PETROLEUM COMPANY INC     3       30  
    1988     SCURRY   TX   300   871
TX-001311-00346A-000
  WALTER L GEYER SR   LION OIL COMPANY     6       25       1952     SCURRY   TX
  121   381
TX-001311-00347A-000
  C T MCLAUGHLIN ET UX   BEN HARWIT     3       12       1948     SCURRY   TX  
32   359
TX-001311-00348A-000
  AUSTIN ADDISON GUARDIAN   HIAWATHA OIL AND GAS COMPANY     2       23      
1949     SCURRY   TX   48   257
TX-001311-00349A-000
  C C MARR ET UX   CANNON DRILLING COMPANY     12       24       1946     SCURRY
  TX   31   481
TX-001311-00350A-000
  ESTATE OF LEMMIE MONROE WILSON   LION OIL COMPANY     11       3       1950  
  SCURRY   TX        
TX-001311-00351A-000
  G H ARLEDGE   LION OIL COMPANY     11       1       1950     SCURRY   TX      
 
 
  FRANK STROM ET UX   HONOLULU OIL CORP     4       26       1949     SCURRY  
TX   55   345
 
  J R CANNING ET UX   E M WAHLENMAIER     3       3       1944     SCURRY   TX  
25   327

PAGE 1 OF 1

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EXHIBIT C-2
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
DESCRIPTION OF WELLS
To be attached.

C-3

--------------------------------------------------------------------------------

 

EXHIBIT “C-2” — DESCRIPTION OF WELLS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                                               
  Property No.   Well Name   API Number     WI BPO     NRI BPO     ORRI/ROY BPO
    WI APO     NRI APO     ORRI/ROY APO     State   County   200062001A    
BYNUM UNIT
    4241502747       0.00000000       0.00000000               0.00000000      
0.00000000             TX   SCURRY        
DIAMOND M UNIT
            99.51298000       86.54068000       0.384610%       99.51298000    
  86.54068000       0.384610%     TX   SCURRY        
LDMU 1W
    4241501107       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU 2 (T/A)
    4241501485       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU C-10
    4241501378       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU E-3 (T/A)
    4241501483       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU E-9
    4241501034       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU E-11 (T/A)
    4241501380       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU E-11A
    4241501042       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU F-1
    4241501477       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU F-1A — TOPAZ
    4241533929       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU F-7
    4241501458       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU F-8
    4241501427       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU F-10A (T/A)
    4241532754       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU G-01-A (S/I)
            99.51298000       86.54068000               99.51298000      
86.54068000             TX   SCURRY        
LDMU G-7A
    4241534186       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU G-9 (T/A)
    4241501388       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU G-12
    4241501512       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU G-10
    4241501389       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU H-1
    4241501473       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU H-6 WIW
    4241501439       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU H-8 (T/A)
    4241501422       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU H-9
    4241501387       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU I-1
    4241501493       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I-2
    4241501485       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I-2W
    4241501520       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I-3W
    4241501115       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I 3W
    4241501487       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I-4-W
    4241501116       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I-4
    4241501488       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU I-5
    4241501455       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU I-6
    4241501435       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU I-7A
    4241531461       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU I-8 (T/A)
    4241501420       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU I-8A (T/A)
    4241531836       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU J-1W
    4241501516       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU J-2 (T/A)
    4241501492       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY

1

--------------------------------------------------------------------------------

 

EXHIBIT “C-2” — DESCRIPTION OF WELLS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                                               
  Property No.   Well Name   API Number     WI BPO     NRI BPO     ORRI/ROY BPO
    WI APO     NRI APO     ORRI/ROY APO     State   County        
LDMU J-3 W (T/A)
    4241501114       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU J-3 (INJ)
    4241501490       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU J-4
    4241501489       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU J-7
    4241501419       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU J-7A
    4241530312       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU J-9 WIW
            24.87824500       21.63517000               37.31736750      
32.45275500             TX   SCURRY        
LDMU K-1
    4241501499       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU K-2
    4241501495       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU K-4-W
    4241501112       24.87824500       21.63517000               37.31736800    
  32.45275500             TX   SCURRY        
LDMU K-4
    4241501491       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU K-5
    4241501462       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU K-5A
    4241530837       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU K-8 (S/I)
    4241501423       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU K-9 WIW
            99.51298000       86.54068000               99.51298000      
86.54068000             TX   SCURRY        
LDMU K-10
    4241501432       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU L-1-W
    4241501500       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU L-2 JADE
    4241533928       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU L-3A
    4241534184       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU L-3
    4241501496       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU L-4
    4241501498       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU L-6
    4241501454       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU L-8 (T/A)
    4241501425       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU L-10 WIW
    4241501436       99.51298000       86.54068000               99.51298000    
  86.54068000             TX   SCURRY        
LDMU M-1
    4241501107       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU M-1W
    4241501508       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU M-4
    4241501501       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU M-6
    4241501460       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU N-9
    424150144       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
LDMU EMERALD 1
            24.87824500       21.63517000               37.31736750      
32.45275500             TX   SCURRY        
LDMU GARNET 1
    4241533949       24.87824500       21.63517000               37.31736800    
  32.45275500             TX   SCURRY        
LDMU GAS GATHERING LINE
            99.51298000       86.54068000               99.51298000      
86.54068000             TX   SCURRY        
LDMU ZIRCON 1
            24.87824500       21.63517000               37.31736750      
32.45275500             TX   SCURRY

2

--------------------------------------------------------------------------------

 

EXHIBIT “C-2” — DESCRIPTION OF WELLS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                                               
  Property No.   Well Name   API Number     WI BPO     NRI BPO     ORRI/ROY BPO
    WI APO     NRI APO     ORRI/ROY APO     State   County        
GCW UNIT
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GEMSTONE — PARALLEL ACTIVE WELLS
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GCW UNIT L11
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
CLARENCE 2
    4241501381       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
CLARENCE 4
            1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
CLARENCE 5
    4241501384       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
CLARENCE 7 (T/A)
    4241501385       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
CLARENCE 8
    4241501386       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
CLARENCE 10
    4241531278       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE/GCW
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE A/GCW
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE 5
    2421501391       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
GERTIE 6
    4241501392       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE 7
    4241501393       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
GERTIE A 9 (T/A)
    4241532277       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE A 10
    4241532438       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE A 11
    4241532475       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE A 12
    4241532962       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE A 13
    4241532960       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
GERTIE A 16 (S/I)
            24.87824500       21.63517000               37.31736750      
32.45275500             TX   SCURRY        
GERTIE A 17
    4241534077       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 9
    4241501404       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 12
    4241501407       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 13
    4241501408       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 15
    4241501412       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 16
    4241501411       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 17
    4241531685       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 18
    4241531682       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 19
    4241531776       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 20
    4241531774       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 21
    4241531775       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 22
    4241532078       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 23
    4241532079       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 25 (S/I)
    4241534030       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 26 WIW (S/I)
    4241534058       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 27 WIW (INJ)
    4241534056       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 28 WIW (INJ)
    4241534057       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY

3

--------------------------------------------------------------------------------

 

EXHIBIT “C-2” — DESCRIPTION OF WELLS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                                               
  Property No.   Well Name   API Number     WI BPO     NRI BPO     ORRI/ROY BPO
    WI APO     NRI APO     ORRI/ROY APO     State   County        
JACK 29 WIW (S/I)
    4241534055       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 30 WIW (INJ)
    4241534054       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 31 WIW (S/I)
    4241534084       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 32 (INJ)
    4241534085       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 34 WIW (INJ)
    4241534088       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
JACK 35 WIW
    4241534089       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 36
    4241534059       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 37
    4241534060       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 38
    4241534061       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 39
    4241534062       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 40 WIW
    4241534090       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
JACK 41 WIW
    4241534091       24.87824500       21.63517000               37.31736750    
  32.45275500             TX   SCURRY        
MCLAUGHLIN ACCT 1 GCW
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1D
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 43
    4241530624       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
MCLAUGHLIN ACCT 1 63
    4241530375       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 64 (S/I)
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 65
    4241531777       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 66
    4241531763       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 71
    4241531902       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 73
    4241531899       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 75
    4241531941       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 78
    4241532050       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 85
    4241532082       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 86
    4241532099       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 87
    4241532083       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
MCLAUGHLIN ACCT 1 88
    4241532171       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 95
    4241532446       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 96 (S/I)
    4241532445       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 97
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 98
    4241532466       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
MCLAUGHLIN ACCT 1 99
    4241532462       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
MCLAUGHLIN ACCT 1 100
    4241532459       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 101
    4241532512       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 102 (T/A)
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 108
    4241533029       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 1 110
    4241532794       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY

4

--------------------------------------------------------------------------------

 

EXHIBIT “C-2” — DESCRIPTION OF WELLS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                                               
  Property No.   Well Name   API Number     WI BPO     NRI BPO     ORRI/ROY BPO
    WI APO     NRI APO     ORRI/ROY APO     State   County        
MCLAUGHLIN ACCT 1 117
    4241533030       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
MCLAUGHLIN ACCT 1 119
    4241533229       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 121
    4241533266       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 130
    4241533927       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 1 131 (S/I)
    4241534028       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 133 WIW (INJ)
    4241534081       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 1 134
    4241534073       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 1 135
    4241534052       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 1 136
    4241534053       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 1 137 WIW (INJ)
    4241534082       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 1 138 WIW (INJ)
    4241534083       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 2 GCW
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 52G (T/A)
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 56
    4241502073       1.00000000       87.50000000               1.00000000      
87.50000000             TX   SCURRY        
MCLAUGHLIN ACCT 2 76
    4241531942       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 79 (T/A)
    4241532049       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 83
    4241532141       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 2 90
    4241533033       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 91
    4241532170       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 93
    4241532704       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 94 (S/I)
    4241532282       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 2 139
    4241534068       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 2 140
    4241534069       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 2 141 WIW
    4241534070       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 2 142 WIW (INJ)
    4241534071       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 3 1C (S/I)
    4241501982       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 2C
    4241501987       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 3C
    4241501992       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 51 A INJ
    4241532954       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 58 (T/A)
    4241502074       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 3 59 (T/A)
    4241502079       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 3 67
    4241531764       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 70
    4241531897       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 74
    4241531900       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 105
    4241532698       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 3 107
    4241533032       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 4 1A
    4241532798       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY

5

--------------------------------------------------------------------------------

 

EXHIBIT “C-2” — DESCRIPTION OF WELLS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                                                                               
  Property No.   Well Name   API Number     WI BPO     NRI BPO     ORRI/ROY BPO
    WI APO     NRI APO     ORRI/ROY APO     State   County        
MCLAUGHLIN ACCT 4 1B
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 4 2 A
    4241532826       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
MCLAUGHLIN ACCT 4 2B (T/A)
    4241501986       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 4 103
    4241532517       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 4 118
    4241533215       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
MCLAUGHLIN ACCT 4 120
    4241533264       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON/GCW
            1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON 6
    4241531683       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON 7 (INJ)
    4241531718       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON 8
    4241531779       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON 10 (T/A)
    4241531778       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY        
THURSTON 11
    4241532961       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON 12
    4241533031       1.00000000       85.52403700               1.00000000      
85.52403700             TX   SCURRY        
THURSTON 14 WIW
    4241534072       24.87824500       21.63517000               37.31736750    
  32.07151300             TX   SCURRY

 
TA — Temporarily Abandoned
SI — Shut-in
INJ — Injection

6

--------------------------------------------------------------------------------

 

EXHIBIT D
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
MATERIAL CONTRACTS
To be attached.

D-1

--------------------------------------------------------------------------------

 

EXHIBIT “D” — MATERIAL CONTRACTS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                  DOCUMENT   PARTIES   DATE   COUNTY   ST UNITIZATION AGREEMENT
 
LION OIL COMPANY, EVELYN MCLAUGHLIN, D A LITTLE, W P CASTLEMAN JR, M C KRAMER,
MARGARITE M LAWLESS, ET AL (NON-OPERATOR)
  8/4/1949   SCURRY   TX UNITIZATION AGREEMENT  
LION OIL COMPANY (OPERATOR) AND W F BRIDEWELL (NON-OPERATOR)
  8/22/1949   SCURRY   TX UNITIZATION AGREEMENT AND MEMO OF UNITIZATION
AGREEMENT  
LION OIL COMPANY AND ROYALTY OWNERS
  8/23/1949   SCURRY   TX UNITIZATION AGREEMENT  
LION OIL COMPANY / L B JOHNSON ET AL
  8/29/1949   SCURRY   TX UNITIZATION AGREEMENT  
LION OIL COMPANY (OPERATOR) AND EMPIRE OIL OF TEXAS (NON-OPERATOR)
  10/19/1949   SCURRY   TX UNITIZATION AGREEMENT  
LION OIL COMPANY (OPERATOR) R MURRAY JOHNSON, L B JOHNSON, MURRAY S JOHNSON
(NON-OPERATOR)
  3/13/1950   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, BURT BAUGH, IRENE BAUGH, PHIL N LANE, J.R. CANNING AND
MARJORIE CANNING
  8/25/1951   SCURRY   TX UNIT AGREEMENT  
LION OIL COMPANY, UNIT OPERATOR
  8/25/1951   SCURRY   TX UNIT AGREEMENT AND OPERATING AGREEMENT  
UNIT AGREEMENT AND OPERATING AGREEMENT BETWEEN LION OIL COMPANY, AS OPERATOR AND
GERTIE WILSON, ET AL, ROYALTY OWNERS
  8/25/1951   SCURRY   TX UNIT AGREEMENT AS AMENDED / JOA  
LION OIL COMPANY / GERTIE WILSON, ET AL
  8/25/1951   SCURRY   TX UNIT AGREEMENT  
LION OIL COMPANY AND LESSORS
  12/1/1951   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, M B ARICK, JACK PETOSKY AND J RAMON JONES
  6/12/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, ROBERT AINSLIE CANNING AND NANCY HOYT CANNING
  6/27/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND C.R. CRAIG
  7/7/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, HAMILTON MCRAE, J GORDON BRISTOW, TOMMY HUTTO, PAUL SAWYER,
CLEO SAWYER, S R COCKRELL, JACK MAXON AND REV KIMBIS
  7/16/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND SOUTHERN PETROLEUM EXPLORATION INC
  7/21/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND J S ABERCROMBIE
  9/4/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND E E FOGELSON
  11/20/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, R W KIMBRO, PAUL SAWYER, C R COCKRELL, J GORDON BRISTOW, TOMMY
HUTTO, HAMILTON MCRAE, JOHN S MAXON AND JACK MAXON
  2/12/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND SOUTHERN PETROLEUM EXPLORATION INC
  2/14/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND E E FOGELSON
  2/20/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, T WEINER AND ROYBELL WEINER
  2/23/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND FIRST NATIONAL BANK IN BIG SPRING
  2/24/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND SNYDER NATIONAL BANK
  3/3/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND J S ABERCROMBIE
  3/3/1953   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LEMMIE WILSON ESTATE
  9/29/1953   SCURRY   TX JOINT OPERATING AGREEMENT  
MONSANTO / SUN PRODUCTION
  5/25/1982   SCURRY   TX AMENDMENT TO UNIT AGREEMENT ON ACCOUNTING PROCEDURES  
BHP PETROLEUM
  11/10/1987   SCURRY   TX ASSIGNMENT  
AMOCO PRODUCTION COMPANY TO ENAQ INC
  6/10/1988   SCURRY   TX

PAGE 1 OF 3

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EXHIBIT “D” — MATERIAL CONTRACTS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                  DOCUMENT   PARTIES   DATE   COUNTY   ST WATER DISPOSAL AND
SUPPLY AGREEMENT  
SUN OPERATING LTD PARTNERSHIP / BHP PETROLEUM
  11/1/1989   SCURRY   TX ASSIGNMENT, BILL OF SALE AND CONVEYANCE  
BHP PETROLEUM (AMERICAS) INC (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  10/1/1991   SCURRY   TX PURCHASE AND SALE AGREEMENT  
PURCHASE AND SALE AGREEMENT BETWEEN BHP PETROLEUM (AMERICAS) INC AND L B.
SIMMONS ENERGY, INC.
  11/6/1991   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
OXY USA INC (SELLER) AND L B SIMMONS ENERGY INC (BUYER)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
VIRGIE M GRAY (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
EMBER OIL COMPANY (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
STEVE TALBOTT D/B/A ENERGY SEARCH CO ET UX JANE M TALBOTT (ASSIGNOR) AND L B
SIMMONS ENERGY INC (ASSIGNEE)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
GORDON GRAY ET UX BARBARA GRAY (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
MELVIN A ELLIS ET UX VERA FERN ELLIS (ASSIGNOR) AND L B SIMMONS ENERGY INC
(ASSIGNEE)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
VERGIE M GRAY (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
STARKEY OILFIELD SERVICES INC (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  9/1/1992   SCURRY   TX UNIT AGREEMENT  
DIAMOND M G-C-W UNIT
  12/1/1992   SCURRY   TX UNIT AGREEMENT  
L B SIMMONS ENERGY INC (OPERATOR) AND DIAMOND “M” FOUNDATION INC ET AL
(NON-OPERATORS)
  12/1/1992   SCURRY   TX UNIT AGREEMENT  
L B SIMMONS ENERGY INC, UNIT OPERATOR
  12/1/1992   SCURRY   TX CERTIFICATE OF EXTENSION OF TERMINATION  
L B SIMMONS ENERGY INC (UNIT OPERATOR)
  12/29/1992   SCURRY   TX CERTIFICATE OF UNITIZATION  
L B SIMMONS ENERGY INC (OPERATOR)
  3/1/1993   SCURRY   TX WATER LEASE  
ROBERT AND KATHY FOWLER / L B SIMMONS
  4/6/1993   SCURRY   TX ASSIGNMENT, BILL OF SALE AND CONVEYANCE  
MARK J MOURNE D/B/A/ MOURNE OIL AND GAS AND WADI PETROLEUM INC
  9/1/1993   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
SMITH ENTERPRISES INC (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  5/1/1995   SCURRY   TX ASSIGNMENT, BILL OF SALE AND CONVEYANCE  
L B SIMMONS ENERGY INC (SELLER) AND DIAMOND “M” PRODUCTION COMPANY (BUYER)
  7/1/1996   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
MAYNARD OIL COMPANY AND QUESTAR EXPLORATION AND PRODUCTION CO
  11/1/1999   SCURRY   TX ASSIGNMENT OF OIL, GAS AND MINERAL LEASES  
ENAQ INC TO DIAMOND “M” PRODUCTION COMPANY
  10/1/2000   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
HUNT INDUSTRIES LTD TO DIAMOND “M” PRODUCTION COMPANY
  12/1/2000   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
LYDA HUNT-MARGARET TRUST ET AL / DIAMOND “M”
  12/1/2000   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
DIAMOND M PRODUCTION CO / ESTATE OF MILDRED GALVIN LARSON
  3/1/2001   SCURRY   TX TRADE AGREEMENT AND JOINT OPERATING AGREEMENT  
DIAMOND “M” PRODUCTION COMPANY, PARALLEL PETROLEUM CORPORATION, BAYTECH, L.L.P.
AND PATRIOT RESOURCES, INC.
  12/10/2001   SCURRY   TX

PAGE 2 OF 3

--------------------------------------------------------------------------------

 

EXHIBIT “D” — MATERIAL CONTRACTS
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer

                  DOCUMENT   PARTIES   DATE   COUNTY   ST UNIVERSAL ASSIGNMENT &
CONVEYANCE OF OIL, GAS AND MINERAL INTERESTS  
BANK OF AMERICA TRUSTEE OF TAYLOR NIBLACK TRUST
  4/1/2002   SCURRY   TX OPERATING AGREEMENT  
PATRIOT RESOURCES INC ET AL AND DIAMOND “M” PRODUCTION COMPANY
  8/20/2002   SCURRY   TX ASSIGNMENT CONVEYANCE AND BILL OF SALE  
WADI PETROLEUM INC TO DIAMOND “M” PRODUCTION COMPANY
  9/1/2002   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
PETRO VAUGHN INC / DIAMOND “M”
  11/1/2002   SCURRY   TX PARTIAL ASSIGNMENT OF OIL AND GAS LEASES  
DIAMOND “M” PRODUCTION COMPANY TO PARALLEL PETROLEUM CORPORATION
  7/1/2003   SCURRY   TX LEASE AGREEMENT  
DIAMOND “M” PRODUCTION COMPANY TO PARALLEL PETROLEUM CORPORATION
  11/1/2003   SCURRY   TX ASSIGNMENT, BILL OF SALE AND CONVEYANCE  
LOYAL TRUST #1, LOYAL TRUST NO 2, LOYAL TRUST NO 3 AND LOYAL TRUST NO 4 TO HUNT
OIL COMPANY
  1/31/1990   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
BOYD & MCWILLIAMS ENERGY GROUP INC AND MICHAEL M WILLIAMS (ASSIGNOR) AND L B
SIMMONS (ASSIGNEE)
  11/1/1994 EFFECTIVE
10/1/1994   SCURRY   TX PURCHASE AND SALE AGREEMENT  
L B SIMMONS ENERGY INC (SELLER) AND SOUTHWESTERN ENERGY PRODUCTION COMPANY AND
DIAMOND “M” PRODUCTION COMPANY (BUYER)
  11/1/1996 EFFECTIVE 7/1/1996   SCURRY   TX ASSIGNMENT, BILL OF SALE AND
CONVEYANCE  
L B SIMMONS ENERGY INC (GRANTOR) TO DIAMOND “M” PRODUCTION COMPANY (GRANTEE)
  11/1/1996 EFFECTIVE 7/1/1996   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
SMITH ENTERPRISES INC (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  11/21/1994 EFFECTIVE
10/1/1994   SCURRY   TX CORRECTION ASSIGNMENT AND BILL OF SALE  
VERGIE M GRAY (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  11/30/1992 EFFECTIVE
6/1/1992   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
LYDA HUNT-MARGARET TRUST — LYDA HILL, LYDA HUNT-MARGARET TRUST — A; L G HILL JR,
LYDA HUNT-MARGARET TRUST — ALINDA HUNT HILL (ASSIGNORS) AND CONDOR PETROLEUM INC
(ASSIGNEE)
  11/4/2002 EFFECTIVE
12/1/2002   SCURRY   TX ASSIGNMENT OF CONTRACTUAL INTEREST AND BILL OF SALE  
DIAMOND “M” / KINDER MORGAN
  3/1/2002 EFFECTIVE 1/13/2002   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY / DIAMOND “M”
  3/28/1953 EFFECTIVE
8/25/1951   SCURRY   TX ASSIGNMENT AND BILL OF SALE  
SMITH ENTERPRISES INC (ASSIGNOR) AND L B SIMMONS ENERGY INC (ASSIGNEE)
  4/26/1995 EFFECTIVE 5/1/1995   SCURRY   TX UNIT AGREEMENT  
LION OIL COMPANY
  5/8/1959 RECORDED 6/24/1959   SCURRY   TX ASSIGNMENT OF OVERRIDING ROYALTY  
L B SIMMONS ENERGY INC TO ROBERT B STALLWORTH TRUST
  7/28/1993 EFFECTIVE 3/1/1993   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY AND ROYBELLE P WEINER
  8/2/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY ET AL, MARJORIE CANNING, C R CRAIG,
ROBERT CANNING, NANCY CANNING, JACK PETOSKY
  8/25/1951 EFFECTIVE
6/17/1952   SCURRY   TX RATIFICATION OF UNIT AGREEMENT  
LION OIL COMPANY, DIAMOND “M” PRODUCTION COMPANY
  8/31/1953 EFFECTIVE
8/25/1951   SCURRY   TX

PAGE 3 OF 3

--------------------------------------------------------------------------------

 

EXHIBIT E
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
NON-FOREIGN AFFIDAVIT
Exemption from Withholding of Tax For
Dispositions of U.S. Real Property Interests
     Article 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform Lime Rock Resources A, L.P. that withholding of tax is not
required upon the disposition of a U.S. real property interest by Diamond “M”
Production Company (“DMPC”), the undersigned hereby certifies the following:
     1. DMPC is not a nonresident alien, foreign corporation, foreign
partnership, foreign trust, or foreign estate for purposes of U.S. income
taxation;
     2. DMPC’s taxpayer identifying number is 71-0358796; and
     3. DMPC’s home office address is 2350 N. Sam Houston Parkway East,
Suite 125, Houston, Texas 77032.
     DMPC understands that this certification may be disclosed to the Internal
Revenue Service by Lime Rock Resources A, L.P. and that any false statement
contained herein could be punished by fine, imprisonment, or both.
     Under penalties of perjury, I declare that I have examined this
certification and, to the best of my knowledge and belief, it is true, correct
and complete, and I further declare I have authority to sign this document.

              DIAMOND “M” PRODUCTION COMPANY
 
       
 
  By:    
 
       
 
  Name:   Richard F. Lane
 
  Title:   President

E-1

--------------------------------------------------------------------------------

 

         
STATE OF TEXAS
  §    
 
  §    
COUNTY OF HARRIS
  §    

     The foregoing instrument was acknowledged before me this
                     day of                                          , 2008, by
Richard F. Lane, President of Diamond “M” Production Company, a Delaware
corporation, on behalf of said corporation.

     
 
   
 
  Notary Public in and for the State of Texas

E-2

--------------------------------------------------------------------------------

 

EXHIBIT F
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
EXCLUDED PROPERTIES
Vehicles and associated equipment.

F-1

--------------------------------------------------------------------------------

 

EXHIBIT G
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
ALLOCATION OF PURCHASE PRICE
To be attached.

G-1

--------------------------------------------------------------------------------

 

EXHIBIT “G”
To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
 
SOUTHWESTERN ENERGY PERMIAN PACKAGE
PURCHASE PRICE ALLOCATION
DIAMOND -M- PROPERTIES

                                                              Net     Allocated
                  Working     Revenue     Purchase Price                  
Interest     Interest     Value   Rsv Cat   Prop#   Field   Lease   %     %    
M$  
1PDP
  J4LIFI5J2F   DIAMOND -M- (GCW)   BYNUM 0101     0.0000 %     0.3846 %   $
14.684  
1PDP
  TXO08A067657   DIAMOND -M- (GCW)   BYNUM 0101     0.0000 %     0.3846 %   $
14.684  
1PDP
  J49FN2SOQQ   DIAMOND -M- (GCW)   GCW WATERFLOOD EXPENSES     25.0000 %    
21.3810 %   $ —  
1PDP
  J4J0A9WAVK   DIAMOND -M- (GCW)   GCWU BASE     100.0000 %     85.5240 %   $
7,532.290  
1PDP
  J4JG9RRP6T   DIAMOND -M- (GCW)   GCWU WEDGE     25.0000 %     21.3810 %   $
436.083  
1PDP
  J49FNATOVQ   DIAMOND -M- (GCW)   GERTIE 5     25.0000 %     21.3810 %   $
355.944  
1PDP
  J49FO03IQQ   DIAMOND -M- (GCW)   GERTIE 7     25.0000 %     21.8750 %   $
606.396  
1PDP
  J49FNIPO6Q   DIAMOND -M- (GCW)   JACK 36     25.0000 %     21.3810 %   $ 3.140
 
1PDP
  J49FNIHP7Q   DIAMOND -M- (GCW)   JACK 37     25.0000 %     21.3810 %   $ 0.438
 
1PDP
  J49FO0AIPQ   DIAMOND -M- (GCW)   JACK 38     25.0000 %     21.3810 %   $
29.163  
1PDP
  J49FNILQ9Q   DIAMOND -M- (GCW)   JACK 39     25.0000 %     21.3810 %   $ 0.096
 
1PDP
  J49FO08HOQ   DIAMOND -M- (GCW)   JACK 40     25.0000 %     21.3810 %   $
16.527  
1PDP
  J49FNI5QBQ   DIAMOND -M- (GCW)   JACK 41     25.0000 %     21.3810 %   $
263.324  
1PDP
  J49FMFJG1Q   DIAMOND -M- (GCW)   MCL ACCT 1 108     25.0000 %     21.3810 %  
$ 3.721  
1PDP
  J49FM15Q4Q   DIAMOND -M- (GCW)   MCL ACCT 1 130     25.0000 %     21.8750 %  
$ 21.532  
1PDP
  J49FM11S7Q   DIAMOND -M- (GCW)   MCL ACCT 1 134     25.0000 %     21.3810 %  
$ 16.837  
1PDP
  J49FM1RS8Q   DIAMOND -M- (GCW)   MCL ACCT 1 135     25.0000 %     21.3810 %  
$ 34.536  
1PDP
  J49FMEJKVQ   DIAMOND -M- (GCW)   MCL ACCT 1 136     25.0000 %     21.3810 %  
$ 27.541  
1PDP
  J49FM53KGQ   DIAMOND -M- (GCW)   MCL ACCT 2 139     25.0000 %     21.3810 %  
$ 326.560  
1PDP
  J49FLPPS6Q   DIAMOND -M- (GCW)   MCL ACCT 2 140     25.0000 %     21.8750 %  
$ 214.639  
1PDP
  J49G3BH338   DIAMOND -M- (GCW)   MCL ACCT 2 83     25.0000 %     21.3810 %   $
73.889  
1PDP
  J4JCL5IJ3A   DIAMOND -M- (GCW)   OUTSIDE UNIT BASE     100.0000 %     87.5000
%   $ 4,346.532  
1PDP
  J4JG8NWU5T   DIAMOND -M- (GCW)   OUTSIDE UNIT WEDGE     25.0000 %     21.8750
%   $ 86.158  
1PDP
  J49FNT4UKQ   DIAMOND -M- (GCW)   THURSTON 14     25.0000 %     21.3810 %   $
665.157  
1PDP
  J49M7T6M1P   DIAMOND -M- (LDMU)   LDMU 1     24.8782 %     21.6352 %   $ 2.169
 
1PDP
  J49DI423SA   DIAMOND -M- (LDMU)   LDMU E-11A     24.8782 %     21.6352 %   $
188.231  
1PDP
  J49DI3E1RE   DIAMOND -M- (LDMU)   LDMU F-1A     24.8782 %     21.6352 %   $
52.916  
1PDP
  J43H7EJQ11   DIAMOND -M- (LDMU)   LDMU G7A     24.8782 %     21.6352 %   $
593.742  
1PDP
  J49DHTV8OG   DIAMOND -M- (LDMU)   LDMU H-1     24.8782 %     21.6352 %   $
246.358  
1PDP
  J49DHMC8MG   DIAMOND -M- (LDMU)   LDMU I-1     24.8782 %     21.6352 %   $
62.515  
1PDP
  J49DHK9ELX   DIAMOND -M- (LDMU)   LDMU I-2W     24.8782 %     21.6352 %   $
342.486  
1PDP
  J49DHJNCKE   DIAMOND -M- (LDMU)   LDMU I-3     24.8782 %     21.6352 %   $
746.251  
1PDP
  J49DHIQBJ7   DIAMOND -M- (LDMU)   LDMU I-3W     24.8782 %     21.6352 %   $
0.845  
1PDP
  J49DHHS8II   DIAMOND -M- (LDMU)   LDMU I-4     24.8782 %     21.6352 %   $
1,126.053  
1PDP
  J49DH02BDG   DIAMOND -M- (LDMU)   LDMU K-10     24.8782 %     21.6352 %   $
4.965  
1PDP
  J49DHRX5BG   DIAMOND -M- (LDMU)   LDMU K-4W     24.8782 %     21.6352 %   $
734.723  
1PDP
  J49DHP009G   DIAMOND -M- (LDMU)   LDMU L-2     24.8782 %     21.6352 %   $
214.114  
1PDP
  J49DHN748G   DIAMOND -M- (LDMU)   LDMU L-3     24.8782 %     21.6352 %   $
0.408  
1PDP
  J43HKLRT1Q   DIAMOND -M- (LDMU)   LDMU L3A     24.8782 %     21.6352 %   $
618.927  
1PDP
  J49DHMT37G   DIAMOND -M- (LDMU)   LDMU L-4     24.8782 %     21.6352 %   $
522.747  
1PDP
  J49DHJU55K   DIAMOND -M- (LDMU)   LDMU M-1     24.8782 %     21.6352 %   $
184.282  
1PDP
  J49DHIM24K   DIAMOND -M- (LDMU)   LDMU M-1W     24.8782 %     21.6352 %   $
705.512  
1PDP
  J49DHGN03P   DIAMOND -M- (LDMU)   LDMU M-4     24.8782 %     21.6352 %   $
84.165  
1PDP
  J49DI1R5QE   DIAMOND -M- (LDMU)   LDMU BASE     99.5130 %     86.5407 %   $
11,270.396  
1PDP
  J49DFFJ21J   DIAMOND -M- (LDMU)   LDMU WATERFLOOD EXPENSES     24.8782 %    
21.6352 %   $ —  
1PDP
  J4HM47G2KF   DIAMOND -M- (LDMU)   LDMU WEDGE     24.8782 %     21.6352 %   $
268.821  
 
                                  TOTALPROVED DEVELOPED PRODUCING              
    $ 33,060.499  
 
                                  TOTAL PROVED DEVELOPED NONPRODUCING          
        $ —  
 
                                 
4PUD
  J4AMKD8J2X   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0001     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNJPMLR   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0002     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNI5JKR   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0003     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNHKHJS   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0004     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNF6MIS   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0005     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNE7KHS   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0006     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNDTJGT   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0007     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNCNGFT   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0008     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMNA2LET   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0009     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMN9JIDU   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0010     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMN8CGCV   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0011     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMN6BJBV   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0012     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMN4JIAV   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0013     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMN37G9V   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0014     0.0000 %    
0.0000 %   $ —  

 

--------------------------------------------------------------------------------

 

To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
 
SOUTHWESTERN ENERGY PERMIAN PACKAGE
PURCHASE PRICE ALLOCATION
DIAMOND -M- PROPERTIES

                                                              Net     Allocated
                  Working     Revenue     Purchase Price                  
Interest     Interest     Value   Rsv Cat   Prop#   Field   Lease   %     %    
M$  
4PUD
  J4AMN19H8W   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0015     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMN0PG7W   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0016     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMMSCT6X   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0017     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMMRQR5X   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0018     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMMP3U4X   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0019     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AMMNDQ3X   DIAMOND -M- (GCW)   DUAL INJECTION STRINGS 0020     0.0000 %    
0.0000 %   $ —  
4PUD
  J4AGE8SKUP   DIAMOND -M- (GCW)   GCW WATERFLOOD EXPENSE PUD     24.9000 %    
21.6567 %   $ —  
4PUD
  J2PDLGC9XS   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0001     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOONKU1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0002     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GON3IT1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0003     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOLGMS1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0004     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOKPKR1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0005     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOJ3IQ1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0006     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOISGP1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0007     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOGNKO1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0008     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOF1IN1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0009     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOESGM1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0010     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOCULL1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0011     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GOBDIK1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0012     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GO96MJ1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0013     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J48GO8NGI1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0014     24.9000 %  
  21.6567 %   $ 24.742  
4PUD
  J2RGBK163O   DIAMOND -M- (GCW)   REPLACE 4 TANKS 0001     0.0000 %     0.0000
%   $ —  
4PUD
  J2RG8GU11R   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0001  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJM8O2J5   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0002  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJM5Q3I5   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0003  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLRF8H6   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0004  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLN2DG6   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0005  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLM0CF6   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0006  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLLH9E6   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0007  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLJWED7   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0008  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLISCC7   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0009  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLH8BB8   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0010  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLF5BA8   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0011  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLE1A98   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0012  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLCGE88   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0013  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLB2D78   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0014  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJLAOB69   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0015  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJL9X959   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0016  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJL79E49   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0017  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJL67839   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0018  
  0.0000 %     0.0000 %   $ —  
4PUD
  J2QJL4C829   DIAMOND -M- (LDMU)   DEEPENING/RE-ENTRIES FOR WIW SUPPORT 0019  
  0.0000 %     0.0000 %   $ —  
4PUD
  J4A0FIW2ER   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q1 PUD 0001    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIAJ2JB1   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q1 PUD 0002    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIAHWMA1   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q1 PUD 0003    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIAGNK91   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q1 PUD 0004    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIAFXH81   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q1 PUD 0005    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIADPK71   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q1 PUD 0006    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIACHH61   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q4 PUD 0001    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIA6QJ51   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q4 PUD 0002    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIA4MM41   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q4 PUD 0003    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIA3EH31   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q4 PUD 0004    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIA1AK21   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q4 PUD 0005    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QI9TAO11   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2008 Q4 PUD 0006    
24.9000 %     21.6567 %   $ 91.049  
4PUD
  J2QIM1QJCZ   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2009 PUD 0001     24.9000 %
    21.6567 %   $ 91.049  
4PUD
  J2QIRFRLZX   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2009 PUD 0002     24.9000 %
    21.6567 %   $ 91.049  
4PUD
  J2QIRELJYX   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2009 PUD 0003     24.9000 %
    21.6567 %   $ 91.049  
4PUD
  J2QIRD7GXX   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2009 PUD 0004     24.9000 %
    21.6567 %   $ 91.049  
4PUD
  J2QIRB2LWY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2009 PUD 0005     24.9000 %
    21.6567 %   $ 91.049  
4PUD
  J2QIR1DKPY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2009 PUD 0006     24.9000 %
    21.6567 %   $ 91.049  
4PUD
  J2PC71IJ2B   DIAMOND -M- (LDMU)   LDMU WATERFLOOD EXPENSE PUD     24.9000 %  
  21.6567 %   $ —  
4PUD
  J2QJFMH91E   DIAMOND -M- (LDMU)   NEW PRODUCTION SATELLITES 0001     0.0000 %
    0.0000 %   $ —  
4PUD
  J2RGA4192O   DIAMOND -M- (LDMU)   NEW PRODUCTION SATELLITES 0002     0.0000 %
    0.0000 %   $ —  
 
                                  TOTAL Drilling Locations — Group I            
          $ 1,985.277  
 
                                 

 

--------------------------------------------------------------------------------

 

To Purchase and Sale Agreement by and between Diamond “M” Production Company, as
Seller,
and Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
 
SOUTHWESTERN ENERGY PERMIAN PACKAGE
PURCHASE PRICE ALLOCATION
DIAMOND -M- PROPERTIES

                                                              Net     Allocated
                  Working     Revenue     Purchase Price                  
Interest     Interest     Value   Rsv Cat   Prop#   Field   Lease   %     %    
M$  
5PRB
  J48GO6RLH1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0015     24.9000 %  
  21.6567 %   $ 85.438  
5PRB
  J48GO5IJG1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0016     24.9000 %  
  21.6567 %   $ 83.561  
5PRB
  J48GO4XHF1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0017     24.9000 %  
  21.6567 %   $ 81.731  
5PRB
  J48GO21ME1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0018     24.9000 %  
  21.6567 %   $ 78.843  
5PRB
  J48GO17KD1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0019     24.9000 %  
  21.6567 %   $ 77.142  
5PRB
  J48GO0JIC1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0020     24.9000 %  
  21.6567 %   $ 75.488  
5PRB
  J48GNTNOB1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0021     24.9000 %  
  21.6567 %   $ 73.877  
5PRB
  J48GNRCTA1   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0022     24.9000 %  
  21.6567 %   $ 71.285  
5PRB
  J48GNQLR91   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0023     24.9000 %  
  21.6567 %   $ 69.795  
5PRB
  J48GNPCP81   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0024     24.9000 %  
  21.6567 %   $ 68.348  
5PRB
  J48GNNGU71   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0025     24.9000 %  
  21.6567 %   $ 66.944  
5PRB
  J48GNMPS62   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0026     24.9000 %  
  21.6567 %   $ 64.631  
5PRB
  J48GNKCP52   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0027     24.9000 %  
  21.6567 %   $ 63.342  
5PRB
  J48GNIGU42   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0028     24.9000 %  
  21.6567 %   $ 62.098  
5PRB
  J48GNHNS32   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0029     24.9000 %  
  21.6567 %   $ 60.898  
5PRB
  J48GNFKT22   DIAMOND -M- (GCW)   GCWU GLORIETTA/CLFK PUD 0030     24.9000 %  
  21.6567 %   $ 58.864  
5PRB
  J2QIR8GMUY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2010 PUD 0001     24.9000 %
    21.6567 %   $ 250.736  
5PRB
  J2QIR7KLTY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2010 PUD 0002     24.9000 %
    21.6567 %   $ 245.036  
5PRB
  J2QIR66ISY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2010 PUD 0003     24.9000 %
    21.6567 %   $ 239.490  
5PRB
  J2QIR4CLRY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2010 PUD 0004     24.9000 %
    21.6567 %   $ 234.094  
5PRB
  J2QIR3KHQY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2010 PUD 0005     24.9000 %
    21.6567 %   $ 226.716  
5PRB
  J2QIRAOJVY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2010 PUD 0006     24.9000 %
    21.6567 %   $ 221.701  
5PRB
  J2QIR0OIOY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2011 PUD 0001     24.9000 %
    21.6567 %   $ 216.834  
5PRB
  J2QIQSWUNY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2011 PUD 0002     24.9000 %
    21.6567 %   $ 212.114  
5PRB
  J2QIQRVSMY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2011 PUD 0003     24.9000 %
    21.6567 %   $ 205.566  
5PRB
  J2QIQQTRLY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2011 PUD 0004     24.9000 %
    21.6567 %   $ 201.217  
5PRB
  J2QIQPOQKY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2011 PUD 0005     24.9000 %
    21.6567 %   $ 197.020  
5PRB
  J2QIQOPOJY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2011 PUD 0006     24.9000 %
    21.6567 %   $ 192.981  
5PRB
  J2QIQM6UIY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2012 PUD 0001     24.9000 %
    21.6567 %   $ 187.276  
5PRB
  J2QIQLLRHY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2012 PUD 0002     24.9000 %
    21.6567 %   $ 183.653  
5PRB
  J2QIQJWUGY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2012 PUD 0003     24.9000 %
    21.6567 %   $ 180.230  
5PRB
  J2QIQF0OFY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2012 PUD 0004     24.9000 %
    21.6567 %   $ 177.048  
5PRB
  J2QIQD2REY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2012 PUD 0005     24.9000 %
    21.6567 %   $ 171.781  
5PRB
  J2QIQCHPDY   DIAMOND -M- (LDMU)   LDMU CANYON REEF 2012 PUD 0006     24.9000 %
    21.6567 %   $ 168.444  
 
                                  TOTAL Drilling Locations — Group II          
            $ 4,854.223  
 
                                 
6POS
  J4JKPTRH23   DIAMOND -M- (LDMU)   LDMU CANYON REEF CO2 FLOOD     24.9000 %    
21.6567 %   $ —  
 
                                  TOTAL Drilling Locations — Group III          
            $ —  
 
                                 
 
                              $ 39,900.000  

 

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EXHIBIT H
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
ENVIRONMENTAL ASSESSMENTS
Photographs of Properties (with captions) as provided in Oil & Gas Asset
Clearinghouse data room.

H-1

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EXHIBIT I
To Purchase and Sale Agreement
by and between
Diamond “M” Production Company, as Seller,
and
Parallel Petroleum Corporation and Ted Collins, Jr., as Buyer
GAS IMBALANCES
None.

I-1