SandRidgePSA03172014_A


Execution Version


















PURCHASE  AND SALE AGREEMENT BY AND BETWEEN
BLACK ELK ENERGY  OFFSHORE  OPERATIONS,  LLC AS SELLER
AND


SANDRIDGE ENERGY  OFFSHORE,  LLC AS PURCHASER
Dated as of March  13,2014



Execution Version








TABLE OF CONTENTS                                                                           
	
				
	ARTICLE  1 PURCHASE  AND SALE
	1

	Section
	1.1
	Purchase and Sale
	1

	Section
	1.2
	Assets
	1

	Section
	1.3
	Excluded Assets
	3

	Section
	1.4
	Effective Time; Proration of Costs and Revenues
	5

	Section
	1.5
	Delivery of Records
	6

	ARTICLE  2 PURCHASE  PRICE 
	6

	Section
	2.1
	Purchase Price
	6

	Section
	2.2
	Allocation of Purchase Price 
	6

	Section
	2.3
	Intentionally Omitted 
	7

	Section
	2.4
	Intentionally Omitted  
	7

	Section
	2.5
	Allocation of Purchase Price
	7

	ARTICLE  3 TITLE  MATTERS
	7

	Section
	3.1
	Seller's Title    
	7

	Section
	3.2
	Definition of Defensible Title
	7

	Section
	3.3
	Definition of Permitted Encumbrances
	9

	Section
	3.4
	Notice of Title Defect Adjustments
	11

	Section
	3.5
	Casualty or Condemnation Loss
	15

	Section
	3.6
	Limitations on Title Defects
	16

	Section
	3.7
	Limitations on Applicability
	16

	ARTICLE  4 ENVIRONMENTAL   MATTERS
	18

	Section
	4.1
	Assessment.
	18

	Section
	4.2
	NORM, Wastes and Other Substances
	20

	Section
	4.3
	Environmental Defects
	20

	Section
	4.4
	Intentionally Omitted
	21

	Section
	4.5
	Exclusive Remedy
	21

	ARTICLE  5 REPRESENTATIONS   AND WARRANTIES  OF SELLER
	21

	Section
	5.1
	Generally
	21

	Section
	5.2
	Existence and Qualification
	21

	Section
	5.3
	Power.
	21

	Section
	5.4
	Authorization and Enforceability
	21

	Section
	5.5
	No Conflicts
	21

	Section
	5.6
	Liability for Brokers' Fees
	21

	Section
	5.7
	Litigation
	21

	Section
	5.8
	Taxes and Assessments
	21





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	Section
	5.9
	Condemnation
	21

	Section
	5.10
	Contracts
	21

	Section
	5.11
	Payments for Hydrocarbon Production
	21

	Section
	5.12
	Governmental Authorizations
	21

	Section
	5.13
	Outstanding Capital Commitments
	21

	Section
	5.14
	Imbalances
	21

	Section
	5.15
	Bankruptcy
	21

	Section
	5.16
	Affiliated Contracts
	21

	Section
	5.17
	Foreign Person
	21

	Section
	5.18
	Preference Rights
	21

	Section
	5.19
	Transfer Requirements and Other Consents
	21

	Section
	5.20
	No Violation of Laws
	21

	Section
	5.21
	Environmental.
	21

	Section
	5.22
	Suspended Funds
	21

	Section
	5.23
	Non-Consent Operations
	21

	Section
	5.24
	BOEM or BSEE Incidents of Non-Compliance and Suspensions
	21

	Section
	5.25
	Casualty Losses
	21

	Section
	5.26
	Third Party Beneficiary
	21

	Section
	5.27
	Condition of Personal Property
	21

	Section
	5.28
	Bonds, Letters of Credit, Escrows, Guarantees and Other
Securities
	21

	Section
	5.29
	Idle Iron
	21

	Section
	5.30
	Seller's Insurance Coverage
	21

	Section
	5.31
	Seller's Existing Mortgages and Liens
	21

	ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER
	21

	Section
	6.1
	Existence and Qualification
	21

	Section
	6.2
	Power.
	21

	Section
	6.3
	Authorization and Enforceability
	21

	Section
	6.4
	No Conflicts
	21

	Section
	6.5
	Liability for Brokers' Fees
	21

	Section
	6.6
	Litigation
	21

	Section
	6.7
	Financing
	21

	Section
	6.8
	Limitation
	21

	Section
	6.9
	SEC Disclosure
	21

	Section
	6.10
	Bankruptcy
	21

	Section
	6.11
	Qualification
	21

	Section
	6.12
	Consents
	21

	Section
	6.13
	Independent Evaluation
	21





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	Section
	6.14
	NORM, Wastes and Other Substances
	21

	ARTICLE    7 COVENANTS    OF THE  PARTIE
	21

	Section
	7.1
	HSR Act
	21

	Section
	7.2
	Government Reviews
	21

	Section
	7.3
	Breaches
	21

	Section
	7.4
	Letters-in-Lieu; Assignments; Operatorship
	21

	Section
	7.5
	Public Announcements
	21

	Section
	7.6
	Operation of Business
	21

	Section
	7.7
	Preference Rights and Transfer Requirements
	21

	Section
	7.8
	Tax Matters
	21

	Section
	7.9
	Further Assurances
	21

	Section
	7.10
	Inentionally Omitted
	21

	Section
	7.11
	No Solicitation of Transactions
	21

	Section
	7.12
	Record Retention
	21

	Section
	7.13
	Bonds, Letters of Credit and Guarantees
	21

	Section
	7.14
	Cure of Misrepresentations
	21

	Section
	7.15
	Cooperation with Respect to Seller Retained Litigation, Etc
	21

	Section
	7.16
	Plugging, Abandonment, Decommissioning and Other Costs
	21

	ARTICLE    8 CONDITIONS     TO  CLOSING
	21

	Section
	8.1
	Conditions of Seller to Closing
	21

	Section
	8.2
	Conditions of Purchaser to Closing
	21

	ARTICLE    9 CLOSING
	21

	Section
	9.1
	Time and Place of Closing
	21

	Section
	9.2
	Obligations  of Seller at Closing
	21

	Section
	9.3
	Obligations  of Purchaser  at Closing
	21

	Section
	9.4
	Closing  Payment.
	21

	ARTICLE    10 TERMINATION
	21

	Section
	10.1
	Termination
	21

	Section
	10.2
	Effect  of Termination
	21

	Section
	10.3
	Intentionally   Omitted
	21

	ARTICLE    11 POST-CLOSING     OBLIGATIONS;     INDEMNIFICATION;       LIMITATIONS; DISCLAIMERS     AND WAIVERS
	21

	Section
	11.1
	Assumed  Seller Obligations
	21

	Section
	11.2
	Survival.
	21

	Section
	11.3
	Indemnification by Seller.
	21

	Section
	11.4
	Indemnification by Purchaser
	21

	Section
	11.5
	Indemnification Proceedings
	21





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	Section
	11.6    
	Limitations on Indemnities
	21

	Section
	11.7    
	Release
	21

	Section
	11.8     
	Disclaimers
	21

	Section
	11.9     
	Waiver of Trade Practices Acts
	21

	Section
	11.10  
	Redhibition Waiver.
	21

	Section
	11.11  
	Recording
	21

	Section
	11.12  
	Non-Compensatory Damages
	21

	Section
	11.13  
	Disclaimer of Application of Anti-Indemnity Statutes
	21

	ARTICLE  12 MISCELLANEOUS
	21

	Section
	12.1
	Counterparts
	21

	Section
	12.2
	Notices
	21

	Section
	12.3
	Sales or Use Tax Recording Fees and Similar Taxes and Fees
	21

	Section
	12.4
	Expenses
	21

	Section
	12.5
	Change of Name
	21

	Section
	12.6
	Governing Law and Venue
	21

	Section
	12.7
	Captions
	21

	Section
	12.8
	Waivers
	21

	Section
	12.9
	Assignment.
	21

	Section
	12.10
	Entire Agreement.
	21

	Section
	12.11
	Amendment.
	21

	Section
	12.12
	No Third-Party Beneficiaries
	21

	Section
	12.13
	References
	21

	Section
	12.14
	Construction
	21

	Section
	12.15
	Conspicuousness
	21

	Section
	12.16
	Severability
	21

	Section
	12.17
	Time of Essence
	21

	Section
	12.18
	Limitation on Damages
	21

	Section
	12.19
	Financial Reporting
	21



                                                                                           

































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EXHIBITS
	
			
	Exhibit
	A
	Leases

	Exhibit
	A-I
	Wells  and Units

	Exhibit
	A-2
	Pipelines

	Exhibit
	A-3
	Easements

	Exhibit
	A-4
	Equipment

	Exhibit
	A-5
	Contracts

	Exhibit
	B
	Form  of Assignment,   Conveyance  and Bill of Sale

	Exhibit
	B-1
	Form  of Assignment  of Record  Title to Oil and Gas Leases

	Exhibit
	B-2
	Form  of Assignment   of Oil and Gas Lease  Operating  Rights

	Exhibit
	B-3
	Form of Assignment   of Rights  of Way

	Exhibit
	C
	Form of Title Indemnity Agreement

	Exhibit
	D
	Form of Escrow  Agreement






SCHEDULES
	
			
	Schedule
	1.2(k)
	Geological Data

	Schedule
	1.3(h)
	Excluded Contracts

	Schedule
	2.2
	Allocated Values

	Schedule
	3.3(n)
	Permitted Encumbrances

	Schedule
	5.7
	Litigation

	Schedule
	5.8
	Taxes and Assessments

	Schedule
	5.10
	Contracts

	Schedule
	5.11
	Hydrocarbon Production Payments

	Schedule
	5.12
	Governmental Authorizations

	Schedule
	5.13
	Outstanding Capital Commitments

	Schedule
	5.14
	Imbalances

	Schedule
	5.20
	Violation of Laws

	Schedule
	5.21
	Environmental

	Schedule
	5.22
	Suspended Funds

	Schedule
	5.23
	Non-Consent Operations

	Schedule
	5.24
	BOEM or BSEE Incidents of Non-Compliance and Suspensions

	Schedule
	5.27
	Condition of Personal Property

	Schedule
	5.28
	Bonds, Letters of Credit, Escrows, Guarantees and Other Securities

	Schedule
	5.29
	Copy of Idle Iron Documentation

	Schedule
	5.31
	Seller's Existing Mortgages and Liens

	Schedule
	7.6
	Operation of Business

	Schedule
	7.7
	Preference Rights and Transfer Requirements







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Schedule  12.20            Additional  Liens

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DEFINITIONS


"Actual knowledge" has the meaning set forth in Section 5.I(a). "AFE" means authority for expenditure.
"Affected Well" has the meaning set forth in Section 3.4(g)(v).


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


"Agreement"  means this Purchase and Sale Agreement. "Allocated Value" has the meaning set forth in Section 2.2. "Assessment" has the meaning set forth in Section 4.1(b). "Assets" has the meaning set forth in Section 1.2.
"Assumed Seller Obligations"  has the meaning set forth in Section 11.1(a).


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


"BSEE"  means the Bureau  of Safety  and Environmental Enforcement  of the United States
Department of the Interior.
"Business Day" means each calendar day except Saturdays, Sundays, and Federal holidays. "Claim"  or "Claims"  means any demand, claim or notice sent or given by a Person to another
Person  in  which  the  former  asserts  that  it  has  suffered a  Loss  or has  become party  to  a
Proceeding that is the responsibility of the latter Person.
"Claim Notice" has the meaning set forth in Section 11.2(b). "Closing" has the meaning set forth in Section 9.1.
"Closing Date" has the meaning set forth in Section 9.1.
"Code" means the Internal Revenue Code of 1986, as amended. "Contracts"  has the meaning set forth in Section 1.2(d). "Conveyance" has the meaning set forth in Section 3.1(b).
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"Cure  Period" has the meaning set forth in Section 3.4(c).
"Customary   Post-Closing  Consents"  means the consents and approvals for the assigmnent of the Assets to Purchaser that are customarily obtained after the assignment of properties similar to the Assets.
"Defective Support  Property"  has the meaning set forth in Section 3.4(g)(v)
"Defensible Title" has the meaning set forth in Section 3.2.
"DOJ"  means the Department of Justice.
"DTP A" has the meaning set forth in Section 11.9.
 "Earned"  has the meaning set for in Section 1.4(b). "Easements"  has the meaning set forth in Section 1.2(e). "Effective Time" has the meaning set forth in Section 1.4(a).
"Environmental   Claim Date" has the meaning set forth in Section 4.3. "Environmental   Defect" has the meaning set forth in Section 4.3. "Environmental   Defect Amount"  has the meaning set forth in Section 4.3. "Environmental   Defect Deductible"  has the meaning set forth in Section4.3. 
"Environmental   Defect Notice" has the meaning set forth in Section 4.3.


"Environmental   Laws" means, as the same may have been amended, superseded or replaced, any federal, state or local statute, law, regulation, ordinance, rule, order or decree including any rule of common law, relating to (i) the control of any potential pollutant or protection of the environment,  including  air, water  or  land,  (ii)  the  generation, handling, treatment,  storage, disposal or transportation of waste materials, or (iii) the regulation of or exposure to Hazardous Materials alleged to be harmful, including, but not limited to, the Comprehensive Environmental Response,  Compensation  and  Liability  Act,  42 U.S.C.  §  9601  et  seq.  ("CERCLA");   the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. ("ReRA");   the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq. the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.c.  § 2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §  11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300fthrough 300j; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Atomic Energy Act, 42 U.S.C. § 2011 et seq.; and all applicable related law, whether local, state, territorial, or national, of any Governmental Body having jurisdiction over the property  in question addressing  pollution or protection of human health,  safety, natural resources  or  the  environment  and  all  regulations  implementing  the  foregoing.    The  term
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"Environmental   Laws" includes all judicial and administrative decisions, orders, directives, and decrees issued by a Governmental Body pursuant to the foregoing.
"Environmental   Liabilities"  means any and all environmental response costs (including costs of  remediation), damages,  natural  resource damages,  settlements, consulting  fees, expenses, penalties, fines, orphan share, prejudgment and post-judgment interest, court costs, attorneys' fees, and other liabilities Incurred or imposed (i) pursuant to any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Body to the extent arising out of any violation of, or remedial obligation under, any Environmental Laws which are attributable to the ownership or operation of the Assets prior to, on or after the Effective Time or (ii) pursuant to any claim or cause of action by a Governmental Body or other Person  for personal injury, property damage, damage to natural resources, remediation or response costs to the extent arising out of any exposure to Hazardous Materials, any violation of, or any remediation or obligation under, any Environmental Laws which is attributable to the ownership or operation of the Assets prior  to, on or after the  Effective  Time; provided, however, notwithstanding the foregoing, Purchaser's  liability or  responsibility  for  any penalties or  fines  shall  be  limited to matters attributable to the ownership or operation of the Assets on or after the Effective Time.
"Equipment"  has the meaning set forth in Section 1.2(f). "Excluded  Assets" has the meaning set forth in Section 1.3.
"Excluded Contracts"  means those contracts described on Schedule 1.3(h). "Excluded  Seller Obligations"  has the meaning set forth in Section 11.1(a).
"Existing Mortgages  and Liens" means those certain mortgages and deeds of trust described on Schedule 5.31 together with related financing statements, and all liens, claims and encumbrances (other than  Permitted  Encumbrances)  filed of record  with respect  to  the  Assets, including, without limitation, the liens described on Schedule 5.31.
"Existing  Mortgagees"  means the mortgagees, trustees, and deed of trust beneficiaries holding the Existing Mortgages and Liens.
"Fieldwood"  means Fieldwood Energy LLC. "FTC" shall mean the Federal Trade Commission.
"Fundamental   Representations"   has the meaning set forth in Section 11.2(a).


"Geologic Data"  means all (i) seismic, geological, geochemical or geophysical data (including cores and other physical samples of materials from wells or tests) belonging to Seller or licensed from  third  parties  relating  to  the  Properties  that  can  be  transferred  without  additional consideration to such third parties (or including such licensed data in the event Purchaser agrees to pay such additional consideration), and (ii) interpretations of seismic, geological, geochemical or geophysical data belonging to Seller or licensed from third parties that can be transferred without  additional  consideration   to such third parties  (or including  such licensed  data in the event
Purchaser  agrees to pay such additional  consideration).
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"Governmental     Authorizations"     has the meaning  set forth in Section  5.12.


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


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


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


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


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


"INC"  means  an incident  of non-compliance   issued by the BOEM  or BSEE. "Included   Geological   Data"  has the meaning  set forth in Section  1.2(k). "Incurred"    has the meaning  set forth  in Section  1.4(b).
"Indemnified    Party"   has the meaning  set forth in Section  11.5(a) "Indemnified    Person"   has the meaning  set forth in Section  11.5(a). "Indemnifying    Party"   has the meaning  set forth in Section  11.5(a). "Indemnity    Agreement"    has the meaning  set forth in Section  3.4( d)(ii).




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"Indemnity    Deductible"    has the meaning  set forth in Section  1l.6(b). "Independent    Expert"   has the meaning  set forth in Section  4.3.
"Individual    Benefit  Threshold"    has the meaning  set forth in Section  3.4(j). "Individual    Environmental     Threshold"    has the meaning  set forth in Section  4.3. "Individual    Title  Threshold"    has the meaning  set forth in Section  3.4(j).
"Lands"   has the meaning  set forth in Section  1.2(a).


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


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


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


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


"Material     Adverse   Effect"   means  any  effect  that  is  material   and  adverse  to the  ownership, operation  or value  of the  Assets,  taken  as a whole,  and as currently  operated;  provided,  however, that "Material    Adverse   Effect"   shall not include  (i) any effect  resulting  from entering  into this Agreement   or  the  announcement   of  the  transactions   contemplated   by this  Agreement;   (ii) any effect  resulting   from  changes   in  general  market,  economic,   financial   or political  conditions  or any  outbreak   of  hostilities   or  war,  (iii)  any  effect  that  affects   the  Hydrocarbon   exploration, production,    development,     processing,     gathering    and/or    transportation     industry    generally (including    changes    in   commodity    prices   or   general   market    prices    in   the   Hydrocarbon exploration,    production,    development,    processing,    gathering    and/or   transportation    industry generally),   and  (iv)  any  effect  resulting   from  a  change  in  Laws  or  regulatory   policies.    The Parties  hereby  agree that any effect which adversely  impacts  the ownership,  operation  or value of the Assets  in an amount  (such  amount  to be determined  after discounting  the present  value of any such  effects  on a PV  10 basis)  equal  to or greater  than  $500,000.00   shall  constitute  a Material Adverse   Effect   for  purposes    of  this   definition   (unless   otherwise    specifically    excluded   in subclauses   (i) through  (iv)  above),  and  any effect  less than  $500,000.00   (as determined  above) shall not constitute  a Material  Adverse  Effect for purposes  of this definition.
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"Material  Environmental   Defect"  means an uncured Environmental Defect that exceeds the
Individual Environmental Threshold.


"Material  Indemnification Matter"  has the meaning set forth in Section 11.6(b).
"Material  Title Benefit" means a Title Benefit that exceeds the Individual Benefit Threshold. "Material   Title  Defect"  means  an  uncured Title  Defect  that  exceeds  the  Individual Title
Threshold.


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


"Net Title Benefit Amount"  has the meaning set forth in Section 3.4(e). "Net Title Defect Amount"  has the meaning set forth in Section 3.4(d)(i). "NORM" means naturally occurring radioactive material.
"Notice Period" has the meaning set forth in Section 1l.5(a). "P&A Obligations"  has the meaning set forth in Section 7.16. "Party"  means either Seller or Purchaser.
"Parties"  means Seller and Purchaser.


"Permitted  Encumbrances"  has the meaning set forth in Section 3.3.


"Person"  means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Body or any other entity.
"Personal  Property"  has the meaning set forth in Section 1.2(g). "Pipelines" has the meaning set forth in Section 1.2(g).
"Preference  Property"  has the meaning set forth in Section 7.7(b).


"Preference   Right"  means  any right  or agreement that enables  any Person to purchase or acquire any Asset or any interest therein or portion thereof as a result of or in connection with (i) the sale, assignment or other transfer of any Asset or any interest therein or portion thereof or (ii) the execution or delivery of this Agreement or the consummation or performance of the terms and conditions contemplated by this Agreement.
"Proceeding"  has the meaning set forth in Section 5.7. "Properties"  has the meaning set forth in Section 1.2(c). "Property  Costs" has the meaning set forth in Section 1.4(b).
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"Purchase  Price" has the meaning set forth in Section 2.1. "Purchaser"  has the meaning set forth in the preamble hereto.
"Purchaser  Indemnified  Persons"  has the meaning set forth in Section 11.3. "Purchaser's   Representatives"   has the meaning set forth in Section 4.1(a). "Records"  has the meaning set forth in Section 1.2(j).


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


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


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


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


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


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


"Seller Operated  Properties"  means those certain Properties operated by Seller or its Affiliates. "Subject Properties"  has the meaning set forth in Section 1.2(d).
"Tax  Returns"   means  any  report,  return,  information  statement, payee  statement  or other information, or any amendment thereof, required to be provided to any Governmental Body with respect to Taxes, including any return of an affiliated, combined or unitary group, and any and all work papers relating thereto.


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


"Taxing Authority"  means, with respect to any Tax, the Governmental Body that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such Governmental Body, including any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar Taxes or premiums
"Termination  Date" has the meaning set forth in Section lO.l(b)(i). "Third  Party  Claim" has the meaning set forth in Section 11.S(a). "Title Arbitrator"   has the meaning set forth in Section 3.4(i).
"Title Benefit" has the meaning set forth in Section 3.2(d).
"Title Benefit Amount"  has the meaning set forth in Section 3.4(b). "Title Benefit Deductible"  has the meaning set forth in Section 3.4(j). "Title Benefit Notice" has the meaning set forth in Section 3.4(b). "Title Claim Date" has the meaning set forth in Section 3.4(a).
"Title Defect" has the meaning set forth in Section 3.2(d).
"Title Defect Amounts"  has the meaning set forth in Section 3.4(d)(i). "Title Defect Deductible"  has the meaning set forth in Section 3.4(j). "Title Defect Notice" has the meaning set forth in Section 3.4(a).
"Title Defect Property"  has the meaning set forth in Section 3.4(a).


"Transfer  Requirement"   means any consent, approval, authorization or permit of, or filing with or notification to, any Person which is required to be obtained, made or complied with for or in connection with any sale, assignment or transfer of any Asset or any interest therein; provided, however, that "Transfer   Requirement"   shall not include any consent of, notice to, filing with, or other action by any Governmental Body in connection with the sale or conveyance of oil and/or gas leases or interests therein or Easements or interests therein, if they are not required prior to the assignment of such oil and/or gas leases, Easements or interests or they are customarily obtained subsequent to the sale or conveyance (including consents from state agencies).
"Transfer  Taxes" has the meaning set forth in Section 12.3. "Units" has the meaning set forth in Section 1.2(c). "UTPCPL"  has the meaning set forth in Section 11.9.




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




























































































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PURCHASE   AND SALE AGREEMENT


This Purchase and Sale Agreement (this "Agreement")  dated as of March 13, 2014, is executed by and between Black Elk Energy Offshore Operations, LLC, a Texas limited liability company  ("Seller"),   and  SandRidge  Energy  Offshore,  LLC,  a  Delaware  limited  liability company ("Purchaser").


RECITALS


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


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


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


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






ARTICLE  1
PURCHASE  AND SALE
 Section  1.1      Purchase and Sale.
At the Closing, and upon the terms and subject to the conditions of this Agreement, Seller
agrees to sell, transfer and convey the Assets to Purchaser and Purchaser agrees to purchase,
accept and pay for the Assets and to assume the obligations attributable to the Assets (including, without limitation the Assumed Seller Obligations).


Section  1.2      Assets.


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


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


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


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


(d)      All  contracts,   agreements,   and  instruments   by which  the  Properties,   Equipment, Pipelines,   Records,   and  Included   Geologic   Data  (collectively,   the  "Subject    Properties")     are bound,  or that  relate  to or are otherwise   applicable  to the Subject  Properties,   only  to the extent such contracts  are valid  and existing  and applicable  to the Subject  Properties  rather  than Seller's other properties,  including  but not limited to, operating  agreements,  unitization,  pooling and communitization    agreements,    declarations   and  orders,  joint   venture   agreements,   farmin  and farmout agreements, exploration agreements, participation agreements, exchange agreements, transportation    or  gathering   agreements,    agreements    for  the   sale  and   purchase   of  oil,  gas, casinghead   gas  or  processing    agreements    to  the  extent   applicable    to  the  Properties   or  the Hydrocarbons   produced   from  the  Properties,   including  but  not  limited  to  those  identified  on Exhibit   A-5  (collectively,   the  "Contracts"),     but  excluding  any master  service  agreements  and any  contracts,   agreements    and  instruments   to  the  extent  transfer   is  restricted   by  third-party agreement  or applicable  Law  and the necessary  consents  to transfer  are not obtained  pursuant  to Section   7.7  and  provided   that  "Contracts"     shall  not  include  the  instruments   constituting   the Leases  or Easements;


(e)      All easements,  permits,  licenses,  servitudes,  rights-of-way,   surface  leases and other surface   rights   and   all   contracts,    agreements,    and   instruments    by   which   they   are  bound (collectively,   the  "Easements")     appurtenant   to, and used  or held for use  in connection  with the Properties  (including  those  identified  on Exhibit   A-3, but excluding  any permits  and other rights to the extent  transfer  is restricted  by third-party   agreement  or applicable  Law and the necessary consents  to transfer  are not obtained  pursuant  to Section  7.7;


(f)       All platforms,   equipment,   machinery,  fixtures  and other tangible  personal  property and  improvements    set  forth  on  Exhibit    A-4  and  all  other  platforms,   equipment,   machinery, fixtures  and  other  tangible   personal   property   and  improvements    located   on the  Properties   or used,  or held for use,  primarily   in connection  with the  operation  of the  Properties  (collectively, "Equipment");






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(g)     All flow lines, pipelines, gathering systems and appurtenances thereto set forth on Exhibit  A-2 and all flow lines, pipelines, gathering systems and appurtenances thereto located on the Properties or used, or held for use, in connection with the operation of the Properties (collectively, "Pipelines"  and, together with the Equipment and Wells, "Personal  Property");


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


(i)      All Imbalances;


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


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


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


Section 1.3     Excluded Assets.


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


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






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


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


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


(e)      Intentionally   Omitted;


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


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


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


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


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


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


(1)        all proprietary   and other computer  software;


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


(n)      except  to the extent  specifically  provided  in Section 1.2(k), all Geologic  Data; (0)      all offices  and office  leases;
(p)      any personal  property  that is not directly  related  to the Assets;  and






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(q)      the Excluded  Contracts.


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


Section 1.4     Effective  Time; Proration  of Costs and Revenues.


(a)       Subject  to Section 1.5, possession  of the Assets  shall be transferred  from  Seller to Purchaser,   at  the  Closing,   but  effective   as  of  7:00  A.M.,  local  time,  on  March   1, 2014  (the "Effective Time"), as described  below.


(b)      "Earned"   and  "Incurred",    as  used  in  this  Agreement,    shall  be  interpreted   in accordance  with generally  accepted  accounting  principles  and Council  of Petroleum  Accountants Society   (COPAS)    standards,    as  applicable.    "Property    Costs"  means   all  third-party   costs attributable   to the ownership   and  operation  of the  Assets  (including  without  limitation  costs of insurance   relating   specifically    to  the  Assets,   royalties   and  overriding   royalties   payable   on account   of  production    from  the  Assets,   and  ad  valorem,   property,   severance,   Hydrocarbon production  and similar  taxes  based upon or measured  by the ownership  or operation  of the Assets or the production   of Hydrocarbons   therefrom,   but excluding  taxes  imposed  on or measured  by income  and any other  taxes)  and capital  expenditures   Incurred  in the ownership  and operation  of the  Assets  in  the  ordinary   course  of  business   and,  where  applicable,   in  accordance   with  the relevant  operating  or unit agreement,   if any, and overhead  costs charged  to the Assets  under the relevant   operating   agreement    or  unit   agreement,    if  any,   by  unaffiliated    third   parties,   but excluding  without  limitation   liabilities,   losses,  costs,  and  expenses  attributable   to (i) claims  for personal  injury  or death,  property  damage  or violation  of any Law,  (ii) obligations  to plug wells, (iii)  obligations   to  dismantle,   abandon   and  salvage   platforms,   pipelines,   facilities,   and  other equipment   (iv)  obligations   to remediate   any  contamination   of groundwater,   surface  water,  soil, Equipment  or Pipelines  under  applicable  Environmental   Laws,  (iv) obligations   to furnish  make­ up gas according  to the  terms  of applicable  gas sales,  gathering  or transportation   contracts,  (v) gas  balancing   obligations   and  (vi)  obligations   to  pay  working   interests,   royalties,   overriding royalties  or other  interests  held in suspense,  all of which are addressed  in Article 11 or elsewhere in  this  Agreement.      Notwithstanding    anything   to  the  contrary   set  forth  in  this  Agreement, however,   Purchaser   shall  have  no  liability  or  responsibility   for  Property   Costs  attributable  to Seller's   bonding  or  surety  obligations   or with  respect  to  the  cost  of  any  windstorm   insurance premiums   Incurred  by  Seller.    Determination   of whether  Property  Costs  are attributable   to the period before  or after the Effective  Time  shall be based on when services  are rendered,  when the goods  are delivered,  or when  the work  is performed.    For clarification,   the date an item or work is  ordered  is  not  the  date  of  a transaction,   but  rather  the  date  on  which  the  item  ordered  is delivered  to the job  site, or the date on which the work ordered  is performed,   shall be the relevant date.   For purposes  of allocating  Hydrocarbon   production   (and  accounts  receivable  with respect thereto),  (i)  liquid  Hydrocarbons    shall  be  deemed  to  be  "from  or  attributable   to"  the  Leases, Lands,  Units,  and  Wells  when  they  pass through  the  liquid  sales  and/or  royalty  meters,  and (ii) gaseous  Hydrocarbons   shall be deemed  to be "from  or attributable  to"  the Leases,  Lands,  Units,




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and Wells when they pass through the gas sales meters on the pipelines through which they are transported.  Seller shall provide to Purchaser, prior to Closing, all data necessary to support any estimated allocation, for purposes of establishing the Hydrocarbon production revenues, Property Costs and   other expenses relating to pre and post-Effective Time periods. Ad valorem and property taxes, right-of-way fees, insurance premiums and other Property Costs that are paid periodically shall be prorated based on the number of days in the applicable period falling before and the number of days in the applicable period falling at or after the Effective Time, except that Hydrocarbon production, severance and similar taxes shall be prorated based on the number of units actually produced, purchased or sold or proceeds of sale, as applicable, before, and at or after, the Effective Time.


Section 1.5     Delivery of Records.


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




ARTICLE  2
PURCHASE  PRICE 
Section 2.1     Purchase Price.
The purchase price for the Assets (the "Purchase  Price")  shall be Fifty  Million Dollars ($50,000,000.00), payable in United States currency by wire transfer in same day funds as and when provided in this Agreement.


Section 2.2     Allocation of Purchase Price.


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


(a)      As the basis for determination of Title Benefit Amounts and Title Defect Amounts and  for  determination  of  casualty  and  condemnation  amounts  and  to  notify  holders  of preferential rights of Purchaser's offer; and


(b)     As otherwise provided in this Agreement.


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


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Section 2.3     Intentionally  Omitted. Section 2.4     Intentionally  Omitted. Section 2.5     Allocation of Purchase Price.
Purchaser has prepared and delivered to Seller the Allocated Values, consistent with the principles of Section 1060 of the Code and the Treasury Regulations thereunder.   Purchaser and Seller shall use the Allocated Values as the basis for reporting asset values and other items for purposes  of  all  federal,  state,  and  local Tax  Returns,  including without  limitation Internal Revenue Service Form 8594, if required, or any similar statement of such allocation that may be required.






ARTICLE  3
TITLE  MATTERS


Section 3.1     Seller's Title.


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


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


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


Section 3.2     Definition of Defensible Title.


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




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


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


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


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


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




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


(iii)      defects  based  on  failure  to  record  Leases  issued  by  any  state  or  federal
Governmental Body, or any assignments of such Leases,  in the real property,






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conveyance or other records of the county or parish in which such Property is located;


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


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


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




(vii)     the Existing Mortgages and Liens to the extent released with respect to the Assets at Closing or for which amounts have been placed in Escrow pursuant to Section
12.20.


Section  3.3     Definition of Permitted Encumbrances.
As used herein, the term "Permitted     Encumbrances"     means any or all of the following: (a)      Royalties and any overriding royalties, reversionary interests and other burdens on
production, to the extent that any such burden does not reduce Seller's  Net Revenue Interest below that shown in Exhibit   A and Exhibit  A-l or  increase Seller's working interest above that shown in Exhibit   A  and Exhibit    A-I   without a proportionate increase in the Net Revenue Interest;


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


(c)      Preference Rights applicable to this transaction as set forth in Schedule  7.7;
(d)     Transfer Requirements applicable to this transaction as set forth in Schedule  7.7; (e)     Liens for current Taxes or assessments not yet delinquent or, if delinquent, are
being contested in good faith in the normal course of business;


(f)      Materialman's,  mechanic's,  repairman's, employee's,  contractor's, operator's and other similar liens or charges arising in the ordinary course of business for amounts not yet delinquent (including any amounts being withheld as provided by Law), excluding, however, any liens or charges identified on Schedule  5.31


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


(h)      Rights   of  reassignment    arising   upon  final  intention   to  abandon   or  release   the Assets,  or anyone   of them  to the  extent  reflected  in one or more  of the  Contracts  set forth  on Exhibit  A-S;


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


(g)      Calls   on  Hydrocarbon    production   under   existing   Contracts   that   are  listed   on
Exhibit  A-5;


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


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


(m)     Any farmout  agreements  that are listed on Exhibit  A-5 affecting  the Assets; (n)      Any matters  shown  on Schedule 3.3(n);
(0)      Any  other  liens,  charges,   encumbrances,    defects  or  irregularities   which  do not, individually  or in the aggregate,  detract  in any material  respect  from the value  of, or interfere  in any material  respect  with  the use or ownership  of, the Assets  subject  thereto  or affected  thereby (as  currently   used  or  owned),   which  would  be  accepted   by  a  reasonably   prudent  purchaser engaged  in the business  of owning  and operating  oil and gas properties,  and which do not reduce Seller's   Net  Revenue   Interest   below  that  shown  in  Exhibit A  and  Exhibit A-I,   or  increase Seller's    working    interest    above    that   shown   III Exhibit  A   and   Exhibit A-I   without    a proportionate   increase  in Net Revenue  Interest;


(p)     Matters  that  would  otherwise  be considered  Title  Defects  but that do not meet the
Individual  Title Threshold  set forth in Section  3.4(j); (q)      Imbalances   associated  with the Assets;
(r)       Liens  granted   under  applicable  joint   operating   agreements   for  amounts  not  yet delinquent;  and


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




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Section 3.4     Notice of Title Defect Adjustments.


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


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


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


(d)     Remedies for Title Defects.


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


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




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


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


(iv)       elect to  attempt  to cure  the Title  Defect.    Seller  shall then  have  180 days after Closing  in which to cure the Title Defect.   Any Property  so held back from   the  initial   Closing   will  be  conveyed   to  Purchaser   at  a  Delayed Closing  within  ten  (l0)   days  following  the  date  that  the  Title  Defect  is cured,  at which  time  Seller  shall  be entitled  to payment  by Purchaser  of the  full  Allocated   Value   of  the  Property,   and  provided   further   that  if multiple   delayed  Closing  are  contemplated   as  a  result  of  this  provision and/or  Section 7.7(c), the delayed  Closings  may  be consolidated  on dates mutually  agreeable  to the Parties.   In the event  that Seller is unable to cure the Title  Defect  within  180 days of the  initial  Closing,  then  the remedies set forth  in subsection  (i) or (iii)  shall  be the sole remedies  for such Title Defect.    All  other  provisions   of Section 3.4(i) shall  apply  as written  and the Title  Expert  shall be selected  within  fifteen  (15) Business  Days  of the end of the 180 day cure period.


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


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


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


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


(ii)        if  the  Title   Defect   is  a  lien,  encumbrance    or  other   charge   which   is undisputed   and  liquidated  in amount,  then  the Title  Defect  Amount  shall










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be the amount necessary to be paid to remove the Title Defect from the
Title Defect Property;


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


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


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










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


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


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


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


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


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






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


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


Section 3.5     Casualty or Condemnation Loss.


(a)     Notwithstanding  anything herein to  the contrary, from  and  after the  Effective Time, but subject to the provisions of Section 3.5(b) and Section 3.5(c) and below, Purchaser shall assume all risk of loss with respect to, and any change in the condition of, the Assets and for production  of Hydrocarbons through  normal depletion (including but not  limited to the watering out of any Well, collapsed casing or sand infiltration of any Well) and the depreciation of Personal Property due to ordinary wear and tear with respect to the Assets.  Until Closing, Seller shall promptly notify Purchaser of each instance of a casualty loss with respect to the Assets, or any portion thereof, occurring from and after the execution of this Agreement up to the Closing, to the extent known to Seller and estimated to exceed $200,000.00.


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




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


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


Section 3.6     Limitations on Title Defects.


Subject to the following sentence, the right of Purchaser to assert a Title Defect under this Agreement shall terminate as of the Title Claim Date, provided there shall be no termination of Purchaser's or Seller's rights under Article  3 with respect to the Existing Mortgages and Liens and with respect to any bona fide Title Defect properly reported in a Title Defect Notice or bona fide Title Benefit Claim properly reported in a Title Benefit Notice on or before the Title Claim Date. Thereafter, Purchaser's  sole and exclusive rights and remedies with regard to title to the Assets shall be as set forth in, and arising under, the Conveyance transferring the Assets from Seller to Purchaser.


Section 3.7     Limitations on Applicability.


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








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required of it pursuant to OPA and 30 C.F.R §§ 250.7, 256.58, 256.59, and 256.61 in excess of any existing lease, pipeline or area-wide bond(s).  Until the governmental approval with respect to an assignment described in this Section 3.7 is obtained, however, the following shall occur:


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


(ii)       Purchaser's indemnity obligation under Section 11.4 shall include any and all  claims,  expenses  of  any  kind  or  character  relating  to  the  Assets accruing after the Effective Time, including but not limited to any regulatory costs incurred by Seller, excluding, however, any bonding costs and excluding any cost incurred by Seller in order to remedy any violation of  laws,  including  any  environmental  laws,  or  associated  with  any activities to respond to any INC to the extent attributable to periods prior to the Closing Date, with respect to Seller Operated Properties and the Effective Time, with respect to Properties operated by Purchaser or its Affiliates;


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


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


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


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


(c)     Upon such termination and rescission, this Agreement shall be null and void as between Purchaser and Seller with respect to the non-approved Assets and (i) Purchaser shall return to Seller the assignments and any and all other documents, materials and data previously delivered to Purchaser with respect to such Assets; and (ii) Seller shall return to Purchaser the






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Purchase  Price  allocated   to  such  Assets  in Schedule   2.2  without  interest,  less the  proceeds  of production  net of all expenses,  capital  expenditures,  royalties,  and costs of operations  (including plugging   and  abandonment    expenses   but   excluding   mortgage   interest   and  any  burdens   or encumbrances   created  by Purchaser  which  shall be released  prior  to this payment)  attributable  to the  Leases  and  other  rights  from  and  after  the  Effective   Time.    Seller  shall  not  be  liable  to Purchaser  if BOEM  approvals  are not obtained,  except as expressly  provided  in this Section  3.7.


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


(e)      The  Parties  acknowledge   and  agree  that  certain  of the  offshore  Assets  are in the nature  of contract  rights  that  are not  recognized   by the  BOEM  as  "record  title"  or  "operating rights,"  and  that,  accordingly,   the  BOEM  will  not  approve,   and  Purchaser   and  Seller  do  not expect  the BOEM  to approve,  the  assignment   of these  interests  from  Seller  to Purchaser.    The Parties  further  acknowledge   and  agree  that  Leases  OCS-G  03251,  OCS-G3256,   OCS-G  15241 OCS-G   15436,  and  OCS-G   13673  have  terminated   and  that  therefore   the  BOEM   will  not approve,  and Purchaser  and  Seller  do not expect  the BOEM  to approve,  the assignment  of those Leases   from  Seller   to  Purchaser.      Purchaser   shall  ensure   nevertheless    that  the  assignment documents  relating  to such interests  are appropriately   filed in the "non-required   filing"  system of the BOEM.   Such  interests  shall  be excluded  from the  scope  of Section  3.7(a)  for all purposes. The  Parties  further  acknowledge   and agree  that  an Assignment,   Conveyance  and Bill of Sale in the form of Exhibit  B shall be filed in the non-required  filing  system  of the BOEM  and in various county  conveyance   records  in Texas  and parish  conveyance   records  in Louisiana.    The  Parties agree  that  such  Assignment,   Conveyance   and  Bill  of  Sale  shall  be  sufficient  to  effectuate  the transfer  of title to the Assets  to Purchaser  regardless  of whether  the record  title, operating  rights, and  right  of way  assignments   filed  with  the  BOEM  are  approved   and  such  interests  assigned shall be excluded  from the scope of Section  3.7(a)  for all purposes.


(f)         With  respect  to  liabilities   assumed  by  Purchaser   under  this  Agreement   for  the Seller  Operated  Properties  assigned  to Purchaser  at the Closing,  from  and after the Closing  Date and until  the later of (i) the BOEM's   approval  of the assignments   contemplated   in Section  3.7(a) above,  or (ii) the  PSA  is rescinded  pursuant  to  Section  3.7(b)  above,  Purchaser   shall maintain and  provide,   at  its  cost,  insurance   coverage   as  required   pursuant   to  the  applicable   operating agreement  and such insurance  coverage  shall be endorsed  to provide  that Purchaser's   insurers  (a) name   Seller   and   Seller   Indemnified    Persons   as  additional    insureds   (except   for   worker's compensation   and  property   insurance  ), (b) waive  their  right  of  subrogation   against  Seller  and Seller Indemnified  Persons,  and (c) are primary  to any other  insurance  providing  any coverage  to Seller or any member  of Seller Indemnified  Persons.


ARTICLE    4
ENVIRONMENTAL     MATTERS
 Section  4.1      Assessment.


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(a)      From and after the date hereof and up to and including the Closing Date (or earlier termination of this Agreement) but subject to (i) applicable Laws, (ii) the other provisions of this Section  4.1 (iii) obtaining any required consents of third parties, including third party operators of the Assets (with respect to which consents Seller shall use commercially reasonable efforts to obtain), and (iv) Purchaser's execution of Seller's customary boarding agreement prior to access to Seller Operated Properties,  Seller shall afford to Purchaser and its officers, employees, agents, accountants, attorneys, investment bankers and other authorized representatives ("Purchaser's Representatives")      full access, during normal business hours and upon reasonable notice, to the Assets and all  Records and other documents in Seller's  or its Affiliates'  possession relating primarily  to  the  Assets.     Seller  shall  also  make  available  to  Purchaser  and  Purchaser's Representatives,  upon  reasonable  notice  during  normal  business  hours,  Seller's  personnel knowledgeable with respect to the Assets in order that Purchaser  may make such diligence investigation  as  Purchaser  considers  necessary  or  appropriate.    All  investigations  and  due diligence conducted  by Purchaser  or  any Purchaser's  Representative  shall  be conducted at Purchaser's sole cost, risk and expense and any conclusions made from any examination done by Purchaser or any  Purchaser's  Representative shall  result from Purchaser's  own independent review and judgment.


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


(c)      Intentionally Omitted.


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


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


(f)      Intentionally Omitted.




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Section 4.2     NORM, Wastes and Other Substances.


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


Section 4.3     Environmental Defects.


If, as a result of its investigation pursuant to Section 4.1, Purchaser determines that with respect to any individual Asset, there exists a violation of an Environmental Law (other than with respect to NORM and other than with respect to any issues disclosed herein or on any Exhibit or Schedule hereto or any other matter with respect to which Purchaser has knowledge prior to entering into this Agreement) (in each case, an "Environmental Defect"), then on or prior to the Closing Date   (the "Environmental  Claim  Date"), Purchaser may notify Seller in writing of such Environmental Defect (an "Environmental  Defect  Notice").    For all purposes of this Agreement,  Purchaser  shall  be  deemed  to  have  waived  any  Environmental  Defect  which Purchaser fails to assert as an Environmental Defect by an Environmental Defect Notice received by Seller on or before the Environmental Claim Date.  To be effective, each such notice shall set forth (i) a  description  of the  matter  constituting the alleged  Environmental  Defect, (ii) the Units/Wells and the associated Asset affected by the Environmental Defect, (iii) the estimated Lowest Cost Response to eliminate the Environmental Defect in question (the "Environmental Defect Amount"),  and (iv) supporting documents reasonably necessary for Seller to verify the existence  of  the  alleged  Environmental  Defect  and  the   Environmental  Defect  Amount. Commencing on the date that is two weeks after the execution of this Agreement, Purchaser shall furnish  Seller  once  every  two  (2)  weeks  until  the  Environmental  Claim  Date  with  an Environmental Defect Notice if any officer of Purchaser or its Affiliates discovers or becomes aware of an Environmental Defect during such two (2) week period.  Seller shall have the right, but not the obligation, to cure any Environmental Defect before Closing or, provided that the Parties shall have agreed to the general plan of remediation with respect to such Environmental Defect and the time period by which such remediation shall take place, after Closing.  If Seller disagrees with any of Purchaser's  assertions with respect to the existence of an Environmental Defect or the Environmental Defect Amount, Purchaser and Seller will attempt to resolve the dispute prior to Closing.   If the dispute cannot be resolved within ten (10) days of the first meeting of  Purchaser  and  Seller, either Party  may  submit the  dispute to  an environmental consultant approved in writing by Seller and Purchaser that is experienced in environmental corrective action at oil and gas properties in the relevant jurisdiction  and that shall not have performed professional services for either Party or any of their respective Affiliates during the previous five years (the "Independent   Expert").   The Independent Expert may elect to conduct the  dispute  resolution  proceeding  by  written  submissions  from  Purchaser  and  Seller with




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exhibits, including interrogatories, supplemented with appearances by Purchaser and Seller, if necessary, as the Independent Expert may deem necessary.  After the Parties and Independent Expert have had the opportunity to review all such submissions, the Independent Expert shall call for a final, written offer of resolution from each Party.  The Independent Expert shall render its decision within twenty (20) Business Days of receiving such offers by selecting one or the other of the offers. The Independent Expert may not award damages, interest or penalties to either Party with respect to any matter.  The decision of the Independent Expert shall be final and binding upon both Parties, without right of appeal.  Seller and Purchaser shall each bear its own legal fees and other costs of presenting its case to the Independent Expert. Each Party shall bear one-half of the  costs and expenses of the Independent Expert.   The Parties  shall adjust the Purchase Price to reflect the Environmental Defect Amounts, as agreed by the Parties or as determined by the Independent Expert, for all uncured Environmental Defects; provided, that notwithstanding anything to the contrary, (a) in no event shall there be any adjustments to the Purchase Price for any individual uncured Environmental Defect for which the Environmental Defect Amount therefor does not exceed $75,000 ("Individual   Environmental    Threshold"); and (b) in no  event shall there  be any adjustments to  the Purchase  Price for any uncured Environmental Defect unless the aggregate Environmental Defect Amount attributable to all Material  Environmental  Defects  exceeds  five  percent  (5%)  of  the  Purchase  Price  (the "Environmental     Defect   Deductible"),    after  which  point  Purchaser  shall  be  entitled  to adjustments  to  the  Purchase  Price  or  other  remedies  only  to  the  extent  the  aggregate Environmental Defect Amounts with respect to all uncured Material Environmental Defects are in excess of such Environmental Defect Deductible.  To the extent the Independent Expert fails to determine any disputed Environmental Defect Amounts prior to Closing, then, within ten (10) days after the Independent Expert delivers written notice to Purchaser and Seller of his award with respect to an Environmental Defect Amount, Seller shall pay to Purchaser the amount, if any, so awarded by the Independent Examiner.


Section 4.4     Intentionally Omitted.


Section 4.5     Exclusive Remedy.


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


ARTICLES
REPRESENTATIONS AND WARRANTIES OF SELLER


Section 5.1     Generally.


(a)     Any representation  or warranty  qualified "to  the  knowledge  of  Seller" or "to Seller's knowledge" or with any similar knowledge qualification is limited to matters within the actual knowledge of the officers of Seller or its Affiliates and those employees of Seller or any of its Affiliates who have responsibility for the Assets and who have the following titles:  President and Chief Executive Officer; General Counsel, Vice President of Land; Land Manager; Chief








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Financial  Officer, and  Chief  Technical  Officer.   "Actual  knowledge"  for  purposes of this
Agreement means information actually personally known by such Persons.


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


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


Section 5.2     Existence and Qualification.


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


Section 5.3     Power.


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


Section 5.4     Authorization and Enforceability.


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


Section 5.5     No Conflicts.


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


Section 5.6     Liability for Brokers' Fees.


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


Section 5.7     Litigation.


With respect to the Assets and Seller's  or any of its Affiliates'  ownership, operation, development, maintenance, or use of any of the Assets, except as set forth in Schedule 5.7: (i) no proceeding, arbitration, action, suit, pending settlement, or other legal proceeding of any kind or nature before or by any Governmental Body (each, a "Proceeding,"  and collectively "Proceedings")  (including any take-or-pay claims) to which Seller or any of its Affiliates is a party and which relates to the Assets is pending or, to Seller's  knowledge, threatened against Seller or any of its Affiliates; (ii) to Seller's knowledge, no Proceeding or investigation to which Seller is not a party which relates to the Assets is pending or threatened; and (iii) no notice in writing from any third party (including any Governmental Body) has been received by Seller or any of its Affiliates  threatening  any  Proceeding relating to  the  Assets which could have  a Material Adverse Effect  (excluding  any notices relating to any Environmental Liabilities or Environmental Law to the extent reflected in Section 5.21 or Schedule 5.21).


Section 5.8     Taxes and Assessments.


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


Section 5.9     Condemnation.


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




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Section 5.10   Contracts.


Except as disclosed on Schedule  5.10, to the knowledge of Seller, Seller has paid its share of all costs (including all Property Costs) payable by it under the Contracts.  Seller is in compliance and, to Seller's knowledge, all counterparties are in compliance under all Contracts, except  as  disclosed on  Schedule  5.10  and except  for  such  non-compliance  as would  not, individually or in the aggregate, exceed the sum of$100,000.    To Seller's knowledge, Schedule 5.10 sets forth all agreement(s) or contracts (i) for the sale, exchange, or other disposition of Hydrocarbons  produced  from  or  attributable  to  Seller's  interest  in  the  Assets  that  is  not cancelable without penalty or other material payment without first providing more than 60 days prior written notice and (ii) that could reasonably be expected to result in aggregate payments by Seller or aggregate revenues to Seller, of more than $200,000.00 (net to the interest of Seller) during the current or any subsequent fiscal year (based solely on the terms thereof and without regard to any expected increase in volumes or revenues).


Section 5.11   Payments for Hydrocarbon Production.


Except as set forth on Schedule 5.11, to the knowledge of Seller (a) all material rentals, royalties, excess royalty, overriding royalty interests, Hydrocarbon production payments, and other payments due and payable by Seller to lessors, overriding royalty holders and other interest owners under  or  with  respect  to  the  Assets  and  the  Hydrocarbons  produced therefrom  or attributable thereto,  have  been  paid,  and  (b)  Seller is not  obligated  under any  contract or agreement for the  sale of  gas from  the Assets containing  a take-or-pay,  advance payment, prepayment, or similar provision, or under any gathering, transmission, or any other contract or agreement with respect to any of the Assets to gather, deliver, process, or transport any gas without then or thereafter receiving full payment therefor.                                                .


Section 5.12   Governmental Authorizations.


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


Section 5.13   Outstanding Capital Commitments.


As of the date hereof, there are no outstanding AFEs or other commitments to make capital expenditures which  are  binding on the  Seller Operated  Properties and  which Seller


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reasonably anticipates will individually require expenditures by the owner of the Assets after the Effective Time in excess of $75,000 (net to Seller's  interest excluding non-consent interests) other than those shown on Schedule 5.13.


Section 5.14   Imbalances.


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


Section 5.15   Bankruptcy.


There are no bankruptcy, reorganization, or receivership proceedings pending against, or, to Seller's knowledge, being contemplated by, or threatened against, Seller or pending against, or, to Seller's knowledge, being contemplated by, or threatened against, any of its subsidiaries.


Section 5.16   Affiliated Contracts.


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


Section 5.17   Foreign Person.


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


Section 5.18   Preference Rights.


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


Section 5.19   Transfer Requirements and Other Consents.


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


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Section 5.20   No Violation of Laws.


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


Section 5.21   Enviromnental.


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


Section 5.22   Suspended Funds.


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


Section 5.23   Non-Consent Operations.


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


Section 5.24   BOEM or BSEE Incidents of Non-Compliance and Suspensions. Seller has  and  shall  retain  responsibility for  all  BOEM  or  BSEE  incidents of non­
compliance ("INC")  and suspensions prior to the Closing Date  set forth on Schedule 5.24 and there are no outstanding unresolved INCs issued by any Govermnental Body with respect to any Asset except to the extent set forth on Schedule 5.24.


Section 5.25   Casualty Losses.


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


Section 5.26   Third Party Beneficiary.


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








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Section 5.27   Condition of Personal Property.


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


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


Except as set forth on Schedule  5.28 and  in Sections  12.21, 12.22, 12.23, 12.24, and
12.25, and except as to any general or area-wide bonding posted with the BOEM, there are no
bonds, letters of credit, escrows, guarantees or other security pertaining to the Assets that have been posted by Seller and/or any of its Affiliates or by a third Person on its behalf for which, upon Closing, Purchaser must replace or to which Purchaser will be bound or to which the Assets  will  be  subject  (unless  replacement  is not  required  by  BOEM  due to the  financial condition of Purchaser).


Section 5.29   Idle Iron.


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


Section 5.30   Reserved.


Section 5.31   Seller's Existing Mortgages and Liens.


Schedule 5.31 lists all outstanding mortgages or other encumbrances affecting the Assets granted by Seller and to Seller's knowledge, all liens filed or, threatened against Seller, or any of its Affiliates,  with  respect  to  the  ownership  or  operation  of  the  Assets  including, without limitation, the Existing Mortgages and Liens.






ARTICLE  6
REPRESENTATIONS   AND WARRANTIES  OF PURCHASER


Purchaser represents and warrants to Seller the following: Section 6.1     Existence and Qualification.


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


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Section 6.2     Power.


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


Section 6.3     Authorization and Enforceability.


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


Section 6.4     No Conflicts.


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


Section 6.5     Liability for Brokers' Fees.


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


Section 6.6     Litigation.


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


Section 6.7     Financing.


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


Section 6.8     Limitation.








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


Section 6.9     SEC Disclosure.


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


Section 6.10   Bankruptcy.


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


Section 6.11   Qualification.


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


Section 6.12   Consents.


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


Section 6.13   Independent Evaluation.


Purchaser is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities.   In making its decision to enter into this Agreement and to consummate the transactions contemplated herein, except for the representations and warranties


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expressly made by Seller in Article 5 of this Agreement, in the Conveyances or confirmed in any certificate furnished or to be furnished to Purchaser pursuant to this Agreement, Purchaser (a) has relied or shall rely solely on its own independent investigation and evaluation of the Assets and the advice of its own legal, tax, economic, insurance, environmental, engineering, geological and  geophysical  advisors  and  the  express  provisions  of  this  Agreement  and  not  on  any comments, statements, projections or other materials made or given by any representatives or consultants or advisors engaged by Seller and (b) has satisfied or shall satisfy itself through its own due diligence as to the environmental and physical condition and state of repair of and contractual arrangements and other matters affecting the Assets.  Purchaser has no knowledge of any fact that results in the breach of any representation, warranty or covenant of Seller given hereunder.


Section 6.14   NORM, Wastes and Other Substances.


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


ARTICLE  7
COVENANTS  OF THE PARTIES


Section 7.1     HSR Act.


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


Section 7.2     Government Reviews.






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


Section 7.3     Breaches.


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


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


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


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


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


Section 7.5     Public Announcements.


Until the Closing, neither  Seller nor Purchaser shall make  any press release or other public announcement regarding  the  existence of this Agreement,  the  contents hereof or the transactions  contemplated  hereby  without the prior  written consent  of the others; provided, however, the foregoing shall not restrict disclosures by Purchaser or Seller which are required by applicable securities or other laws or regulations or the applicable rules of any stock exchange






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having jurisdiction over the disclosing Party or its Affiliates.  At or after Closing, the content of any press release or public announcement first announcing the consummation of this transaction shall be subject to the prior review and reasonable approval of Seller and Purchaser; provided, however, the foregoing shall not restrict disclosures by Purchaser or Seller which are required by applicable securities or other laws or regulations or the applicable rules of any stock exchange having jurisdiction over the disclosing Party or its Affiliates.


Section 7.6     Operation of Business.


Except as set forth on Schedule 7.6, until the Closing, Seller (i) will not, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, commit to any operation, or series of related operations thereon, reasonably anticipated to require future capital expenditures by Purchaser as owner of the Assets in excess of $75,000 (net to Seller's interest excluding non-consent interests), or make any capital expenditures in respect of the Assets in excess  of  $75,000  (net  to  Seller's  interest  excluding  non-consent  interests),  or  terminate, materially amend, execute or extend any material Contracts affecting the Assets, (ii) will use commercially  reasonable  efforts  to  maintain  insurance  coverage  on  the  Assets  presently furnished by nonaffiliated third parties in the amounts and of the types presently in force, (iii) with  respect to  the  Seller  Operated  Properties, will use  commercially  reasonable efforts to maintain  in full  force and  effect  all  Leases and Easements,  (iv)  with  respect to the  Seller Operated Properties, will maintain all material governmental permits and approvals affecting the Assets, (v) will not transfer, farmout, sell, encumber or otherwise dispose of any Assets, except for (A) sales and dispositions  of Hydrocarbon production in the ordinary course of business consistent with past practices or (B) transfers, farmouts, encumbrances or other dispositions of Assets, in one or more transactions, not exceeding $75,000 (net to Seller's interest) of consideration (in any form), in the aggregate, (vi) will consult with Purchaser prior to agreeing to conduct any repairs or work after the date of this Agreement in order to remedy any violation of Laws, including Environmental Laws, or associated with any activities to respond to incidents of non-compliance, and provide reasonable advance notice to Purchaser in order that Purchaser may be present to observe such repair or work activities, and (vii) will not commit to do any of the foregoing. Purchaser's approval of any action restricted by this Section 7.6 shall be considered granted within ten (10) days (unless a shorter time is reasonably required by the circumstances and  such  shorter  time  is  specified  in  Seller's  written notice)  of  Seller's  written notice to Purchaser requesting such consent unless Purchaser notifies  Seller to the contrary in writing during that period. In the  event of an emergency, Seller may take  such action as a prudent operator would take and shall notify Purchaser of such action promptly thereafter.


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


Section 7.7     Preference Rights and Transfer Requirements.


(a)     The  transactions  contemplated  by this  Agreement  are  expressly  subject to  all validly existing and applicable Preference Rights and Transfer Requirements.   Subject to the








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obligations   as  set  forth   in  this  Section   7.7,  All  Preference   Properties   shall  be  conveyed   to Purchaser  at the Closing.    Within  three  (3) Business  Days  after  the Closing,  Seller  shall initiate all  procedures   which   are  reasonably   required   to  comply   with   or  obtain   the  waiver   of  all Preference   Rights   and  Transfer   Requirements   set  forth  in  Schedule 7.7  with  respect  to  the transactions   contemplated    by  this  Agreement.      Seller  shall  use  its  commercially   reasonable efforts  to  obtain  all  applicable   consents  and to obtain  waivers  of applicable  Preference   Rights; provided,  however,  neither  Seller nor Purchaser  shall be obligated  to pay any consideration  to (or incur  any  cost  or  expense   for  the  benefit  of)  the  holder  of  any  Preference   Right  or  Transfer Requirement  in order to obtain  the waiver thereof  or compliance  therewith.


(b)      If the holder  of a Preference  Right timely  elects  following  the Closing  to purchase that  portion   of  an  Asset  that  is  subject  to  a Preference   Right  (a  "Preference  Property") in accordance  with the terms  of such Preference  Right:


		
	(i)
	Contemporaneously     with  its  receipt   of  the  Allocated   Value   of  the  Preference Property   from  the  holder  of  a Preference   Right  as  set  forth  in  subsection   (iv) below,  Seller  shall be obligated  to refund  to Purchaser  the Allocated  Value of the Preference  Property to account  for the exclusion  of Preference  Property;




(ii)        Contemporaneously    with  the transfer  to the holder  of the Preference  Right  as set forth  in subsection   (iv) below,  Purchaser  and Seller  shall  be obligated  to execute conveyance    documents    in  substantially    the   same   form   as  the   Conveyances executed   by the  Parties  at the  Closing  (but  with  Purchaser   as the  Assignor  and Seller  as  the  Assignee   and  with  such  other  appropriate   revisions   to  reflect  the unwinding    of  the  transactions   associated   with   such  Preference   Property)   and sufficient  to reconvey  such Preference  Property  to Seller upon Purchaser's   receipt of the Allocated  Value  of such Preference  Property;


(iii)       upon  such  reconveyance   of the Preference  Property  by Purchaser,  the Preference
Property  shall be deemed  an Excluded  Assets;  and


(iv)       Seller  shall  be  obligated   to  close  and  convey   such  Preference   Property  to  the holder  of  the  Preference   Right  pursuant  to  a purchase   and  sale  agreement   with terms and conditions  substantially  identical  to this Agreement.


(c)      If:


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




(ii)        an Asset  is subject  to a Transfer  Requirement   identified  on Schedule 7.7, and such Transfer  Requirement   is not waived,  complied  with or otherwise satisfied  prior to the Closing Date;


Seller  and  Purchaser   shall  mutually   determine   whether   to  (x)  extend  the  Closing  Date  up to fifteen  (15)  days  to  attempt   to  address  such  suit  or Transfer   Requirement,   (y) proceed  to  the




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Closing regardless of (i) or (ii), or (z) have Seller retain the Asset or portion thereof affected by such Preference Right or Transfer Requirement (a "Retained  Asset")  from the Assets to be transferred and conveyed to  Purchaser at the  Closing. In the  event the Parties elect (z) the Purchase Price to  be paid  at the  Closing shall be reduced by the Allocated  Value of such Retained Asset pursuant to Section  7.7(b). Any Retained Asset so held back at the originally scheduled Closing will be conveyed to Purchaser at a delayed Closing (which shall become the new Closing Date with respect to such Retained Asset) within ten (10) days following the date on which the suit, action or other proceeding, if any, referenced in clause (i) above is settled or a judgment is rendered (and no longer subject to appeal) permitting transfer of the Retained Asset to Purchaser pursuant to this Agreement and Seller obtains, complies with, obtains a waiver of or notice of election not to  exercise or otherwise satisfies all remaining Preference Rights and Transfer Requirements with respect to such Retained Asset as contemplated by this Section (or if multiple Assets are Retained Assets, on a date mutually agreed to by the Parties in order to consolidate, to the extent reasonably possible, the number of Closings).  At a delayed Closing provided for above, Purchaser shall pay Seller a purchase price equal to the amount by which the Purchase Price was reduced on account of the holding back of such Retained Asset; provided, however, if all such Preference Rights and Transfer Requirements with respect to any Retained Asset are not obtained, complied with, waived or otherwise satisfied as contemplated by this Section within one hundred eighty (180) days after the Closing has occurred with respect to any Asset, then such Retained  Asset  shall be eliminated  from the Assets  and  shall become an Excluded Asset.  If Seller and Purchaser are unable to agree upon (x), (y), or (z), the provisions of (z) shall govern.


Section 7.8     Tax Matters.


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


Purchaser and Seller shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of any Tax Return and any audit, litigation or other proceeding with respect to Taxes.   Such cooperation shall include the retention and (upon the other Party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide  additional information and explanation of any material provided




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hereunder. Each of Purchaser and Seller agrees (a) to retain all books and records with respect to Tax matters and the allocation of Purchase Price provided for in Section 2.5 pertinent to the acquired Assets relating to  any taxable period  beginning before  the  Closing Date until the expiration of the statute of limitations (and, to the extent notified by Purchaser or Seller, any extensions  thereof)  of  the  respective  taxable  periods,  and to  abide  by  all  record  retention agreements entered into with any Taxing Authority, and (b) to give the other Party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other Party so requests, each Party shall allow the other Party the option of taking possession of such books and records prior to their disposal.   Purchaser and Seller further agree, upon request, to use their commercially reasonable efforts to obtain any certificate or other document from any Taxing Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated.


Section 7.9     Further Assurances.


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


Section 7.10   Intentionally Omitted.








Section 7.11   No Solicitation of Transactions.


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


Section 7.12   Record Retention.


Purchaser, for a period of seven years following Closing, will (i) retain the Records, (ii) provide Seller, its Affiliates and its and their officers, employees and representatives with access to the Records (to the extent that Seller has not retained the original or a copy) during normal business hours for review and copying at Seller's expense and upon reasonable notice, and (iii) provide Seller, its Affiliates and its and their officers, employees and representatives with access,


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


Section 7.13   Bonds,  Letters  of Credit and Guarantees.


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


Section 7.14   Cure of Misrepresentations.


If any of the representations   and warranties  contained  in Article 5 or Article 6 hereof are determined  (whether  by notice  from a Party  or otherwise)  to have  been  untrue  or incorrect  as of the date of this Agreement,  then any cure of such untrue  or incorrect  representation   and warranty shall be at the expense  of the Party  that made  such representation   and warranty.
Section 7.15   Cooperation  with Respect  to Seller Retained  Litigation,  Etc. 
Purchaser   agrees  to  use  reasonable   efforts  to cooperate   with  Seller  in  connection  with
Seller's   defense  and other  actions  relating  to or arising  out of the  litigation  and claims  set forth
on   Schedule  5.7.     Purchaser    agrees   to   make   available,    at   Seller's    expense,   Purchaser's employees  engaged  in, or having  information   about,  the ownership  and operation  of the Assets, for  the  purposes   of  providing   testimony,   depositions,   information   and  other  related  activities relating  to such litigation  and claims.   Additionally,  each Party  agrees to use reasonable  efforts to cooperate   with  the  other  in  connection   with  any  third  party  audits  pertaining   to pre-Effective Time  matters.


Section 7.16   Plugging,  Abandonment,   Decommissioning   and Other Costs.












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








ARTICLE  8
CONDITIONS  TO CLOSING


Section 8.1     Conditions of Seller to Closing.


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


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


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


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


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










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


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


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


(h)     Seller shall have received a release of the Existing Mortgages and Liens from, as applicable, its Existing Mortgagees or lien claimants with respect to the Assets, on forms or instruments  reasonably  acceptable  to  Purchaser,  or has  entered  into  a  mutually  acceptable agreement with Purchaser regarding the escrow of funds attributable to one or more Existing Mortgages and Liens.


Section 8.2     Conditions of Purchaser to Closing.


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


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


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


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








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


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


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


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


(h)      Seller  shall  have  received  and furnished  Purchaser  with  copies  of a release  of the Existing  Mortgages  and Liens  from, as applicable,  its Existing  Mortgagees  or lien claimants  with respect  to the Assets,  executed   on forms  or instruments   reasonably   acceptable   to Purchaser,  or has entered  into a mutually  acceptable   agreement  with  Purchaser  regarding  the escrow  of funds attributable  to one or more  Existing  Mortgages  and Liens; and


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






ARTICLE    9
CLOSING
 Section  9.1      Time and Place of Closing.
Unless  this Agreement   shall have been terminated  and the transactions   herein  contemplated  shall have been abandoned  pursuant  to Article   10 or any other express  termination   provision  set forth in this  Agreement,   subject  to the provisions  of Section  7.7(c)  and  subject  to the satisfaction  or waiver  of the conditions   set forth  in Article   8 (other than  conditions  the fulfillment  of which by their nature  is to occur  at the completion  of the transactions   contemplated   by this Agreement,  the Closing  shall  take  place  at 2:00  p.m.,  local  time,  on March   13, 2014  ("Closing"),    at  Seller's offices  in Houston,  Texas,  unless  another  date,  time  or place  is mutually  agreed  to in writing  by Purchaser  and Seller.   If any of the conditions  (other than conditions  the fulfillment  of which by their nature  is to occur at the Closing)  set forth in Article  8 are not satisfied  or waived  at the time the  Closing  is to occur  pursuant   to the  foregoing   sentence   of this  Section   9.1,  then  subject  to Article   10 the  Closing  shall  occur  on a date  thereafter  that  is the  third  Business  Day  after the






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satisfaction or waiver of all such conditions.  The date on which the Closing occurs is herein referred to as the "Closing Date."


Section 9.2     Obligations of Seller at Closing.


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


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


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


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


(d)     releases of the Existing Mortgages and Liens other than those for which amounts have been escrowed pursuant to a mutually acceptable escrow; and


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


Section 9.3     Obligations of Purchaser at Closing.


At the Closing, upon the terms and subject to the conditions of this Agreement, Purchaser shall  deliver or  cause  to  be  executed  and delivered  to  Seller, or perform  or  caused to be performed, the following:
(a)     a wire transfer of the Purchase Price, in same-day funds; (b)     the Conveyances, duly executed by Purchaser;
(c)      letters-in-lieu of transfer orders covering the Assets, duly executed by Purchaser;
and
(d)     any other  agreements, instruments and documents which are required by other terms of this Agreement to be executed and/or delivered at Closing.


Section 9.4     Payments.


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


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


ARTICLE 10
TERMINATION


 Section 10.1   Termination.


This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:
(a)     by mutual written consent of Seller and Purchaser; (b)     by either Seller or Purchaser; if:
		
	(i)
	the  Closing  shall not have  occurred  on  or before  April  1, 2014  (the "Termination Date"); provided, however, the right to terminate this Agreement  under this  Section 10.1(b)(i) shall  not be  available (A)  to Seller, if any breach of this Agreement by Seller has been the principal cause of, or resulting in, the failure of the Closing to occur on or before the Termination Date or (B) to Purchaser, if any breach of this Agreement by Purchaser has been the principal cause of, or resulted in, the failure of the Closing to occur on or before the Termination Date; or




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




(iii)      the  sum of all Title Defects exceeds, in the  aggregate, fifteen percent
(15%) of the Purchase Price; or


(iv)      the sum of all Environmental Defects exceeds, in the aggregate, fifteen percent (15%) of the Purchase Price; or


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




(c)     by Seller, if (i) any of the representations and warranties of Purchaser contained in this Agreement shall not be true and correct in all material respects (provided that any such representation or warranty  that  is  already qualified by a  materiality  standard or a Material Adverse Effect qualification shall not be further qualified); or (ii) Purchaser shall have failed to fulfill in any material respect any of its obligations under this Agreement; and, in the case of






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each of clauses (i) and (ii), such misrepresentation, breach of warranty, or failure, if curable, has not  been cured  within  ten  (10) days after  written  notice thereof  from  Seller to  Purchaser; provided that any cure period shall not extend beyond the Termination Date and shall not extend the Termination Date; or


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


Section 10.2   Effect of Termination.


If this Agreement is terminated pursuant to Section 10.1, this Agreement shall become void and of no further force or effect (except for the provisions of Section 4.4 Section 5.6, Section 6.5, Section 7.5, Section 11.8, Section 11.9, and Section 11.10 of this Agreement and this Article 10, the Section entitled "Definitions," and Article 12, all of which shall continue in full force and effect).   Notwithstanding the foregoing, nothing contained in this Section 10.2 shall relieve any Party from liability for Losses resulting from its breach of this Agreement.


Section 10.3   Intentionally Omitted.


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


Section 11.1   Assumed Seller Obligations.


(a)       Subject to  the  indemnification  by  Seller under Section 11.3,   on the  Closing Date, Purchaser shall assume and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled,  performed,  paid  or  discharged),  and  also  hereby  releases  Seller  and  each  Seller Indemnified Person from and against, all of the obligations and liabilities of Seller, known or unknown, with respect to the  Assets,  REGARDLESS OF  FAULT  of Seller or any Seller Indemnified Person and regardless of whether such obligations or liabilities arose prior to, on or after the Effective Time,  including but not limited  to obligations to (a) furnish makeup gas according to the terms of applicable gas sales, gathering or transportation contracts, and to satisfy all  other gas  balancing  obligations,  if  any,  (b) pay  working  interests,  royalties,  overriding royalties and other interests held in suspense, (c) properly plug and abandon any and all wells (including, without limitation, the Wells), including inactive wells or temporarily abandoned wells, drilled on the Properties, as required by Law, (d) replug any well, wellbore, or previously plugged well on the Properties to the extent required by Governmental Body, (e) dismantle, salvage and remove any equipment, structures, materials, platforms, flow lines, and property of whatever kind related to or associated with operations and activities conducted on the Properties, (f)  clean up, restore  and/or  remediate the  premises  covered by  or related  to  the Assets  in




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accordance with applicable agreements and Laws, (g) pay all Property Costs, (h) perform all obligations applicable to  or imposed on the lessee, owner, or operator under the Leases or Contracts, or as required by applicable Laws, and (i) otherwise perform  and pay, including payment of any contribution obligations of Seller, relating to any other P&A Obligations  with respect to the Assets   (all of said obligations and liabilities, subject to the exclusions below, herein being referred to as the "Assumed  Seller  Obligations");  provided, however, that the Assumed Seller Obligations shall not include, and Purchaser shall have no obligation to assume, any obligations or liabilities of Seller or any of its Affiliates as set forth in Section 11.1(b) below(such excluded obligations and liabilities, the "Excluded  Seller Obligations").


(b) The Excluded Seller Obligations are those obligations and liabilities of Seller or any of its
Affiliates that are:


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


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


(iii)      attributable  to  any  and  all  liabilities,  responsibilities  and  obligations relating to the matters described in Section 11.3(b).


		
	(iv)
	attributable  to  the  failure  to  payor     the  improper  payment  of  any production proceeds attributable to the Assets prior to the Closing Date (including, without limitation, lessor's  royalties, overriding royalties and payments to working interest owners);




(v)       attributable to damage to property owned by a third Person or for personal injury, illness or death of any Person, arising out of operations or activities pertaining to the Assets and attributable to the period prior to the Closing Date, to the extent and only to the extent that a Claim is asserted with respect to such matters within two (2) years from the Closing Date;


(vi)      attributable to fines and penalties (and any interest thereon) with respect to the Assets and applicable to periods prior to the (i) Effective Time with respect to applicable Seller Operated Properties  and (ii) Closing Date with respect to Properties operated by Seller or its Affiliates; or


(vii)     attributable  to  Property  Costs  associated  with  the  ownership, use  or operation of the Assets prior to the Effective Time.


For avoidance of doubt, the Excluded Seller Obligations apply only to the sole or proportionate liability of  Seller or  its Affiliates  that is  attributable to  Seller's  or its Affiliates ownership interests with respect to any oil and gas properties comprising the Assets, and the Excluded Seller Obligations therefore do not include Purchaser's or Purchaser's predecessor-in-title's sole or proportionate liability attributable to their ownership interest prior to the Closing Date with respect to any oil and gas properties comprising the Assets.






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Section 11.2   Survival.


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


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


Section 11.3   Indemnification by Seller.


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


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
















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


(c)      any Excluded Seller Obligations REGARDLESS OF FAULT.


Section 11.4   Indemnification by Purchaser.


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


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


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


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


(d)     the Assumed Seller Obligations REGARDLESS OF FAULT;


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


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


Section 11.5   Indemnification Proceedings.


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


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Claim   by  delivery   of  a  Claim   Notice,   provided   that  the  failure   or  delay  to  so  notify  the
Indemnifying   Party  shall  not relieve  the Indemnifying   Party  of its obligations  under this Article
11, except  (and solely)  to the extent  that the Indemnifying   Party  demonstrates   that its defense  of such  Third  Party  Claim  is actually  and materially  prejudiced   thereby.    The Indemnifying   Party shall  have  thirty  (30)  days  from  receipt  of the  Claim  Notice  from  the  Indemnified   Person  (the "Notice  Period")   to  notify   the  Indemnified   Person   whether   or  not  the  Indemnifying   Party desires,  at the  Indemnifying    Party's   sole  cost  and  expense,  to  defend  the  Indemnified   Person against  such claim  or demand;  provided,  that the Indemnified   Person  is hereby  authorized  prior to and  during  the Notice  Period,  and  at the cost  and expense  of the  Indemnifying   Party,  to file any  motion,   answer   or  other  pleading   that  it  shall  reasonably   deem  necessary   to  protect   its interests  or  those  of  the  Indemnifying   Party.    The  Indemnifying   Party  shall  have  the  right  to assume  the defense  of such Third  Party  Claim  only  if and for so long as the Indemnifying  Party (i)  notifies  the  Indemnified    Person  during  the  Notice   Period  that  the  Indemnifying   Party  is unqualifiedly   assuming  the  defense  of such  Third  Party  Claim  and any  resulting  liability  of the Indemnified  Person  REGARDLESS OF  FAULT,   (ii) uses counsel  of its own choosing  that  is reasonably   satisfactory   to  the  Indemnified   Person,  and  (iii) conducts   the defense  of such Third Party  Claim  in an active  and diligent  manner.   If the Indemnifying   Party  is entitled  to, and does, assume  the defense  of any such Third Party Claim,  the Indemnified  Person  shall have the right to employ  separate  counsel  at its own  expense  and to participate   in the  defense  thereof;  provided, however,   that  notwithstanding    the  foregoing,   if  the  Indemnifying    Party  would   otherwise   be entitled  to assume  the defense  of any such  Third  Party  Claim,  but is not willing  to do so on an unqualified  basis,  REGARDLESS OF  FAULT,   the Indemnified   Person  shall have the right to defend itself  and reserve  the right to recover  its defense  costs from the Indemnifying   Party  or, at the option  of the Indemnified   Person,  the Indemnifying   Party  shall pay the reasonable  attorneys' fees  of  the  Indemnified    Person   if  the  Indemnified   Person's   counsel   shall  have  advised  the Indemnified   Person  that  there  is  a conflict  of  interest  that  could  make  it inappropriate   under applicable  standards  of professional   conduct  to have common  counsel  for the Indemnifying  Party and the  Indemnified   Person  (provided  that  the  Indemnifying   Party  shall  not be responsible  for paying  for more  than one separate  firm of attorneys  and one local  counsel  to represent  all of the Indemnified  Persons  subject  to such Third Party  Claim.   If the Indemnifying   Party  elects (and is entitled)   to  assume   the  defense   of  such  Third  Party  Claim,  (i)  no  compromise   or  settlement thereof  or consent  to any admission  or the entry of any judgment  with respect  to such Third Party Claim  may  be  effected   by  the  Indemnifying   Party  without   the  Indemnified   Person's   written consent  (which  shall not be unreasonably   withheld,  conditioned  or delayed)  unless the sole relief provided  is monetary  damages  that are paid  in full by the Indemnifying   Party  (and no injunctive or other  equitable  relief  is imposed  upon the Indemnified   Person)  and there  is an unconditional provision  whereby  each plaintiff  or claimant  in such Third  Party  Claim  releases  the Indemnified Person  from  all  liability   with  respect  thereto   and  (ii)  the  Indemnified    Person  shall  have  no liability   with  respect   to  any  compromise    or  settlement   thereof   effected   without   its  written consent  (which  shall  not  be  unreasonably   withheld).    If the  Indemnifying   Party  elects  not  to assume  the defense  of such  Third  Party  Claim  (or fails to give notice  to the Indemnified  Person during  the Notice  Period  or otherwise  is not  entitled  to assume  such  defense),  the  Indemnified Person  shall be entitled  to assume  the defense  of such Third Party  Claim  with counsel  of its own choice,  at the expense  and for the account  of the Indemnifying   Party; provided,  however,  that the Indemnified  Person  shall  make  no settlement,  compromise,   admission,   or acknowledgment   that would  give rise  to liability  on the part  of any Indemnifying   Party  without  giving  ten (10) days'




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notice to  Indemnifying Party  and allowing Indemnifying Party to  unqualifiedly assume the defense of such Third Party Claim and any resulting liability of the Indemnified Person within such ten (10) day period.


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


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


Section 11.6   Limitations on Indemnities.


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


(b)     Notwithstanding  anything  to the  contrary  in this  ARTICLE 11 or otherwise, except for matters arising  out of or relating to breaches of Fundamental Representations, (i) Seller shall have no liability for any indemnification under Section 1l.3(a)  unless and until the amount of the liability  for  any individual  Claim for which a  Claim Notice  is delivered by Purchaser exceeds $75,000.00 (each a "Material  Indemnification Matter"),  (ii) Seller shall not be obligated to indemnify the Purchaser Indemnified Persons pursuant to Section 11.3(a) unless and until the aggregate amount of all Losses incurred by Purchaser Indemnified Persons with respect to all Material Indemnification Matters exceeds $200,000 before any adjustments (the "Indemnity  Deductible"), in which event the Purchaser Indemnified Persons may recover all Losses Incurred with respect to such Material Indemnification Matters in excess of the Indemnity Deductible,  and  (iii)  Seller's   maximum  liability  for  Losses  associated  with  all  Material








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Indemnification Matters shall be thirty percent (30%) of the Purchase Price before any adjustments.


Section 11.7   Release.


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


Section 11.8   Disclaimers.


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


(b)     EXCEPT  AS EXPRESSLY  REPRESENTED   OTHERWISE   IN ARTICLE  5 OF  THIS  AGREEMENT,   OR  IN  THE  CONVEYANCE,  AND  WITHOUT   LIMITING THE GENERALITY   OF THE  FOREGOING,   SELLER  EXPRESSLY  DISCLAIMS  ANY REPRESENTATION   OR WARRANTY, EXPRESS,  STATUTORY  OR IMPLIED,  AS TO (I)  TITLE   TO  ANY  OF  THE   ASSETS,  (II)  THE   CONTENTS,   CHARACTER   OR NATURE OF ANY DESCRIPTIVE  MEMORANDUM,  OR ANY REPORT  OF ANY PETROLEUM  ENGINEERING   CONSULTANT,  OR ANY GEOLOGICAL   OR SEISMIC DATA OR INTERPRETATION,    RELATING  TO THE ASSETS, (III) THE  QUANTITY, QUALITY  OR   RECOVERABILITY    OF PETROLEUM   SUBSTANCES  IN OR FROM THE ASSETS, (IV) ANY ESTIMATES  OF THE VALUE OF THE ASSETS OR FUTURE REVENUES    GENERA TED    BY    THE    ASSETS,    (V)   THE    PRODUCTION     OF HYDROCARBONS    FROM    THE   ASSETS,   (VI)   THE   MAINTENANCE,    REPAIR,


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


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


Section 11.9   Waiver of Trade Practices Acts.


(a)     It is the intention of the Parties that Purchaser's rights and remedies with respect to this transaction and with respect to all acts or practices of Seller, past, present or future, in connection with this transaction  shall be governed by legal principles  other than the Texas Deceptive Trade Practices--Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.41 et seq. (the "DTPA") or the Louisiana unfair trade practices and consumer protection law, La. R.S. 51:1402, et seq. (the "UTPCPL").    As such, Purchaser hereby waives the applicability of the DTPA and the UTPCPL to this transaction and any and all duties, rights or remedies that might be imposed by the DTPA and/or the UTPCPL, whether such duties, rights and remedies are applied directly by the  DTPA  or the UTPCPL  itself or indirectly  in connection with other statutes; provided,  however,  Purchaser  does  not  waive  § 17.555 of  the  DTPA.    Purchaser




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


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


Section 11.10 Redhibition Waiver.


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


Section 11.11 Recording.


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


Section 11.12 Non-Compensatory Damages.


Purchaser shall not be entitled to recover from Seller Indemnified Persons, and Seller shall not be entitled to recover from Purchaser Indemnified Persons, any indirect, consequential, punitive or exemplary damages or damages for lost profits of any kind arising under or in connection with this Agreement or the transactions contemplated hereby, REGARDLESS OF FAULT (and, as to punitive  or exemplary damages, EVEN IF CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE RELEASED PERSON) except to the






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extent Seller or Purchaser  suffers such damages (including costs of defense  and reasonable attorney's fees Incurred in connection with defending of such damages) to a third party, which damages (including costs of defense and reasonable attorney's fees Incurred in connection with defending  against  such  damages)  shall  not  be  excluded  by  this  provision  as  to  recovery hereunder.   Subject to the preceding sentence, Purchaser and Seller waive any right to recover punitive,  special, exemplary  and consequential damages, including damages  for lost profits, arising in connection with or with respect to this Agreement or the transactions contemplated hereby,  REGARDLESS  OF FAULT  (and, as to  punitive or exemplary  damages, EVEN IF CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE RELEASED PERSON).


Section 11.13 Disclaimer of Application of Anti-Indemnity Statutes.


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


ARTICLE 12
MISCELLANEOUS


Section 12.1   Counterparts.
This Agreement may be executed and delivered in counterparts, each of which shall be deemed  an  original  instrument,  but  all  such  counterparts  together  shall  constitute but  one agreement.


Section 12.2   Notices.


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


If to Seller:     Black Elk Energy Offshore Operations, LLC
11451 Katy Freeway, Suite 500
Houston, Texas 77079
Attention: J.D. "Joe" Matthews
Telephone: 281-598-8600
Telecopy: 281-598-8601
Email: jmatthews@blackelkenergy.com


If to Purchaser:    SandRidge Energy Offshore, LLC
2000 West Sam Houston Parkway South, Suite 1200
Houston, Texas 77042
Attention: Mr. John Smith
Vice President, Land and Business Development
Telephone: 713-969-1000
Telecopy:  713-969-1099
Email: jsmith@fwellc.com


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With a copy to:
SandRidge Energy Offshore, LLC
2000 West Sam Houston Parkway South, Suite 1200
Houston, Texas 77042
Attention: Richard D. Black
Sr. Vice President & General Counsel
Telephone: 713-969-1000
Telecopy: 713-969-1099






Either Party may change its address for notice by notice to the other in the manner set forth above. All notices shall be deemed to have been duly given at the time of receipt by the Party to which such notice is addressed.
Section 12.3   Sales or Use Tax Recording Fees and Similar Taxes and Fees. Purchaser shall bear any sales, use, excise, real property transfer, gross receipts, goods
and  services, registration,  capital, documentary, stamp or transfer  taxes,  recording fees and
similar taxes  and fees other than  such fees and taxes  in connection  with any title curative materials delivered by Seller (collectively "Transfer Taxes")  Incurred and imposed upon, or with respect to, the transactions contemplated by this Agreement.   Seller will determine, and Purchaser will cooperate with Seller in determining the amount of any Transfer Taxes, if any, that is due in connection with the transactions contemplated by this Agreement and Purchaser agrees to pay any such Transfer Tax to Seller or to the appropriate Governmental Body.  If any of the transactions contemplated by this Agreement are exempt from any such Transfer Taxes upon the  filing of an appropriate  certificate or other evidence of exemption, Purchaser will timely furnish to Seller such certificate or evidence.


Section 12.4   Expenses.


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


Section 12.5   Change of Name.


As promptly as practicable,  but in any case within ninety (90) days after the later of Closing Date or the date the BOEM approves of Purchaser or its affiliate, Fieldwood, as the designated operator with respect to a Property (and then only with respect to such Property), Purchaser shall eliminate  the name  "Black  Elk Energy Offshore  Operations, LLC" and any variants thereof and any names of Seller's  Affiliates and any variants thereof from the Assets acquired  pursuant  to  this  Agreement  and,  except  with  respect  to  such  grace  period  for




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eliminating existing usage, shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates.


Section 12.6   Governing Law and Venue.


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


Section 12.7   Captions.


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


Section 12.8   Waivers.


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


Section 12.9   Assignment.


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


Section 12.10  Entire Agreement.


This Agreement and the Exhibits and Schedules attached hereto, the documents to be executed hereunder constitute the entire agreement between the Parties pertaining to the subject






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matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof.   Following the Closing, and except as required for Seller to fulfill its obligations under this Agreement, Seller and its Affiliates, together with its and their directors, officers, employees, agents and representatives shall keep confidential and not disclose the terms and conditions of this Agreement or any information which is required to be kept confidential pursuant to any existing agreements  (including,  without  limitation, joint  operating  agreements,  without  the  express written consent of Purchaser.


Section 12.11 Amendment.


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


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


Section 12.12  No Third-Party Beneficiaries.


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


Section 12.13 References.


In this Agreement:
(a)      References to any gender includes a reference to all other genders; (b)     References to the singular includes the plural, and vice versa;
(c)      Reference to any Article or Section means an Article or Section of this Agreement;


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


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


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


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






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Section 12.14 Construction.


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


Section 12.15 Conspicuousness.


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


Section 12.16 Severability.


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


Section 12.17  Time of Essence.


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


Section 12.18  Intentionally Omitted.


Section 12.19 Financial Reporting.


Seller shall use  its best efforts  to  cause its  independent auditors, at the  expense of Purchaser, to audit and prepare a report on the direct revenues and expenses with respect to the Assets  for  the  annual  periods  2011-2014.     Seller  expressly  disclaims  all  liability  and responsibility for the accuracy of any information received from any prior owner of the Assets.


Section 12.20 Grand Isle and Additional Lien Escrow.






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Seller and Grand Isle Shipyard, Inc. ("GIS") are involved in arbitration regarding responsibility for a casualty loss that affected the Assets prior to the Effective Time.  Seller has refused to pay invoices of GIS in connection with work conducted for Seller and GIS has filed liens against the Assets,  as more particularly identified under item number  lea) and  l(b)on Schedule 12.20 (the "GIS Lien").


In addition to the GIS Lien, some or all of the Assets currently may be, or as of the Closing Date  may  be  subject to  liens  in favor  of various  third  parties,  including, without limitation, the Wood Group which, as of the Closing Date, have not been released, which such liens filed as of the date hereof are more particularly identified on Schedule  12.20, and the underlying liens with respect to the lien claimants referenced on Schedule  12.20 or more fully identified on Schedule 5.31 (collectively, other than the GIS Lien, the "Additional  Liens", each an "Additional  Lien").


At Closing, Seller and Purchaser will enter into and execute that certain Escrow Agreement dated as of March 13, 2014, together with Bank of America, National Association ("Escrow Agent") (the "Escrow Agreement"),  which will establish an escrow ("Escrow") with the  Escrow Agent.    Notwithstanding  anything to  the contrary  set  forth  in this Agreement, particularly Section 9.3(a), at the Closing a portion of the Closing Payment equal to the amount claimed by the applicable lien holder for each outstanding an unpaid Additional Lien plus an additional ten percent (10%) will be deposited with Escrow Agent in the account maintained pursuant to the Escrow Agreement for payment of the GIS Lien and the Additional Liens, or to Seller as expressly set forth hereafter.  Seller and Purchaser hereby agree that all funds deposited in Escrow shall be property of Purchaser until such time as such funds are released to Seller pursuant to this Section 12.20.


Subject to the satisfaction of the conditions as set forth below, Purchaser shall consent to the withdrawal of such portion of the funds held in escrow by Escrow Agent pursuant to the Escrow Agreement and sign and deliver all documents required by the Escrow Agent pursuant to the Escrow Agreement to release such funds, upon two (2) Business Days notice from a duly authorized officer of Seller certifying that:


(a)       GIS has  executed  and  delivered to  Purchaser  an  instrument  of release,  on a recordable form reasonably acceptable to Purchaser, that will serve to release the GIS Lien of record in all appropriate jurisdictions  upon GIS'  receipt of a payment of $229,290.00, or less, which amount shall be paid by Escrow Agent out of the Escrow; or


(b)       A lien claimant under one or more of the Additional  Liens has executed and delivered to Purchaser an instrument(s) of release, on a recordable form reasonably acceptable to Purchaser,  that  will  serve  to  release  such  Additional  Liens  of  record  in  all  appropriate jurisdictions upon such lien claimant's receipt of a payment in the amount of each such released Additional Liens as determined in paragraph 2 of this Section 12.20 above, or a lesser amount, which amount shall be paid by Escrow Agent out of the escrow; or


(c)       A final non-appealable decision of a court or of an arbitration has determined that GIS, or the lien claimant under one of the Additional Liens, as the case may be, is not entitled to the payment of any amounts claimed pursuant to the GIS Lien, or any of the Additional Liens, as


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the case may be, and evidence of such final non-appealable decision of a court or arbitration has been provided to Purchaser, then the amount specified in Section 12.20(a) or (b) with respect to such GIS Lien or Additional Liens, shall be paid by Escrow Agent to Seller out of the Escrow.


(d)       Upon  the  full release,  of record, of  any of the  Additional  Liens, Seller and Purchaser shall issue joint written instructions to Escrow Agent to release to Seller the balance of such funds held in the Escrow attributable to such released Additional Liens.  The "balance of funds" for purposes of this provision means the difference between the amount of each such released Additional Liens as determined in paragraph 2 of this Section  12.20 above, less the amount paid to the lien claimant for the release of such Additional Liens.  Upon the full release, of record, of all of the Additional Liens and the GIS Lien, Seller and Purchaser shall issue joint written instructions to Escrow Agent to release the balance of any funds in the Escrow to Seller.


The provisions of this Section 12.20, shall survive until all funds held in escrow pursuant to the Escrow Agreement have been disbursed by Escrow Agent.


Section 12.21 W&T.


Reference is hereby made for all purposes to that certain Purchase and Sale Agreement, dated September 14,2009 as amended, executed by and between W&T Offshore, Inc. ("W&T") as seller, and Black Elk Energy Offshore Operations, LLC, as buyer ("W&TlBlack  Elk PSA"). Seller acquired certain of the Assets from W&T, among numerous other oil and gas properties, pursuant to the W&TlBlack Elk PSA and in connection with such acquisition, Seller and W&T executed  a  certain  Non-Operated  Escrow  Agreement  dated  October  29,  2009  (the  "Non­ Operated  Escrow")  with Capital One, N.A. as escrow agent in order to secure all of Seller's P&A  Obligations  with  respect  to  certain  Assets  that  constituted  Non-Operated  Properties pursuant to the W&TIBlack  Elk PSA.  Seller has partially completed its obligation to fund the account established pursuant to the Non-Operated Escrow and retains the obligation to continue funding in connection with the terms thereof.


Seller and Purchaser agree that each of the W&TIBlack Elk PSA and the Non-Operated Escrow (i) is an Excluded Contract and Purchaser shall assume no obligations to W&T with respect to the W&T/Black    Elk PSA or the Non-Operated Escrow.  Seller and Purchaser further agree that subject to the terms and conditions of the Non-Operated Escrow, Purchaser shall not be entitled to any funds now or hereafter held in applicable escrow account established pursuant to the Non-Operated Escrow.


Notwithstanding the above, in order to facilitate the ability of Seller to receive funds held in the escrow account established pursuant to the Non-Operated Escrow, to the extent P&A Obligations are performed and completed on the Assets acquired by Seller or its Affiliates from W&T, Purchaser  will provide  Seller on or before January  1 and July  1 of each year, (i) a schedule indicating all P&A Obligations performed in the prior six-month period, (ii) a copy of the Final Site Clearance  Report,  if  any, submitted to the  BOEM  or  BSEE with respect to platform, conductor removal, and pipeline abandonment, or (iii) the End of Well Report, if any, submitted to the BOEM with respect to each abandoned well, as applicable, together with final daily operations reports showing completion of operations from the contractor performing such work.  Further, if required by W&T, Purchaser shall provide W&T with an agreement which


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provides:  (i) in the event any Governmental Body (including without limitation the BOEM or BSEE)  makes  demand  on  W&T  to  perform any  of the  P&A  Obligations,  Purchaser shall indemnify W&T from and against any and all Losses, asserted against, resulting from, imposed upon, or incurred or suffered by W&T, directly or indirectly, to the extent resulting from, arising out of, or relating to the P&A Obligations, (ii) Purchaser assumes the obligations under Section 7.09 of the W&T/Black Elk PSA with respect to those identified prospects covering the Assets acquired by Purchaser, and (iii) Purchaser agrees to furnish a guarantee by Purchaser's parent entity of all obligations  of Purchaser  under this Section  12.21 and any agreement executed between W&T and Purchaser with regard to such P&A Obligations.


Section 12.22 Nippon Replacement Bond.


Reference is hereby made for all purposes to that certain Purchase and Sale Agreement, dated August 5, 2010, executed by and between Nippon Oil Exploration U.S.A. Limited, now known as IX   Nippon Oil Exploration (U.S.A.) Limited ("Nippon"),  as seller, and Black Elk Energy Offshore Operations, LLC, as buyer, as amended ("Nippon/Black   Elk PSA").   Seller acquired certain of the Assets  from Nippon,  among numerous other  oil  and gas properties, pursuant to the Nippon/Black Elk PSA and in connection with such acquisition, Seller delivered to  Nippon  Bond  Nos.  (1)  K08024807  executed  by  Seller,  as  Principal,  Westchester Fire Insurance  Company,  as  Surety,  and  Nippon,  as  Obligee,  providing  for  the  penal  sum  of $975,000, and  (2) K08024881, executed  by Seller, as Principal,  Westchester Fire Insurance Company, as Surety, and Nippon, as Obligee, providing for the penal sum of $756,000, in order to secure all of Seller's P&A Obligations with respect to the Assets  (collectively, the "Nippon Seller Bonds").


In order that Nippon will grant an unconditional release of the Nippon Seller Bonds as expressly provided for therein, within sixty (60) days after the Closing, Purchaser will make arrangements  necessary  in  order to  obtain  a replacement performance  bond (or  such other financial security as agreed by Nippon and Purchaser) in favor of Nippon, as obligee, pursuant and subject to the  specific terms and provisions set forth in the Nippon  Seller Bonds, and providing for a penal sum in an amount that is up to but does not exceed $3,558,598.00 being $1,189,719.00 applicable to Grand Isle Block 110 (OCS-G 13943), $846,924.00 applicable to Viosca Knoll Block 824 (OCS-G 15436) and $1,521,955.00 applicable to West Delta Block 12 (OCS-G 13645) (the "Nippon  Replacement  Bond").   In this connection, Seller and Purchaser agree to work cooperatively with Nippon (i) in order to facilitate the substitution of the Nippon Replacement Bond (or such other financial security as agreed by Nippon and Purchaser) for the Nippon  Seller Bond.  Seller  and Purchaser  agree  that the  Nippon/Black  Elk  PSA  (i) is  an Excluded Contract and Purchaser shall assume no obligations to Nippon with respect thereto; provided,  however, to the  extent  required by Nippon,  Purchaser shall enter into a mutually acceptable written agreement with Nippon which acknowledges (x) Purchaser's  assumption of Seller's P&A Obligations with respect to the Assets acquired by Purchaser and (y) Purchaser's agreement to comply with those obligations as set forth in Section 6.4 of the Nippon/Black Elk PSA to (1) obtain future P&A Reports (as defined in the Nippon/Black Elk PSA) or (2) provide future Seller Bonds and/or Supplemental Bonds (each as defined in the Nippon/Black Elk PSA), with respect to those Assets acquired by Purchaser; and provided, further,  that if required by Nippon  or any bonding  company, Purchaser  shall furnish a guarantee  by Fieldwood of all obligations of Purchaser under this Section 12.22.






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Section 12.23 Merit.


Reference is hereby made for all purposes to that certain Purchase and Sale Agreement, dated March 17, 2011, as amended, executed by and between Merit Management Partners I, L.P. et al (collectively, "Merit")  as seller, and Black Elk Energy Offshore Operations, LLC, as buyer ("Merit/Black  Elk PSA").   Seller acquired certain of the Assets from Merit, among numerous other oil and gas properties, pursuant to the Merit/Black Elk PSA and in connection with such acquisition, Seller and Merit executed a certain Escrow Agreement (the "Merit  Escrow") with Capital One, N.A. in order to secure all of Seller's P&A obligations with respect to the assets acquired pursuant to the Merit/Black Elk PSA.  Seller has partially completed its obligation to fund the account established pursuant to the Merit Escrow and retains the obligation to continue funding until all obligations are completed.  Seller has calculated that $2,618,888.00 of the funds that are, or will be, deposited in the Merit Escrow, relate to the Assets.


Seller and Purchaser agree that each of the Merit/Black Elk PSA and the Merit Escrow (i) is an Excluded Contract and Purchaser shall assume no obligations to Merit with respect to the Merit/Black Elk PSA or the Merit Escrow.  Seller and Purchaser further agree that subject to the terms and conditions of the Merit Escrow, Purchaser shall not be entitled to any funds now or hereinafter held in the account established pursuant to the Merit Escrow.  Notwithstanding the above, in order to facilitate the ability of Seller to receive funds held in the Merit Escrow, to the extent P&A Obligations are performed and completed on the Assets acquired by Seller or its Affiliates from Merit, Purchaser will provide Seller on or before January 1 and July 1 of each year, (i) a schedule indicating all P&A Obligations performed in the prior six-month period, (ii) a copy of the Final Site Clearance Report, if any, submitted to the BOEM or BSEE with respect to platform, conductor removal, and pipeline abandonment, or (iii) the End of Well Report, if any, submitted to the BOEM with respect to each abandoned well, as applicable, together with final daily operations reports showing completion of operations from the contractor performing such work.


Section 12.24 Stone.


Reference is hereby made for all purposes to that certain Asset Sale Agreement, dated December 21, 2007, executed by and between Stone Energy Corporation ("Stone"), as seller, and Black Elk Energy  Offshore Operations, LLC, as buyer, as amended  ("StonelBlack Elk ASA").   Seller acquired certain of the Assets from Stone, among numerous other oil and gas properties, pursuant to the Stone/Black Elk ASA and in connection with such acquisition, Seller delivered to Stone Bond No. SUR0002550, executed by Seller, as Principal, Argonaut Insurance Company, as Surety, and Stone, as Obligee, providing for the penal sum of $2,200,000.00, in order to secure all of Seller's P&A Obligations with respect to the Assets ("Stone Seller Bond"). Purchaser has advised Seller that  Stone has agreed to release the  Stone Seller Bond and not require Purchaser to issue a replacement bond in its place.   Within thirty (30) days after the Closing, Seller and Purchaser will work diligently to obtain from Stone an unconditional release of the Stone Seller Bond.  If required by Stone, Purchaser shall furnish either a replacement bond for the penal sum of $2,200,000.00 or a guarantee by Fieldwood of all obligations of Purchaser under this Section 12.24.


Section 12.25 Apache Replacement Bond.






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Reference is made to those certain bonds that Seller furnished to Apache Corporation ("Apache") (1) SurOOI9135 executed by Seller, as Principal, Argonaut Insurance Company, as Surety, and Apache, as Obligee, providing for the penal sum of $3,981,649.68, (the "Argonaut Bond" and (2) SU02014 executed by Seller, as Principal, Aspen Insurance Company, as Surety, and Apache, as Obligee, providing for the penal sum of $26,714,118.28, (the "Aspen Bond" and collectively with the Argonaut Bond, the "Apache Bonds").


Within thirty (30) days after the Closing, Purchaser and Seller will make arrangements necessary in order to obtain an agreement (or replacement bonds as necessary) whereby the Argonaut  Bond  is  reduced  by  the  amount  of  $2,608,796.39  ($600,239.97  attributable  to Galveston Area, Block 210 and $2,008,556.42 attributable to High Island Block 340).  Further, within thirty (30) days after the Closing, Purchaser and Seller will make arrangements necessary in order to obtain an agreement (or replacement bonds as necessary whereby the Aspen Bond is reduced by the amount of $4,611,868.58 ($4,031,839.58 attributable to South Timbalier Block 53 and $580,029.00 attributable to North Padre Blocks 883/899).  In this connection, Seller and Purchaser  agree  to  work  cooperatively with  Apache to  (i)  facilitate the  substitution of the Purchaser as Principal under the Apache Bonds and (ii) reduce the Apache Bonds by a total amount equal to $7,220,664.97.  If required by Apache Purchaser shall furnish a guarantee by Fieldwood of all obligations of Purchaser under this Section 12.25.












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








SELLER:
BLACK ELK ENERGY OFFSHORE OPERATIONS, LLC



PURCHASER:
SANDRIDGE ENERGY OFFSHORE, LLC























































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