Document:

Exhibit 10.1

Letter of Intent

GLOBAL EARTH ENERGY, INC.

1213 Culbreth Drive

Wilmington, North Carolina 28405

March 19, 2010

Mr. Mel Dick

1 – 215 Neave Road

Kelowna, British Columbia

Canada V1V 2L90

Re: Proposal to the Acquire the Shares of 688239 B.C. Ltd.

Dear Mr. Dick:

This letter will confirm that Global Earth Energy, Inc., a Nevada corporation (“Global Earth”) is interested in exploring the possibility of acquiring all of the outstanding capital stock (the “688239 B.C. Stock”) of 688239 B.C. Ltd., a British Columbia corporation (“688239 B.C.”) pursuant to a reverse triangular merger (the “Merger”) on terms that would be mutually agreeable.

Part One

Global Earth and 688239 B.C. wish to commence negotiating a definitive written agreement providing for the Merger (the “Definitive Agreement”).  To facilitate the negotiation of the Definitive Agreement, the parties request that Global Earth’s counsel prepare an initial draft.  The execution of the Definitive Agreement would be subject to the satisfactory completion of the ongoing investigation by Global Earth and 688239 B.C. of their respective businesses, approval by their respective boards of directors, and the approval of the Merger by the stockholders of 688239 B.C.

Based upon the information currently known to Global Earth, it is proposed that the Definitive Agreement include the following terms:

1.

Basic Transaction.  Global Earth proposes to acquire all of the outstanding shares of the 688239 B.C. Stock by means of the Merger between 688239 B.C. and a wholly-owned subsidiary of Global Earth to be formed whereby the stockholders of 688239 B.C. would receive in exchange shares of the common stock of Global Earth (the “Global Earth Stock”) so that following the closing of the Merger (the “Closing”) Global Earth would own all of the issued and outstanding shares of the 688239 B.C. Stock.  It is understood that the Global Earth Stock to be received by the stockholders of 688239 B.C. in the Merger would, upon their issuance, be restricted in their resale pursuant to the Securities Act of 1933, as amended (the “Securities Act”).  Further, at the time of the Merger, 688239 B.C. will have no more than 35 unaccredited stockholders as described in the Securities Act.

2.

Exchange Ratio.  The number of shares of the Global Earth Stock to be received at the Closing in exchange for the shares of the 688239 B.C. Stock would be set forth in the Definitive Agreement (the “Exchange Ratio”).  It is anticipated that the 688239 B.C. stockholders would own approximately 64 percent of the issued and outstanding shares of the Global Earth Stock following the Merger, with the remaining approximately 34 percent owned by the current Global Earth stockholders, and other parties.  However, it should be understood that one stockholder of Global Earth owns 1,000,000 shares of the Global Earth Class B preferred stock which has voting rights equal to 500 shares of the Global Earth Stock for every one share of Global Earth preferred stock held, which equates to voting rights of 500,000,000 shares of the Global Earth Stock, which amount exceeds the outstanding shares of the Global Earth Stock.  Therefore, due to the voting rights contained in the outstanding shares of the Global Earth preferred stock, there will be no change of control.

1

 

3.

Other Terms.  Global Earth and 688239 B.C. would make comprehensive representations and warranties to each other and would provide comprehensive covenants, indemnities and other protections for the benefit of the parties and their respective stockholders.  The consummation of the Merger by the parties would be subject to the satisfaction of various conditions, including:

(a)

An evaluation of by each of the parties that the value of each of Global Earth and 688239 B.C. on March 26, 2010, the date of the Closing (the “Closing Date”) is such that the Exchange Ratio is in the best interests of the stockholders of Global Earth and 688239 B.C. on the Closing Date.

(b)

Such other matters as may be stated in the Definitive Agreement.

Part Two

The following paragraphs of this letter (the “Binding Provisions”) are the legally binding and enforceable agreements of Global Earth and 688239 B.C.

4.

Access.  During the period from the date this letter is signed on behalf of 688239 B.C. (the “Signing Date”) until the date on which either party provides the other party with written notice that negotiations toward the Definitive Agreement are terminated (the “Termination Date”), each of the parties will afford the other full and free access to such party, its personnel, properties, contracts, books and records and all other documents and data, subject to the confidentiality provisions referred to or described in Paragraph 7 of this letter.

5.

Exclusive Dealing.  Until the later of 90 days after the Signing Date, or the Termination Date:

(a)

688239 B.C. will not, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept or consider any proposal of any other person relating to the acquisition of 688239 B.C. or the 688239 B.C. Stock, its assets or business, in whole or in part, whether directly or indirectly, through purchase, merger, consolidation or otherwise (other than sales of inventory in the ordinary course); and

(b)

688239 B.C. will immediately notify Global Earth regarding any contact between 688239 B.C. or its representatives and any other person regarding any such offer or proposal or any related inquiry.

6.

Conduct of Business.  During the period from the Signing Date until the Termination Date, 688239 B.C. shall operate its business in the ordinary course and refrain from any extraordinary transactions.  In addition, during such period, 688239 B.C. shall not issue any additional shares of its capital stock, either common or preferred.

7.

Confidentiality.  Except as and to the extent required by law, neither Global Earth nor 688239 B.C. will disclose or use, and will direct its representatives not to disclose or use to the detriment of 688239 B.C. or Global Earth, any Confidential Information (as defined below) with respect to Global Earth or 688239 B.C. furnished, or to be furnished, by each party or its representatives to the other party or its representatives at any time or in any manner other than in connection with its evaluation of the transaction proposed in this letter.  For purposes of this paragraph, “Confidential Information” means any information about 688239 B.C. or Global Earth stamped “confidential” or identified in writing as such to a party hereunder to the other promptly following its disclosure, unless (a) such information is already known to the non-disclosing party or its representatives or to others not bound by a duty of confidentiality at the time of its disclosure or such information becomes publicly available through no fault of the non-disclosing party or its representatives; (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Merger; or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings.  Upon the written request of either party hereunder, the other will promptly return to requesting or destroy any Confidential Information in its possession and certify in writing to the requesting party that it has done so.

8.

Disclosure.  Except as and to the extent required by law, without the prior written consent of the other party, neither Global Earth nor 688239 B.C. will, and each will direct its representatives not to make, directly or indirectly, any public comment, statement or communication with respect to, or otherwise to disclose or to permit the disclosure of the existence of discussions regarding, a possible transaction between Global Earth and 688239 Global Earth Letter of Intent reverse triangular merger B.C. or any of the terms, conditions or other aspects of the transaction proposed in this letter.  If a party is required by law to make any such disclosure, it must first provide to the other party the content of the proposed disclosure, the reasons that such disclosure is required by law and the time and place that the disclosure will be made.

2

 

 

9.

Costs.  Global Earth and 688239 B.C. will be responsible for and bear all of their respective costs and expenses (including any broker’s or finder’s fees and the expenses of its representatives) incurred at any time in connection with pursuing or consummating the Merger.

10.

Entire Agreement.  The Binding Provisions constitute the entire agreement between the parties and supersede all prior oral or written agreements, understandings, representations and warranties and courses of conduct and dealing between the parties on the subject matter thereof.  Except as otherwise provided herein, the Binding Provisions may be amended or modified only by a writing executed by the parties.

11.

Governing Law.  The Binding Provisions will be governed by and construed under the laws of the State of Nevada without regard to conflicts-of-laws principles.

12.

Jurisdiction; Service of Process.  Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, the Binding Provisions may be brought against either of the parties in the courts of Hanover County, North Carolina, or, if it has or can acquire jurisdiction, in the United States District Court located in Hanover County, North Carolina, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein.  Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.

13.

Termination.  The Binding Provisions will automatically terminate 90 days after the execution of this letter by 688239 B.C., and may be terminated earlier upon written notice by either party to the other party unilaterally, for any reason or no reason, with or without cause, at any time, provided, however, that the termination of the Binding Provisions will not affect the liability of a party for breach of any of the Binding Provisions prior to the termination.  Upon termination of the Binding Provisions, the parties will have no further obligations hereunder, except as stated in Paragraphs 5, 7, 8, 9, 10, 11, and 12, which will survive any such termination.

14.

Counterparts.  This letter may be executed in one or more counterparts, each of which will be deemed to be an original of this letter and all of which, when taken together, will be deemed to constitute one and the same letter.  A facsimile or PDF transmission of this signed Agreement shall be legal and binding on all parties hereto.

15.

No Liability.  The provisions of Paragraphs 1 through 3 of this letter are intended only as an expression of intent on behalf of Global Earth and 688239 B.C., are not intended to be legally binding on Global Earth or 688239 B.C. and are expressly subject to the execution of an appropriate Definitive Agreement.  Moreover, except as expressly provided in Paragraphs 4 through 15 (or as expressly provided in any binding written agreement that the parties may enter into in the future), no past or future action, course of conduct or failure to act relating to the Merger, or relating to the negotiation of the terms of the Merger or any Definitive Agreement, will give rise to or serve as a basis for any obligation or other liability on the part of Global Earth, or 688239 B.C.

If you are in agreement with the foregoing, please sign and return one copy of this letter no later than 5:00 p.m., North Carolina time on Friday, March 19, 2010 to the undersigned at (910) 270 6640, which thereupon will constitute our understanding with respect to its subject matter.

Very truly yours,

GLOBAL EARTH ENERGY, INC.

By:/s/ Sydney A. Harland

Sydney A. Harland

Cheif Executive Officer
  

 

Agreed to as to the Binding Provisions on March ___, 2010.

688239 B.C. LTD.

By:    /s/Mel Dick, Chief Executive Officer

3ex10-01.htm

    

    EXHIBIT
10.01

     

    

     

    

     

    

     

    PURCHASE
AGREEMENT

     

    BY
AND BETWEEN

     

    MAINLAND
RESOURCES, INC.

     

    AS
SELLER

     

    AND

     

    LP

     

    AS
BUYER

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    MARCH
12, 2010

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    TABLE
OF CONTENTS

     

                                                                                                                                                                                                                                                               Page

    

     

    
      	
              ARTICLE I

            	
              DEFINITIONS 

            	
              1

            

    

     

     

    
      	
              ARTICLE II

            	
              PURCHASE
      AND SALE 

            	
              8

            

    

     

    
      	
               
      

            	
              2.1.

            	
              Purchase
      and Sale 

            	
              8

            

    

    
      	
               
      

            	
              2.2.

            	
              Purchase
      Price 

            	
              8

            

    

    
      	
               
      

            	
              2.3.

            	
              Adjustments
      to Purchase Price 

            	
              8

            

    

    
      	
               
      

            	
              2.4.

            	
              Determination
      of Purchase Price 

            	
              10

            

    

     

    
      	
              ARTICLE III

            	
              REPRESENTATIONS
      AND WARRANTIES OF SELLER 

            	
              11

            

    

     

    
      	
               
      

            	
              3.1.

            	
              Organization 

            	
              12

            

    

    
      	
               
      

            	
              3.2.

            	
              Authorization 

            	
              12

            

    

    
      	
               
      

            	
              3.3.

            	
              No
      Violation or Conflict 

            	
              12

            

    

    
      	
               
      

            	
              3.4.

            	
              Title 

            	
              12

            

    

    
      	
               
      

            	
              3.5.

            	
              Contracts 

            	
              13

            

    

    
      	
               
      

            	
              3.6.

            	
              Lease
      Provisions 

            	
              14

            

    

    
      	
               
      

            	
              3.7.

            	
              Compliance
      With Law 

            	
              14

            

    

    
      	
               
      

            	
              3.8.

            	
              Litigation 

            	
              15

            

    

    
      	
               
      

            	
              3.9.

            	
              Taxes 

            	
              15

            

    

    
      	
               
      

            	
              3.10.

            	
              Environmental
      Matters 

            	
              15

            

    

    
      	
               
      

            	
              3.11.

            	
              Broker’s
      Fees 

            	
              15

            

    

    
      	
               
      

            	
              3.12

            	
              Outstanding
      Commitments, AFEs and Invoices 

            	
              15

            

    

    
      	
               
      

            	
              3.13

            	
              Preferential
      Rights and Required Consents 

            	
              15

            

    

     

    
      	
              ARTICLE IV

            	
              REPRESENTATIONS
      AND WARRANTIES OF BUYER 

            	
              16

            

    

     

    
      	
               
      

            	
              4.1.

            	
              Organization 

            	
              16

            

    

    
      	
               
      

            	
              4.2.

            	
              Authorization 

            	
              16

            

    

    
      	
               
      

            	
              4.3.

            	
              No
      Violation or Conflict 

            	
              16

            

    

    
      	
               
      

            	
              4.4.

            	
              No
      Reliance 

            	
              16

            

    

    
      	
               
      

            	
              4.5.

            	
              Financing 

            	
              17

            

    

    
      	
               
      

            	
              4.6.

            	
              Broker’s
      Fees 

            	
              17

            

    

     

    
      	
              ARTICLE V

            	
              COVENANTS 

            	
              17

            

    

     

    
      	
               
      

            	
              5.1.

            	
              Conduct
      of Business 

            	
              17

            

    

    
      	
               
      

            	
              5.2.

            	
              Buyer’s
      Access to Information 

            	
              18

            

    

    
      	
               
      

            	
              5.3.

            	
              Further
      Assurances 

            	
              18

            

    

    
      	
               
      

            	
              5.4.

            	
              Filings 

            	
              18

            

    

    
      	
               
      

            	
              5.5.

            	
              Publicity 

            	
              18

            

    

    
      	
               
      

            	
              5.6.

            	
              Casualty 

            	
              19

            

    

    
      	
               
      

            	
              5.7

            	
              Notification
      of Claims 

            	
              19

            

    

     

    
      	
              ARTICLE VI

            	
              CONDITIONS
      PRECEDENT TO CONSUMMATION OF  THE CLOSING;
      CLOSING 

            	
              19

            

    

     

    
      	
               
      

            	
              6.1.

            	
              Conditions
      Precedent to Each Party’s Obligations to Close 

            	
              19

            

    

    
      	
               
      

            	
              6.2.

            	
              Conditions
      Precedent to Obligations of Buyer 

            	
              19

            

    

    
      	
               
      

            	
              6.3.

            	
              Conditions
      Precedent to Obligations of Seller 

            	
              19

            

    

    
      	
               
      

            	
              6.4.

            	
              The
      Closing 

            	
              19

               

            

    

    
      	
               
      

            	
              ARTICLE VIIADDITIONAL
      COVENANTS                                                                                                                                               
      21

            

    

     

    
      	
               
      

            	
              7.1.

            	
              Seller’s
      Access to Books and Records 

            	
              21

            

    

    
      	
               
      

            	
              7.2.

            	
              Tax
      Matters 

            	
              22

            

    

    
      	
               
      

            	
              7.3.

            	
              Surety
      Bonds; Letters of Credit 

            	
              23

            

    

    
      	
               
      

            	
              7.4.

            	
              Consents
      and Preferential Rights 

            	
              23

            

    

     

    
      	
               
      

            	
              ARTICLE VIIIINDEMNIFICATION23

            

    

     

    
      	
               
      

            	
              8.1.

            	
              Limitation
      On and Survival of Representations and Warranties 

            	
              23

            

    

    
      	
               
      

            	
              8.2.

            	
              Indemnification
      of Seller 

            	
              24

            

    

    
      	
               
      

            	
              8.3.

            	
              Indemnification
      by Buyer 

            	
              25

            

    

    
      	
               
      

            	
              8.4.

            	
              Consent
      to Settlement; Cooperation 

            	
              26

            

    

    
      	
               
      

            	
              8.5.

            	
              Limitation
      of Liability 

            	
              26

            

    

    
      	
               
      

            	
              8.6.

            	
              Exclusive
      Remedy 

            	
              26

            

    

    
      	
               
      

            	
              8.7.

            	
              Title
      and Environmental Defects 

            	
              26

            

    

    
      	
               
      

            	
              8.8.

            	
              Disclaimer
      of Other Warranties 

            	
              27

            

    

    
      	
               
      

            	
              8.9.

            	
              Materiality
      Qualifiers Disregarded 

            	
              28

            

    

     

    
      	
              ARTICLE IX

            	
              TERMINATION 

            	
              28

            

    

     

    
      	
               
      

            	
              9.1.

            	
              Termination 

            	
              28

            

    

    
      	
               
      

            	
              9.2.

            	
              Effect
      of Termination 

            	
              29

            

    

     

    
      	
              ARTICLE X

            	
              MISCELLANEOUS 

            	
              29

            

    

     

    
      	
               
      

            	
              10.1.

            	
              Entire
      Agreement 

            	
              29

            

    

    
      	
               
      

            	
              10.2.

            	
              Expenses 

            	
              29

            

    

    
      	
               
      

            	
              10.3.

            	
              Governing
      Law 

            	
              29

            

    

    
      	
               
      

            	
              10.4.

            	
              Assignment 

            	
              30

            

    

    
      	
               
      

            	
              10.5.

            	
              Notices 

            	
              30

            

    

    
      	
               
      

            	
              10.6.

            	
              Counterparts;
      Headings 

            	
              31

            

    

    
      	
               
      

            	
              10.7.

            	
              Specific
      Performance 

            	
              31

            

    

    
      	
               
      

            	
              10.8.

            	
              Interpretation 

            	
              31

            

    

    
      	
               
      

            	
              10.9.

            	
              Severability 

            	
              31

            

    

    
      	
               
      

            	
              10.10.

            	
              No
      Third-Party Reliance 

            	
              31

            

    

    
      	
               
      

            	
              10.11.

            	
              Like-Kind
      Exchange 

            	
              31

            

    

    
      	
               
      

            	
              10.12.

            	
              Amendment;
      Waiver 

            	
              32

            

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

          
             

             

            TABLE
OF CONTENTS

            (continued)

             

             

            

          

        

      

    

     

    EXHIBITS

     

     

    
      	
              Exhibit A

            	
              Procedure
      for Claiming Title Defects and Adjusting the Purchase
  Price

            
	
              Exhibit B

            	
              Procedure
      for Claiming Environmental Defects and Adjusting the Purchase
      Price

            
	
              Exhibit C

            	
              Form
      of Assignment, Conveyance and Bill of Sale

            
	
              Exhibit
      D

            	
              Form
      of FIRPTA Affidavit

            
	 
      	 
      
	 
      	 
      

    

    

    SCHEDULES

     

    
      	
              Schedule
      2.1(a)

            	
              Excluded
      Assets

            
	
              Schedule
      2.3(a)(iv)

            	
              Certain
      Drilling and Completion Costs

            
	
              Schedule
      2.3(b)(iv)

            	
              Accrued
      Suspense Funds

            
	
              Schedule
      3.3

            	
              Violations
      or Conflicts

            
	
              Schedule
      3.4(a)

            	
              Leased
      Personal Property

            
	
              Schedule
      3.4(b)

            	
              Leases
      and Wells (including Net Acres, WI, NRI and Allocated
    Values)

            
	
              Schedule
      3.5(a)

            	
              Property
      Agreements

            
	
              Schedule
      3.5(b)

            	
              Matters
      relating to Property Agreements

            
	
              Schedule
      3.6

            	
              Unpaid
      Rentals, Royalties, Overriding Royalty Interests and Other
      Payments

            
	
              Schedule
      3.7

            	
              Compliance
      with Law

            
	
              Schedule
      3.8

            	
              Litigation

            
	
              Schedule
      3.12

            	
              Outstanding
      Commitments, AFEs and Invoices

            
	
              Schedule
      3.13

            	
              Preferential
      Rights and Required Consents

            
	
              Schedule
      7.3

            	
              Seller’s
      Surety Bonds and Letters of Credit

            

    

    

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    PURCHASE
AGREEMENT

     

    This
Purchase Agreement (this “Agreement”) is made
as of March 12, 2010 by and between Mainland Resources, Inc., a Nevada
corporation (“Seller”), and LP, a
Delaware limited partnership (“Buyer”).

     

    RECITALS

     

    A.           Seller
owns an interest in certain oil and gas leases and wells located DeSoto Parish,
Louisiana and assets related thereto.

     

    B.           Seller
desires to sell and Buyer desires to acquire the Assets (as defined herein) on
the terms and subject to the conditions set forth in this
Agreement.

     

    AGREEMENT

     

    The
parties, in consideration of the premises and of the mutual representations,
warranties, covenants, conditions and agreements set forth herein and intending
to be bound, agree as set forth below:

     

                       
ARTICLE I                      

     

    DEFINITIONS

     

    When used
in this Agreement, the following terms shall have the meanings
specified:

     

    “Action” means any
action, claim, suit, litigation, arbitration or governmental
investigation.

     

    “Agreement” means this
Agreement, together with the Exhibits and Schedules attached hereto, as the same
may be amended from time to time in accordance with the terms
hereof.

     

    “Allocated Value”
means the monetary amount for each Lease or Well set forth Schedule 3.4(b) for
purposes of determining Title Defect Amounts and Title Benefit
Amounts.

     

    “Assets” means the
following:

     

    (a) the
Property Agreements, including, without limitation, the Leases;

     

    (b) the
Personal Property;

     

    (c) the
Production;

     

    (d) the Books
and Records; and

     

    (e) all other
mineral and real property rights, titles and interests of any nature that Seller
owns in and to all lands covered by the Leases (including but not limited to
rights to bonus, rentals, royalties, executive rights, and reversionary
rights).

     

     

    1

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Assignment” means the
Assignment, Conveyance and Bill of Sale in the form of Exhibit C attached
hereto.  The Assignment may be executed in multiple counterparts for
recording in the various jurisdictions where the Assets are
located.

     

    “Assumed Liabilities”
means:

     

    (f) any
liability or obligation arising out of or resulting from performance due on or
after the Effective Time under any Property Agreement, including the
Leases;

     

    (g) any
liability or obligation for Taxes arising from and attributable to ownership and
operations after the Effective Time;

     

    (h) any
liability or obligation for properly plugging and abandoning all of the Wells
and restoring the surface areas associated with the Wells in accordance and
compliance with the rules and regulations of Governmental Authorities having
jurisdiction and the terms of the Leases;

     

    (i) any
liability or obligation relating to the accrued suspense funds as of the Closing
Date, but only to the extent such suspended funds have been transferred to
Buyer;

     

    (j) any
liability or losses attributable to a Title Defect for which the Purchase Price
is decreased pursuant to Section 2.3(b)(iv);
and

     

    (k) except
for any right to a Purchase Price adjustment or as it may constitute a breach of
the representation set forth in Section 3.10, any
matter relating to the environmental condition of the Properties.

     

    “Books and Records”
means, in whatever form or media expressed, all books, records, files or copies
thereof, in Seller’s possession relating directly to the Assets, including
geological, plats, surveys, maps, cross-sections, production records, electric
logs, cuttings, cores, core data, pressure data, decline and production curves,
well files and all related matters, division of interest records, division
orders, lease files, title opinions, abstracts, lease operating statements and
all other accounting information, marketing reports, statements, gas balancing
information and all other marketing information, all geophysical and seismic
records except to the extent that the transfer of such geophysical or seismic
records would violate existing licensing or other contractual restrictions on
such transfer, but excluding all Tax Returns.

     

    “Business Day” means
any day other than (a) Saturday or Sunday; or (b) a day on which commercial
banks in Houston, Texas are closed.

     

    “Buyer” has the
meaning given in the opening paragraph.

     

    “Closing” means the
purchase and sale of the Assets and the assignment and assumption of the Assumed
Liabilities as contemplated this Agreement and the documents related
hereto.

     

    “Closing Date” means
May 1, 2010 or such other date as the parties may mutually agree in
writing.

     

     

    2

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    “Closing Purchase
Price” has the meaning given in Section 2.2
below.

     

    “Code” means the
Internal Revenue Code of 1986 and the regulations promulgated thereunder, as
amended.

     

    “Easements” means all
rights of way, easements, surface leases and other rights of surface use held by
Seller related to the Assets.

     

    “Effective Time” for
all purposes of this Agreement shall mean 12:01 a.m. Central Time on January 1,
2010.

     

    “Environmental Defect”
means any condition in, on or under an Asset (including, without limitation,
air, land, soil, surface and subsurface strata, surface water and ground water
or sediments) that causes an Asset to be in violation of an Environmental
Law.  It is understood and agreed that matters of an essentially
similar nature such as, but not limited to, oil spills, chemical barrels or
equipment containing NORM found at a single site shall be deemed a single
incident or condition.  Each Environmental Defect shall be addressed
as a single incident or condition and Environmental Defects will not be
aggregated on a per condition basis or otherwise (i.e., chemical barrels found
at all of the Well sites shall not be aggregated, but instead, shall be
evaluated on a site by site basis).  The existence or presence of
asbestos or NORM in or with respect to any equipment, tubulars, material,
facility or other property which is currently in use and which is not currently
required to be remediated under any Environmental Law shall not be considered an
Environmental Defect notwithstanding that remediation may be required when such
property is taken out of service.

    

    “Environmental Defect
Notice” means a written notice given by Buyer to Seller alleging an
Environmental Defect.  To be effective, each Environmental Defect
Notice must be in writing, received by Seller on or before the expiration of the
Examination Period and satisfy the following conditions precedent: (i) name
the affected Asset, (ii) describe the condition that causes the
Environmental Defect, (iii) provide reasonable factual substantiation for
the Environmental Defect, and (iv) state the Environmental Defect
Value.  For the purpose of the preceding sentence, “factual
substantiation for the Environmental Defect” shall mean reports prepared by, or
the basis of tests performed by Buyer or its consultants.

    

    “Environmental Defect
Value” means the costs to remediate that particular Environmental Defect
as substantiated by Buyer or its consultants in writing, which includes the
remediation proposed and all assumptions used to calculate such
costs.

     

    “Environmental Laws”
means any and all Laws, relating to public health, or to pollution or protection
of the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) including, without limitation,
the Clean Air Act, the Comprehensive Environmental Response Compensation and
Liability Act (“CERCLA”), the
Resource Conservation and Recovery Act of 1976 (“RCRA”), the Toxic
Substances Control Act (“TSCA”), the Clean
Water Act, the Safe Drinking Water Act, the Hazardous Materials Transportation
Act (“HMTA”),
the Oil Pollution Act of 1990, all as amended, and any state Laws implementing
or analogous to the foregoing federal Laws, and all other Laws relating to or
regulating emissions, discharges, releases, or cleanup of pollutants,
contaminants, chemicals, polychlorinated biphenyls (“PCBs”), oil and gas
exploration and production wastes, brine, solid wastes, or toxic or Hazardous
Substances or wastes.

     

     

    3

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    “Excluded Assets”
means:

     

    (l) the oil
and gas leases excluded in accordance with the procedures set forth in Section 5.6, Section 7.4 or on
Exhibit A or
B;

     

    (m) a copy of
the Books and Records;

     

    (n) any other
assets held by Seller or its affiliates, including any other assets held by
Seller in DeSoto Parish, Louisiana.

     

    “Governmental
Authority” means any federal, state, provincial, municipal, local or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States, any of
its possessions or territories, or of any foreign nation.

     

    “Hazardous Substances”
means any substance or material which, if present in the environment would,
under applicable Law, require assessment, remediation, or corrective action
including, without limitation, chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products which are classified as
hazardous, toxic, radioactive, dangerous, or otherwise regulated by, or form the
basis for liability under, any Environmental Laws including but not limited to
any polluting substances, hazardous wastes under RCRA, hazardous substances
under CERCLA, toxic substances under TSCA, hazardous materials under HMTA, or
comparable materials or classification under any other Environmental
Laws.

     

    “Knowledge of Seller”
means the actual knowledge of the following employees of Seller: Michael J.
Newport, Mark Witt or Simeon Horton.

     

    “Laws” means any
federal, state, local or other law or governmental requirement of any kind, and
the rules, regulations and orders promulgated thereunder, including principles
of common law and duties existing thereunder, all of the foregoing as in effect
on the date hereof.

     

    “Lease” (individually)
and “Leases”
(collectively) means the oil, gas, and/or mineral leases (including federal
leases) set forth on Schedule 3.4(b),
including, but not limited to leaseholds, record title and operating rights,
royalty or overriding royalty interests, production payment, reversionary, net
profit, contractual working interests and other similar rights and estates
therein owned by Seller in such leases, including all rights in any pooled,
unitized or communitized acreage by virtue of the Leases being a part
thereof.

     

    “Lease Burdens” means
the royalties, overriding royalties, production payments, net profit interests,
and all similar interests burdening the Leases or production therefrom, that are
legally binding and enforceable at law or in equity.

     

    “Liabilities” means
any direct or indirect losses, damages, debts, obligations or liabilities of any
nature, whether absolute, accrued, contingent, liquidated or otherwise, and
whether due or to become due, asserted or unasserted, known or
unknown.

     

     

    4

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    “Losses” has the
meaning given in Section
8.2(a).

     

    “Material Adverse
Effect” or “Material Adverse
Change” means a material adverse effect on or change in (or any
development that is reasonably likely to have a material adverse effect on or
change in) the Assets, other than any change, circumstance or effect
(a) relating to the economy, securities markets or financial markets,
including the credit markets, in general, (b) affecting the oil and gas or
energy industry generally, such as fluctuations in the price of oil or gas, or
(c) resulting from the execution or performance of this Agreement or the
announcement thereof.

     

    “Net Acres” means the
pro rata undivided interest of Seller in a Lease or other agreement obtained by
multiplying the total number of acres covered by the Lease or agreement by the
percentage Working Interest owned by Seller.

     

    “Net Revenue Interest”
means the decimal ownership of the lessee in production from a Lease, after
deducting all applicable Lease Burdens.

     

    “Permits” means all
written permits, licenses and governmental authorizations, registrations and
approvals required, as of the date hereof, for the conduct of Seller’s
business.

     

    “Permitted
Encumbrances” means:  (a) liens, charges, encumbrances,
contracts, agreements, instruments, obligations, defects and irregularities of
title and restrictions of right or interest of any nature affecting any Lease to
the extent discharged at Closing; (b) lessors’ royalties, overriding royalties,
and similar burdens that do not operate to reduce the Net Revenue Interest set
forth on Exhibit
3.4(b) in any Lease; (c) contingent future obligations under any joint
operating agreement, farm-out agreement, or similar agreement whereby an
operator or other party with an interest in such agreement may earn, or
otherwise become entitled to, an interest in any Lease or Well to the extent set
forth on Exhibit
3.4(b); (d) division orders and sales contracts relating to hydrocarbons
that are terminable, without material penalty, upon no more than 90 days notice
to the purchaser under such division orders or sales contract (subject to
applicable governmental regulations); (e) all rights to consent by, required
notices to, and filings with or other actions by Governmental Authorities, if
any, in connection with the change of ownership or control of an interest in any
Lease; (f) any required third-party consent to change of ownership or control of
the Leases or similar agreements to the extent consent is obtained prior to
Closing; (g) materialmen’s, mechanics’, repairmen’s, employees’, contractors’,
operators’, tax and other similar liens or charges arising pursuant to
operations or in the ordinary course of business incidental to construction,
maintenance, or operation of the Leases (i) if they have not been filed pursuant
to Law and the opportunity to do so has expired, or (ii) if they are not
delinquent and payment is being made in the ordinary course of business, or
(iii) if their validity is being contested in good faith by appropriate
action and Seller executes and delivers at Closing an indemnification agreement,
reasonably acceptable to Buyer, agreeing to hold Buyer harmless therefrom; or
(iv) if due and payable, now or in the future, provision has been made by
Seller for the payment thereof; (h) easements in respect of surface
operations, pipelines, or the like and easements on, over or in respect of the
Leases that are not such as to interfere materially with the operation or use of
the Leases; (i) all other inchoate liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities affecting any
of the Leases that individually or in the aggregate are customary in the
industry and do not interfere materially with the operation, value or use of any
of the Leases; (j) all applicable Laws, rules and orders of any
Governmental Authority; and (k) inchoate liens for Taxes not due and
payable before the Closing Date.

     

     

    5

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    “Person” means an
individual, partnership, corporation, business trust, limited liability company,
limited liability partnership, joint stock company, trust, unincorporated
association, joint venture or other entity or a Governmental
Authority.

     

    “Personal Property”
means all of Seller’s interest in all of the tangible personal property,
fixtures and improvements now and as of the Effective Time on, appurtenant to or
used solely in connection with the Assets or with the production, treatment,
storage, sale or disposal of hydrocarbons, water or other minerals or substances
produced from the Leases, including, without limitation, all Wells, wellhead
equipment, fixtures, casing and tubing, all production, storage, treating,
compression, dehydration, delivering, salt water disposal and pipeline fixtures,
and other facilities of every kind, character and description, used or usable
solely in connection with the production, treatment, storage, delivery, sale or
disposal of hydrocarbons, water or other minerals or substances produced from
the Assets.

     

    “Production” means all
of Seller’s right, title and interest in the oil, gas, casinghead gas,
condensate, distillate and other liquid and gaseous hydrocarbons produced from
the Leases, products refined and manufactured therefrom and the accounts and
proceeds from the sale thereof to the extent the Production has been produced,
or accrued, or is held on the Leases or in the tanks from and after the
Effective Time.

     

    “Properties” means the
lands associated with and subject to the Leases, to the extent, and only to the
extent, that Seller has made use of such lands in connection with the
exploration or drilling for, or production of, hydrocarbons under the terms of
the Leases.

     

    “Property Agreements”
means the Leases, pooling and unitization agreements, hydrocarbon purchase and
sale contracts, leases, permits, rights-of-way, easements, servitudes, licenses,
farmouts, options, surface leases, surface fee interests, orders and other
contracts or agreements:  (i) to the extent relating to any Well
or to the other Assets; or (ii) to the extent relating to the production,
storage, treatment, transportation, processing, sale or disposal of
hydrocarbons, water or other minerals or substances produced therefrom or
attributable thereto, identified on Schedule 3.5(a).

     

    “Purchase Price” means
the amount specified in Section 2.2
hereof.

     

    “Referral Firm” has
the meaning given in Section 2.4(c)(ii).

     

    “Retained Liabilities”
means all liabilities and obligations of Seller, whether such liabilities or
obligations relate to payment, performance or otherwise, other than the Assumed
Liabilities.

     

    “Seller” has the
meaning given in the opening paragraph.

     

     

    6

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    “Tax” or “Taxes” means any and
all taxes, levies, imposts, duties, assessments, charges and withholdings
imposed or required to be collected by or paid over to any Governmental
Authority.

     

    “Tax Returns” means
any report, return, information statement, payee statement or other information
required to be provided to any Governmental Authority, with respect to Taxes
imposed on Seller.

     

    “Title Benefit” means
any right, circumstance or condition that: (a) operates to increase the Net
Acres of Seller in any Lease above that shown therefor on Schedule 3.4(b);
(b) increases Seller’s Net Revenue Interest in any of the Leases to more
than the amount shown on Schedule 3.4(b) for
each Lease; or (c) decreases Seller’s Working Interest as set forth on
Schedule 3.4(b)
for each Lease (other than decreases that would result in the Net Revenue
Interest in such Lease being proportionately decreased).

     

    “Title Benefit Amount”
means, with respect to a Title Benefit Property, the increase in the Allocated
Value of a property as a result of the existence of one or more Title Benefits
as determined pursuant to Exhibit
A.

     

    “Title Benefit
Property” means a property affected by a Title Benefit.

     

    “Title Defect” means
any right, circumstance or condition (other than a Permitted Encumbrance)
that:  (a) operates to reduce the Net Acres of Seller in any
Lease below that shown therefor on Schedule 3.4(b);
(b) reduces Seller’s Net Revenue Interest in any of the Leases to less than
the amount shown on Schedule 3.4(b) for
each Lease; (c) increases Seller’s Working Interest as set forth on Schedule 3.4(b) for
each Lease (other than increases that would result in the Net Revenue Interest
in such Lease being proportionately increased); or (d) imposes, on any of
the Leases any encumbrance, claim, easement, servitude, right, burden or defect
that is not a Permitted Encumbrance hereunder.  It is expressly
understood that Permitted Encumbrances and production imbalances do not
constitute Title Defects.

     

    “Title Defect Amount”
means, with respect to a Title Defect Property, the decrease in the Allocated
Value of a property as a result of the existence of one or more Title Defects as
determined pursuant to Exhibit
A.

     

    “Title Defect
Mechanism” means the procedure whereby the Purchase Price is adjusted to
compensate for variations in the Allocated Values caused by Title
Defects.  The Title Defect Mechanism is set forth in Exhibit A.

     

    “Title Defect
Property” means any Lease set forth on Schedule 3.4(b)
affected by a Title Defect.

     

    “Well” (individually)
and “Wells”
(collectively) means the oil, gas, and/or mineral wells set forth on Schedule
3.4(b).

     

    “Working Interest”
means that interest that bears a share of all costs and expenses proportionate
to the interest owned, associated with the exploration, development and
operation of a Lease and the Wells associated therewith, that the owner of a
Lease is required to bear and pay by reason of such ownership, expressed as a
decimal.

     

     

    7

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

                            
ARTICLE II                                

     

    PURCHASE AND
SALE

     

    2.1. Purchase and
Sale.

     

    (a) At
Closing, Seller shall sell, assign, convey, transfer and deliver to Buyer, and
Buyer shall purchase and accept from Seller, all of Seller’s right, title and
interest in and to the Assets; provided, however,
the Excluded Assets, as set forth on Schedule 2.1(a)
will not be conveyed or purchased hereunder, but will be excluded from this
transaction.

     

    (b) At
Closing, Buyer shall assume and become obligated to pay, perform, or otherwise
discharge the Assumed Liabilities.

     

    (c) Notwithstanding
anything herein to the contrary, Buyer shall not acquire any right or interest
in any properties of Seller other than the Assets prior to the Effective
Time.

     

    2.2. Purchase
Price.  The purchase price for the Assets will be $20,321,525
adjusted as provided in this Article II (as
so adjusted, being herein called the “Purchase
Price”).  At Closing, the Purchase Price as adjusted pursuant
to Sections 2.3
(the “Closing Purchase
Price”) shall be paid by Buyer to Seller in cash by wire transfer of
immediately available funds. A portion of the Purchase Price in the amount of
$823,843.12 shall be paid by Buyer to Madison Williams and Company LLC in cash
by wire transfer of immediately available funds.

     

    2.3. Adjustments to Purchase
Price.

     

    (a) To
determine the Closing Purchase Price, the Purchase Price shall be increased by
the following amounts:

     

    (i) the
amount of all (1) ad valorem, property or similar Taxes paid by Seller and
relating to the Assets for periods from and after the Effective Time, calculated
in a similar fashion as set forth in Section 2.3(b)(i),
and (2) any other expenses paid by Seller and relating to the Assets for
periods from and after the Effective Time and properly incurred under Section
5.1;

     

    (ii) the
aggregate amount of any and all out of pocket operating costs paid by Seller to
third parties, not in violation of Section 5.1, that
relate to the Assets for periods from and after the Effective Time, provided,
however, that the out of pocket operating costs associated with the Dehan 15 #1
well will be calculated from and after the date of first
production,  (excluding amounts for which the Purchase Price is
increased pursuant to Section 2.3(a)(i)
above), including, but not limited to, lease operating expenses, transportation
and marketing expenses, lease payments, severance Taxes and producing overhead
rates;

     

     

    8

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (iii) the
aggregate amount of any and all capital expenditures actually paid to third
parties by Seller or on Seller’s behalf, not in violation of Section 5.1, that
relate to the Assets for periods from and after the Effective Time;

     

    (iv) other
than with respect to the Griffith 11-1 well, all drilling and completion costs
incurred by Seller, not in violation of Section 5.1, on the
Leases prior to the Closing Date, which costs as of the date of this Agreement
are set forth on Schedule 2.3(a)(iv);
and

     

    (v) any other
amount agreed upon by the parties in writing.

     

    (b) To
determine the Closing Purchase Price, the Purchase Price shall be decreased,
without duplication, by the following amounts:

     

    (i) the
amount of all of Seller’s unpaid ad valorem, production, severance, property or
similar Taxes relating to the Assets, to the extent that such unpaid Taxes
relate to periods of time before the Effective Time (to the extent that any such
amount has not been finally determined by Closing or any other date of
determination, such amount will be estimated based upon the best information
then reasonably available to the parties).  Such Taxes with respect to
a period which the Effective Time splits shall be prorated based on the number
of days in such period which fall on each side of the Effective Time; provided, however, to
the extent that such Taxes are computed based on the production from the Assets,
such Taxes shall be prorated between the parties based on the period in which
such production which is the basis for such calculation of Taxes occurs, in the
same manner as the parties are entitled to receive (or be credited with) such
production pursuant to the terms hereof;

     

    (ii) amounts
equal to all revenues (net of applicable Taxes that are paid by Seller
subsequent to the Effective Time and prior to the Closing Date, and royalty,
overriding royalty payments and similar such payments) collected by Seller that
are attributable to production of oil or gas from the Griffith 11-1 well (but
not taking into account any hedges) and from the disposal of salt water and
relating to periods of time from and after the Effective Time;

     

    (iii) all
proceeds of production as produced and sold as of the date of first production
with respect to all Wells other than the Griffith 11-1 well;

     

    (iv) an amount
equal to the amount of accrued suspense funds as of the Closing Date (such
amount to be determined by Seller by updating the amount of accrued suspense
funds as of December 31, 2009 set forth on Schedule 2.3(b)(iv)
to reflect the amount of accrued suspense funds as of the Closing
Date;

     

    (v) an
amount, calculated in accordance with the procedures of Exhibit A for Title Defects,
equal to the agreed value of any Title Defect that is asserted prior to Closing,
agreed to by Seller, and remains uncured by Seller at Closing; provided that Title
Defects for which there is no agreement prior to Closing shall be addressed in
accordance with procedures of Exhibit A;

     

     

    9

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (vi) an
amount, calculated in accordance with the procedures of Exhibit B for
Environmental Defects, equal to the agreed value of any Environmental Defect
that is asserted prior to Closing, agreed to by Seller, and remains uncured by
Seller at Closing; provided that
Environmental Defects for which there is no agreement prior to Closing shall be
addressed in accordance with procedures of Exhibit
B;

     

    (vii) an amount
of money equal to the Allocated Value of any Assets set forth on Schedule 3.4(b) that
are removed from the purchase and sale under this Agreement by reason of the
exercise of a preferential right to purchase by the holder of such right prior
to Closing; and

     

    (viii) any other
amount agreed upon by the parties in writing.

     

    2.4. Determination of Purchase
Price.

     

    (a) The
Closing Purchase Price shall be determined by adding to or subtracting from the
Purchase Price, as applicable, each adjustment to be made to the Purchase Price
at Closing pursuant to Sections 2.3(a) and
2.3(b), as proposed by Seller and not disputed by Buyer in accordance
with this Section 2.4.

     

    (b) Seller
shall prepare and deliver to Buyer at least five Business Days before the
Closing Date a statement (the “Preliminary Settlement
Statement”) setting forth Seller’s good faith estimate of each adjustment
(including the calculation thereof) to be made in accordance with Sections 2.3(a) and
2.3(b).  Buyer may dispute in good faith Seller’s estimate of
the amount of such adjustments by delivery to Seller by written notice thereof
within two Business Days after receipt of such estimate.  Buyer and
Seller shall use commercially reasonable efforts to resolve any such dispute in
writing prior to Closing.  If any such disputed amounts are not
resolved by mutual written agreement of Buyer and Seller prior to Closing, (i)
such disputed amounts shall be resolved in accordance with Section 2.4(c)(i)
and (ii) Closing shall occur with payment of the Closing Purchase Price less the
amount of such disputed item or items (but only to the extent of dispute); provided, however,
that Title Defects shall be addressed as set forth in Section
2.3(b)(iv).

     

    (c) After
Closing, and regardless of whether Seller or Buyer proposed or disputed such
adjustments pursuant to Section 2.4(b), the
Closing Purchase Price shall be subject to further adjustment pursuant to this
Section
2.4(c).

     

    (i) On or
before the 90th day after Closing, Seller shall prepare and deliver to Buyer, a
statement (the “Final
Settlement Statement”) setting forth Seller’s calculation of the final
adjustments described in Sections 2.3(a) and
2.3(b) and showing the calculation of such adjustments, including any
items that may have been disputed by the parties but unresolved prior to Closing
in accordance with Section
2.4(b).  Within 30 days after receipt of the Final Settlement
Statement, Buyer shall deliver to Seller a written report containing any changes
that Buyer proposes be made to the Final Settlement Statement and the reasons
for those changes.  The parties shall attempt to agree to the amounts
due pursuant to such adjustments, including any amounts disputed under Section 2.4(b)
and not resolved prior to Closing, no later than 30 days after Buyer’s receipt
of the Final Settlement Statement.  The date upon which such agreement
is reached shall be herein called the “Final Settlement
Date.”  Within five Business Days from the Final Settlement
Date, the party owing any undisputed amount for additional adjustments shall
wire such amount in cash, in immediately available funds to the other
party.

     

     

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    (ii) If Seller
and Buyer are unable to agree upon the Final Settlement Statement by the 30th
day after Buyer’s receipt of same, Ernst & Young LLP (or, if such firm is
unable or unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by Buyer and Seller in writing) (the
“Referral
Firm”) shall review the Final Settlement Statement and the records
relating to the Leases and determine the final adjustments, other than
adjustments determined under the mechanism regarding Title Defects set forth in
Exhibit A.  With
respect to any matters under this Agreement to be resolved by the Referral Firm,
neither the Referral Firm nor any Person employed by the Referral Firm will
interpret the provisions of this Agreement unless otherwise agreed by Seller and
Buyer in writing.  With respect to any matters for which
interpretation of this Agreement is required, and for which Buyer and Seller
cannot agree on such interpretation, such matter shall be submitted to
arbitration in a similar manner as set forth in Exhibit A, paragraph 11
regarding Title Defect disputes and the Referral Firm shall decide all other
matters specified in this Section 2.4(c)(ii)
and subsequently determine the matters for which interpretation was required,
based upon the results of said determination after same has become
final.  The decision of the Referral Firm shall be binding on Buyer
and Seller, and the fees and expenses of the Referral Firm shall be borne
one-half each by Buyer and Seller.  The Referral Firm shall deliver
its final calculation of the Purchase Price in writing to Buyer and Seller as
soon as is practicable, and the parties shall pay and receive the final
adjustment amount by wire transfer of cash in immediately available funds, no
later than the 5th business day following the paying party’s receipt from the
Referral Firm of the final Purchase Price determination, notwithstanding any
ongoing dispute, if any, regarding Title Defects.

     

    (iii) The
parties will, and will cause their representatives to, reasonably cooperate and
assist in the preparation of the Final Settlement Statement and the conduct of
the reviews and audits referred to in this Section 2.4,
including but not limited to making available books, records and personnel as
necessary or appropriate.

     

     

    11

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

                                
ARTICLE III                                

     

    REPRESENTATIONS AND
WARRANTIES OF SELLER

     

    Seller
hereby represents and warrants to Buyer that:

     

    3.1. Organization.  Seller
is duly organized, validly existing and in good standing under the laws of the
State of Nevada.  Seller has full power and authority to conduct its
business as it is now being conducted and to own the Assets (or to lease those
Assets leased by it).  Seller is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the Assets owned or
used by it, or the nature of the activities conducted by it related to the
Assets, requires such qualification.

     

    3.2. Authorization.  The
execution, delivery and performance of this Agreement have been authorized by
all necessary action on the part of Seller, and no further actions on the part
of Seller are necessary to authorize the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated
hereby.  This Agreement, and all of the other documents or instruments
required to be executed and delivered by Seller at Closing have been, or at
Closing will be, duly executed and delivered by Seller and (assuming the due
authorization, execution and delivery hereof and thereof by Buyer) are valid and
binding obligations of Seller, enforceable against Seller in accordance with
their terms (except to the extent that enforcement may be affected by applicable
bankruptcy, reorganization, insolvency and similar Laws affecting creditors’
rights and remedies generally and by general principles of equity (regardless of
whether enforcement is sought at law or in equity)).

     

    3.3. No Violation or
Conflict.  Except as set forth on Schedule 3.3,
the execution, delivery and performance of this Agreement and all of the other
documents and instruments contemplated hereby to which Seller is a party does
not and will not (a) conflict with, violate or breach any Laws, judgment,
order or decree binding on Seller, the limited liability company agreement of
Seller, or any material contract to which Seller is a party or by which it is
bound, (b) give any party to any of the Property Agreements to which Seller
is a party or by which they are bound any right of termination, breach,
cancellation, acceleration or modification thereunder or (c) require the
approval, consent or authorization of, or prior notice to, filing with or
registration with any Governmental Authority.

     

    3.4. Title.

     

    (a) Seller
owns or leases, subject to its rights and the rights of third parties under
joint operating agreements where applicable, all Personal Property currently
used with and which is reasonably sufficient to operate, in the ordinary course
of business, the Assets of which Seller is the operator of record; provided, as
to Personal Property currently used with Assets of which Seller is not the
operator of record, Seller only represents and warrants that it has an interest
in such Personal Property commensurate with its working
interest.  Schedule 3.4(a)
contains a list of all leased Personal Property used in connection with the
Assets of which Seller is the operator of record and, except as set forth on
Schedule
3.4(a), all of said leases are assignable.  Subject to ordinary
wear and tear and to scheduled or necessary repairs in the ordinary course of
business, all material items of Personal Property appurtenant to or used in
connection with Assets of which Seller is the operator of record are in
reasonably good and serviceable condition and repair and there are no necessary
material repairs, improvements, restoration or other service work necessary to
make any of such assets serviceable.  Seller owns or leases such
Personal Property appurtenant to or used in connection with Assets of which
Seller is the operator of record free and clear of any claim, lien, right, or
encumbrance, except for Permitted Encumbrances.

     

     

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    (b) Set forth
on Schedule
3.4(b) is a true, correct and complete description of each of the Leases
and a list of the Wells located on the lands associated with and subject to the
Leases, together with a description of Seller’s Net Acres, Net Revenue Interest
and Working Interest therein.

     

    (c) Seller
owns all rights of way and surface damage agreements associated therewith that
are currently used with and which are reasonably sufficient for the operation of
the Assets or the production, treatment, storage, sale or disposal of
hydrocarbons, water or other minerals or substances produced from the Leases,
and, to the Knowledge of Seller, all of same are assignable.

     

    3.5. Contracts.

     

    (a) Schedule 3.5(a)
lists the material Property Agreements other than the Leases.  Prior
to the date hereof, Seller has made available to Buyer true and correct copies
of all Property Agreements.  Except as set forth on Schedule 3.5(a)
(i) each Property Agreement is a valid and binding agreement of Seller,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, or other laws affecting creditors’
rights generally or equitable principles; (ii) Seller has performed, and,
to the Knowledge of Seller, each other party has performed, each material term,
covenant and condition of each of the material Property Agreements to which
Seller is a party that is to be performed by Seller or such other party at or
before the date hereof; (iii)  no event has occurred that would, with the
passage of time or compliance with any applicable notice requirements or both,
constitute a default by Seller or, to the Knowledge of Seller, any other party,
under any of the material Property Agreements to which Seller is a party, except
for such defaults that individually or in the aggregate are not reasonably
expected to have a Material Adverse Effect on any of the Property Agreements;
and (iv) Seller does not intend, and Seller has not received written notice
that any other party to a material Property Agreement intends, to cancel or
terminate any of such Property Agreements.

     

    (b) Except as
set forth on Schedule 3.5(b)
there are no on-going renegotiations of, or attempts to renegotiate, any amounts
paid or payable to Seller under any of the Property Agreements and no party has
made written demand for such renegotiations.  Except as set forth on
Schedule 3.5(b),
there are no commissions due (or to become due) to any broker or other party as
a result of the purchase or sale of hydrocarbons under any of the Property
Agreements.  Except as set forth on Schedule 3.5(b)
Seller has not, with respect to the Property
Agreements:  (i) become overproduced as to any Asset so as to
have a balancing obligation relative thereto, nor has it otherwise received any
quantity of natural gas or liquids, condensate or crude oil to be paid for
thereafter other than in the normal cycle of billing; or (ii) received
prepayments, advance payments or loans which will require the performance of
services or provision of natural gas or liquids, condensate or crude oil under
such Property Agreements on or after the Effective Time without being currently
paid therefore other than in the normal cycle of billing.  Except as
set forth on Schedule 3.5(b),
Seller is not obligated, by virtue of prepayment arrangement, make up right
under production sales contract containing a “take or pay” or similar provision,
gas balancing agreement, production payment or any other arrangement to deliver
hydrocarbons, or proceeds from the sale thereof, attributable to the Leases at
some future time without then or thereafter receiving the full contract price
therefore.  Except as set forth on Schedule 3.5(b),
there is no call upon, option to purchase or similar right to obtain
hydrocarbons from the Leases in favor of any Person other than pursuant to
renewal rights or automatic renewal provisions contained in existing contracts
for the sale for hydrocarbons and the Assets are not subject to any area of
mutual interest provisions, farm-ins, farm-outs or other agreements under which
any party thereto is entitled to receive assignments not yet made or could earn
additional assignments after the Effective Time.

     

     

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    3.6. Lease
Provisions.  All Leases are in force and effect and are
maintained by their terms.  Accurate and timely payment of delay
rentals have been made to maintain in force and effect all Leases within the
primary term on which drilling operations were not timely
commenced.  All other Leases are validly preserved beyond the primary
term by production in paying quantities or the accurate and timely payment of
shut-in royalty payments or otherwise.  Except as set forth on Schedule 3.6, all
rentals, royalties, overriding royalty interests and other payments due under
each of the Leases have been timely and accurately paid, except amounts that are
being held in suspense as a result of title issues in circumstances that do not
provide any third party a right to terminate any such Lease.  Schedule 2.3(b)(iv)
lists the accrued suspense funds as of December 31, 2009.

     

    3.7. Compliance With
Law.  Except as set forth on Schedule
3.7:

     

    (a) All
filings and notices relating to the Assets, or the ownership or operation
thereof, required to be made by Seller with all Governmental Authorities have
been made by or on behalf of Seller other than filings or notices for which the
failure to provide is not, individually or in the aggregate, reasonably expected
to have a Material Adverse Effect on the Assets or the transactions contemplated
hereby.  Seller has not received any notice of violation and is not in
violation of any Law with respect to the Assets, except for such violations as
are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect on the Leases as a whole.

     

    (b) Seller
holds all of the Permits necessary for the operation of Seller’s business as
currently conducted, other than Permits for which the failure to hold is not,
individually or in the aggregate, reasonably expected to have a Material Adverse
Effect on the Assets or the transactions contemplated hereby.  There
are no proceedings pending or, to the Knowledge of Seller, threatened that are
reasonably expected to result in the revocation, cancellation, suspension or
modification of any material Permits.  There are no proceedings
pending or, to the Knowledge of Seller, threatened (i) with respect to any
alleged failure to have all Permits required in connection with the operation of
Seller’s business as currently conducted, or (ii) with respect to any valid
requirement to plug or abandon any Well in which Seller owns an interest or that
is located on any of the Leases.

     

     

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    3.8. Litigation.  Except
as set forth on Schedule 3.8 or
Schedule 3.10,
there is no claim, legal action, suit, litigation, arbitration, dispute or
investigation, judicial, administrative or otherwise, or any order, decree or
judgment, now pending or in effect, or, to the Knowledge of Seller, threatened
or contemplated that, if adversely determined, would have an adverse effect on
the Assets or the transactions contemplated by this Agreement.

     

    3.9. Taxes.  There
are no liens for Taxes on the Assets, except for Taxes not yet due and payable,
and (subject to Section 7.2(a)) there
is no unpaid Tax payable by Seller for which Buyer would become liable by reason
of purchasing the Assets hereunder.  Seller has filed or will file all
Tax Returns required to be filed by Seller in connection with its ownership or
operation of the Assets.  None of the Assets includes any stock,
partnership interests, limited liability company interests, or legal or
beneficial interests of any other person, and none of the Assets is subject to
any agreement that creates a partnership for U.S. federal income tax purposes
that has not properly elected out of Subchapter K of Chapter 1 of Subtitle A of
the Code.

     

    3.10. Environmental
Matters.  As to the Properties, there are no pending or, to the
Knowledge of Seller, threatened (a) lawsuits, (b) notices of violation or
notices of deficiency, (c) civil or criminal penalties, or (d) other unresolved
orders based on any noncompliance with Environmental Laws. Seller has no reason
to believe that its operations or other activities on the Lands violate any
Environmental Law. All written reports pertaining to environmental conditions on
the Assets have been provided to Buyer.   THIS SECTION 3.10
CONSTITUTES SELLER’S SOLE REPRESENTATION AND WARRANTY WITH RESPECT TO
ENVIRONMENTAL LAWS.

     

    3.11. Broker’s
Fees.  Seller has incurred no obligation or liability,
contingent or otherwise, for broker’s or finder’s fees in respect of the matters
provided for in this Agreement for which Buyer or Buyer’s affiliates will be
responsible.

     

    3.12. Outstanding Commitments,
AFEs and Invoices.  Except as set forth in Schedule 3.12,
(i) Seller has incurred no expenses, and has made no commitments to make
expenditures (including any agreements that would obligate Buyer to make
expenditures) in connection with the ownership or operation of the Assets at or
after the Effective Time, other than with respect to routine operations
performed in the ordinary course of operating the existing Wells, which
operations are, individually, estimated to cost $10,000.00 or less, net to
Seller’s interest, and (ii) no proposals or authorities for expenditures
(AFEs) are currently outstanding (whether made by Seller or by any other party)
to drill additional wells, or to deepen, plug back, or rework existing wells, or
to conduct other operations on the Assets for which consent is required under
the applicable operating or unitization agreement, or to abandon any Wells, or
to conduct any other operation on the Assets for which, in each such case, the
estimated cost exceeds $10,000.00 net to Seller’s interest.

     

     

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    3.13. Preferential Rights and
Required Consents.  Except as set forth in Schedule 3.13, there
are no preferential rights to purchase any of the Assets and no consents to
assignment that are required to be obtained in connection with the consummation
of the transaction contemplated hereby.

     

                                 
ARTICLE IV                                

     

    REPRESENTATIONS AND
WARRANTIES OF BUYER

     

    Buyer
hereby represents and warrants to Seller:

     

    4.1. Organization.  Buyer
is a limited partnership, duly formed, validly existing and in good standing
under the laws of the State of Delaware.  Buyer is duly qualified as a
foreign limited partnership in good standing in each jurisdiction in which the
conduct of its business requires such qualification, except where the failure to
be so qualified would not prevent, materially delay or affect consummation of
the transactions contemplated hereby.

     

    4.2. Authorization.  Buyer
has full power and authority to execute, deliver and perform this Agreement and
each agreement or instrument (to which it is a party) executed in connection
herewith or delivered pursuant hereto and to consummate the transactions
contemplated hereby.  Buyer’s execution, delivery and performance of
this Agreement and all agreements and instruments executed in connection
herewith or delivered pursuant hereto and the transactions contemplated hereby
have been duly authorized by all requisite action.  This Agreement and
all agreements or instruments executed by Buyer in connection herewith or
delivered by Buyer pursuant hereto have been or will be duly executed and
delivered by Buyer, and this Agreement and all agreements and instruments
executed by Buyer in connection herewith or delivered by Buyer pursuant hereto
constitute and will constitute the legal, valid and binding obligations of
Buyer, enforceable in accordance with their respective terms (except to the
extent that enforcement may be affected by applicable bankruptcy,
reorganization, insolvency and similar laws affecting creditors’ rights and
remedies generally and by general principles of equity (regardless of whether
enforcement is sought at law or in equity)).

     

    4.3. No Violation or
Conflict.  The execution, delivery and performance by Buyer of
this Agreement and each agreement or instrument executed in connection herewith
or delivered pursuant hereto and the consummation of the transactions
contemplated herein will not, with or without the giving of notice or the
passage of time, or both, (a) conflict with, or result in a violation or
breach of, or a default, right to accelerate or loss of rights under, or result
in the creation of any Lien under or pursuant to, any provision of Buyer’s
articles of incorporation or bylaws (or equivalent governing documents) or any
Laws, or any finding, order, judgment, writ, injunction or decree to which Buyer
is a party or by which Buyer or its assets may be bound or affected; or
(b) require the approval, consent or authorization of, or prior notice to,
filing with or registration with, any Governmental Authority, or any other
Person.

     

    4.4. No
Reliance.  Buyer acknowledges that it has not relied on any
oral or written statements, representations, warranties, or assurances from
Seller or its officers, directors, employees, agents, or consultants, except
those set forth in this Agreement.  Buyer 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 transaction contemplated herein, subject to the
express representations of Seller set forth in this Agreement, Buyer
(a) has relied or shall rely solely on its own independent investigation
and evaluation of the Assets and the express provisions of this Agreement and
(b) has satisfied or shall satisfy itself as to the environmental and
physical condition of and contractual arrangements affecting the
Assets.  Buyer has no knowledge of any fact that results in the breach
of any representation, warranty or covenant of Seller given
hereunder.

     

     

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    4.5. Financing.

     

    (a) Buyer
will have at Closing, unencumbered cash sufficient to fully satisfy its
obligations to pay the Purchase Price to Seller, as and when due.

     

    (b) Buyer has
sufficient financial resources to fulfill the surety bonding requirements of the
State of Louisiana in connection with the Leases.

     

    4.6. Broker’s
Fees.  Buyer has incurred no obligation or liability,
contingent or otherwise, for broker’s or finder’s fees in respect of the matters
provided for in this Agreement for which Seller or Seller’s affiliates will be
responsible.

     

                                
ARTICLE V                                

     

    COVENANTS

     

    5.1. Conduct of
Business.  Except as provided in this Agreement, until the
earlier of Closing or the termination of this Agreement in accordance with its
terms, Seller will use commercially reasonable efforts to maintain Seller’s
interest in the Assets consistent with past practices and will pay lease revenue
burdens, pay Taxes, and file all reports and other documents, and renew all
permits, as due consistent with past practices.  Other than capital
expenditures for the various projects set forth on Schedule 2.3(a)(iv), Seller
has not, from and since the date hereof, and will not undertake any capital
expenditures in excess of $10,000 or any contractual
commitment in excess of thirty (30) days without the approval of Buyer, except
in instances that could, in the opinion of Seller, result in material damage or
injury to Persons, property or any of the Assets. Except in the case of an
emergency and subject to the terms of applicable operating and other existing
agreements, without the prior written consent of Buyer, Seller shall
not:

     

    
      	
               
      

            	
              1.

            	
              make
      any nonconsent elections;

            

    

     

    
      	
               
      

            	
              2.

            	
              abandon
      any Well or release (or permit to terminate), or modify or reduce its
      rights under all or any portion of any of the
  Leases;

            

    

     

    
      	
               
      

            	
              3.

            	
              except
      in the ordinary course of business, modify or terminate any of the
      Property Agreements or waive or relinquish any right
      thereunder;

            

    

     

    
      	
               
      

            	
              4.

            	
              agree
      to any renegotiated price, take-or-pay or other terms under existing gas
      purchase agreements;

            

    

     

     

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              5.

            	
              agree
      to any credit or prepayment arrangement that would reduce the share of gas
      deliverable following the Effective
Time;

            

    

     

    
      	
               
      

            	
              6.

            	
              enter
      into any agreement or instrument for the sale, treatment, or
      transportation of production (except for sales agreements terminable on no
      more than 30 days’ notice);

            

    

     

    
      	
               
      

            	
              7.

            	
              create
      any material gas imbalance;

            

    

     

    
      	
               
      

            	
              8.

            	
              encumber,
      sell or otherwise dispose of any of the Assets, other than
      (i) hydrocarbons sold or otherwise disposed of in the ordinary course
      of business or (ii) personal property that is replaced by equivalent
      property or consumed in Seller’s normal
  operation;

            

    

     

    
      	
               
      

            	
              9.

            	
              pay,
      discharge, or satisfy any claims, liabilities, or obligations (whether
      accrued, absolute, contingent, unliquidated, or otherwise, and whether
      asserted or unasserted), other than the payment, discharge, or
      satisfaction of obligations and liabilities in the ordinary course of
      business.

            

    

     

    For the purposes of obtaining the
written consents required in this Section 5.1,
Buyer designates the person set forth in Section 10.5.  Such
consents may be obtained in writing by overnight courier or given by telecopy or
facsimile transmission.

     

    5.2. Buyer’s Access to
Information.  At Buyer’s sole cost and expense, Buyer and its
authorized agents, officers and representatives shall have reasonable access to
the Assets, including the Books and Records, in order to conduct such
examinations and investigations of the Assets as Buyer deems necessary; provided, however,
that such examinations and investigations:  (a) shall be
conducted during the normal business hours of Seller and (b) shall not
unreasonably interfere with the operations and activities of
Seller.

     

    5.3. Further
Assurances.  Seller hereby agrees to use commercially
reasonable efforts to obtain any and all approvals of Governmental Authorities
and third party consents, approvals, notations and authorizations required in
connection with the consummation of the transactions contemplated by this
Agreement and Buyer hereby agrees to cooperate and assist Seller with respect to
obtaining such approvals and consents. Each of the parties hereto hereby agrees
to take all such other commercially reasonable actions as are necessary or
advisable in order to cause the conditions set forth herein to be
satisfied.  Seller further agrees to fully cooperate and exercise
reasonable, good faith efforts to accommodate Buyer’s efforts to succeed Seller
as operator of Seller-operated Assets.

     

    5.4. Filings.  Promptly
after the execution of this Agreement, the parties shall prepare and make or
cause to be made any required filings, submissions and notifications under the
Laws of any domestic or foreign jurisdiction to the extent that such filings are
necessary to consummate the transactions contemplated hereby (including to
obtain the consents and approvals, contemplated by Section
5.3).  Each party will furnish to the other party such
necessary information and reasonable assistance as such other party may
reasonably request in connection with the foregoing.

     

     

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    5.5. Publicity.  All
general notices, releases, statements and communications to suppliers,
distributors and customers of Seller or Buyer and to the general public and the
press relating to the transactions contemplated by this Agreement shall be made
only at such times and in such manner as may be agreed upon in advance by Seller
and Buyer; provided, however,
that any party hereto or its affiliates shall be entitled to make a public
announcement if, upon the advice of its legal counsel, such announcement is
required to comply with Laws or any listing agreement with any national
securities exchange and if, to the extent practicable, it gives prior notice to
the other party hereto of its intention to make such public announcement and
provides the opportunity to review the content of such disclosure.

     

    5.6. Casualty.  Seller
will maintain until Closing all existing insurance, at its sole cost and
expense.  If any material portion of any Asset shall be damaged or
destroyed by fire or other casualty before the Closing, either party may, at its
option, and upon written notice prior to Closing to the other party, elect to
exclude such Asset from this Agreement.  In the event that the Asset
to be excluded pursuant to this Section 5.6 is the
entirety of a Lease, the Purchase Price shall be reduced by the Allocated Value
of the Asset to be excluded.  In the event that the Asset sought to be
excluded is less than the entirety of a Lease, the Purchase Price shall be
reduced by an amount mutually agreed to in writing.  If neither party
elects to delete such Asset from this Agreement, Seller shall pay the deductible
due under any insurance policy or policies insuring the same and deliver to
Buyer, at Closing, any insurance proceeds actually received by it by reason of
such casualty, and assign to Buyer all of its right, title and interest in any
claim under any applicable insurance policies in respect of such
casualty.

     

    5.7. Notification of
Claims.  Seller shall promptly notify Buyer of any suit, action
or other written proceeding before any court or governmental agency and any
cause of action that relates to the Assets or that might, in Seller’s reasonable
judgment, result in impairment or loss Seller’s title to any portion of the
Assets or the value thereof or that might hinder or impede the operation of the
Leases, in each case, arising or threatened in writing prior to the
Closing.

     

                         
ARTICLE VI                                

     

    CONDITIONS PRECEDENT TO
CONSUMMATION OF

     

    THE CLOSING;
CLOSING

     

    6.1. Conditions Precedent to Each
Party’s Obligations to Close.  The respective obligations of
each party to consummate the transactions contemplated by this Agreement on the
Closing Date are subject to the satisfaction or waiver at or prior to the
Closing of the following conditions precedent:

     

    (a) no order,
decree or injunction shall have been enacted, entered, promulgated or enforced
by any Governmental Authority that prohibits the consummation of the
transactions contemplated by this Agreement; provided, however,
that the parties hereto shall use their commercially reasonable efforts to have
any such order, decree or injunction vacated or reversed; and

     

     

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    (b) all
consents, authorizations, orders, permits and approvals for (or registrations,
declarations or filings with) any Governmental Authority required in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby shall have been obtained or made, and except
where the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration may not reasonably be expected to have a
Material Adverse Effect on Buyer or Seller following the Closing
Date.

     

    6.2. Conditions Precedent to
Obligations of Buyer.  The obligation of Buyer to consummate
the transactions contemplated by this Agreement on the Closing Date is subject
to the satisfaction or waiver at or prior to the Closing of the following
conditions precedent:

     

    (a) the
representations and warranties of Seller contained in Article III
shall be true and correct in all material respects (when read without exception
for materiality or Material Adverse Effect) at and as of the Closing Date with
the same force and effect as if those representations and warranties had been
made at and as of such time (with such exceptions, if any, necessary to give
effect to events or transactions expressly permitted herein);

     

    (b) Seller
shall have performed, in all material respects, all obligations and complied
with all covenants contained herein that are necessary to be performed or
complied with by it at or before Closing; and

     

    (c) Seller
shall have delivered, or caused to be delivered, to Buyer at Closing, all
closing deliveries described in Section 6.4(a).

     

    6.3. Conditions Precedent to
Obligations of Seller.  The obligation of Seller to consummate
the transactions contemplated by this Agreement on the Closing Date is subject
to the satisfaction or waiver at or prior to the Closing of the following
conditions precedent:

     

    (a) the
representations and warranties of Buyer contained in Article IV shall
be true and correct in all material respects  (when read without
exception for materiality or Material Adverse Effect) at and as of the Closing
Date with the same force and effect as if those representations and warranties
had been made at and as of such time (with such exceptions, if any, necessary to
give effect to events or transactions expressly permitted herein);

     

    (b) Buyer
shall have performed, in all material respects, all obligations and complied
with all covenants contemplated herein that are necessary to be performed or
complied with by it at or before Closing;

     

    (c) Buyer
shall have delivered, or caused to be delivered, to Seller at Closing, the
closing deliveries described in Section 6.4(b).

     

     

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    6.4. The
Closing.  The following provisions shall be applicable with
respect to the Closing:

     

    (a) At
Closing, Seller shall, as a condition precedent to Buyer’s obligations
hereunder:

     

    (i) execute
and deliver the Assignment and the Assumption Agreements to Buyer;

     

    (ii) deliver a
certificate of Seller, signed by an authorized officer of Seller, certifying
that the conditions set forth in Section 6.2 have
been satisfied;

     

    (iii) execute
and deliver a FIRPTA Affidavit in the form attached as Exhibit
D;

     

    (iv) execute
and deliver to Buyer letters in lieu of transfer or division
orders;

     

    (v) execute
and deliver to Buyer any other forms required by any Governmental Authority
relating to the assignment of the Assets and relating to the assumption of
operations by Buyer;

     

    (vi) deliver
to Buyer such of the original Books and Records as Seller determines to be
feasible and thereafter deliver the remainder of the original Books and Records
to Buyer as soon after Closing as is reasonably practicable; and

     

    (vii) deliver
possession of the Assets to Buyer.

     

    (b) At
Closing, and as a condition precedent to Seller’s obligations hereunder, Buyer
shall:

     

    (i) pay to
Seller in cash in immediate available funds the Closing Purchase Price by wire
transfer to a bank to be designated by Seller in writing;

     

    (ii) execute
and deliver the Assumption Agreement to Seller;

     

    (iii) deliver a
certificate of Buyer, signed by an authorized officer of Buyer, certifying that
the conditions set forth in Section 6.3 have
been satisfied; and

     

    (iv) execute
and deliver to Seller any and all other instruments, documents and other items
reasonably necessary to effectuate the terms of this Agreement, as may be
reasonably requested by Seller.

     

     

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ARTICLE VII                                

     

    ADDITIONAL
COVENANTS

     

    7.1. Seller’s Access to Books and
Records.  At its expense, Seller and its affiliates and its and
their authorized agents, officers and representatives shall have reasonable
access after the Closing Date to the Books and Records for any reasonable
business purpose; provided, however,
that such access by Seller and its affiliates, and its and their authorized
agents, officers and representatives (a) shall be conducted during the
normal business hours of Buyer, and (b) shall not unreasonably interfere
with the operations and activities of Buyer.  Buyer shall cooperate in
all reasonable respects with Seller’s review of such information, including,
without limitation, retaining all such information until Seller has notified
Buyer in writing that all tax years (including any portion of a tax year) prior
to and including the Closing Date have been closed or for seven years, whichever
is longer.

     

    7.2. Tax
Matters.

     

    (a) Apportionment of Tax
Liability.  With respect to the Assets, all Taxes shall be
prorated between Buyer and Seller as of the Effective Time for all taxable
periods that include the Effective Time.  Accordingly, for the purpose
of apportioning the liability for Taxes, (i) Buyer shall be responsible for all
Taxes related to the Assets that are attributable to the period of time after
the Effective Time and (ii) Seller shall be responsible for all Taxes related to
the Assets that are attributable to the period of Seller’s ownership prior to
the Effective Time.  Such Taxes with respect to a period which the
Effective Time splits shall be prorated based on the number of days in such
period which fall on each side of the Effective Time.  Seller shall be
responsible, and agrees to hold harmless and indemnify the Buyer Indemnified
Parties, for all oil and gas production, severance, ad valorem and other similar
Taxes with respect to the Assets for periods (or any portion thereof) or
production prior to the Effective Time, in each case to the extent not taken
into account under Section
2.3(b).  Buyer shall be responsible, and agrees to hold
harmless and indemnify the Seller Indemnified Parties, for all oil and gas
production, severance, ad valorem and other similar Taxes with respect to the
Assets for periods (or any portion thereof) or production after the Effective
Time, in each case to the extent not taken into account under Section
2.3(a).

     

    (b) Transfer
Taxes.  Buyer shall be responsible, and agrees to hold harmless
and indemnify the Seller Indemnified Parties, for any and all sales and use,
conveyance, transfer, recordation, or similar Taxes or fees (including any
related interest, penalties or legal costs) that may be imposed on any transfer
of the Assets pursuant to this Agreement.

     

    (c) Federal Tax
Reporting.  Buyer and Seller will cooperate to comply with all
procedural requirements of Section 1060 of the Code and the regulations
promulgated thereunder, including, but not limited to, providing employer
identification numbers.  Except as otherwise required by applicable
law, Buyer and Seller agree that they will not take any tax position
inconsistent with the allocations made pursuant to this Agreement; provided,
however, that (i) Buyer’s cost for the Assets may differ from the total amount
allocated thereunder to reflect Buyer’s capitalized transaction costs so
allocated, and (ii) Seller’s amount realized on the sale of the Assets may
differ from the total amount so allocated to reflect Seller’s transaction costs
that reduce the amount realized.

     

     

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    (d) The
parties agree to cooperate with each other as reasonably required after the
Closing Date in connection with audits and other proceedings with respect to any
Taxes relating to the Assets.

     

    (e) Notwithstanding
any other provision of this Agreement, the covenants and obligations set forth
in this Section
7.2 shall survive until, and any claim for indemnification with respect
thereto must be made prior to, the expiration of the applicable statute of
limitations with respect to the underlying Tax claim (including any valid
extensions).

     

    7.3. Surety Bonds; Letters of
Credit.  Buyer shall have surety bonds or letters of credit in
place, if and as required, prior to or immediately following the Closing Date
sufficient to replace Seller’s surety bonds or letters of credit set forth on
Schedule
7.3.

     

    7.4. Consents and Preferential
Rights.  Any consents other than consents customarily obtained
after Closing (such as, for example, consents to assign federal leases) arising
under any of the Property Agreements and unresolved at Closing (either by time
constraints or by refusal to consent), shall be considered agreed-upon Title
Defects under Exhibit A, until
satisfied.  If on the Closing Date, the holder of a preferential right
has not indicated whether or not it will exercise its right and the time period
within which it must timely respond has not lapsed, then the parties shall
proceed to Closing on those Assets unaffected by the preferential right and
Seller shall retain the Assets affected by the preferential right and Buyer
shall retain a portion of the Purchase Price equal to the Allocated Value of
such affected Assets as reflected on Schedule 3.4(b) until
such time period has lapsed or has been waived by the holder of such
preferential right. If the holder of the preferential right exercises such right
after the Closing, then the Assets affected by the preferential right shall be
Excluded Assets for purposes of this Agreement.  If the holder of the
preferential right waives such right after the Closing or if the time period
within which it must timely respond has lapsed, then the Assets affected by the
preferential right shall immediately be conveyed to Buyer in return for payment
by Buyer to Seller of the Allocated Value of the affected Assets.

     

                                  
ARTICLE VIII                                

     

    INDEMNIFICATION

     

    8.1. Limitation On and Survival
of Representations and Warranties.

     

    (a) Buyer and
Seller acknowledge and agree that no representations or warranties have been
made by Buyer or Seller in connection with the transactions contemplated by this
Agreement, except for those representations and warranties made in
Article III and Article IV hereof.

     

    (b) Subject
to paragraph (a) of this Section 8.1 all
representations and warranties contained in this Agreement, or in any agreements
or instruments executed in connection herewith or delivered pursuant hereto,
shall survive the Closing for a period of twelve (12) months beginning on the
Closing Date, except that any representations and warranties with respect to
Taxes shall survive until the expiration of the applicable statute of
limitations with respect to the underlying Tax claim (including any valid
extensions).  Such representations and warranties shall only be
effective with respect to any breach or claim when notice of such breach or
claim shall have been given in writing to the other Party in breach or against
whom indemnification is sought within such period.  All covenants
contained in this Agreement or in any agreement or instrument executed in
connection herewith shall survive the Closing for the applicable statute of
limitations relating thereto.  Any claim for indemnification for which
notice has been given within the prescribed period may be prosecuted to
conclusion notwithstanding the subsequent expiration of such
period.

     

     

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    8.2. Indemnification of
Seller.

     

    (a) Subject
to the limitations set forth in Sections 7.2, 8.1, 8.5,
8.6, and 8.7, Seller hereby
agrees to indemnify and hold Buyer and its affiliates and their respective
employees, officers, managers, members and directors (each a “Buyer Indemnified
Party”) harmless from and against any and all claims, demands, suits,
proceedings, judgments, losses, liabilities, damages, costs and expenses
(including, but not limited to, reasonable attorneys’ fees) (collectively,
“Losses”)
imposed upon or incurred by any Buyer Indemnified Party as a result of or in
connection with any of the following:

     

    (i) any
breach of a representation or warranty made by Seller in Article III of
this Agreement or in the certificate delivered by Seller pursuant to Section
6.4(a)(ii);

     

    (ii) the
breach of, or default in the performance by Seller of, any covenant, agreement
or obligation to be performed by Seller pursuant to this Agreement or any
agreement or instrument executed in connection herewith or pursuant
hereto;

     

    (iii) the
Excluded Assets or the Retained Liabilities; or

     

    (iv) any
responsibility for any offsite transportation, treatment, storage or disposal by
Sellers of Hazardous Substances produced from the Assets.

     

    Buyer
covenants that it shall not solicit third parties to commence any proceedings or
make any claims against Buyer or any affiliate of a Buyer for which a Buyer
Indemnified Party would be entitled to indemnification under this Section 8.2 and
shall not disclose any information with the intent of soliciting third parties
to commence such proceedings or make such claims.

     

    (b) Within
thirty (30) days after receipt by a Buyer Indemnified Party of notice of
the commencement of an Action or other event giving rise to a claim by a Buyer
Indemnified Party for indemnification under this Section 8.2 (a
“Buyer
Claim”), the Party receiving such notice shall notify (the “Buyer Claim
Notice”) Seller in writing of the commencement of such Action or the
assertion of such Buyer Claim; provided, however, that
failure to give such notice shall not relieve Seller of its obligations
hereunder unless and only to the extent that Seller is materially
prejudiced thereby.  Seller shall have the option, and shall notify
Buyer Indemnified Party in writing within ten (10) Business Days after its
receipt of a Buyer Claim Notice of its election, either:  (A) to
participate (at the expense of Seller) in the defense of such Action or Buyer
Claim (in which case the defense of such Action or Buyer Claim shall be
controlled by Buyer Indemnified Party) or (B) to take charge of and control
the defense of such Action or Buyer Claim (at the expense of
Seller).  If Seller elects to control the defense, it will not
compromise or settle the Action or Buyer Claim without the prior written consent
of Buyer (which consent shall not be unreasonably withheld, conditioned or
delayed), except as provided in Section
8.4.  If Seller fails to notify Buyer Indemnified Party of its
election within the applicable response period, then Seller shall be deemed to
have elected not to control the defense of such Action or Buyer
Claim.  If Seller elects to control the defense of any Action or Buyer
Claim, Buyer Indemnified Party shall have the right to employ separate counsel
and participate in the defense of such Action or Buyer Claim, but the fees and
expenses of such counsel shall be at the expense of Buyer Indemnified
Party.

     

     

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    (c) Except as
provided in Section
8.4, if Seller does not control the defense of any Action or Buyer Claim,
then Buyer Indemnified Party may settle such Action or Buyer Claim only with the
prior written consent of Seller Indemnifying Party (not to be unreasonably
withheld, conditioned or delayed).

     

    8.3. Indemnification by
Buyer.

     

    (a) Subject
to the limitations set forth in Sections 7.2, 8.1 8.5,
8.6 and 8.7, Buyer hereby
agrees to indemnify and hold Seller and its affiliates and their respective
employees, officers, managers, and members (each a “Seller
Indemnified Party”) harmless from and against any and all Losses imposed
upon or incurred by any Seller Indemnified Party as a result of or in connection
with any of the following:

     

    (i) any
breach of a representation or warranty made by Buyer in Article IV of this
Agreement or in the certificate delivered by Buyer pursuant to Section
6.4(b)(iii);

     

    (ii) the
breach of or default in the performance by Buyer of any covenant, agreement or
obligation to be performed by Buyer pursuant to this Agreement or any agreement
or instrument executed in connection herewith or pursuant hereto, including,
without limitation, the Assumption Agreement; or

     

    (iii) the
ownership or operation of the Assets and Assumed Liabilities from and after the
Closing Date.

     

    (b) Within
thirty (30) days after receipt by a Seller Indemnified Party of notice of
the commencement of an Action or other event giving rise to a claim by a Seller
Indemnified Party for indemnification (a “Seller
Claim”), the Party receiving such notice shall notify (the “Seller Claim
Notice”) Buyer in writing of the commencement of such Action or the
assertion of such Seller Claim; provided, however, that
failure to give such notice shall not relieve Buyer of its obligations hereunder
unless and only to the extent that Buyer is materially prejudiced
thereby.  Buyer shall have the option, and shall notify Seller
Indemnified Party in writing within ten (10) Business Days after its
receipt of a Seller Claim Notice of its election, either:  (A) to
participate (at its own expense) in the defense of the Action or Seller Claim
(in which case the defense of such Action or Seller Claim shall be controlled by
Seller Indemnified Party) or (B) to take charge of and control defense of
such Action or Seller Claim (at its own expense).  If Buyer fails to
notify Seller Indemnified Party of its election within the applicable response
period, then Buyer shall be deemed to have elected not to control the defense of
such Action or Seller Claim.  If Buyer elects to control the defense,
it will not compromise or settle the Action or Seller Claim without the prior
written consent of Seller (which consent shall not be unreasonably withheld,
conditioned or delayed), except as provided in Section
8.4.  If Buyer elects to control the defense of any Action or
Seller Claim, each Seller Indemnified Party shall have the right to employ
separate counsel and participate in the defense of any such Action or Seller
Claim, but the fees and expenses of such counsel shall be at the expense of
Seller Indemnified Party.

     

     

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    (c) Except as
provided in Section
8.4, if Buyer does not control the defense of any Action or Seller Claim,
then Seller Indemnified Party may settle such Action or Seller Claim only with
the prior written consent of Buyer (not to be unreasonably withheld, conditioned
or delayed).

     

    8.4. Consent to Settlement;
Cooperation.  Either Buyer or Seller, as the case may be (each
an “Indemnifying
Party”), in the defense of any claim or litigation, may, without the
consent of the Buyer Indemnified Party or Seller Indemnified Party, as the case
may be, consent to entry of any judgment or enter into any settlement only if
the same includes as an unconditional term thereof the giving by the claimant or
plaintiff to such Buyer Indemnified Party or Seller Indemnified Party (as
applicable) of a full and unconditional release from all liability in respect of
such claim or litigation.  A Buyer Indemnified Party or Seller
Indemnified Party, as the case may be, shall furnish such information regarding
itself or the claim in question as the Indemnifying Party, may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.

     

    8.5. Limitation of
Liability.  Notwithstanding the foregoing, and except with
respect to Buyer’s and Seller’s respective obligations for Taxes and
post-closing adjustments to the Purchase Price and except for Seller’s
obligations under Section 8.2(a)(iii)
and Buyer’s obligations under Section 8.3(a)(iii),
(a) Seller shall not be obligated to indemnify Buyer Indemnified Parties,
and Buyer shall not be obligated to indemnify Seller Indemnified Parties
pursuant to this Article VIII unless and until the amount of all Losses
incurred by Buyer, or by Seller, as the case may be, exceeds one
percent (1%) of the Purchase Price in the aggregate (the “Basket”),
in which event the Party seeking indemnity may recover all Losses incurred in
excess of the Basket from the first dollar above the Basket, and
(b) Seller’s maximum liability for Losses under Section 8.2
shall be fifteen percent (15%) of the Purchase Price (the “Maximum Indemnity
Amount”).

     

     

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    8.6. Exclusive
Remedy.  Except as provided in Section 7.2
or 8.7,
after the Closing, the Parties’ sole and exclusive recourse against each other
for any Loss or claim of Losses arising out of or relating to this Agreement
shall be expressly limited to the provisions of this
Article VIII.  Under no circumstances shall any Party be liable
to the other Party for consequential, incidental, or punitive damages, including
damages for lost profits, and this sentence shall survive the Closing or any
termination of this Agreement under Section 9.1.

     

    8.7. Title and Environmental
Defects.  Buyer’s sole and exclusive remedy with respect to
Title Defects or Losses arising thereunder shall be as provided in Exhibit A.
Buyer’s sole and exclusive remedy with respect to Environmental Defects or
Losses arising thereunder shall be as provided in Exhibit B.

     

    8.8. Disclaimer of Other
Warranties.

     

    (a) The
express representations and warranties of Seller contained in this Agreement are
exclusive and are in lieu of all other representations and warranties, express,
implied, or statutory.  Except as provided in Article III, SELLER HAS
NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY
EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE RELATING TO (I) PRODUCTION RATES, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR THE QUALITY,
QUANTITY, OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE
ASSETS, (II) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION,
DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED
TO BUYER BY OR ON BEHALF OF SELLER, (III) THE ENVIRONMENTAL CONDITION OF
THE PROPERTIES, (IV) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
(V) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
(VI) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (VII) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO
CLAIM DIMINUTION OF CONSIDERATION, AND (VIII) ANY AND ALL IMPLIED
WARRANTIES EXISTING UNDER APPLICABLE LAW; IT BEING THE EXPRESS INTENTION OF BOTH
BUYER AND SELLER THAT SUBJECT TO AND WITHOUT LIMITING SELLER’S EXPRESS
REPRESENTATION AND WARRANTIES CONTAINED HEREIN, THE PERSONAL PROPERTY, EQUIPMENT
AND FIXTURES INCLUDED WITHIN THE PROPERTIES ARE TO BE CONVEYED TO BUYER IN THEIR
PRESENT CONDITION AND STATE OF REPAIR, AND THAT BUYER HAS MADE OR CAUSED TO BE
MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE.  SELLER AND BUYER
AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE
DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE “CONSPICUOUS”
DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.

     

     

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    (b) Buyer is
aware that the Properties have been used for exploration, development,
production, handling, transporting and/or processing of oil and gas and that
there may be petroleum, produced water, wastes, or other materials located on or
under the Properties or associated with the premises.  Some equipment
and sites included in the Properties may contain asbestos, Hazardous Substances,
or naturally occurring radioactive material (“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 Properties may contain NORM and other materials or
Hazardous Substances; and NORM containing material and other materials or
Hazardous Substances may have been buried, come in contact with the soil or
water, or otherwise been disposed of on the Properties.  Special
procedures may be required for the remediation, removal, transportation, or
disposal of materials, asbestos, Hazardous Substances, and NORM from the
Properties.  Effective as of Closing, Buyer will assume all liability
for the assessment, remediation, removal, transportation, and disposal of these
materials and associated activities and will conduct these activities in
accordance with all applicable laws and regulations, including applicable
environmental laws.

     

    (c) Buyer
understands that operation of the Leases is subject to requirements of the
Governmental Authorities having jurisdiction.  It will be the
obligation of Buyer to ensure that, as of the Closing, or as soon thereafter as
reasonably practicable, Buyer will meet the qualifications of the Governmental
Authorities having jurisdiction, in order to become record operator of the
Leases.

     

    8.9. Materiality Qualifiers
Disregarded.  For the sole purpose of determining the amount of
any Losses under this Article VIII arising from the existence of a breach of any
of either Party’s representations and warranties herein, all such breached
representations and warranties that are qualified by materiality shall be deemed
to be not so qualified.  For the avoidance of doubt, however, for the
purpose of determining whether there has been a breach of a representation or
warranty, all such qualifiers shall be considered.

     

                               
ARTICLE IX                                

     

    TERMINATION

     

    9.1. Termination.  This
Agreement may be terminated and the transactions contemplated by this Agreement
may be abandoned at any time, prior to the Closing only as follows:

     

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

     

    (b) by Seller
if there shall have been a material breach of any of the covenants or agreements
or any of the representations or warranties set forth in this Agreement on the
part of Buyer, which breach would prevent Buyer from performing its obligations
under this Agreement and which is not cured within 5 days following written
notice to Buyer, or which breach, by its nature or timing, cannot be cured prior
to Closing; provided that Seller
shall not have the right to terminate this Agreement pursuant to this Section 9.1(b) if it
is then in material breach of any of representations, warranties, covenants or
other agreements hereunder;

     

     

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    (c) by Buyer
if there shall have been a material breach of any of the covenants or agreements
or any of the representations or warranties set forth in this Agreement on the
part of Seller, which breach would prevent Seller from performing its
obligations under this Agreement and which is not cured within 5 days following
written notice to Seller, or which breach, by its nature or timing, cannot be
cured prior to Closing; provided that Buyer shall not have the right to
terminate this Agreement pursuant to this Section 9.1(c) if it
is then in material breach of any of representations, warranties, covenants or
other agreements hereunder;

     

    (d) by Buyer
or Seller if the Closing shall not have occurred on or before June 1, 2010
(provided that
the right to terminate this Agreement under this Section 9.1(d)
shall not be available to any party whose breach of this Agreement or failure to
fulfill any obligation under or pursuant to this Agreement has been the cause,
directly or indirectly of, or has resulted in, the failure of the Closing to
occur on or before such date);

     

    (e) by Buyer
or Seller, if any court of competent jurisdiction of any Governmental Authority
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, decree, ruling or other action shall have become final
and non-appealable; or

     

    (f) by Buyer
or Seller, if the aggregate of the Title Defect Values, Environmental Defect
Values, preferential rights and Required Consents total more than
$5,000,000.

     

    9.2. Effect of
Termination.  If this Agreement is terminated pursuant to Section 9.1 and
the transactions contemplated by this Agreement are not consummated, all further
obligations of the parties under or pursuant to this Agreement shall terminate
without further liability of either party to the other; provided, however,
the obligations contained in this Section 9.2 and
in Sections 8.6
and 10.2
of this Agreement shall survive any such termination.

     

                              
ARTICLE X                                

     

    MISCELLANEOUS

     

    10.1. Entire
Agreement.  This Agreement and the documents referred to herein
and to be delivered pursuant hereto constitute the entire agreement between the
parties pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written, and there are no warranties, representations
or other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or therein.

     

    10.2. Expenses.

     

    (a) Whether
or not the transactions contemplated by this Agreement are consummated, each of
the parties hereto shall pay the fees and expenses of their respective counsel,
investment bankers, financial advisors, accountants and other experts and the
other expenses incident to the negotiation and preparation of this Agreement and
consummation of the transactions contemplated hereby.

     

     

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    (b) Buyer
shall be solely responsible for all filings and recording of assignments and
other documents which transfer any of the Assets to Buyer or which designate
Buyer as the operator of the Assets and for all fees connected with such filing
or recording.  Upon request, Buyer shall advise Seller of the
pertinent recording data.  Seller shall not be responsible for any
loss to Buyer because of Buyer’s failure to file or record any such documents
correctly or promptly.

     

    10.3. Governing
Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, without reference to the
principles of conflicts of laws or any other principle that could result in the
application of the laws of any other jurisdiction, except for matters concerning
real property located in the State of Louisiana, including oil and gas
interests, which matters will be governed  by, and construed in
accordance with, the laws of the State of Louisiana, without reference to the
principles of conflicts of laws or any other principle that could result in the
application of the laws of any other jurisdiction.

     

    10.4. Assignment.  Neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by Seller or Buyer without the prior written consent of
Buyer or Seller, as applicable, and any purported assignment or delegation in
violation hereof will be null and void; except that (i) a party may assign its
rights and obligations under this Agreement to any affiliate, but no such
assignment shall relieve the assigning party of its obligations hereunder and
such assigning party shall cause its assignee to perform its obligations under
this Agreement and shall be responsible for any failure of such assignee to
comply with any representation, warranty, covenant or other provision of this
Agreement and (ii) Buyer may, after the Closing, assign 50% of its rights and
obligations under this Agreement to BG US Production Company, LLC or any of its
affiliates, but no such assignment shall relieve the assigning party of its
obligations hereunder and such assigning party shall cause its assignee to
perform its obligations under this Agreement and shall be responsible for any
failure of such assignee to comply with any representation, warranty, covenant
or other provision of this Agreement.

     

    10.5. Notices.  All
communications, notices and disclosures required or permitted by this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally or by messenger or by overnight delivery service, or when mailed by
registered or certified United States mail, postage prepaid, return receipt
requested, or when received via telecopy, telex or other electronic
transmission, in all cases addressed to the Person for whom it is intended at
his address set forth below or to such other address as a party shall have
designated by notice in writing to the other party in the manner provided by
this Section 10.5:

     

    
      	
              If
      to Seller:

            	
              Mainland
      Resources, Inc.

              20333
      SH 249, Suite 200

              Houston,
      Texas  77070

              Attention:  Michael
      J. Newport

              Telecopy:  713-583-1162

            
	
              With
      a copy to:

            	
              Fulbright &
      Jaworski L.L.P.

              2200
      Ross Avenue, Suite 2800

              Houston,
      Texas  75201

              Attention:  Mark
      R. Wasem

              Telecopy:  214-855-8200

            
	
              If
      to Buyer:

            	
              LP

               

            
	
              With
      a copy to:

            	 
      

    

     

     

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    10.6. Counterparts;
Headings.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement.  The Table
of Contents and Article and Section headings in this Agreement are inserted
for convenience of reference only and shall not constitute a part
hereof.

     

    10.7. Specific
Performance.  The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.

     

    10.8. Interpretation.  Unless
the context requires otherwise, all words used in this Agreement in the singular
number shall extend to and include the plural, all words in the plural number
shall extend to and include the singular and all words in any gender shall
extend to and include all genders.  All references to contracts,
agreements, leases or other understandings or arrangements shall refer to oral
as well as written matters.  The term “include” or any derivative of
such term does not mean that the items following such term are the only types of
such items.

     

    10.9. Severability.  If
any provision, clause or part of this Agreement, or the application thereof
under certain circumstances, is held invalid, the remainder of this Agreement,
or the application of such provision, clause or part under other circumstances,
shall not be affected thereby.

     

    10.10. No Third-Party
Reliance.  No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement, and
Seller and Buyer assume no liability to any third party because of any reliance
on the representations, warranties and agreements of Seller and Buyer contained
in this Agreement.

     

    10.11. Like-Kind
Exchange.  In the event either party so elects (the “Requesting Party”)
within two (2) business days prior to Closing, the other party agrees to
cooperate, as and to the extent reasonably requested by the Requesting Party, in
connection with the transactions contemplated herein to make such modifications
as may be necessary to qualify such transactions, in whole or in part, as a
“like-kind” exchange pursuant to Section 1031 of the Code.  The
Requesting Party shall have the right at any time prior to Closing to assign all
or a portion of its rights under this Agreement to a “Qualified
Intermediary” (as that term is defined in Treasury Regulations
§ 1.1031(k)-1(g)(4)) in order to accomplish the transaction in a manner
that will comply, either in whole or in part, with the requirements of a
like-kind exchange pursuant to Section 1031 of the Code.  Each party
acknowledges and agrees that any assignment of this Agreement (or any rights
hereunder) to a Qualified Intermediary shall not release any party from any of
its respective liabilities and obligations hereunder.  Neither party
represents to the other that any particular Tax treatment will be obtained by
reason of the transactions contemplated by this Section 10.11.

     

     

    31

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    10.12. Amendment;
Waiver.  This Agreement may not be amended except by an
instrument in writing signed by all of the parties.  At any time prior
to the Closing, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained herein or in
any document, certificate or writing delivered pursuant hereto, or
(c) waive compliance with any of the covenants, agreements or conditions
contained herein.  Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.

     

    [SIGNATURE
PAGE FOLLOWS]

     

     

     

    

    32

     

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    IN WITNESS WHEREOF, the parties have
caused this Purchase Agreement to be duly executed as of the day and year first
above written.

     

    SELLER:

     

    MAINLAND
RESOURCES, INC.

     

    

     

    By:                                                                           

    Name:
Michael J. Newport

    Title:
President and Chief Executive Officer

     

    BUYER:

     

    LP

     

    By:
LLC

     

    By:                                                                           

    Name:

     

    Title:  Vice-President

     

     

    33

     

     

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

         

         

      

    

    

    EXHIBIT
A

     

    PROCEDURE
FOR CLAIMING TITLE DEFECTS

     

    AND
ADJUSTING THE PURCHASE PRICE

     

    1. Title and
Procedure.  From the date of this Agreement until 5:00 p.m.
Central time on the April 15, 2010 (the “Examination Period”),
Seller will afford to Buyer and its representatives reasonable access during
normal business hours to the offices, personnel and books and records of Seller
in order for Buyer to conduct a title examination as it may in its sole
discretion choose to conduct with respect to the Assets in order to determine
whether Title Defects exist.

     

    2. Accessible Information;
Expenses; Confidential Information; Indemnification. Buyer and its
representatives may examine all abstracts of title, title opinions, title files,
ownership maps, lease files, assignments, division orders, operating records and
agreements, well files, financial and accounting records, geological,
geophysical, and engineering records, in each case insofar as the same may now
be in existence and in the possession of Seller, provided,
however, that
Seller may withhold access to (a) all legally privileged documents (other than
title opinions) identified in writing by Seller which includes a brief
explanation of the nature of the privilege being asserted and (b) information
that Seller is prohibited from disclosing by third party confidentiality
restrictions; provided further that Seller will use
its reasonable efforts to obtain a waiver of any such restrictions in favor of
Buyer.  The cost and expense of Buyer’s review of the title to the
Assets will be borne solely by Buyer.  Buyer will not contact any of
the customers or suppliers of Seller or its Working Interest co-owners,
operators, lessors or surface interest owners, in connection with the
transactions contemplated hereby, whether in person or by telephone, e-mail,
mail or other means of communication, without the specific prior written
authorization of Seller, which consent will not be unreasonably
withheld.

     

    3. Notice of Asserted Title
Defects.  If Buyer discovers any Title Defect affecting any
Lease set forth on Schedule 3.4(b),
Buyer may notify Seller of such alleged Title Defect from time to time prior to
the expiration of the Examination Period, provided that such allegation is made
in good faith.  To be effective, such notice (“Title Defect Notice”)
must:

     

    
      	
              A.  

            	
              be
      in writing,

            

    

     

    
      	
              B.  

            	
              be
      received by Seller prior to the expiration of the Examination
      Period,

            

    

     

    
      	
              C.  

            	
              describe
      the Title Defect in reasonable detail including the basis therefore
      (including any alleged variance in the Net Acres, Net Revenue Interest or
      Working Interest of any Property) and any supporting
      documents,

            

    

     

    
      	
              D.  

            	
              identify
      the specific Assets to which such Title Defect relates,
  and

            

    

     

    
      	
              E.  

            	
              include
      the value of such Title Defect as determined by Buyer in good
      faith.

            

    

     

    Notwithstanding
anything to the contrary herein, at the end of the Examination Period, any
matters that may otherwise constitute a Title Defect, but of which Seller has
not been specifically notified by Buyer in accordance with the foregoing, will
be deemed to have been waived by Buyer for all purposes.

     

     

    A-1

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    4. Cure.  Upon
the receipt of an effective Title Defect Notice from Buyer, Seller will have the
option, but not the obligation, to attempt to cure such Title Defect during the
Cure Period (as hereinafter defined) at Seller’s sole cost and
expense.  A Property affected by such Title Defect will be referred to
as a “Title Defect
Property.”

     

    5. Notice of Asserted Title
Benefits.  If Seller discovers any Title Benefit affecting any
Lease set forth on Schedule 3.4(b),
Seller may notify Buyer of such alleged Title Benefit from time to time prior to
the expiration of the Examination Period, provided that such allegation is made
in good faith.  To be effective, such notice (“Title Benefit
Notice”) must:

     

    
      	
              A.  

            	
              be
      in writing;

            

    

     

    
      	
              B.  

            	
              be
      received by Buyer prior to the expiration of the Examination
      Period;

            

    

     

    
      	
              C.  

            	
              describe
      the Title Benefit in reasonable detail including the basis therefore
      (including any alleged variance in the Net Acres, Net Revenue Interest or
      Working Interest of any Property) and any supporting
      documents;

            

    

     

    
      	
              D.  

            	
              identify
      the specific Assets to which such Title Benefit relates;
    and

            

    

     

    
      	
              E.  

            	
              include
      the value of such Title Benefit as determined by Seller in good
      faith.

            

    

     

    Notwithstanding
anything to the contrary herein, at the end of the Examination Period, any
matters that may otherwise constitute a Title Benefit, but of which Buyer has
not been specifically notified by Seller in accordance with the foregoing, will
be deemed to have been waived by Seller for all purposes.

     

    6. Defensible
Title.  As used in this Exhibit A, “Defensible Title”
means, as of the Closing Date, with respect to the Leases set forth and
identified on Schedule
3.4(b), such record title and ownership by Seller that:

     

    
      	
              A.  

            	
              entitles
      Seller to receive and retain from each Lease, without reduction,
      suspension or termination, not less than the Net Acres and Net Revenue
      Interest set forth and identified for each Lease set forth and identified
      on Schedule
      3.4(b); and

            

    

     

    
      	
              B.  

            	
              is
      free and clear of all encumbrances except Permitted
      Encumbrances.

            

    

     

    7. Title Defect
Amount.  The Title Defect Amount with respect to a Title Defect
Property will be determined by taking into consideration the Allocated Value of
the Title Defect Property affected by such Title Defect, the portion of the
Title Defect Property subject to such Title Defect, and the legal effect of such
Title Defect on the Title Defect Property affected thereby; provided, however,
that:

     

    
      	
              A.  

            	
              if
      such Title Defect is the result of a discovery by Buyer that Seller owns
      fewer Net Acres per Lease than the Net Acres reflected therefor on Schedule
      3.4(b), then Buyer and Seller agree that the Title Defect Amount
      shall be equal to the product of the Allocated Value for each Lease set
      forth on Schedule
      3.4(b), as applicable, and the percentage reduction in such Net
      Acres as a result of such Title Defect.  For all purposes
      hereunder, each Net Acre shall have a value of $17,500.  For
      example, if Buyer were to discover that Seller owns only 108.46 Net Acres
      in the Mary Griffith lease set forth on line 7 of Schedule 3.4(b)
      for which Schedule 3.4(b)
      indicates Seller owns 109.46 Net Acres in such Lease, then the Title
      Defect Amount would be $17,500 and the Allocated Value for such Lease
      would be reduced by $17,500;

            

    

     

     

     

    A-2

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    
      	
              B.  

            	
              if
      such Title Defect is in the nature of the Net Revenue Interest in a Lease
      being less than the Net Revenue Interest set forth on Schedule 3.4(b)
      with respect thereto and the corresponding Working Interest remains the
      same, then the Title Defect Amount will be the Allocated Value for the
      relevant Lease multiplied by the percentage reduction in such Net Revenue
      Interest as a result of such Title
Defect;

            

    

     

    
      	
              C.  

            	
              if
      such Title Defect is in the nature of an encumbrance, then the Title
      Defect Amount will be the amount required to fully discharge such
      encumbrance; and

            

    

     

    
      	
              D.  

            	
              if
      the Title Defect results from any matter not described in subsections (a)
      or (b) above, the Title Defect Amount will be an amount equal to the
      difference between the value of the Title Defect Property with such Title
      Defect and the value of such Title Defect Property without such Title
      Defect (taking into account the Allocated Value of the Title Defect
      Property).  Notwithstanding the foregoing, any matters that
      would otherwise constitute a Title Defect will not be a Title Defect if it
      is not reasonably likely to affect the market value to Buyer of the
      affected Asset based on the standards and practices of reasonably prudent
      operators of oil and gas wells in the Haynesville
  Shale.

            

    

     

    8. Title Benefit
Amount.  The Title Benefit Amount with respect to a Title
Benefit Property will be determined by taking into consideration the Allocated
Value of the Title Benefit Property affected by such Title Benefit, the portion
of the Title Benefit Property subject to such Title Benefit, and the legal
effect of such Title Benefit on the Title Benefit Property affected thereby;
provided, however, that:

     

    
      	
              A.  

            	
              if
      such Title Benefit is the result of a discovery by Seller that Seller owns
      more Net Acres per Lease than the Net Acres reflected therefor on Schedule
      3.4(b), then Buyer and Seller agree that Title Benefit Amount shall
      be equal to the product of the Allocated Value for each Lease set forth on
      Schedule
      3.4(b), as applicable, and the percentage increase in such Net
      Acres as a result of such Title Benefit.  For all purposes
      hereunder, each Net Acre shall have a value of $17,500.  For
      example, if Seller were to discover that Buyer owns 110.46 Net Acres in
      the Mary Griffith lease set forth on line 7 of Schedule 3.4(b)
      for which Schedule 3.4(b)
      indicates Seller owns 109.46 Net Acres in such Lease, then the Title
      Benefit Amount would be $17,500 and the Allocated Value for such Lease
      would be increased by $17,500;

            

    

     

     

     

    A-3

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    
      	
              B.  

            	
              if
      such Title Benefit is in the nature of the Net Revenue Interest in a Lease
      being more than the Net Revenue Interest set forth on Schedule 3.4(b)
      with respect thereto and the corresponding Working Interest remains the
      same, then the Title Benefit Amount will be the Allocated Value for the
      relevant Lease multiplied by the percentage increase in such Net Revenue
      Interest as a result of such Title
Benefit;

            

    

     

    
      	
              C.  

            	
              if
      the Title Benefit results from any matter not described in subsection (a)
      above, the Title Benefit Amount will be an amount equal to the difference
      between the value of the Title Benefit Property with such Title Benefit
      and the value of such Title Benefit Property without such Title Benefit
      (taking into account the Allocated Value of the Title Benefit
      Property).

            

    

     

    9. Procedures for Title
Defects.

     

    
      	
              A.  

            	
              If
      Seller and Buyer agree that a Title Defect exists and if prior to the
      Closing Date, Seller has been unable to cure such Title Defect (and there
      is no dispute as to whether or not it has been cured), and Buyer and
      Seller agree that Seller will not be able to cure such Title Defect within
      60 days after the expiration of the Examination Period (the “Cure Period”),
      then the Purchase Price will be reduced by the Title Defect Amount, with
      respect to such Title Defect Property (taking into account the results of
      any curative efforts made by or on behalf of Seller with respect to such
      Title Defect Property).

            

    

     

    
      	
              B.  

            	
              If
      Seller and Buyer are unable to reach an agreement at any time as to
      whether a Title Defect exists or, if it does exist, whether it has been
      cured or the amount of the Title Defect Amount attributable to such Title
      Defect, then dispute resolution procedures may be initiated by Seller or
      Buyer under Section 11 of
      this Exhibit
      A promptly following the inability to reach an
      agreement.

            

    

     

    
      	
              C.  

            	
              Buyer
      will act in good faith and reasonably cooperate with Seller after the
      Closing to cure any Title Defects that have not been cured or resolved
      pursuant to Section 9(a) of
      this Exhibit
      A.  If, at the end of the Cure Period, Seller has been
      unable to cure a Title Defect (and there is no dispute as to whether or
      not it has been cured), Seller will pay Buyer, within 30 days, the Title
      Defect Amount with respect to such Title Defect (taking into account the
      value of the results of any curative efforts made by or on behalf of
      Seller with respect to such Title).

            

    

     

     

     

    A-4

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    
      	
               
      

            	
              Notwithstanding
      anything to the contrary contained herein, Seller will have the option,
      but not the obligation, within 60 days after the resolution of any dispute
      as to any Title Defect Property as to which the Title Defect Amount
      exceeds fifty percent (50%) of the Allocated Value, to retain any Title
      Defect Property or to cause to be assigned any Title Defect Property to
      Buyer and the Purchase Price will be adjusted as set forth in Section 9(a)
      of this Exhibit
      A.  If Seller exercises its option to retain any Title
      Defect Property, then Buyer will transfer such Title Defect Property to
      Seller, and Seller will pay Buyer an amount equal to the Allocated Value
      paid by buyer for such Title Defect
Property.

            

    

     

    10. Procedures for Title
Benefits.

     

    
      	
              A.  

            	
              If
      Seller and Buyer agree that a Title Benefit exists and agree upon Title
      Benefit Amount, then the Purchase Price will be increased by the Title
      Benefit Amount, with respect to such Title Benefit
    Property.

            

    

     

    
      	
              B.  

            	
              If
      Seller and Buyer are unable to reach an agreement at any time as to
      whether a Title Benefit exists or, if it does exist, the amount of the
      Title Benefit Amount attributable to such Title Benefit, then dispute
      resolution procedures may be initiated by Seller or Buyer under Section 11
      promptly following the inability to reach an
  agreement.

            

    

     

    11. Arbitration.

     

    
      	
              A.  

            	
              In
      the event of any dispute with respect to this Exhibit A, the
      parties hereto agree to make reasonable efforts to come to a mutually
      acceptable resolution of such dispute among themselves prior to the
      involvement of any third-party intermediary.  If any party
      hereto elects to submit any dispute to arbitration as specifically
      provided in this Section 11,
      then such party will notify the other party in writing.  Within
      15 days following such notice, Seller and Buyer agree to jointly select an
      arbitrator.  For disputes regarding Title Defects, Title Defect
      Amounts, Title Benefits or Title Benefit Amounts the arbitrator will be an
      experienced oil and gas attorney licensed in Louisiana with at least 15
      years of experience with U.S. oil and gas legal and business matters,
      including title examinations and oil and gas transactions.  This
      person will be the sole arbitrator (the “Title Defect
      Arbitrator”) to hear and decide all existing disputes regarding
      asserted Title Defects, Title Defect Amounts, Title Benefits or Title
      Benefit Amounts.  If Seller and Buyer are unable to agree on the
      Title Defect Arbitrator within the 15 day period, any Party hereto may
      apply to a court in the State of Texas, regarding asserted Title Defects,
      Title Defect Amounts, Title Benefits, or Title Benefit Amounts for the
      selection of a Title Defect Arbitrator or, respectively, with the
      qualifications set forth in this
paragraph.

            

    

     

    
      	
              B.  

            	
              Any
      arbitration hearing, if one is desired by the Title Defect Arbitrator,
      will be held in Harris County, Texas, or such other location acceptable to
      both parties and the Title Defect Arbitrator.  The Parties may
      mutually elect to conduct the proceeding by written submissions from
      Seller and Buyer with exhibits, including interrogatories, supplemented
      with appearances by Buyer and Seller as the Title Defect Arbitrator may
      desire.  The arbitration proceeding, subject only to the terms
      hereof, will be conducted informally and expeditiously (the intention of
      the parties being that the Arbitration shall allow only that minimum
      discovery determined by the Arbitrator to be reasonably necessary to
      protect the integrity of the process) and in such a manner as to result in
      a good faith resolution as soon as reasonably possible under the
      circumstances.  The decision of the Title Defect Arbitrator with
      respect to such remaining disputed matters will be reduced to writing and
      binding on the parties.  Judgment upon the award(s) rendered by
      the Title Defect Arbitrator may be entered and execution had in any court
      of competent jurisdiction, or application may be made to such court for a
      judicial acceptance of the award and an order of
      enforcement.  Seller and Buyer will bear their own legal fees
      and other costs incurred in presenting their respective
      cases.  The charges and expenses of the Title Defect Arbitrator
      will be shared equally by the
parties.

            

    

     

     

     

    A-5

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    
      	
              C.  

            	
              The
      arbitration will commence as soon as possible after the Title Defect
      Arbitrator is selected in accordance with the provisions of this Section 11 of
      this Exhibit
      A.  In fulfilling his or her duties with respect to
      determining the amount of a Title Defect Amount or Title Benefit Amount,
      the Title Defect Arbitrator may consider such matters as, in the opinion
      of the Title Defect Arbitrator, are necessary or helpful to make a proper
      valuation; however, the Title Defect Arbitrator will be bound by those
      factors set forth in Sections 7 and
      8,
      respectively.  Furthermore, the Title Defect Arbitrator may
      consult with and engage disinterested third parties to advise the Title
      Defect Arbitrator including, without limitation, geologists,
      geophysicists, petroleum engineers, title and oil and gas lawyers,
      accountants and consultants, and the fees and expenses of such third
      parties will be considered to be charges and expenses of the Title Defect
      Arbitrator.  The sole remedy in any arbitration award will be
      resolution of alleged Title Defects, Title Defect Amounts, Title Benefits,
      and Title Benefit Amounts and the Title Defect Arbitrator will not award
      any other remedy, including, without limitation, equitable relief, actual
      damages, consequential, exemplary or punitive damages, attorneys’ fees or
      interest reflecting the time value of
money.

            

    

     

    
      	
              D.  

            	
              Any
      replacement Title Defect Arbitrator, should one become necessary, will be
      selected in accordance with the procedure provided above for the initial
      selection of the Title Defect
Arbitrator.

            

    

     

    
      	
              E.  

            	
              As
      to any determination of amounts owing under the terms of this Section 11 of
      this Exhibit
      A, no lawsuit based on such claimed amounts owing will be commenced
      by either Buyer or Seller, other than to compel arbitration proceedings or
      enforce the award of the Title Defect
  Arbitrator.

            

    

     

    
      	
              F.  

            	
              All
      privileges under state and federal law, including attorney-client and
      work-product privileges, will be preserved and protected to the same
      extent that such privileges would be protected in a federal or state court
      proceeding applying state or federal law, as the case may
    be.

            

    

     

    12. Uncured Title Defects and
Title Benefits.  If any dispute resolution procedures initiated
pursuant to Section
11 of this Exhibit A are finally
resolved after Closing, then within 10 days after the date of the final
resolution of any such arbitration of any alleged Title Defect or Title Benefit
hereunder (as set forth in Section 11 of
this Exhibit
A), Seller will pay Buyer an amount, if any, equal to such final
resolution of such Title Defect and Buyer will pay Seller an amount, if any,
equal to such final resolution of such Title Benefit.

     

     

    A-6

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
B

     

    PROCEDURE
FOR CLAIMING ENVIRONMENTAL DEFECTS

     

    AND
ADJUSTING THE PURCHASE PRICE

     

    1.           Environmental
Review.

     

    A.           Environmental
Access.  Prior to the expiration of the Examination Period,
subject to the restrictions contained in this Agreement and any required consent
or waiver of any third person, Seller shall (i) permit Buyer and representatives
of Buyer and its lenders to have reasonable access and at reasonable times in
the Seller’s offices, and in a manner so as not to interfere unduly with the
business operations of Seller, to Seller’s environmental files and records in
Seller’s possession relating to the Assets insofar as Seller may do so without
waiving any attorney/client work product or like privilege, and (ii) use
reasonable efforts to permit Buyer, its representatives and consultants to have
reasonable access to the Assets for the purpose of allowing Buyer, its
representatives and consultants to inspect and/or audit the Assets for any
Environmental Defects (collectively, “Buyer’s Environmental
Review”), all at Buyer’s sole risk, cost and expense

     

    B.           Conduct of
Review.  Prior to conducting Buyer’s Environmental Review,
Buyer shall furnish Seller with a written proposed scope of Buyer’s
Environmental Review, including a description of the activities to be conducted
and the locations of such activities.  Buyer shall not commence any
activity proposed to be included in Buyer’s Environmental Review unless and
until such activity (including the location thereof) has been approved in
writing by Seller which approval shall not be unreasonably withheld or delayed;
provided, that if Seller declines to approve a proposed activity, Buyer may
elect to exclude the affected property from the transaction and the Purchase
Price will be adjusted downward accordingly.  Seller shall have the
right to be present during any inspection (including Buyer’s Environmental
Review) of the Assets and shall have the right, at its option and expense, to
split samples with Buyer.

     

    C.           Buyer’s Responsibility for
Review.  In connection with Buyer’s Environmental Review, Buyer
agrees that Buyer and Buyer’s employees, agents and contractors shall comply
with all laws and shall exercise due care with respect to the Assets and their
condition, taking into consideration the characteristics of any wastes or
substances found thereon, and in light of all relevant facts and
circumstances.  Specifically, but without limitation, when handling
solid waste or Hazardous Substances, if any, discovered during the inspection of
the Assets, Buyer and Buyer’s employees, agents and contractors shall handle
such waste or substances in accordance with all laws.  Any soil or
water samples taken by Buyer from the Assets shall become the sole property and
possession of Buyer and will be managed consistent with the applicable rules and
regulations of the U.S. Environmental Protection Agency and other applicable
Governmental Authority.  Promptly after completing Buyer’s
Environmental Review, Buyer shall, at its sole cost and expense, restore the
Assets substantially to their original condition, in accordance with good
engineering practice, if changed due to Buyer’s Environmental
Review.  Failure by Buyer to comply with the requirements of this
subsection within a reasonable time period will entitle (but shall not obligate)
Seller to take any action deemed necessary or appropriate by Seller to correct
such failure, all at Buyer’s expense.  Prior to Closing, Buyer shall
maintain and shall cause its partners, officers, directors, employees, agents,
representatives, contractors, consultants and advisors to maintain all
information obtained pursuant to Buyer’s Environmental Review strictly
confidential and shall not disclose the same to any third person without the
prior written consent of Seller, except to the extent required by
law.  Buyer shall provide Seller’s counsel with copies of any reports
prepared and analytical test results received by Buyer or Buyer’s consultants
promptly following Buyer’s or such consultant’s preparation or receipt of the
same.  Buyer does hereby indemnify and hold harmless, release and
agree to defend Seller and its officers, directors, employees and agents from
and against any and all liabilities arising out of any violation by Buyer, its
consultants or their officers, directors, employees, agents, representatives,
contractors, consultants and advisors of any Environmental Law, the provisions
of this Section or, in whole or in part, from their inspection or testing of the
Assets or handling any substances or samples in connection therewith, regardless
of any concurrent negligence or strict liability on the part of Seller and its
officers, directors, employees and agents and regardless of the form of claim
whether at common law, strict liability, negligence or under any statute or
regulation.

     

     

    B-1

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

     

    2.           Environmental Liabilities
and Obligations.

     

               A.           Retained Environmental
Liabilities.  Upon Closing, if and to the extent the aggregate
Environmental Defect Values exceed $200,000 (the “Defect Threshold”),
and subject to subsection 2.C. below, Seller shall retain and pay, perform,
fulfill and discharge all claims, cost, expenses, liabilities and obligations
accruing or relating to and release Buyer from all Losses attributable to and
relating to Environmental Defects for which Seller receives a timely
Environmental Defect Notice (the “Retained Environmental
Liabilities”).

     

               B.           Assumed Environmental
Liabilities.  Subject to the provisions in Section 3, Contested Environmental
Defects, if the aggregate Environmental Defect Values do not exceed the
Defect Threshold, upon Closing Buyer shall assume and pay, perform, fulfill and
discharge and release Seller from all Losses relating to environmental
conditions in, on or under the Assets attributable to the period of time before
and after the Effective Time (collectively, the “Assumed Environmental
Liabilities”).  If Buyer fails to timely deliver an
Environmental Defect Notice with respect to an Asset, Buyer shall be deemed to
(i) accept the environmental condition(s) in, on and under that Asset or
the Assets, (ii) have waived its right to claim an Environmental Defect
with respect to that particular condition in, on or under the Assets and
(iii) include the particular environmental condition(s) as part of the
Assumed Environmental Liabilities.

     

               C.           Remedies.  If
the aggregate Environmental Defect Values exceed the Defect Threshold, Seller
shall elect one of the following options: (i) remediate the condition on
the affected Assets comprising the specified Environmental Defect(s) as promptly
as practicable (and retain its obligation to indemnify and defend Buyer from any
Losses relating to such Environmental Defects), such remediation to be
consistent with Environmental Laws; (ii) exclude the affected Asset from the
transaction and reduce the Purchase Price by the Allocated Value of such Asset,
or (iii) if agreed to by Buyer, in its sole discretion, leave such affected
Assets in the transaction and reduce the Purchase Price by the amount of the
aggregate Environmental Defect Values, in which event Buyer shall release Seller
from any further Retained Environmental Liability relating to the Environmental
Defects so satisfied.  Seller will be deemed to have adequately
completed the remediation set forth in option (i) upon receipt of either (x) a
certificate or approval from the applicable Governmental Authority that the
remediation has been implemented to the extent necessary to comply with existing
regulatory requirements or (y) a certification from a licensed professional
engineer approved by Buyer that the remediation has been completed to the extent
necessary to comply with existing regulatory requirements if the approval or
certification specified in clause (x) cannot be obtained because provision for
such approval or certification is not provided under applicable Environmental
Law.  In the event Seller elects option (ii) above as to any portion
of the Assets, Buyer may waive the relevant Environmental Defect in lieu
thereof.

     

     

    B-2

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

     

    3.           Contested Environmental
Defects.  If Seller contests the existence of an Environmental
Defect or the Environmental Defect Value, Seller shall notify Buyer in writing
on or before five (5) days after receipt of the Environmental Defect Notice
(“Rejection
Notice”).  The Rejection Notice shall state with reasonable
specificity the basis of the rejection of the Environmental Defect or the
Environmental Defect Value.  Within three business days of
receipt of the Rejection Notice, representatives of Buyer and Seller
knowledgeable in environmental matters shall meet and, either (i) mutually
agree to reject the particular Environmental Defect or (ii) agree on the
validity of such Environmental Defect and the Environmental Defect
Value.  If the Parties cannot agree on either options (i) or (ii)
in the preceding sentence, the Environmental Defect and/or the Environmental
Defect Value subject to the Rejection Notice shall be resolved in accordance
with the arbitration procedures set forth in Section 4
below.  If Seller fails to timely deliver a Rejection Notice, Seller
shall be deemed to have accepted the validity of the Environmental Defect and
Buyer’s estimate of the Environmental Defect Value, and shall be deemed to have
waived its own option to contest the Environmental Defect pursuant to this
Section.

     

    4.           Arbitration.

     

    A.           In
the event of any dispute with respect to this Exhibit B, the
parties hereto agree to make reasonable efforts to come to a mutually acceptable
resolution of such dispute among themselves prior to the involvement of any
third-party intermediary.  If any party hereto elects to submit any
dispute to arbitration as specifically provided in this Section 4, then such
party will notify the other party in writing.  Within 15 days
following such notice, Seller and Buyer agree to jointly select an
arbitrator.  For disputes regarding Environmental Defects the
arbitrator will be an oil and gas attorney licensed in Louisiana with at least
15 years of experience with U.S. oil and gas legal and business matters,
including environmental examinations and oil and gas
transactions.  This person will be the sole arbitrator (the “Environmental Defect
Arbitrator”) to hear and decide all existing disputes regarding asserted
Environmental Defects.  If Seller and Buyer are unable to agree on the
Environmental Defect Arbitrator within the 15 day period, any party hereto may
apply to a court in the State of Texas, regarding asserted Environmental Defects
for the selection of a Environmental Defect Arbitrator or, respectively, with
the qualifications set forth in this paragraph.

     

    B.           Any
arbitration hearing, if one is desired by the Environmental Defect Arbitrator,
will be held in Harris County, Texas, or such other location acceptable to both
parties and the Environmental Defect Arbitrator.  The Parties may
mutually elect to conduct the proceeding by written submissions from Seller and
Buyer with exhibits, including interrogatories, supplemented with appearances by
Buyer and Seller as the Environmental Defect Arbitrator may
desire.  The arbitration proceeding, subject only to the terms hereof,
will be conducted informally and expeditiously (the intention of the parties
being that the Arbitration shall allow only that minimum discovery determined by
the Arbitrator to be reasonably necessary to protect the integrity of the
process) and in such a manner as to result in a good faith resolution as soon as
reasonably possible under the circumstances.  The decision of the
Environmental Defect Arbitrator with respect to such remaining disputed matters
will be reduced to writing and binding on the parties.  Judgment upon
the award(s) rendered by the Environmental Defect Arbitrator may be entered and
execution had in any court of competent jurisdiction, or application may be made
to such court for a judicial acceptance of the award and an order of
enforcement.  Seller and Buyer will bear their own legal fees and
other costs incurred in presenting their respective cases.  The
charges and expenses of the Environmental Defect Arbitrator will be shared
equally by the parties.

     

     

    B-3

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

     

    C.           The
arbitration will commence as soon as possible after the Environmental Defect
Arbitrator is selected in accordance with the provisions of this Section 4 of this
Exhibit
B.  In fulfilling his or her duties with respect to determining
the value of an Environmental Defect, the Environmental Defect Arbitrator may
consider such matters as, in the opinion of the Environmental Defect Arbitrator,
are necessary or helpful to make a proper valuation; however, the Environmental
Defect Arbitrator will be bound by those factors set forth in Sections
2.  Furthermore, the Environmental Defect Arbitrator may
consult with and engage disinterested third parties to advise the Environmental
Defect Arbitrator including, without limitation, geologists, geophysicists,
petroleum engineers, oil and gas lawyers, accountants and consultants, and the
fees and expenses of such third parties will be considered to be charges and
expenses of the Environmental Defect Arbitrator.  The sole remedy in
any arbitration award will be resolution of alleged Environmental Defects and
the Environmental Defect Arbitrator will not award any other remedy, including,
without limitation, equitable relief, actual damages, consequential, exemplary
or punitive damages, attorneys’ fees or interest reflecting the time value of
money.

     

    D.           Any
replacement Environmental Defect Arbitrator, should one become necessary, will
be selected in accordance with the procedure provided above for the initial
selection of the Environmental Defect Arbitrator.

     

    E.           As
to any determination of amounts owing under the terms of this Section 4 of this
Exhibit B, no
lawsuit based on such claimed amounts owing will be commenced by either Buyer or
Seller, other than to compel arbitration proceedings or enforce the award of the
Environmental Defect Arbitrator.

     

    F.           All
privileges under state and federal law, including attorney-client and
work-product privileges, will be preserved and protected to the same extent that
such privileges would be protected in a federal or state court proceeding
applying state or federal law, as the case may be.

     

    5.           Uncured Environmental
Defects.  If any dispute resolution procedures initiated
pursuant to Section
4 of this Exhibit B are finally
resolved after Closing, then within 10 days after the date of the final
resolution of any such arbitration of any alleged Environmental Defect hereunder
(as set forth in Section 4 of
this Exhibit
B), Seller will pay Buyer an amount, if any, equal to such final
resolution of such Environmental Defect.

     

     

    B-4

     

     

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
 

    EXHIBIT
C

     

    FORM
OF ASSIGNMENT, CONVEYANCE AND BILL OF SALE

     

    

    THIS
ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this “Assignment”),
effective as of 12:01 a.m. (local time) on January 1, 2010 (the “Effective Time”), is
made from Mainland Resources, Inc., a Nevada corporation, 20333 SH 249, Suite
200, Houston, Texas  77070 (the “Assignor”), to LP, a
Delaware limited partnership, 12377 Merit Drive, Suite 1700, Dallas, Texas 75251
(the “Assignee”).

     

    ARTICLE
I

     

    GRANTING
AND HABENDUM

     

    For Ten
Dollars ($10.00) and other good and valuable consideration, the receipt, and
sufficiency of which are hereby acknowledged, Assignor does hereby grant,
bargain, sell, transfer, convey, set over, assign and deliver unto Assignee, its
successors and assigns, effective for all purposes as of the Effective Time and
subject to the matters set forth herein, the Assets. The term “Assets” shall mean
all of Assignor’s right, title and interest in and to the
following:

     

    (i)           Leasehold.  All
Assignor’s right, title and interest in and to all oil, gas and mineral leases
described in EXHIBIT “A”, including renewals, extensions, ratifications and
amendments to such leases, and further including working interests, rights of
assignment and reassignment, net revenue interests, bonus, rentals, royalties,
executive rights, reversionary rights and undeveloped locations under or in oil,
said gas and mineral leases, and interests in rights to explore for and produce
oil, gas or other minerals and the non-exclusive right to utilize all rights of
way, rights of ingress and egress, road, pipeline and other easement rights, and
any other rights, titles, interests, permits or privileges, that relate directly
to or are used in connection with the leasehold rights, titles and interests
described in EXHIBIT “A” attached and made a part hereof,  all of such
right, title and interest described in this clause (i) being hereinafter
referred to herein as the “Leases” or in some
cases “Lease”
if the context requires;

     

    (ii)           Wells and
Equipment.  All of Assignor’s right, title and interest in and
to those wells listed on EXHIBIT “B”, and all related personal property,
equipment, fixtures, improvements and permits necessary for the use or operation
of said wells (“Wells”);
and

     

    (iii)           Contract
Rights.  All of  Assignor’s right, title and interest
in or derived from unit agreements, orders and decisions of regulatory
authorities establishing or relating to units, operating agreements, exploration
agreements, communitization agreements, farmout agreements and farmin agreements
and any other agreements relating to the Leases and Wells (collectively, the
“Contracts”),
including, without limitation, the Contracts set forth on EXHIBIT “C” attached
hereto.

     

    TO HAVE
AND TO HOLD the Assets, together with all and singular the rights, privileges,
contracts and appurtenances, in any way appertaining or belonging thereto, unto
Assignee, its successors and assigns, forever, subject to the matters set forth
herein.

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    ARTICLE
II

     

    SPECIAL
WARRANTY OF TITLE AND DISCLAIMERS

     

    Section
2.01 Special Warranty
of Title.  Assignor hereby agrees to warrant and defend title
to the Assets solely unto Assignee (and its affiliates) against every person
whomsoever lawfully claiming or to claim the same or any part thereof, by,
through or under Assignor, but not otherwise; subject, however, to the Permitted
Encumbrances (as such term is defined in the Purchase Agreement described
below).  Assignee shall have full rights of substitution and
subrogation to all warranties and covenants heretofore given by others not
affiliated with Assignor with respect to the Leases or any part
thereof. 

     

    Section
2.02                      Disclaimer.  Except
as set forth in the Purchase Agreement, SELLER HAS NOT MADE, AND SELLER HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE RELATING TO (I) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES,
DECLINE RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY, OR VOLUME OF
THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (II) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY
OR ON BEHALF OF SELLER, (III) THE ENVIRONMENTAL CONDITION OF THE
PROPERTIES, (IV) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
(V) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
(VI) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (VII) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO
CLAIM DIMINUTION OF CONSIDERATION, AND (VIII) ANY AND ALL IMPLIED
WARRANTIES EXISTING UNDER APPLICABLE LAW; IT BEING THE EXPRESS INTENTION OF BOTH
BUYER AND SELLER THAT SUBJECT TO AND WITHOUT LIMITING SELLER’S EXPRESS
REPRESENTATION AND WARRANTIES CONTAINED HEREIN, THE PERSONAL PROPERTY, EQUIPMENT
AND FIXTURES INCLUDED WITHIN THE PROPERTIES ARE TO BE CONVEYED TO BUYER IN THEIR
PRESENT CONDITION AND STATE OF REPAIR, AND THAT BUYER HAS MADE OR CAUSED TO BE
MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE.  SELLER AND BUYER
AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE
DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE “CONSPICUOUS”
DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.

     

    ARTICLE
III

     

    MISCELLANEOUS

     

    Section
3.01 Construction. The
captions in this Assignment are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Assignment. Assignor and Assignee acknowledge that they have participated
jointly in the negotiation and drafting of this Assignment and as such they
agree that if an ambiguity or question of intent or interpretation arises
hereunder, this Assignment shall not be construed more strictly against one
party than another on the grounds of authorship.

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

    Section
3.02 No Third Party
Beneficiaries. Nothing in this Assignment shall provide any benefit to
any third party or entitle any thirty party to any claim, cause of action,
remedy or right of any kind, it being the intent of the parties hereto that this
Assignment shall otherwise not be construed as a third party beneficiary
contract.

     

    Section
3.03 Assignment. This
Assignment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.

     

    Section
3.04 Governing
Law. This Assignment, other documents delivered pursuant hereto and the
legal relations between the parties hereto shall be governed and construed in
accordance with the laws of the State of Louisiana.

     

    Section
3.05 Counterpart
Execution. This Assignment may be executed in any number of counterparts,
and each counterpart hereof shall be effective as to each party that executes
the same whether or not all of such parties execute the same counterpart. If
counterparts of this Assignment are executed, the signature pages from various
counterparts may be combined into one composite instrument for all purposes. All
counterparts together shall constitute only one Assignment, but each counterpart
shall be considered an original.

     

    Section
3.06 Recording.
To facilitate the recording or filing of this Assignment, the counterpart to be
recorded in a given parish may contain only that portion of the exhibits that
describes Assets located in that parish. In addition to filing this Assignment,
the parties hereto shall execute and file with the appropriate authorities,
whether federal, state or local, all forms or instruments required by applicable
law to effectuate the conveyance contemplated hereby. Said instruments shall be
deemed to contain all of the exceptions, reservations, rights, titles and
privileges set forth herein as fully as though the same were set forth in each
such instrument. The interests conveyed by such separate assignments are the
same, and not in addition to the Assets conveyed herein.

     

    Section
3.07 Purchase
Agreement. This Assignment is subject to all of the terms and conditions
of the Purchase and Sale Agreement dated March 12, 2010 by and between Assignor
and Assignee (the “Purchase
Agreement”).  If there is a conflict between the terms of the
Purchase Agreement and the terms of this Assignment, the terms of the Purchase
Agreement shall control to the extent of the conflict.  Assignor and
Assignee intend that the terms of the Purchase Agreement remain separate and
distinct from and not merge into the terms of this Assignment.

     

    

     

    [Signatures on
following page]

     

     

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
 

    IN
WITNESS WHEREOF, this Assignment is executed by the parties on the date of their
respective acknowledgments below, but shall be effective for all purposes as of
the Effective Time.

     

    WITNESSES:                                                                ASSIGNOR:

    
 

     

                                                                                           
MAINLAND RESOURCES, INC.

     

    By:                                                                          
By:                 

    Name:                                                                     
Name:                                                           

                                                                                            
Title:

                                                               

    By:                                                           

    Name:                                                           

     

     

    WITNESSES:                                                                ASSIGNEE:

    

    
      	
                                                                                                      
      LP

            

                                                                                        
a Delaware limited partnership

     

    By:                                                                    
      By:    LLC

    Name:                                                                     
a Delaware limited liability
company

                                                                                            
Its:
General Partner

     

    By:                                                           

    Name:                                                                             
By:                                                                       

     Vice
President

     

     

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    STATE OF
TEXAS §

     

     

    COUNTY OF
DALLAS §

     

    This
foregoing instrument was acknowledged before me this ___ day of
____________, 2010, by
______________, the ____________ of Mainland Resources, Inc., on behalf of such
company.

     

    

    NOTARY PUBLIC, STATE OF
TEXAS

     

    STATE OF
TEXAS §

     

     

    COUNTY OF
DALLAS §

     

    This
foregoing instrument was acknowledged before me this ___ day of
____________, 2010, by Vice
President of LLC, General Partner of L.P., on behalf of such limited
partnership.

     

    _______________________

    NOTARY PUBLIC, STATE OF
TEXAS

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
D

     

    FORM
OF FIRPTA AFFIDAVIT

    

    ATTACHED
TO AND MADE PART OF THAT CERTAIN PURCHASE AGREEMENT BY AND AMONG

    MAINLAND
RESOURCES, INC., AS SELLER

    AND

    LP,
AS BUYER

    DATED
MARCH 12, 2010

    

    FORM OF CERTIFICATE OF
NON-FOREIGN STATUS

    

    Section 1445 of the Internal Revenue
Code provides that a transferee of a U.S. real property interest must withhold
tax if the transferor is a foreign person.  To inform the transferee
that withholding of tax is not required upon the disposition of a U.S. real
property interest by Mainland Resources, Inc.  (“Seller”), the
undersigned hereby certifies under penalties of perjury the following on behalf
of Seller:

    

    
      	
               
      

            	
              1.

            	
              Seller
      is not a foreign corporation, foreign partnership, foreign trust, or
      foreign estate (as those terms are defined in the Internal Revenue Code
      and Income Tax Regulations) nor a nonresident alien for U.S. income tax
      purposes;

            

    

    

    
      	
               
      

            	
              2.

            	
              Seller
      is not a disregarded entity as defined in Treasury Regulation Section
      1.1445-2(b)(2)(iii).

            

    

    

    
      	
               
      

            	
              3.

            	
              Seller’s
      U.S. employer identification number is _____________;
  and

            

    

    

    
      	
               
      

            	
              4.

            	
              Seller’s
      office address is ___________

            

    

    

    Seller understands that this
certification may be disclosed to the Internal Revenue Service by transferee and
that any false statement contained herein could be punished by fine,
imprisonment, or both.

    

    Under penalties of perjury I declare
that I have examined this certification and to the best of my knowledge and
belief it is true, correct and complete, and I further declare that I have
authority to sign this document on behalf of Seller.

    

    

    _______________________________

    

    

    By:_________________________________                                                                                           Date:  ______________,
2010

    Name:           ______________________________

    Title:________________________________

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

         

         

      

    

    

    STATE OF
__________                                           §

    §

    COUNTY OF
________                                           §

    

    This instrument was acknowledged before
me on this ___ day of __________, 2010 by ______________, ______________ of.

    

    

    

    Notary Public

    My
Commission Expires:

    
      	 
      

    

                                                          

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
 

    SCHEDULE
2.1(a)

     

    EXCLUDED
ASSETS

     

    

    

     

    (a) The oil
and gas leases excluded in accordance with the procedures set forth in Section 5.6, Section 7.4 or on
Exhibit A or
B.

     

    (b) A copy of
the Books and Records.

     

    (c) Any other
assets held by Seller or its affiliates, including any other assets held by
Seller in DeSoto Parish, Louisiana.

     

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    
 

    SCHEDULE
2.3(a)(iv)

     

    CERTAIN DRILLING AND
COMPLETION COSTS

     

    Summary
of drilling, completions costs and operating costs as of 3/2/10

     

    
      	
              1.  

            	
              Paul
      Little 7H No. 1 Well - $837,039.26 - drilling
  costs

            

    

     

    
      	
              2.  

            	
              Dehan
      et al 15 #1H - $2,436,914.11 - drilling and completion; $58,612.45 -
      operating costs

            

    

     

    
      	
              3.  

            	
              Griffith
      11#1- $22,639.68 - operating costs as of effective
  date

            

    

     

    
      	
              4.  

            	
              International
      Paper Co 12H Well - $1,457,985.00- drilling costs as of effective
      date

            

    

     

    
      	
              5.  

            	
              Stevenson
      Douglas LLC et al #1 - $2,007,977.56 – drilling and completion costs as of
      effective date

            

    

     

    

     

    Total -
$6,821,167.77

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

     SCHEDULE
2.3(b)(iv)

     

    ACCRUED SUSPENSE
FUNDS

     

    

    NONE.

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
3.3

     

    VIOLATIONS OF
CONFLICTS

     

    

     

    NONE.

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

    SCHEDULE
3.4(a)

     

    LEASED PERSONAL
PROPERTY

     

    

     

    NONE.

     

    

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
3.4(b)

     

    LEASES AND
WELLS

    (INCLUDING NET ACRES, WI,
NRI AND ALLOCATED VALUES)

     

    Seller
will sell all of its rights in the Leases set forth below only as to depths 100
feet below the stratigraphic equivalent of the base of the Cotton Valley
formation, as identified at 10,260 feet log depth in the electric log of the
Winchester Samuels 23-1 well (API# 17-031-24064).

     

    

     

    SEE
ATTACHED

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
3.5(a)

     

    PROPERTY
AGREEMENTS

     

    
      	
              1.  

            	
              Letter
      Agreement between Mainland Resources, Inc. and Petrohawk Energy
      Corporation, dated July 14, 2008.

            

    

     

    
      	
              2.  

            	
              Operating
      Agreement between Petrohawk Operating Company, Petrohawk Properties, LP
      and Mainland Resources, Inc., dated August 1,
  2008.

            

    

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

    SCHEDULE
3.5(b)

     

    MATTERS RELATING TO PROPERTY
AGREEMENTS

     

    

    NONE.

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

    

    SCHEDULE
3.6

     

    UNPAID RENTALS, ROYALTIES,
OVERRIDING ROYALTY INTERESTS AND OTHER PAYMENTS

     

    

     

    NONE.

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
3.7

     

    COMPLIANCE WITH
LAW

     

    

    NONE.

     

    

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
3.8

     

    LITIGATION

     

    NONE.

     

    

     

    

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

    SCHEDULE
3.12

     

    OUTSTANDING COMMITMENTS,
AFEs and INVOICES

     

    

     

    NONE.

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
3.13

     

    PREFERENTIAL RIGHTS AND
REQUIRED CONSENTS

     

    

     

    There are
no Preferential Rights to Purchase.

     

    Listed
below please find the leases that contain consent to assign
language.

     

    

    
      	
              Lessor

            	
              Lessee

            	
              Book

            	
              /

            	
              Page

            	
              Comments

            
	
              Weyerhaeuser
      Company

            	
              Petrohawk
      Properties, LP

            	
              953

            	
              /

            	
              771

            	
              Approval
      requires prior written consent.

            

    

    

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
7.3

     

    SELLER’S SURETY BONDS AND
LETTERS OF CREDIT

     

    NONE.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}]]