Document:

Receivables Purchase Agreement

 EXHIBIT 10.3 – RECEIVABLES PURCHASE AGREEMENT 
  
 [EXECUTION COPY] 
  
 CARMAX AUTO SUPERSTORES, INC., 
 as Seller, 
  
 and 
  
 CARMAX AUTO FUNDING LLC, 
 as Purchaser 
  

  
 RECEIVABLES PURCHASE AGREEMENT 
 Dated as of October 1, 2004 
  

 TABLE OF CONTENTS 
  

					
	 	 	 	  	Page

	 ARTICLE I
 DEFINITIONS

			
	SECTION 1.1	 	 Definitions
	  	1
	SECTION 1.2	 	 Other Definitional Provisions
	  	3
	
	 ARTICLE II
 CONVEYANCE OF RECEIVABLES

			
	SECTION 2.1	 	 Sale and Conveyance of Receivables
	  	4
	SECTION 2.2	 	 Receivables Purchase Price; Payments on the Receivables
	  	5
	SECTION 2.3	 	 Transfer of Receivables
	  	5
	SECTION 2.4	 	 Examination of Receivable Files
	  	6
	SECTION 2.5	 	 Expenses
	  	6
	
	 ARTICLE III
 REPRESENTATIONS AND WARRANTIES

			
	SECTION 3.1	 	 Representations and Warranties of the Purchaser
	  	6
	SECTION 3.2	 	 Representations and Warranties of the Seller
	  	7
	
	 ARTICLE IV
 CONDITIONS

			
	SECTION 4.1	 	 Conditions to Obligation of the Purchaser
	  	13
	SECTION 4.2	 	 Conditions to Obligation of the Seller
	  	14
	
	 ARTICLE V
 COVENANTS OF THE SELLER

			
	SECTION 5.1	 	 Protection of Right, Title and Interest in, to and Under the Receivables
	  	15
	SECTION 5.2	 	 Security Interests
	  	16
	SECTION 5.3	 	 Delivery of Payments
	  	16
	SECTION 5.4	 	 No Impairment
	  	17
	SECTION 5.5	 	 Costs and Expenses
	  	17
	SECTION 5.6	 	 Hold Harmless
	  	17
	
	 ARTICLE VI
 MISCELLANEOUS PROVISIONS

			
	SECTION 6.1	 	 Amendment
	  	17
	SECTION 6.2	 	 Termination
	  	18
	SECTION 6.3	 	 Governing Law
	  	18
	SECTION 6.4	 	 Notices
	  	18
	SECTION 6.5	 	 Severability of Provisions
	  	18

  

 i 

					
	 	 	 	  	Page

	SECTION 6.6	 	 Further Assurances
	  	18
	SECTION 6.7	 	 No Waiver; Cumulative Remedies
	  	18
	SECTION 6.8	 	 Counterparts
	  	19
	SECTION 6.9	 	 Third-Party Beneficiaries
	  	19
	SECTION 6.10	 	 Headings and Table of Contents
	  	19
	SECTION 6.11	 	 Representations, Warranties and Agreements to Survive
	  	19
	SECTION 6.12	 	 No Proceedings
	  	19
	SECTION 6.13	 	 Accountant’s Letters
	  	19
	SECTION 6.14	 	 Obligations of Purchaser
	  	19
	
	SCHEDULES
			
	SCHEDULE A	 	Receivables Schedule	  	 
	
	EXHIBITS
			
	EXHIBIT A	 	Bill of Sale and Assignment	  	 
	EXHIBIT B	 	Form of Retail Installment Sale Contract	  	 

  

 ii 

 RECEIVABLES PURCHASE AGREEMENT 
  
 This Receivables Purchase Agreement, dated as of October 1, 2004, is between CarMax Auto Superstores, Inc., a Virginia
corporation (“CarMax”), as seller (the “Seller”), and CarMax Auto Funding LLC, a Delaware limited liability company (“CarMax Funding”), as purchaser (the “Purchaser”). 

 
 WHEREAS, in the regular course of business, the Seller and certain
affiliates of the Seller originate motor vehicle retail installment sale contracts secured by new and used motor vehicles; 
  
 WHEREAS, the Seller intends to convey all of its right, title and interest in and to contracts having an aggregate outstanding principal balance of
$550,000,012.06 as of the close of business on September 30, 2004 (the “Receivables”) to the Purchaser and, concurrently with its purchase of the Receivables, the Purchaser intends to convey all of its right, title and interest in
and to the Receivables to CarMax Auto Owner Trust 2004-2, as issuer (the “Issuer”), pursuant to a Sale and Servicing Agreement, dated as of October 1, 2004 (the “Sale and Servicing Agreement”), among the Issuer,
CarMax Funding, as depositor, and CarMax, as servicer; and 
  
 WHEREAS, the Seller and the Purchaser wish to set forth the terms pursuant to which the Receivables are to be sold by the Seller to the Purchaser; 
  
 NOW, THEREFORE, in consideration of the mutual terms and covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows: 
  
 ARTICLE I 
 DEFINITIONS 
  
 SECTION 1.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the following meanings: 
  
 “Agreement” shall mean this Receivables Purchase Agreement
and all amendments hereof and supplements hereto. 
  
 “Base Prospectus” shall mean the prospectus, dated September 27, 2004, of the Purchaser relating to the public offering by the Purchaser of the Notes. 
  
 “Bill of Sale” shall mean the Bill of Sale and Assignment, substantially in the form attached as Exhibit A.

  
 “CarMax” shall mean CarMax Auto Superstores,
Inc., a Virginia corporation, and its successors. 
  
 “CarMax Funding” shall mean CarMax Auto Funding LLC, a Delaware limited liability company, and its successors. 
  

 “Class A Notes” shall mean the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes issued pursuant to the Indenture. 
  
 “Class B Notes” shall mean the Class B Notes issued pursuant to the Indenture. 
  
 “Class C Notes” shall mean the Class C Notes issued pursuant to the Indenture. 
  
 “Class D Notes” shall mean the Class D Notes issued pursuant
to the Indenture. 
  
 “Closing Date” shall mean
October 6, 2004. 
  
 “Cutoff Date” shall mean
September 30, 2004. 
  
 “Delaware Trustee” shall
mean The Bank of New York (Delaware), a Delaware banking corporation, as Delaware trustee under the Trust Agreement, and its successors in such capacity. 
  
 “Depositor” shall mean CarMax Auto Funding LLC, a Delaware limited liability company, as Depositor under the Trust Agreement, and its
successors in such capacity. 
  
 “Indenture”
shall mean the Indenture, dated as of October 1, 2004, between the Issuer and the Indenture Trustee, as amended, supplemented or otherwise modified and in effect from time to time. 
  
 “Indenture Trustee” shall mean Wells Fargo Bank, National Association, a national banking association, as
indenture trustee under the Indenture, and its successors in such capacity. 
  
 “Initial Reserve Account Deposit” shall mean $2,750,000. 
  
 “Issuer” shall mean CarMax Auto Owner Trust 2004-2, a Delaware statutory trust, and its successors. 
  
 “Noteholders” shall mean the registered holders of the
Notes. 
  
 “Notes” shall mean the Class A Notes,
the Class B Notes, the Class C Notes and the Class D Notes. 
  
 “Owner Trustee” shall mean The Bank of New York, a New York banking corporation, as owner trustee under the Trust Agreement, and its successors in such capacity. 
  
 “Prospectus Supplement” shall mean the final prospectus supplement, dated September 29, 2004, of the
Purchaser relating to the public offering by the Purchaser of the Notes. 
  
 “Prospectus” shall mean the Prospectus Supplement and the Base Prospectus. 
  
 “Purchaser” shall mean CarMax Funding, in its capacity as purchaser of the Receivables under this Agreement, and its successors in such
capacity. 
  

 2 

 “Receivables” shall mean the motor vehicle retail installment sale contracts sold by the
Seller to the Purchaser pursuant to this Agreement and identified on the Receivables Schedule. 
  
 “Receivables Purchase Price” shall mean $566,500,000. 
  
 “Receivables Schedule” shall mean the schedule of receivables attached as Schedule A, as amended, supplemented or otherwise modified and
in effect from time to time. 
  
 “Representative”
shall mean Banc of America Securities LLC, a Delaware limited liability company, as representative of the Underwriters. 
  
 “Sale and Servicing Agreement” shall have the meaning specified in the recitals. 
  
 “Seller” shall mean CarMax, in its capacity as seller of the
Receivables under this Agreement, and its successors in such capacity. 
  
 “State” shall mean any of the 50 states of the United States or the District of Columbia. 
  
 “Transaction Documents” shall mean this Agreement, the Trust Agreement, the Sale and Servicing Agreement, the Indenture, the
Administration Agreement and the other documents and certificates delivered in connection therewith, in each case as amended, supplemented or otherwise modified and in effect from time to time. 
  
 “Trust Agreement” shall mean the Trust Agreement, dated as
of August 12, 2004, among CarMax Funding, the Delaware Trustee and the Owner Trustee, as amended and restated by the Amended and Restated Trust Agreement, dated as of October 1, 2004, among CarMax Funding, the Delaware Trustee and the Owner Trustee.

  
 “Trustee” shall mean either the Owner Trustee
or the Indenture Trustee, as the context requires. 
  
 “UCC” shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction. 
  
 “Underwriters” shall mean the underwriters named in Schedule A to the Underwriting Agreement. 
  
 “Underwriting Agreement” shall mean the Underwriting
Agreement, dated September 29, 2004, among CarMax Funding, CarMax and the Representative, relating to the purchase of the Notes by the Underwriters from CarMax Funding. 
  
 SECTION 1.2 Other Definitional Provisions. 
  
 (a) Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Sale and
Servicing Agreement. 
  

 3 

 (b) The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, subsection, Schedule and Exhibit references contained in this Agreement are references to Sections,
subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified; the term “proceeds” shall have the meaning set forth in the applicable UCC; and the word “including” shall mean including without limitation.

  
 ARTICLE II 
 CONVEYANCE OF RECEIVABLES 
  
 SECTION 2.1 Sale and Conveyance of Receivables. 
  
 (a) On the Closing Date, subject to the terms and conditions of this Agreement, the Seller hereby agrees to sell, transfer, assign, set over and otherwise
convey to the Purchaser, and the Purchaser hereby agrees to purchase from the Seller, without recourse (subject to the Seller’s obligations hereunder and the satisfaction of the conditions set forth in Section 4.1), all of the right, title and
interest of the Seller, whether now owned or hereafter acquired, in, to and under the following: 
  
 (i) the Receivables; 
  
 (ii) all amounts received on or in respect of the Receivables (including proceeds of the repurchase of Receivables by the Seller pursuant
to Section 3.2(f)) after the Cutoff Date; 
  
 (iii) the security interests in the Financed Vehicles granted by the Obligors pursuant to the Receivables and any other interest of the Seller in such Financed Vehicles; 
  
 (iv) all proceeds from claims on or refunds of premiums of any physical damage or theft insurance policies
covering the Financed Vehicles and any proceeds or refunds of premiums of any credit life or credit disability insurance policies relating to the Financed Vehicles or the Obligors; 
  
 (v) the Receivable Files; 
  
 (vi) the right to realize upon any property (including the right to receive future Liquidation Proceeds)
that shall have secured a Receivable and have been repossessed by or on behalf of the Issuer; and 
  
 (vii) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property; all accounts,
general intangibles, chattel paper, instruments, documents, money, investment property, deposit accounts, letters of credit, letter-of-credit rights, insurance proceeds, condemnation awards, rights to payment of any and 

  

 4 

 
every kind and other forms of obligations; and all other property which at any time constitutes all or part of or is included in the proceeds of any of the
foregoing. 
  
 (b) The parties hereto intend that the conveyance
of the Receivables and related property hereunder be a sale and not a loan. In the event that the conveyance hereunder is not for any reason considered a sale, the Seller hereby grants to the Purchaser a first priority perfected security interest in
all of the Seller’s right, title and interest in, to and under the Receivables and all other property conveyed hereunder and listed in this Section and all proceeds of any of the foregoing. The parties intend that this Agreement constitute a
security agreement under applicable law. Such grant is made to secure the payment of all amounts payable hereunder, including the Receivables Purchase Price. If such conveyance is for any reason considered to be a loan and not a sale, the Seller
consents to the Purchaser transferring such security interest in favor of the Indenture Trustee and transferring the obligations secured thereby to the Indenture Trustee. 
  
 (c) The Seller agrees to treat the transfer of the Receivables and the related property contemplated by this Section for all
purposes (including tax and financial accounting purposes) as an absolute transfer on all relevant books, records, tax returns, financial statements and other applicable documents. 
  
 SECTION 2.2 Receivables Purchase Price; Payments on the Receivables. 
  
 (a) On the Closing Date, in exchange for the Receivables and other assets
described in Section 2.1, the Purchaser shall pay to the Seller the Receivables Purchase Price. An amount equal to $545,983,043 of the Receivables Purchase Price shall be paid by the Purchaser to the Seller in cash or immediately available funds.
The remainder of the Receivables Purchase Price shall be paid by crediting the Seller with a contribution to the capital of the Purchaser. The Purchaser shall deposit, from funds it receives from the issuance of the Notes, an amount equal to the
Initial Reserve Account Deposit into the Reserve Account, which amount shall be an asset of the Issuer. 
  
 (b) The Purchaser shall be entitled to, and shall convey such right to the Owner Trustee pursuant to the Sale and Servicing Agreement, all payments of
principal and interest on or in respect of the Receivables received after the Cutoff Date. 
  
 SECTION 2.3 Transfer of Receivables. Pursuant to the Sale and Servicing Agreement, the Purchaser will assign all of its right, title and interest in, to and under the Receivables and other assets described in
Section 2.1 to the Issuer. The parties hereto acknowledge that the Issuer will pledge its rights in, to and under the Receivables and other assets described in Section 2.1 to the Indenture Trustee pursuant to the Indenture. The Purchaser has the
right to assign its interest under this Agreement as may be required to effect the purposes of the Sale and Servicing Agreement, without the consent of the Seller, and the Owner Trustee as assignee shall succeed to the rights and obligations
hereunder of the Purchaser. 
  

 5 

 SECTION 2.4 Examination of Receivable Files. The Seller will make the Receivable Files available
to the Purchaser or its agent for examination during normal business hours at the Seller’s offices or such other location as otherwise shall be agreed upon by the Purchaser and the Seller. 
  
 SECTION 2.5 Expenses. The Seller will reimburse the Purchaser for
expenses of the Purchaser in connection with the sale of the Notes, including expenses which are reimbursable to the Underwriters by the Purchaser pursuant to the Underwriting Agreement. 
  
 ARTICLE III 
 REPRESENTATIONS AND WARRANTIES 
  
 SECTION 3.1
Representations and Warranties of the Purchaser. The Purchaser hereby makes the following representations and warranties to the Seller as of the date of this Agreement and as of the Closing Date: 
  
 (a) Organization and Good Standing. The Purchaser is
a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has power and authority to own its properties and to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and shall have, power, authority and legal right to acquire, own and sell the Receivables. 
  
 (b) Power and Authority; Binding Obligation. The Purchaser has the power and authority to execute and deliver this Agreement and to
carry out its terms; and the execution, delivery and performance of this Agreement has been duly authorized by the Purchaser by all necessary action. This Agreement constitutes the legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws and to general equitable principles.

  
 (c) No Violation. The consummation of
the transactions contemplated by this Agreement and the fulfillment of the terms hereof shall not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under,
the limited liability company agreement or certificate of formation of the Purchaser, or conflict with or breach any of the material terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture,
agreement or other instrument to which the Purchaser is a party or by which it may be bound. 
  
 (d) No Proceedings. There are no proceedings or investigations pending, or, to the knowledge of the Purchaser, threatened, against
the Purchaser before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Purchaser or its properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that, in the 

  

 6 

 
reasonable judgment of the Purchaser would materially and adversely affect the performance by the Purchaser of its obligations under, or the validity or
enforceability of, this Agreement or the Receivables. 
  
 SECTION
3.2 Representations and Warranties of the Seller. 
  
 (a)
The Seller hereby makes the following representations and warranties to the Purchaser as of the date of this Agreement and as of the Closing Date: 
  
 (i) Organization and Good Standing. The Seller is a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia, and has power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and shall have,
power, authority and legal right to acquire, own and sell the Receivables. 
  
 (ii) Power and Authority; Binding Obligation. The Seller has the power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this
Agreement has been duly authorized by the Seller by all necessary action. This Agreement constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject, as to enforceability,
to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws and to general equitable principles. 
  
 (iii) No Violation. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Seller, or conflict with or breach any of
the material terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement or other instrument to which the Seller is a party or by which it may be bound. 
  
 (iv) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of the Seller, threatened, against the Seller before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Seller or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller
would materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or the Receivables. 
  
 (v) No Tax Liens. The Seller is not aware of any material judgment or tax lien filings against the
Seller. 
  
 (b) The Seller hereby makes the following
representations and warranties to the Purchaser as of the date of this Agreement and as of the Closing Date, which representations 

  

 7 

 
and warranties shall remain operative and in full force and effect, shall survive the transfer and conveyance of the Receivables and other assets described
in Section 2.1 by the Seller to the Purchaser and by the Purchaser to the Issuer and shall inure to the benefit of the Purchaser, the Trustees and the Noteholders: 
  
 (i) Characteristics of Receivables. Each Receivable (i) has been originated by the Seller or an
Affiliate of the Seller in the ordinary course of business in connection with the sale of a new or used motor vehicle and has been fully and properly executed by the parties thereto, (ii) contains customary and enforceable provisions such that the
rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security, (iii) provides for level monthly payments that fully amortize the Amount Financed by maturity (except that the period
between the date of such Receivable and the date of the first Scheduled Payment may be less than or greater than one month and the amount of the first and last Scheduled Payments may be less than or greater than the level payments) and yield
interest at the related APR, (iv) provides for, in the event that such Receivable is prepaid, a prepayment that fully pays the Principal Balance of such Receivable with interest at the related APR through the date of payment, (v) is a retail
installment sale contract substantially in the form of Exhibit B, (vi) is secured by a new or used motor vehicle that had not been repossessed as of the Cutoff Date, (vii) is a Simple Interest Receivable, (viii) relates to an Obligor who has made at
least one payment under such Receivable as of the Cutoff Date and (ix) relates to an Obligor whose mailing address is located in any State. 
  
 (ii) Receivable Schedule. The information set forth in the Receivable Schedule was true and correct in all material respects as of
the opening of business on the Cutoff Date, and no selection procedures believed to be adverse to the Depositor and/or the Noteholders were utilized in selecting the Receivables from those retail installment sale contracts which met the criteria
contained in this Agreement. The information set forth in the compact disk or other listing regarding the Receivables made available to the Depositor and its assigns (which compact disk or other listing is required to be delivered as specified
herein) is true and correct in all material respects. 
  
 (iii) Compliance with Law. Each Receivable and the sale of the related Financed Vehicle complied, at the time such Receivable was originated and complies, as of the Closing Date, in all material respects with all requirements of
applicable federal, state and local laws, and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations B and Z, the Servicemembers Civil Relief Act, state adaptations of the National Consumer Act and the Uniform Consumer Credit Code and any other consumer
credit, equal opportunity and disclosure laws applicable to such Receivable and sale. 
  
 (iv) Binding Obligation. Each Receivable represents the genuine, legal, valid and binding payment obligation in writing of the
related Obligor, enforceable by the holder thereof in all material respects in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation or 

  

 8 

 
other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity. 
  
 (v) No Government Obligor. No Receivable is due from
the United States or any State or from any agency, department or instrumentality of the United States or any State. 
  
 (vi) Security Interest in Financed Vehicles. Immediately prior to the transfer of the Receivables by the Seller to the Depositor,
each Receivable was secured by a valid, binding and enforceable first priority perfected security interest in favor of the Seller in the related Financed Vehicle, which security interest has been validly assigned by the Seller to the Depositor. The
Servicer has received, or will receive within 180 days after the Closing Date, the original certificate of title for each Financed Vehicle (other than any Financed Vehicle that is subject to a certificate of title statute or motor vehicle
registration law that does not require that the original certificate of title for such Financed Vehicle be delivered to the Seller). 
  
 (vii) Receivables in Force. No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released
in whole or in part from the Lien granted by the related Receivable. 
  
 (viii) No Waiver. No provision of any Receivable has been waived in such a manner that such Receivable fails to meet all of the representations and warranties made by the Seller in this Section 3.2(b) with
respect thereto. 
  
 (ix) No Defenses. No
Receivable is subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of any Receivable, or the exercise of any right thereunder, will not render such Receivable
unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the Seller has no knowledge of any such right of rescission, setoff, counterclaim or defense being asserted
or threatened with respect to any Receivable. 
  
 (x) No Liens. The Seller has no knowledge of any liens or claims that have been filed, including liens for work, labor or materials or for unpaid state or federal taxes, relating to any Financed Vehicle that are prior to, or equal or
coordinate with, the security interest in such Financed Vehicle created by the related Receivable. 
  
 (xi) No Default. Except for payment defaults continuing for a period of not more than 30 days, the Seller has no knowledge that any
default, breach, violation or event permitting acceleration under the terms of any Receivable has occurred or that any continuing condition that with notice or the lapse of time or both would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable has arisen, and the Seller has not waived any such event or condition. 
  
 (xii) Title. The Seller intends that the transfer of the Receivables contemplated by Section 2.1 constitute a sale of the
Receivables from the Seller to the Depositor and that the beneficial interest in, and title to, the Receivables not be part of the 

  

 9 

 
Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. The Seller has not sold,
transferred, assigned or pledged any Receivable to any Person other than the Depositor. Immediately prior to the transfer of the Receivables contemplated by Section 2.1, the Seller had good and marketable title to the Receivables free and clear of
any Lien, claim or encumbrance of any Person and, immediately upon such transfer, the Depositor shall have good and marketable title to the Receivables free and clear of any Lien, claim or encumbrance of any Person. 
  
 (xiii) Security Interest Matters. This Agreement
creates a valid and continuing “security interest” (as defined in the Relevant UCC) in the Receivables in favor of the Depositor, which security interest is prior to all other Liens and is enforceable as such as against creditors of and
purchasers from the Seller. With respect to each Receivable, the Seller has taken all steps necessary to perfect its security interest against the related Obligor in the related Financed Vehicle. The Receivables constitute “tangible chattel
paper” (as defined in the Relevant UCC). The Seller has caused or will cause prior to the Closing Date the filing of all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law
necessary to perfect the security interest in the Receivables granted to the Depositor under this Agreement. Other than the security interest granted to the Depositor under this Agreement, the Seller has not pledged, assigned, sold, granted a
security interest in or otherwise conveyed any of the Receivables. The Seller has not authorized the filing of and is not aware of any financing statements against the Seller that include a description of collateral covering the Receivables other
than any financing statement relating to the security interest granted to the Depositor under the Sale and Servicing Agreement or that has been terminated. The motor vehicle retail installment sale contracts that constitute or evidence the
Receivables do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Depositor, the Issuer or the Indenture Trustee. The Seller is not aware of any judgment or tax lien
filings against the Seller. 
  
 (xiv)
Financing Statements. All financing statements filed or to be filed against the Seller in favor of the Issuer (as assignee of the Depositor) contain a statement substantially to the following effect: “A purchase of or security interest
in any collateral described in this financing statement will violate the rights of the Issuer.” All financing statements filed or to be filed against the Seller in favor of the Indenture Trustee (as assignee of the Issuer) contain a statement
substantially to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Indenture Trustee.” 
  
 (xv) Valid Assignment. No Receivable has been
originated in, or is subject to the laws of, any jurisdiction under which the sale, transfer, assignment and conveyance of such Receivable under this Agreement or the Sale and Servicing Agreement or the pledge of such Receivable under the Indenture
is unlawful, void or voidable or under which such Receivable would be rendered void or voidable as a result of any such sale, transfer, assignment, conveyance or pledge. The Seller has not entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of the Receivables. 
  

 10 

 (xvi) One Original. There is only one original executed copy of each Receivable.

  
 (xvii) Principal Balance. Each
Receivable had an original Principal Balance of not more than $60,000 and a remaining Principal Balance as of the Cutoff Date of not less than $500. 
  
 (xviii) No Bankrupt Obligors. As of the Cutoff Date, no Receivable was due from an Obligor that was the subject of a proceeding
under the Bankruptcy Code of the United States or was bankrupt. 
  
 (xix) New and Used Vehicles. As of the Cutoff Date, approximately 4.53% of the Pool Balance related to Receivables secured by new Financed Vehicles and approximately 95.47% of the Pool Balance related to
Receivables secured by used Financed Vehicles. 
  
 (xx) Origination. Each Receivable was originated after December 1, 1998. 
  
 (xxi) Term to Maturity. Each Receivable had an original term to maturity of not more than 72 months and not less than 12 months and
a remaining term to maturity as of the Cutoff Date of not more than 71 months and not less than three months. 
  
 (xxii) Weighted Average Remaining Term to Maturity. As of the Cutoff Date, the weighted average remaining term to maturity of the
Receivables was approximately 54.63 months. 
  
 (xxiii) Annual Percentage Rate. Each Receivable has an APR of at least 4.45% and not more than 25.00%. 
  
 (xxiv) Location of Receivable Files. The Receivable Files are maintained at the location listed in Schedule 2 to the Sale and
Servicing Agreement. 
  
 (xxv) Simple Interest
Method. All payments with respect to the Receivables have been allocated consistently in accordance with the Simple Interest Method. 
  
 (xxvi) No Delinquent Receivables. As of the Cutoff Date, no payment due under any Receivable was more than 30 days past due.

  
 (xxvii) Insurance. Each Obligor has
obtained or agreed to obtain physical damage insurance (which insurance shall not be force placed insurance) covering the related Financed Vehicle in accordance with the Seller’s normal requirements. 
  
 (xxviii) Fair Market Value. The Receivables Purchase
Price represents the fair market value of the Receivables. 
  
 (xxix) Custodial Agreements. Immediately prior to the transfer of the Receivables by the Seller to the Depositor, the Seller or an Affiliate of the Seller had possession of the Receivable Files and there were
no, and there will not be any, custodial 

  

 11 

 
agreements in effect materially adversely affecting the right or ability of the Seller to make, or cause to be made, any delivery required under this
Agreement. 
  
 (xxx) Bulk Transfer Laws.
The transfer of the Receivables and the Receivable Files by the Seller to the Depositor pursuant to this Agreement is not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction. 
  
 (c) The Seller shall indemnify the Purchaser and hold the Purchaser harmless
against any losses, penalties, fines, forfeitures, legal fees and related costs, judgments and other costs and expenses resulting from any third party claim, demand, defense or assertion based on or grounded upon, or resulting from, a breach of the
Seller’s representations and warranties set forth in Section 3.2(b). The Trustees shall also have the remedies provided in the Sale and Servicing Agreement. 
  
 (d) Any cause of action against the Seller relating to or arising out of the breach of any of its representations and
warranties set forth in Section 3.2(b) shall accrue as to any Receivable upon (i) discovery of such breach by the Purchaser or either Trustee or notice thereof by the Seller to the Purchaser, (ii) failure by the Seller to cure such breach and (iii)
demand upon the Seller by the Purchaser for all amounts payable in respect of such Receivable under this Agreement. 
  
 (e) The Purchaser or the Seller, as the case may be, shall inform the other parties promptly, in writing, upon discovery of any breach of the
Seller’s representations and warranties set forth in Section 3.2(b) which materially and adversely affects the interests of the Noteholders in any Receivable. 
  
 (f) If a breach of any representation or warranty set forth in Section 3.2(b) which materially and adversely affects the
interests of the Purchaser, the Issuer or the Noteholders in any Receivable shall not have been cured by the close of business on the last day of the Collection Period which includes the thirtieth day after the date on which the Seller becomes aware
of, or receives written notice from the Servicer, the Purchaser or the Owner Trustee of, such breach or failure, the Seller shall repurchase such Receivable from the Purchaser on the Distribution Date following such Collection Period. In
consideration for the repurchase of any such Receivable, the Seller shall remit the Purchase Amount of such Receivable to the Purchaser. Upon any such repurchase, the Purchaser shall, without further action, be deemed to transfer, assign, set-over
and otherwise convey to the Seller, without recourse, representation or warranty, all the right, title and interest of the Purchaser in, to and under such repurchased Receivable and all other related assets described in Section 2.1. The Purchaser
shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Seller to effect the conveyance of such Receivable pursuant to this Section. The sole remedy of the Purchaser
with respect to a breach of the Seller’s representations and warranties set forth in Section 3.2(b) shall be to require the Seller to repurchase the related Receivables pursuant to this Section. 
  

 12 

 ARTICLE IV 
 CONDITIONS 
  
 SECTION 4.1
Conditions to Obligation of the Purchaser. The obligation of the Purchaser to purchase the Receivables from the Seller on the Closing Date is subject to the satisfaction of the following conditions: 
  
 (a) Representations and Warranties True. The
representations and warranties of the Seller contained herein and in the other Transaction Documents shall be true and correct on the Closing Date with the same effect as if made on the Closing Date, and each of the Seller and the Servicer shall
have performed all obligations to be performed by it hereunder and under the other Transaction Documents on or before the Closing Date. 
  
 (b) Computer Files Marked. The Seller shall, at its own expense, on or before the Closing Date, indicate in its computer files that
the Receivables have been sold to the Purchaser pursuant to this Agreement and deliver to the Purchaser the Receivables Schedule, certified by an officer of the Seller to be true, correct and complete. 
  
 (c) Release of Lenders. The Seller shall obtain
executed release agreements and UCC partial releases with respect to the Receivables from Bank of America, N.A. (and certain other parties) and CarMax Funding, in each case in form and substance satisfactory to the Purchaser. 
  
 (d) Documents to be Delivered. The Purchaser shall
have received the following, all of which shall be dated as of the Closing Date or such other date as specified: 
  
 (i) the Receivables Schedule; 
  
 (ii) an Officer’s Certificate of the Seller, in form and substance previously approved by the Purchaser and its counsel, as to, among
other things, the representations and warranties of the Seller and satisfaction of conditions precedent; 
  
 (iii) an opinion or opinions of counsel for the Seller, in form and substance previously approved by the Purchaser and its counsel,
addressed to the Purchaser; 
  
 (iv) [RESERVED];

  
 (v) copies of resolutions of the board of
directors of the Seller approving the execution, delivery and performance of the Transaction Documents to which the Seller is a party, and the performance of the transactions contemplated hereunder and thereunder, certified by the Secretary or an
Assistant Secretary of the Seller; 
  
 (vi)
copies of the articles of incorporation of the Seller, together with all amendments, revisions and supplements thereto, certified by the Virginia State 

  

 13 

 
Corporation Commission as of a recent date, and a certificate of fact from the Virginia State Corporation Commission, dated as of a recent date, to the
effect that the Seller has been duly incorporated, is in good standing and has a legal corporate existence; 
  
 (vii) UCC search reports from the appropriate offices in Virginia as to the Seller; 
  
 (viii) reliance letters to each opinion of counsel to the
Seller or the Servicer delivered to Standard & Poor’s or Moody’s in connection with the purchase of the Receivables hereunder or the issuance or sale of the Notes; 
  
 (ix) a financing statement to be filed with the Virginia State Corporation Commission, naming the Seller, as
seller or debtor, the Purchaser, as purchaser or secured party, and the Issuer as assignee, naming the Receivables and the related property described in Section 2.1 as collateral and meeting the requirements of the laws of each such jurisdiction and
in such manner as is necessary to perfect the sale, transfer, assignment and conveyance of the Receivables to the Purchaser; 
  
 (x) the Bill of Sale; and 
  
 (xi) such other documents, certificates and opinions as may be reasonably requested by the Purchaser or its counsel. 
  
 (e) Execution of Transaction Documents. The
Transaction Documents shall have been executed and delivered by the parties thereto. 
  
 (f) Rating of the Notes. Moody’s and Standard & Poor’s, respectively, shall have assigned ratings of (i)
“Prime-1” and “A-1+” to the Class A-1 Notes, (ii) “Aaa” and “AAA” to the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, (iii) “Aa2” and “AA” to the Class B Notes, (iv)
“A2” and “A” to the Class C Notes and (v) “Baa3” and “BBB” to the Class D Notes. 
  
 (g) No Unsolicited Ratings. There shall not have been issued an unsolicited rating of any Class of Notes by any nationally
recognized statistical rating agency at a level that is lower than the ratings for such Class of Notes from Moody’s or Standard & Poor’s specified in Section 4.1(f). 
  
 (h) Other Transactions. The transactions contemplated by the Transaction Documents and the
Underwriting Agreement shall be consummated on the Closing Date. 
  
 SECTION 4.2 Conditions to Obligation of the Seller. The obligation of the Seller to sell the Receivables to the Purchaser on the Closing Date is subject to the satisfaction of the following conditions: 
  
 (a) Representations and Warranties True. The
representations and warranties of the Purchaser contained herein and in the other Transaction Documents shall be true 

  

 14 

 
and correct on the Closing Date with the same effect as if then made, and the Purchaser shall have performed all obligations to be performed by it hereunder
and under the other Transaction Documents on or before the Closing Date. 
  
 (b) Payment of Receivables Purchase Price. In consideration of the sale of the Receivables from the Seller to the Purchaser as provided in Section 2.1, on the Closing Date the Purchaser shall have paid to the
Seller the Receivables Purchase Price. 
  
 (c)
Opinions of Purchaser. An opinion or opinions of counsel for the Purchaser addressed to the Seller and the Underwriters shall have been delivered. 
  
 ARTICLE V 
 COVENANTS OF THE SELLER 

 
 SECTION 5.1 Protection of Right, Title and Interest in, to and Under
the Receivables. 
  
 (a) The Seller, at its expense, shall
cause all financing statements and continuation statements and any other necessary documents covering the Purchaser’s right, title and interest in, to and under the Receivables and other property conveyed by the Seller to the Purchaser
hereunder to be promptly authorized, recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and
interest of the Purchaser hereunder to the Receivables and such other property. The Seller shall deliver to the Purchaser file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. The Purchaser shall cooperate fully with the Seller in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of
this subsection. 
  
 (b) Within five days after the Seller makes
any change in its name, identity or organizational structure which would make any financing statement or continuation statement filed in accordance with Section 4.1(d) seriously misleading within the meaning of the UCC as in effect in the applicable
state, the Seller shall give the Purchaser notice of any such change and, within 30 days after such change, shall authorize and file such financing statements or amendments as may be necessary to continue the perfection of the Purchaser’s
security interest in the Receivables and the proceeds thereof. 
  
 (c) The Seller shall give the Purchaser written notice within five days of any relocation of the state of organization of the Seller or any office in which the Seller keeps records concerning the Receivables and whether, as a result of such
relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and, within 30 days after such relocation, shall authorize and
file such financing statements or amendments as may be necessary to continue the perfection of the interest of the Purchaser in the Receivables and the proceeds thereof. The Seller shall at all times maintain its state of organization, its principal
place of business and its chief executive office and the location of the office where the Receivables Files and any accounts and records relating to the Receivables are kept within the United States. 
  

 15 

 (d) The Seller shall maintain accounts and records as to each Receivable accurately and in sufficient
detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Receivable. 
  
 (e) The Seller shall maintain its
computer systems so that, from and after the time of the transfer of the Receivables to the Purchaser pursuant to this Agreement, the Seller’s master computer records (including any back-up archives) that refer to a Receivable shall indicate
clearly and unambiguously that such Receivable is owned by the Purchaser (or, upon transfer of the Receivables to the Issuer, by the Issuer). Indication of the Purchaser’s ownership of a Receivable shall be deleted from or modified on the
Seller’s computer systems when, and only when, such Receivable shall have been paid in full or repurchased by the Seller. 
  
 (f) If at any time the Seller shall propose to sell, grant a security interest in or otherwise transfer any interest in any motor vehicle retail
installment sale contract to any prospective purchaser, lender or other transferee, the Seller shall give to such prospective purchaser, lender or other transferee computer tapes, compact disks, records or print-outs (including any restored from
back-up archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly and unambiguously that such Receivable has been sold and is owned by the Purchaser (or, upon transfer of the Receivables to the Issuer,
the Issuer), unless such Receivable has been paid in full or repurchased by the Seller. 
  
 (g) The Seller shall permit the Purchaser and its agents at any time during normal business hours to inspect, audit and make copies of and abstracts from the Seller’s records regarding any Receivable. 

 
 (h) If the Seller has repurchased one or more Receivables from the
Purchaser or the Issuer pursuant to Section 3.2(f), the Seller shall, upon request, furnish to the Purchaser, within ten days, a list of all Receivables (by receivable number and name of Obligor) then owned by the Purchaser, together with a
reconciliation of such list to the Receivables Schedule. 
  
 SECTION 5.2 Security Interests. Except for the conveyances hereunder, the Seller covenants that it will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any
Receivable, whether now existing or hereafter created, or any interest therein; the Seller will immediately notify the Purchaser of the existence of any Lien on any Receivable and, in the event that the interests of the Noteholders in such
Receivable are materially and adversely affected, such Receivable shall be repurchased from the Purchaser by the Seller in the manner and with the effect specified in Section 3.2(f), and the Seller shall defend the right, title and interest of the
Purchaser in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under the Seller. 
  

SECTION 5.3 Delivery of Payments. The Seller covenants and agrees to deliver in kind upon receipt to the Servicer under the Sale and Servicing
Agreement all payments received by the Seller in respect of the Receivables as soon as practicable after receipt thereof by the Seller. 
  

 16 

 SECTION 5.4 No Impairment. The Seller covenants that it shall take no action, nor omit to take any
action, which would impair the rights of the Purchaser in any Receivable, nor shall it, except as otherwise provided in this Agreement or the Sale and Servicing Agreement, reschedule, revise or defer payments due on any Receivable. 
  
 SECTION 5.5 Costs and Expenses. The Seller shall pay all reasonable
costs and expenses incurred in connection with the perfection of the Purchaser’s right, title and interest in, to and under the Receivables. 
  
 SECTION 5.6 Hold Harmless. The Seller shall protect, defend, indemnify and hold the Purchaser and the Issuer and their respective assigns and their
attorneys, accountants, employees, officers and directors harmless from and against all losses, costs, liabilities, claims, damages and expenses of every kind and character, as incurred, resulting from or relating to or arising out of (i) the
inaccuracy, nonfulfillment or breach of any representation, warranty, covenant or agreement made by the Seller in this Agreement, (ii) any legal action, including any counterclaim, that has either been settled by the litigants (which settlement, if
the Seller is not a party thereto shall be with the consent of the Seller) or has proceeded to judgment by a court of competent jurisdiction, in either case to the extent it is based upon alleged facts that, if true, would constitute a breach of any
representation, warranty, covenant or agreement made by the Seller in this Agreement, (iii) any actions or omissions of the Seller or any employee or agent of the Seller occurring prior to the Closing Date with respect to any Receivable or Financed
Vehicle or (iv) any failure of a Receivable to be originated in compliance with all requirements of law. These indemnity obligations shall be in addition to any obligation that the Seller may otherwise have. 
  
 ARTICLE VI 
 MISCELLANEOUS PROVISIONS 
  
 SECTION 6.1 Amendment. 
  
 (a) This Agreement may be amended from time to time by a written amendment duly executed and delivered by the Purchaser and the Seller, without the consent of any Noteholder, to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to add any other provision with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement or the Sale and
Servicing Agreement; provided, however, that any such amendment shall not, as evidenced by an Opinion of Counsel to the Seller delivered to the Indenture Trustee, adversely affect in any material respect the interests of the
Noteholders. 
  
 (b) This Agreement may also be amended from time
to time for any other purpose by a written amendment duly executed and delivered by the Seller and by the Purchaser; provided, however, that any such amendment that materially adversely affects the interests of the Noteholders under
the Indenture, the Sale and Servicing Agreement or the Trust Agreement must be consented to by the Holders of Notes evidencing not less than 51% of the Note Balance of the Controlling Class. 
  

 17 

 (c) Promptly after the execution of any amendment to this Agreement, the Seller shall furnish written
notification of the substance of such amendment to the Owner Trustee, the Indenture Trustee and the Rating Agencies. 
  
 SECTION 6.2 Termination. The respective obligations and responsibilities of the Seller and the Purchaser created hereby shall terminate, except for
the indemnity obligations of the Seller as provided herein, upon the termination of the Issuer as provided in the Trust Agreement. 
  
 SECTION 6.3 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 
  
 SECTION 6.4 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally delivered at or sent by telecopier, overnight courier or mailed by registered mail, return receipt requested, in the case of (i) the Purchaser, to CarMax Auto Funding LLC,
4900 Cox Road, Suite 200, Glen Allen, Virginia 23060, Attention: Treasurer and (ii) the Seller, to CarMax Auto Superstores, Inc., 4900 Cox Road, Glen Allen, Virginia 23060, Attention: Treasury Department; or, as to either of such Persons, at such
other address as shall be designated by such Person in a written notice to the other Person. 
  
 SECTION 6.5 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions and terms of this Agreement and shall in no way affect the validity or enforceability of the other covenants, agreements, provisions and terms of this
Agreement or any amendment or supplement hereto. 
  
 SECTION 6.6
Further Assurances. The Seller and the Purchaser agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party hereto or by the Issuer or the
Indenture Trustee more fully to effect the purposes of this Agreement, including the execution of any financing statements, amendments, continuation statements or releases relating to the Receivables for filing under the provisions of the UCC or
other law of any applicable jurisdiction. 
  
 SECTION 6.7 No
Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Purchaser, the Issuer or the Seller, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. 
  

 18 

 SECTION 6.8 Counterparts. This Agreement may be executed in two or more counterparts (and by
different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. 
  
 SECTION 6.9 Third-Party Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Issuer and the
Indenture Trustee for the benefit of the Noteholders, who shall be considered to be third-party beneficiaries hereof. Except as otherwise provided in this Agreement, no other Person will have any right or obligation hereunder. 
  
 SECTION 6.10 Headings and Table of Contents. The Table of Contents and
headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. 
  
 SECTION 6.11 Representations, Warranties and Agreements to Survive. The respective agreements, representations, warranties and other statements by
the Seller and by the Purchaser set forth in or made pursuant to this Agreement shall remain in full force and effect and will survive the closing hereunder of the transfers and assignments by the Seller to the Purchaser and by the Purchaser to the
Issuer and shall inure to the benefit of the Purchaser, the Trustees and the Noteholders. 
  
 SECTION 6.12 No Proceedings. The Seller covenants and agrees that so long as this Agreement is in effect, and for one year plus one day following its termination, it will not file any involuntary petition or
otherwise institute any bankruptcy, reorganization arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy law or similar law against the Issuer or the Owner Trustee. 
  
 SECTION 6.13 Accountant’s Letters. 
  
 (a) The Seller shall cause a firm of independent certified public accountants
(who may also render other services to the Seller) to perform certain procedures regarding the characteristics of the Receivables described in the Receivables Schedule and to compare those characteristics to the information with respect to the
Receivables contained in the Prospectus. The Seller shall cooperate with the Purchaser and such accountants in making available all information and taking all steps reasonably necessary to permit such accountants to complete such procedures and to
deliver the letters required of them under the Underwriting Agreement. 
  
 (b) The Seller shall cause a firm of independent certified public accountants (who may also render other services to the Seller) to deliver to the Purchaser a letter, dated October 6, 2004, in the form previously agreed to by the Seller and
the Purchaser, with respect to the financial and statistical information contained in the Prospectus under the caption “CarMax—Delinquency, Credit Loss and Recovery Information” and with respect to such other information as may be
agreed in the forms of such letters. 
  
 SECTION 6.14
Obligations of Purchaser. The obligations of the Purchaser under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Receivable. 
  

 19 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective
officers as of the day and year first above written. 
  

			
	 CARMAX AUTO SUPERSTORES, INC.,
as Seller

		
	By:	 	 /s/ Keith D. Browning

	 	 	 Name: Keith D. Browning

	 	 	 Title: Chief Financial Officer

	
	 CARMAX AUTO FUNDING LLC,
as Purchaser

		
	By:	 	 /s/ Thomas W. Reedy

	 	 	 Name: Thomas W. Reedy

	 	 	 Title: Treasurer

  

 S-1 

 SCHEDULE A 
  
 RECEIVABLES SCHEDULE 
  
 [ON FILE WITH THE SERVICER] 
  

 SA-1 

 EXHIBIT A 
  
 BILL OF SALE AND ASSIGNMENT 
  
 For value received, in accordance with the receivables purchase agreement, dated as of October 1, 2004 (the “Receivables Purchase
Agreement”), between the undersigned and CarMax Auto Funding LLC (the “Purchaser”), the undersigned does hereby sell, assign, transfer and otherwise convey unto the Purchaser, without recourse, all right, title and interest
of the undersigned in and to (i) the Receivables listed on Schedule A hereto (the “Receivables”); (ii) all amounts received on or in respect of the Receivables (including proceeds of the repurchase of Receivables by the Seller
pursuant to the Receivables Purchase Agreement) after the Cutoff Date; (iii) the security interests in the Financed Vehicles granted by the Obligors pursuant to the Receivables and any other interest of the undersigned in such Financed Vehicles;
(iv) all proceeds from claims on or refunds of premiums of any physical damage or theft insurance policies covering the Financed Vehicles and any proceeds or refunds of premiums of any credit life or credit disability insurance policies relating to
the Financed Vehicles or the Obligors; (v) the Receivable Files; (vi) the right to realize upon any property (including the right to receive future Liquidation Proceeds) that shall have secured a Receivable and have been repossessed by or on behalf
of the Issuer; and (vii) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or
all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all accounts, general intangibles, chattel paper, instruments, documents, money, investment property, deposit
accounts, letters of credit, letter-of-credit rights, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations, and all other property which at any time constitutes all or part of or is included
in the proceeds of any of the foregoing. 
  
 This Bill of Sale and
Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Receivables Purchase Agreement and is to be governed by the Receivables Purchase Agreement. 
  
 Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to them in the Receivables Purchase Agreement. 
  
 IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale and Assignment to be duly executed as of October 6, 2004. 
  

			
	 CARMAX AUTO SUPERSTORES, INC.

		
	By:	 	 
	 	 	 Name:

	 	 	 Title:

  

 A-1Asset Purchase Agreement

 EXHIBIT 10.1 
  
 ASSET PURCHASE AGREEMENT 
  
 by and among 
  
 CONTANGO STEP, L.P., 
  
 CONTANGO OIL & GAS COMPANY, 
  
 EDGE PETROLEUM EXPLORATION COMPANY 
  
 and

  
 EDGE PETROLEUM CORPORATION 
  
 Dated as of October 7, 2004 

 ASSET PURCHASE AGREEMENT 
  
 THIS ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of October 7, 2004 (the
“Execution Date”) is entered into by and among CONTANGO STEP, L.P., a Texas limited partnership (the “Seller”) and an indirect wholly owned subsidiary of CONTANGO OIL & GAS COMPANY, a Delaware
corporation (the “Parent”), and EDGE PETROLEUM EXPLORATION COMPANY, a Delaware corporation (the “Buyer”) and a direct wholly owned subsidiary of EDGE PETROLEUM CORPORATION
(“Edge”) (Seller, Parent, Buyer and Edge sometimes individually a “Party” and collectively the “Parties”). Capitalized terms used but not otherwise defined herein have the
meanings given in Section 9.2. 
  
 RECITALS

  
 A. Parent is the sole shareholder of Contango Step I, Inc., a Delaware
corporation (the “General Partner”) and the sole general partner of Seller. Parent is also the sole shareholder of Contango Step II, Inc., a Delaware corporation (the “Limited Partner”) and the sole
limited partner of Seller. 
  
 B. Parent, as the ultimate corporate parent of
Seller, and Edge, as the ultimate corporate parent of Buyer, are Parties to this Agreement to, among other things, make various of the representations and warranties set forth herein and for purposes of giving and receiving various of the
indemnities set forth herein. 
  
 C. Seller desires to sell to Buyer, and Buyer
desires to purchase from Seller, all of Seller’s non-operating oil and gas interests and related assets identified in Section 1.1 and the attached Exhibit A and Exhibit B all on the terms and conditions set forth herein.

  
 STATEMENT OF AGREEMENT 
  
 NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 
  
 ARTICLE I 
  
 PURCHASE AND SALE OF ASSETS 
  
 Section 1.1 Assets. On the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined in Section 6.1)
Seller agrees to sell, transfer and assign to Buyer, and Buyer shall purchase and receive, all of Seller’s right, title and interest in and to the following (the “Assets”): 
  

	 	(a)	Leases. The oil and gas leases described in Exhibit A (each a “Lease” and sometimes, collectively, the “Leases”);

  

	 	(b)	Wells. All oil and/or gas wells, whether producing, operating, shut-in or temporarily abandoned, located on the lands covered by the Leases or pooled therewith, including,
without limitation, those described in Exhibit B (each a “Well” and sometimes, collectively, the “Wells”); 

  

 1 

	 	(c)	Equipment. All equipment, fixtures, machinery, tanks, pipelines, gathering lines, flow lines, saltwater and other disposal wells, and other appurtenances and all other
personal property or fixtures that are located on the lands covered by the Leases or pooled therewith and used in connection with the ownership or operation thereof and the production of oil and/or gas therefrom (collectively, the
“Equipment”); and 

  

	 	(d)	Contracts. All contracts, agreements, leases, rights-of-way, easements, servitudes, surface leases, title instruments and other similar rights, only to the extent
attributable to and affecting, the Leases, Wells and Equipment, including all hydrocarbon sales, purchase, gathering, transportation, treating, storage, compression, marketing, exchange, processing and fractionating contracts or agreements, division
orders and joint operating agreements (each a “Contract” and, collectively, the “Contracts”). 

  

	 	(e)	Seismic and Other Data. To the extent assignable without payment of fees or charges, any seismic data (and proceeds from the sale thereof), together with any related data,
studies, compilations, reserve reports, engineering data or other information, covering the Leases or surrounding lands, other than the Excluded Seismic Rights (as defined in Section 1.2). 

  
 Section 1.2 Excluded Assets. The Assets do not include, and Seller
shall not sell, transfer or assign to Buyer, and Buyer shall not acquire, or make any payments or otherwise discharge any liability or obligation of Seller relating to, any of the following (the “Excluded Assets”):

  

	 	(a)	accounts receivable relating to any operation or ownership of the Assets for periods prior to the Effective Time (as defined in Section 6.2); 

  

	 	(b)	fifty percent (50%) of Seller’s right to receive proceeds from the sale of seismic data covering the Borregos Lease or surrounding lands, if and to the extent a sale of such
seismic data is consummated prior to Closing (the “Excluded Seismic Rights”); 

  

	 	(c)	oil and liquid hydrocarbon inventories in tanks above the pipeline connections as of the Effective Time; and 

  

	 	(d)	gas produced through designated sales meters prior to the Effective Time. 

  
 Section 1.3 Purchase Price. As consideration for the sale of the Assets, the aggregate purchase price to be paid by Buyer to Seller shall be Fifty
Million and No/100 Dollars ($50,000,000.00) (the “Purchase Price”), and subject to adjustment as set forth herein, payable by wire transfer of immediately available funds in accordance with the wire transfer instructions
attached as Exhibit C. 
  

 2 

 Section 1.4 Allocated Values. The Purchase Price shall be allocated to the Wells in accordance
with the values set forth in Exhibit B attached hereto and made a part hereof, subject to reduction and increase of such values pursuant to Article VII and Article VIII. Such values (singularly, the “Allocated
Value,” and collectively, the “Allocated Values”) shall be binding for purposes of adjusting the Purchase Price pursuant to Article VII and Article VIII. 
  
 Section 1.5 Adjustments to Purchase Price. Notice of any adjustments
to the Purchase Price otherwise payable at Closing shall be delivered, as between the Parties, no later than two Business Days prior to the Closing in order to be considered at the Closing. The Purchase Price shall be adjusted as follows:

  

	 	(a)	The Purchase Price shall be increased by the following: 

  

	 	(1)	an amount equal to any ad valorem, property, production, excise, severance and similar taxes and assessments based upon or measured by the ownership of the Assets paid by or on
behalf of Seller that are attributable to periods of time from and after the Effective Time, which amounts shall, to the extent not actually assessed, be computed based on such taxes and assessments for the preceding tax year (such amount to be
prorated for the period of Seller’s and Buyer’s ownership before and from and after the Effective Time); 

  

	 	(2)	an amount equal to any Texas Severance Tax Incentive rebates attributable to the Assets, paid to Buyer, that are attributable to periods of time prior to the Effective Time;

  

	 	(3)	an amount equal to any expenses attributable to the Assets that are paid by or on behalf of Seller that are, in accordance with GAAP (as defined in Section 9.2), attributable
to the periods from and after the Effective Time; and 

  

	 	(4)	the value of any additional interests identified pursuant to Section 7.16. 

  

	 	(b)	The Purchase Price shall be reduced by the following: 

  

	 	(1)	the amount of any proceeds received by Seller attributable to the Assets that are, in accordance with GAAP, attributable to the periods of time from and after the Effective Time;

  

	 	(2)	an amount equal to any ad valorem, property, production, excise, severance and similar taxes and assessments based upon or measured by the ownership of the Assets unpaid by or on
behalf of Seller that are attributable to periods of time 

  

 3 

 prior to the Effective Time, which amounts shall, to the extent not actually assessed, be computed based
on such taxes and assessments for the preceding tax year (such amount to be prorated for the period of Seller’s and Buyer’s ownership before and after the Effective Time); 
  

	 	(3)	an amount equal to any Texas Severance Tax Incentive rebates attributable to the Assets, paid to Seller, that are attributable to periods of time from and after the Effective Time;

  

	 	(4)	an amount equal to any and all expenses attributable to the Assets that are paid by or on behalf of Buyer that are, in accordance with GAAP, attributable to any periods prior to the
Effective Time; and 

  

	 	(5)	the value of any Title Defects (as defined in Section 7.7) or Environmental Defects (as defined in Section 8.2) identified pursuant to and subject to the limitations
described in Article VII and Article VIII. 

  
 Section 1.6 Termination for Reduction. If net adjustments to the Purchase Price pursuant to Article VII and Article VIII exceed ten percent (10%) of the original unadjusted Purchase Price, either Seller or Buyer may
terminate this Agreement by giving written notice to the other Party no later than three (3)Business Days prior to the Closing Date. 
  
 Section 1.7 Assumption of Liabilities. As additional consideration for the sale of the Assets, if the Closing occurs, Buyer shall assume
Seller’s proportionate share of the following obligations and liabilities (“Assumed Liabilities”): 
  

	 	(a)	all obligations and liabilities relating to the ownership or use of the Assets that arise and are attributable to occurrences from and after the Effective Time (except for (1) any
liability or obligation that arises under contracts or agreements, or that arises from or is the subject of a breach by Seller of any of its covenants, representations or warranties hereunder, none of which shall be Assumed Liabilities; and (2) any
payment obligation associated with an agreement for the supply of materials, goods or services, which shall be an Assumed Liability only to the extent that such materials, goods or services with respect to which such payment is due is received by
Buyer and relates to operation of the Assets from and after the Effective Time); 

  

	 	(b)	all obligations and liabilities relating to the ownership or use of the Assets that arise from and after the Effective Time, for site reclamation and plugging and abandonment of all
Wells. Buyer recognizes and specifically assumes the obligation to properly plug and abandon all Wells and remove all personal property associated with the Assets when appropriate; 

  

 4 

	 	(c)	all obligations and liabilities (including, without limitation, all liabilities and obligations under present and future federal, state and local laws relating to the protection of
health or the environment) in respect of the condition of the Assets as of the Closing relating to such Assets, other than any condition that is the subject of a breach by Seller or Parent of any of their representations and warranties under this
Agreement; 

  

	 	(d)	any Assumed Title Liabilities (as defined in Section 7.10); and 

  

	 	(e)	any Assumed Environmental Liabilities (as defined in Section 8.2). 

  
 ARTICLE II 
  
 REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT 
  
 Each of Seller and Parent hereby represents, warrants and covenants to and with Buyer that: 
  
 Section 2.1 Organization and Good Standing. Each of Parent, General Partner and Limited Partner is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware. Parent is the sole stockholder of each of General Partner and Limited Partner. General Partner and Limited Partner are the only partners of Seller. Seller is a
limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas. Seller does not have any subsidiaries. Each of Seller and Parent has the power and authority to own its properties and to carry on its
business as now conducted. 
  
 Section 2.2 Authorization.
This Agreement constitutes the legal, valid and binding obligation of Seller and Parent, enforceable against Seller and Parent in accordance with its terms. Subject to Parent’s obtaining the approval described in Section 6.3(b), each of
Seller and Parent has the requisite power and authority, to execute, deliver and perform its obligations under this Agreement, and the execution, delivery and performance by Seller and Parent of this Agreement has been duly authorized by all
necessary partnership action of Seller and corporation action of General Partner and Parent, respectively, and no other act or proceeding on the part of Seller, General Partner or Parent is necessary to authorize the execution, delivery or
performance by Seller of this Agreement. 
  
 Section 2.3
Purchased Assets; Defensible Title. Subject to Section 7.10, Seller owns Defensible Title (as defined in Section 7.2) to the Leases and Wells. Notwithstanding anything to the contrary contained herein, after Closing,
Seller’s only warranty of title to the Assets shall be that special warranty provided in Section 2 of that Assignment and Bill of Sale in the form set forth in Exhibit D. 
  
 Section 2.4 Consents and Approvals. Except (a) as set forth in
Schedule 2.4 and (b) as would not be reasonably expected to have a Material Adverse Effect, no consent, approval or 
  

 5 

 authorization of, or declaration, filing or registration with, any Person is required under any Contract in connection
with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. Seller and Parent will use reasonable efforts to obtain all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Person required to be made or obtained by Seller, General Partner or Parent in connection with the authorization, execution, delivery and performance by Seller, General Partner or Parent of this
Agreement and the transactions contemplated hereby, subject to the limitations with respect to consents to assign and preferential rights to purchase set forth in Section 7.17. 
  
 Section 2.5 No Conflict or Violation. The execution, delivery and performance by Seller and Parent of this Agreement
and the consummation of the transactions contemplated herein, will not: 
  

	 	(a)	result in the breach of any of the terms or conditions of, or constitute a default under, or in any manner release any party thereto from any obligation under, any mortgage, note,
bond, indenture, contract, agreement, license or other instrument or obligation of any kind or nature by which Seller may be bound or affected; 

  

	 	(b)	violate any law, order, writ, injunction, rule, regulation, statute or decree of any Governmental Authority (as defined in Section 9.2); 

  

	 	(c)	result in the creation or imposition of any liens, mortgages, charges, security interests, pledges or other encumbrances or adverse claims (“Liens”) upon any
of the Assets; 

  

	 	(d)	except as set forth in Schedule 2.4, trigger (i) the rights of any third party that would have any Material Adverse Effect on the Assets (other than consents to assign and
preferential rights to purchase covered by Section 7.17) or (ii) any requirement for the issuance of additional shares of Seller or Parent; or 

  

	 	(e)	violate any provision of the organizational documents of Seller or Parent. 

  
 Section 2.6 Litigation. To Seller’s and Parent’s Knowledge, there are no, and neither Seller nor Parent have received written notice of
any, claims, counterclaims, actions, suits, orders, proceedings (arbitration or otherwise) or investigations pending or threatened against or involving Seller or the Assets, or relating to the transactions contemplated hereby, at law or in equity in
any court or agency, or before or by any Governmental Authority or arbitral tribunal that, if granted, could be reasonably expected to have a Material Adverse Affect. 
  
 Section 2.7 No Brokers or Finders. Seller has not retained any broker or finder, made any statement or representation
to any Person which would entitle such Person to, or agreed to pay, any broker’s, finder’s or similar fees or commissions in connection with the transactions contemplated by this Agreement. 
  

 6 

 Section 2.8 Contracts; Leases. To Seller’s and Parent’s Knowledge, 
  

	 	(a)	Seller is not in, and has not received written notice of any, default under any order, judgment, contract, lease, license or instrument, which default or potential default might
reasonably be expected to have a Material Adverse Effect; 

  

	 	(b)	with respect to the Contracts and Leases, Seller is not in, and has not received written notice of any, material default or breach and no event has occurred which, with the giving
of notice or the passage of time or both, would constitute a material default or breach by Seller under any of the Contracts or Leases; 

  

	 	(c)	with respect to any Contracts and Leases which may not be assigned to Buyer without the consent, approval, notification or waiver of any Person, Seller shall use reasonable
commercial efforts to obtain such consent, approval or waiver, or give such notice, as soon as practicable following the Execution Date, but in any event no later than the Closing Date; and 

  

	 	(d)	with respect to any Contracts and Leases which, are subject to a preferential rights to purchase provisions, Seller shall use reasonable commercial efforts to obtain any consents,
approvals and waivers of the preferential right to purchase provisions as soon as practicable following the Execution Date. 

  
 Section 2.9 Environmental Matters. There are no notices, claims, suits, actions or proceedings (including government investigations and audits) now
pending or threatened against Seller relating to Environmental Defects with respect to any of the Assets, and, to Seller’s and Parent’s Knowledge, there is no reasonable basis for believing that any such claims for Environmental Defects
may be asserted against Seller with respect to the Assets. 
  
 Section 2.10 Compliance with Laws; Licenses and Permits. To Seller’s and Parent’s Knowledge, Seller’s business has been conducted in material compliance with, all applicable laws, rules, regulations, permits and orders
of Governmental Authorities having jurisdiction over the Assets, and no investigation or review by any Governmental Authority with respect to the Seller is pending or threatened. 
  
 Section 2.11 Oil and Gas Agreements. To the Knowledge of Seller and Parent, and except as would not have a Material
Adverse Effect, all Leases and other Contracts relating to the Assets pursuant to which the Seller has ownership rights are in good standing, valid and effective, and all royalties, rentals and other payments and expenses due by Seller or its
Affiliates to any lessor of any such Leases have been timely and properly paid for all periods prior to the Effective Time. 
  

 7 

 Section 2.12 Gas Balancing; Forward Sales; Calls on Production. To Seller’s and Parent’s
Knowledge, except as disclosed in Schedule 2.12, 
  

	 	(a)	neither Seller nor its Affiliates have any gas, pipeline or other production imbalances with any Person related to the interest of the Seller in the Wells and Leases;

  

	 	(b)	Seller has made no so-called “forward sales” of oil or gas production from the Wells or Leases for which it is obligated to deliver hydrocarbons without then or within
sixty (60) days after such sale is made receiving the contract price applicable to deliveries at the time of such sales; and 

  

	 	(c)	there are no calls or hedges on production or preferential rights to purchase production from any of the Wells or Leases at a price below market price. 

  
 Section 2.13 Payout Balances and Back-In Interests. To the extent
there are any “Payout Balances” (as defined below) with respect to any Well such that, effective upon payout, Seller’s ownership interest in that Well and any related Lease will change, Schedule 2.13 sets forth, as of the date
set forth for each Well therein, the Payout Balances for each of the Wells and the changes in Seller’s interest. Furthermore, other than as provided in Schedule 2.13, no third party has any back-in interests affecting Seller’s
right, title and interest in the Leases. “Payout Balances” means the status, as of the date of the Seller’s calculations, of the recovery of the applicable amount, as specified in the contract relating to a Well, out of
the revenue from such Well, where the net revenue interest and/or working interest of the Seller therein will be reduced or increased when such amount has been recovered. 
  
 Section 2.14 Transactions with Related Parties. Except as set forth in Schedule 2.14, during the period
beginning with the Effective Time, no Affiliate of Seller or its subsidiaries, or any officer, director or key employee of Seller or any of its subsidiaries, or any officer or director of any direct or indirect owner of Seller or its subsidiaries,
or any spouse, child, relative, grantor, trustee or beneficiary of any of such Persons or any other Affiliate of any such Persons (collectively, “Related Parties”) has, directly or indirectly, purchased, leased or otherwise
acquired any of the Assets or obtained any services from, or sold, leased or otherwise disposed of any of the Assets or furnished any services to, or purchased, sold, transferred, or held any direct or indirect interest in any of the Assets, or
otherwise dealt with (except with respect to remuneration for services rendered as an officer, director or employee of Seller and its subsidiaries), in the ordinary course of business or otherwise, Seller or its subsidiaries in connection with any
of the Assets. Seller and its subsidiaries do not owe any amount to, or have any contract with or commitment to, any Related Parties in respect of the Assets (other than compensation for current services not yet due and payable and reimbursement of
expenses arising in the ordinary course of business not in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00) in the aggregate), and none of such Persons owe any amount to Seller or any of its subsidiaries in respect of the Assets.

  
 Section 2.15 Non-Operator. Seller, with respect to all
of the Leases, Wells and other Assets, is a non-operator and has limited consent and control in operational expenditures and activities, limited Knowledge of the condition of the Assets and access to the lands covered by the Leases or upon which the
Wells are situated, and limited Knowledge of the Contracts 
  

 8 

 affecting the Leases, Wells and sale of production therefrom. None of Seller’s employees are employees engaged in
any operational expenditures or activities or supervision of conditions with respect to the Leases, Wells and other Assets. 
  
 ARTICLE III 
  
 REPRESENTATIONS AND WARRANTIES OF BUYER AND EDGE 
  
 Each of Buyer and Edge hereby represents, warrants and covenants to Seller and Parent that: 
  
 Section 3.1 Corporate Organization. Each of Buyer and Edge is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full corporate power and authority to conduct its business as it is now conducted. 
  
 Section 3.2 Authorization. This Agreement constitutes the legal, valid and binding obligation of Buyer and Edge, enforceable against Buyer and Edge
in accordance with its terms. The execution and delivery of this Agreement, the performance by each of Buyer and Edge of its obligations hereunder and the consummation by each of Buyer and Edge of the transactions contemplated hereby have been duly
authorized by all necessary action and no other act or proceeding on the part of either of Buyer or Edge is necessary. Each of Buyer and Edge has full power and authority to enter into, execute and deliver this Agreement and to perform its
obligations hereunder. 
  
 Section 3.3 No Violation. The
execution, delivery and performance by each of Buyer and Edge of this Agreement and the consummation of the transactions contemplated herein do not and will not: (a) result in the breach of any of the terms or conditions of, or constitute a default
under, or in any manner release any party thereto from any obligation under, any mortgage, note, bond, indenture, contract, agreement, license or other instrument or obligation of any kind or nature by which either of Buyer or Edge may be bound or
affected; (b) violate any law, order, writ, injunction, rule, regulation, statute or decree of any Governmental Authority; or (c) violate any provision of the certificate of incorporation or bylaws of Buyer or Edge. 
  
 Section 3.4 Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any Person is required to be made or obtained by Buyer or Edge in connection with the execution and delivery of this Agreement by Buyer and Edge, the performance by Buyer or Edge of its
obligations hereunder, and the consummation by it of the transactions contemplated hereby. 
  
 Section 3.5 No Brokers or Finders. Buyer has not retained any broker or finder, made any statement or representation to any Person which would entitle such Person to, or agreed to pay, any broker’s,
finder’s or similar fees or commissions in connection with transactions contemplated by this Agreement. 
  
 Section 3.6 Knowledge of the Business; Investment Intent. Buyer is directly and actively engaged in the business of exploration for and production
of oil and gas. Buyer is a sophisticated investor in oil and gas properties and has knowledge and expertise in financial and 
  

 9 

 business matters relating to the evaluation and purchase of producing oil and gas properties. Buyer is acquiring the
Assets to be conveyed herein for its own account and not for distribution in violation of any applicable securities laws. Buyer confirms that Seller and Parent have made available to Buyer and its representatives and agents the opportunity to ask
questions of the officers and management employees of the Seller and Parent and to acquire such additional information about the Assets as Buyer has requested, and all such information has been received. Nothing in this Section 3.6 shall
affect the liability of Seller or Parent for a breach of the representations and warranties set forth in Article II. 
  
 ARTICLE IV 
  
 CERTAIN COVENANTS AND AGREEMENTS OF SELLER AND PARENT 
  
 Seller covenants and agrees with Buyer as follows: 
  
 Section 4.1 Operations Prior to Closing. Except as otherwise consented to in writing by Buyer or provided for in this Agreement, from the Execution
Date to the Closing Date, Seller shall 
  

	 	(a)	pay or cause to be paid its proportionate share of all costs and expenses incurred in connection with operation of the Assets in the ordinary course of business;

  

	 	(b)	notify Buyer of any capital expenditures and authorizations for expenditure (“AFE”) in excess of One Hundred Thousand and No/100 Dollars ($100,000.00) per
activity net to Seller’s interest conducted on the Assets and not agree to participate in any such activity without Buyer’s prior written consent; 

  

	 	(c)	notify Buyer of any request for capital expenditures and AFEs for the drilling of any new Well on the lands covered by the Leases or pooled therewith and not agree to participate in
such new Well without Buyer’s prior written consent; 

  

	 	(d)	not abandon any part of the Assets except abandonments of non-producing wells in the ordinary course of business as recommended by the operator of the Wells and Leases (the
“Operator”); 

  

	 	(e)	not convey or dispose of any of the Assets (other than dispositions and replacement of equipment undertaken by the Operator in the normal course of business or sales of oil, gas and
other liquid products produced from the Assets in the ordinary course of business) affecting the Assets if the net expense to Seller’s interest will be in excess of Fifty Thousand and No/100 Dollars ($50,000.00) or enter into any farm-out,
farm-in or other similar contract; 

  

 10 

	 	(f)	not let lapse any of Seller’s insurance now in force with respect to the Assets; 

  

	 	(g)	not encumber or mortgage the Assets or allow any lien or other encumbrance to become a burden on the Assets (except liens of contractors arising as a matter of law in the ordinary
course of business for amounts not yet due); or 

  

	 	(h)	not materially modify or terminate any of the operating agreements or other significant contracts governing or pertaining to the Assets or any other relevant material agreements.

  
 If Buyer fails to respond within a period of time reasonably
requested by Seller (taking into account any time limitations imposed on Seller) following delivery by Seller of a request for approval or consent with respect to any such proposed action or expenditure, then Buyer shall be deemed to have agreed
with Seller’s election or other determination with respect thereto. Buyer shall not unreasonably withhold its approval or consent with respect to any such proposed action or expenditure. 
  
 Section 4.2 Marketing. Unless Seller obtains the prior written consent
of Buyer to act otherwise, prior to Closing Seller will not alter any existing marketing contracts or any Contracts currently in existence, or enter into any new marketing contracts or agreements providing for the sale of hydrocarbons from the Wells
for a term in excess of thirty (30) days or which obligate Seller to deliver hydrocarbons after the Effective Time without then or within sixty (60) days thereafter receiving the contract price applicable to deliveries at the time of such sales, or
any other sales of hydrocarbons which are not in the ordinary course of business. Seller will not enter into any call, option to purchase or similar right to obtain production from the Wells and Leases other than rights contained in existing
production sales contracts or rights exercisable at prices at or near the fair market price in the general area involved at the time sales occur. 
  
 Section 4.3 Meetings of Stockholders. 
  

	 	(a)	Parent shall undertake reasonable efforts to convene a meeting of its stockholders as promptly as practicable to consider and vote upon the adoption of this Agreement.

  

	 	(b)	Prior to Closing, neither Parent, Seller nor any Affiliate of Seller shall pursue, solicit or seek to enter into any offer or opportunity, directly or indirectly, for the sale,
trade, exchange, joint venture, lease, farmout or similar transaction of the Assets to any Person, including without limitation, any sale, merger or business combination involving the stock of Seller (collectively, a “Takeover
Proposal”). Parent, through its board of directors, shall recommend approval of this Agreement and the transactions contemplated hereby and use reasonable efforts to solicit approval by its stockholders in favor thereof (including,
without limitation, the solicitation of proxies and the taking of all other action 

  

 11 

 necessary or advisable to secure the vote of its stockholders required by applicable laws and the
American Stock Exchange to obtain such approvals); provided, however, and notwithstanding the foregoing or any other provision of this Agreement to the contrary, that the Parent, Seller or any Affiliate of Seller may at any time prior
to the date the condition set forth in Section 6.3(b) is satisfied (the “Cut-Off Date”), (a) in response to an unsolicited Takeover Proposal (i) furnish information with respect to the Assets and/or Seller and Parent
to any Person pursuant to an executed, customary confidentiality and “standstill” agreement and (ii) participate in discussion or negotiations with any Person regarding such Takeover Proposal and (b) upon two (2) Business Days’ prior
written notice to Buyer (i) withdraw, modify or change any recommendation and declaration regarding such matters or (ii) recommend and declare advisable any proposal that is superior to the transaction contemplated by this Agreement (a
“Seller Superior Proposal”) if Parent’s board of directors determines in good faith, after consultation with its outside legal counsel, the failure to so withdraw, modify or change its recommendation and
declaration or to so recommend and declare advisable any Seller Superior Proposal could be reasonably likely to be inconsistent with its fiduciary obligations under applicable law and (iii) in the event of a withdrawal, modification or change in
recommendation or the determination to do so, discontinue the reasonable efforts referred to in this sentence. In the event of a recommendation and declaration pursuant to clause (ii) in the preceding sentence, Parent and Seller must have fully
complied with the terms of this Agreement and have provided Buyer with at least three (3) Business Days’ prior written notice of its intention to enter into such agreement, the identity of the other party thereto and the material terms and
conditions of the agreement to be entered into with such person and during such period of three (3) Business Days, considered and caused its financial and legal advisors to consider, any written counteroffer from Buyer, and Parent’s board of
directors, must have determined in the good faith of its members and after consultation with its financial and legal advisors that the terms and conditions of such counteroffer are not at least as favorable to the stockholders of Parent from a
financial point of view, as that proposal. Any withdrawal, modification or change in the recommendation or the determination to do so or discontinuance of reasonable efforts of any party in accordance with this Section 4.3 shall not
constitute a breach of such party’s representations, warranties, covenants or agreements contained in this Agreement. For purposes hereof, the Cut-Off Date means the date the condition set forth in Section 6.3(b) is satisfied.

  
 Section 4.4 Delivery of Financial Statements and Reserve
Information. 
  

	 	(a)	To the extent requested by Buyer, Parent shall provide to Buyer as promptly as reasonably practical any financial statements, schedules or 

  

 12 

 information (including without limitation access to the work papers of Parent’s accountants related
to the financial statements described in this Section 4.4) relating to the Assets that are required to be included in any registration statement filed or to be filed by Buyer or any of its affiliates under the Securities Act of 1933 and any
additional financial or operating data relating to any of the financial statements, schedules or information referred to in this Section 4.4 or relating to any of the Assets. 
  

	 	(b)	Seller shall use reasonable efforts to cause to be delivered to Buyer “comfort letters” of Parent’s accountants and Parent’s independent reserve engineers dated
as of the Effective Time and the closing dates and addressed to the underwriters in any offering of securities for which such comfort letters are required by underwriters with regard to certain financial information regarding the Assets or the
reserves relating to the Assets as the case may be, in form reasonably satisfactory to Buyer and customary in scope and substance for “comfort” letters delivered by independent public accountants and reserve engineers in connection with
registration statements similar to Edge’s registration statement and to use reasonable efforts to cause Parent’s accountant and Parent’s reserve engineer to consent to inclusion of the information described in this Section 4.4
and to be named in Edge’s filings with the SEC as is customary for such consents. 

  

	 	(c)	Seller shall use reasonable efforts to provide any relevant historical accounting or financial information in Seller’s possession, custody or control related to the Assets that
Buyer may reasonably request. 

  

	 	(d)	Buyer shall bear all out-of-pocket costs paid to any third party for preparation of any of the items described in Section 4.4(a), Section 4.4(b) and Section
4.4(c) above. 

  
 Section 4.5 Inspection.
From the Execution Date until the Closing Date, each of Seller and Parent shall (and, in the case of access to the premises of the Leases, use reasonable efforts to cause Operator to) allow, at Buyer’s sole risk, all designated officers,
attorneys, accountants and other representatives of Buyer reasonable access, at all reasonable times during normal business hours, upon reasonable notice, to Seller’s records and files relating to contracts and titles pertaining to the Assets
(including without limitation any correspondence and joint venture audits related to the Assets) and to the premises of the Leases for inspection of the condition of the Assets; provided that no due diligence review pursuant to this Section 4.5
shall affect any representation or warranty, or disclaimer or limitation thereof, given by any Party hereunder, and provided further that notwithstanding the provisions of information or due diligence review by any Party, no Party shall be deemed to
make any representation or warranty except as expressly set forth in this Agreement. Notwithstanding the foregoing, no Party shall be required to provide any information which it reasonably believes it may not provide to the other Party by reason of
applicable law, rules or regulations, which constitutes information protected by attorney/client privilege, or which it is required to keep confidential by reason of contract or 
  

 13 

 agreement with third parties. The parties hereto shall make reasonable and appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence apply. Buyer agrees that it shall not, and shall cause its respective representatives not to, use any information obtained pursuant to this Section 4.5 for any purpose
unrelated to the consummation of the transactions contemplated by this Agreement. All non-public information obtained pursuant to this Section 4.5 shall be governed by the Confidentiality Agreement between Buyer and Seller as defined in
Section 9.10 below. All such information is made available to Buyer subject to the disclaimer set forth in Section 9.18. 
  
 ARTICLE V 
  
 INDEMNIFICATION 
  
 Section 5.1 Indemnification by Seller and Parent. If the Closing occurs, each of Seller and Parent hereby agrees to indemnify, defend and save
Buyer and its officers, directors, employees, agents and Affiliates (all or each, a “Buyer Indemnified Party”) harmless from and against any and all liabilities (whether contingent, fixed or unfixed, liquidated or
unliquidated, or otherwise), obligations, deficiencies, demands, claims, suits, actions, or causes of action, assessments, losses, costs, expenses, interest, fines, penalties, and damages (including reasonable fees and expenses of attorneys,
accountants and other experts) (individually and collectively, the “Losses”), other than Assumed Liabilities, suffered, sustained or incurred by any Buyer Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of: 
  

	 	(a)	any misrepresentation or breach of the representations or warranties of Seller and Parent contained in this Agreement or in any exhibit or schedule hereto; 

 

	 	(b)	the failure of Seller or Parent to perform any of its covenants or obligations contained in this Agreement or in any schedule or exhibit hereto; 

  

	 	(c)	the liabilities and obligations relating to or arising out of the ownership of the Assets and attributable to any act, omission, occurrence or event occurring prior to the Effective
Time; 

  

	 	(d)	any Title Defects for which Seller retains liability pursuant to Section 7.12(b) or Section 7.15(b); 

  

	 	(e)	any consents to assign for which Seller retains liability pursuant to Section 7.17(b)(i); and 

  

	 	(f)	any and all Losses arising directly or indirectly out of the Retained Remediation Obligations (as defined in Section 8.2). 

  
 Section 5.2 Indemnification by Buyer. If the Closing occurs, each of
Buyer and Edge agrees to indemnify, defend and save Seller and its Affiliates, and their respective officers, directors, employees and agents (each, a “Seller Indemnified Party”) forever harmless from and against any and all
Losses suffered, sustained or incurred by any Seller Indemnified Party relating to, resulting from, arising out of or otherwise by virtue of: 
  

	 	(a)	any misrepresentation in or breach of the representations and warranties of Buyer and Edge contained in this Agreement or in any schedule or exhibit hereto;

  

 14 

	 	(b)	the failure of Buyer or Edge to perform any of its covenants or obligations contained in this Agreement or in any exhibit or schedule hereto; 

  

	 	(c)	the liabilities and obligations relating to or arising out of ownership of the Assets and attributable to any act, omission, occurrence or event occurring after the Effective Time;
and 

  

	 	(d)	all Assumed Liabilities. 

  
 Section 5.3 Indemnification Procedure. Any Person entitled to seek indemnification pursuant to this Article V shall promptly provide written
notice of any claim to the Person from which it seeks indemnification within a reasonable period of time. The indemnifying Person, if such Person so elects, shall assume and control the defense thereof (and shall consult with the indemnified Person
with respect thereto), including the employment of counsel reasonably satisfactory to the indemnified Person within ten (10) Business Days after receipt of the notice with respect thereto, and the payment of all necessary expenses; provided
that as a condition precedent to the indemnifying Person’s right to assume control of such defense, it must first enter into an agreement with the indemnified Person (in form and substance reasonably satisfactory to the indemnified
Person) pursuant to which the indemnifying Person agrees to be fully responsible for all losses relating to such claim and unconditionally guarantees the payment and performance of any liability or obligation which may arise with respect to such
claim or the facts giving rise to such claim for indemnification; provided further that the indemnifying Person shall not have the right to assume control of such defense if the claim which the indemnifying Person seeks to assume
control of (a) seeks non-monetary relief or (b) involves criminal or quasi-criminal allegations; and provided further that (i) the indemnifying Person shall not consent to the imposition of any injunction against the indemnified Person
without the written consent of the indemnified Person, (ii) the indemnifying Person shall permit the indemnified Person to participate in such conduct or settlement through counsel chosen by the indemnified Person, but the fees and expenses of such
counsel shall be borne by the indemnified Person (except as provided below), and (c) upon a final determination of such action, suit or proceeding, the indemnifying Person shall promptly reimburse to the full extent required under this Article
V the indemnified Person for the full amount of any Loss resulting from such action, suit or proceeding and all reasonable and related expenses incurred by the indemnified Person, other than fees and expenses of counsel for the indemnified
Person incurred after the assumption of the conduct and control of such action, suit or proceeding by the indemnifying Person (except as provided below). If the indemnifying Person is permitted to assume and control the defense and elects to do so,
the indemnified Person shall have the right to employ counsel separate from counsel employed by the indemnifying Person in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the
indemnified Person shall be 
  

 15 

 at the expense of the indemnified Person unless (1) the employment thereof has been specifically authorized by the
indemnifying Person in writing, (2) the indemnifying Person has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the indemnifying Person and the indemnified Person, (3) the indemnifying Person has failed
to assume the defense and employ counsel; or (4) the indemnified Person has reasonably determined that an adverse outcome could have a material adverse effect on its business reputation or could reasonably be expected to have a material adverse
precedential effect; in which case the fees and expenses of the indemnified Person’s counsel shall be paid by the indemnifying Person. In the event the indemnifying Person fails to elect to defend such claim in accordance with the foregoing,
then the indemnified Person may elect, but shall not be required, to defend against or settle such claim as it sees fit, provided that any settlement of such claim shall require the consent of the indemnifying Person, which consent shall not be
unreasonably withheld. 
  
 Section 5.4 Amount Limitations.
Seller and Parent shall have no liability for indemnification with respect to any Losses under Section 5.1(a), Section 5.1(b) and Section 5.1(c) until the total of such Losses exceeds Five Hundred Thousand and No/100 Dollars
($500,000.00) and, notwithstanding anything in this Agreement to the contrary, the maximum aggregate liability of Seller and Parent for any such Losses shall not exceed Twenty-Five Million and No/100 Dollars ($25,000,000.00). The foregoing threshold
and limitation shall not apply to any indemnification provided by Seller and Parent with respect to any claim under Section 5.1(d), Section 5.1(e) and Section 5.1(f). 
  
 Section 5.5 Time Limitation. Notwithstanding anything to the contrary contained in this Agreement, Seller and Parent
shall have no liability for indemnification with respect to any Losses under Section 5.1(a), Section 5.1(b) and Section 5.1(c) unless on or before the date that is twelve (12) months after the Closing Date, Buyer notifies Seller
and Parent of a claim specifying the factual basis of the applicable claim in reasonable detail to the extent then known by Buyer. The foregoing time limitation shall not apply to any indemnification provided by Seller and Parent with respect to any
claim under Section 5.1(d), Section 5.1(e) and Section 5.1(f). 
  
 Section 5.6 Sole and Exclusive Remedy. After Closing, the indemnities provided in this Article V shall constitute the sole and exclusive remedies of the Parties for all Losses in connection with the
types of matters covered by such indemnities. 
  
 Section 5.7
Disclaimer. ALL OF THE INDEMNITIES UNDER THIS ARTICLE V SHALL APPLY REGARDLESS OF WHETHER CAUSED BY, ARISING OUT OF OR ATTRIBUTABLE TO, IN WHOLE OR IN PART, THE SOLE OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF THE
INDEMNIFIED PERSON OR PERSONS. 
  

 16 

 ARTICLE VI 
  
 CLOSING 
  
 Section 6.1 Closing. The transactions that are the subject of this Agreement shall be consummated at a closing (the
“Closing”), which shall be held at the offices of Seller in Houston, Texas on a date mutually agreeable to the Parties on or before December 31, 2004 or, if the SEC gives notice that it will review the proxy statement
prepared by Parent for approval by its stockholders in connection with this transaction (the “Proxy Statement”), on or before the date that follows December 31, 2004 by a number of days equal to those elapsed between the date
of the SEC’s notice and the date of the SEC’s approval of the Proxy Statement; provided, however, in no event shall the Closing occur on a date later than February 28, 2005 (the date upon which the Closing occurs being called
the “Closing Date”). 
  
 Section 6.2
Effective Time. Ownership of the Assets shall be transferred from Seller to Buyer at the Closing, but effective as of 7:00 a.m. Central Time on July 1, 2004 (the “Effective Time”). 
  
 Section 6.3 Conditions Precedent to Closing. Closing shall not occur
unless the following conditions precedent are met: 
  

	 	(a)	no Party exercises its right to terminate due to reductions in the Purchase Price pursuant to Section 1.6; 

  

	 	(b)	Parent has obtained by the Closing Date the consents and approvals of its stockholders at a special meeting of its stockholders called for that purpose, in the percentage required
by Parent’s certificate of incorporation or bylaws or by any law, order, writ, injunction, rule, regulation, statute or decree of any Governmental Authority or the American Stock Exchange, authorizing the transactions contemplated by this
Agreement; provided, however, that this condition precedent shall not apply if Seller’s counsel determines that such consent and approval are not required to be obtained; 

  

	 	(c)	Seller has obtained any required consents to assign applicable to, or no consents to assign are applicable to, Wells which, in the aggregate, have Allocated Values constituting at
least eighty percent (80%) of the Purchase Price; provided, however, that this condition precedent shall not apply if Buyer and Seller agree to its waiver; 

  

	 	(d)	Seller has obtained waiver of, and no third party has exercised within any required time period, any preferential rights to purchase applicable to, or no preferential rights to
purchase are applicable to, Wells which, in the aggregate, have Allocated Values constituting at least eighty percent (80%) of the Purchase Price; provided, however, that this condition precedent shall not apply if Buyer agrees to its
waiver; 

  

 17 

	 	(e)	at any time after the Effective Time of this Agreement, there has not been any event or occurrence, or series of events or occurrences (specific to the Assets, and not including
changes in the economy or fluctuations in the commodity markets or other events not uniquely affecting the Assets), that has had or is reasonably likely to have, individually or in the aggregate with all other events or occurrences since the
Effective Time, a material adverse effect on any Asset which, in Buyer’s judgment exercised in good faith, causes a reduction in value of any single Well or group of Wells in an amount in excess of Five Hundred Thousand and No/100 Dollars
($500,000.00), and which Seller is unable or unwilling to replace, remediate or compensate Buyer for, and Seller has received a certificate of Buyer executed on its behalf by any of its executive officers, dated as of the Closing Date, certifying to
such effect; provided, however, that this condition precedent shall not apply if Buyer agrees to its waiver; 

  

	 	(f)	Seller and Parent have performed their covenants and agreements contained in this Agreement that are required to be performed on or prior to the Closing Date, and the
representations of Seller and Parent contained in this Agreement and in any document delivered in connection herewith are in all respects true and correct as of the Closing Date, and Buyer shall have received certificates of Seller and Parent
executed on their behalf by any of their executive officers, dated as of the Closing Date, certifying to such effect; provided, however, that this condition precedent shall not apply if Buyer agrees to its waiver; and

  

	 	(g)	Buyer and Edge have performed their covenants and agreements contained in this Agreement that are required to be performed on or prior to the Closing Date, and the representations
of Buyer and Edge contained in this Agreement and in any document delivered in connection herewith are in all respects true and correct as of the Closing Date, and Seller shall have received certificates of Buyer and Edge executed on their behalf by
any of their executive officers, dated as of the Closing Date, certifying to such effect; provided, however, that this condition precedent shall not apply if Seller agrees to its waiver. 

  

	 	(h)	Seller has provided or caused Operator to provide Buyer with access to the Lease premises in sufficient time to permit Buyer to obtain its Independent Phase I Environmental Review
(as defined in Section 8.2) no later than five (5) days prior to the Objection Date (as defined in Section 7.9); provided, however, that this condition precedent shall not apply if Buyer agrees to its waiver.

  

	 	(i)	Seller has provided Buyer with the description of the Borregos Lease in Exhibit A no later than five (5) days prior to the Objection Date; provided, however,
that this condition precedent shall not apply if Buyer agrees to its waiver. 

  

 18 

 Section 6.4 Deliveries by Seller. At the Closing, pursuant to this Agreement, Seller shall execute
and deliver to Buyer, in form and substance reasonably satisfactory to Buyer: 
  

	 	(a)	an Assignment and Bill of Sale (substantially in the form of attached Exhibit D) transferring to Buyer the Assets; 

  

	 	(b)	a certificate, executed and delivered by the Secretary of the General Partner in form and substance reasonably satisfactory to Buyer and Edge, attesting and certifying as to:

  

	 	(1)	the Certificate of Limited Partnership of Seller (as also certified as of a recent date by the Secretary of State of Texas); 

  

	 	(2)	the Partnership Agreement of Seller; 

  

	 	(3)	resolutions of the (i) Parent and its Board of Directors (individually and in its capacity as the sole shareholder of General Partner) and (ii) General Partner and its Board of
Directors (as the general partner of Seller), authorizing the transactions contemplated by this Agreement; and 

  

	 	(4)	incumbency and specimen signatures; 

  

	 	(c)	a certificate, executed and delivered by the Secretary of Parent in form and substance reasonably satisfactory to Buyer and Edge, attesting and certifying as to:

  

	 	(1)	the Certificate of Incorporation of Parent (as also certified as of a recent date by the Secretary of State of Delaware); 

  

	 	(2)	the Bylaws of Parent; 

  

	 	(3)	resolutions of the Board of Directors and stockholders of Parent authorizing the transactions contemplated by this Agreement; and 

  

	 	(4)	incumbency and specimen signatures; 

  

	 	(d)	any obtained written consents to assign or waivers of preferential rights to purchase, subject to Section 6.3(c), Section 6.3(d) and Section 7.17;

  

	 	(e)	evidence satisfactory to Buyer and Edge that all liens, claims, pledges, security interests and other encumbrances on the Assets have been released, including, without limitation,
UCC-3 termination statements; 

  

 19 

	 	(f)	certificates of good standing of Seller and Parent, issued not earlier than ten (10) days prior to the Closing Date by the Secretaries of State of Texas and Delaware, respectively;

  

	 	(g)	clearance certificates or similar documents required by the Internal Revenue Service or Texas state taxing authority in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price; 

  

	 	(h)	originals of all Seller’s files and records relating to the Assets; 

  

	 	(i)	letters in lieu of transfer order, prepared by Buyer and approved by Seller, providing for the payment of all proceeds of production from the Wells on and after July 1, 2004
directly to Buyer; and 

  

	 	(j)	such other documents and instruments as Buyer and Edge may reasonably require in order to effectuate the transactions which are the subject of this Agreement.

  
 Section 6.5 Deliveries by Buyer. At the
Closing, pursuant to this Agreement, Buyer shall deliver to Seller and Parent, in form and substance reasonably satisfactory to Seller and Parent: 
  

	 	(a)	a wire transfer of immediately available funds in an amount equal to the Purchase Price; 

  

	 	(b)	the properly executed and notarized Assignment and Bill of Sale described in Section 6.4(a); 

  

	 	(c)	certificates, executed and delivered by the Secretary of each of Buyer and Edge in form and substance reasonably satisfactory to Seller and Parent, attesting and certifying as to:

  

	 	(1)	the Certificates of Incorporation of Buyer and Edge (as also certified as of a recent date by the Secretary of State of Delaware); 

  

	 	(2)	the Bylaws of Buyer and Edge; 

  

	 	(3)	resolutions of the Board of Directors and stockholders of Buyer and Edge authorizing the transactions contemplated by this Agreement; and 

  

	 	(4)	incumbency and specimen signatures; 

  

	 	(d)	certificates of good standing of Buyer and Edge, issued not earlier than ten (10) days prior to the Closing Date by the Secretary of State of Delaware; and 

 

 20 

	 	(e)	such other documents and instruments as Seller and Parent may reasonably require in order to effectuate the transactions which are the subject of this Agreement.

  
 Section 6.6 Further Assurances. From time
to time after the Closing and without further consideration, the Parties shall execute such further documents and perform such further acts as may be necessary to transfer and convey the Assets to Buyer, on the terms contained herein, and to
otherwise comply with the terms of this Agreement and consummate the transactions contemplated hereby. 
  
 Section 6.7 Post-Closing Adjustments. 
  

	 	(a)	Initial Adjustment. Contemporaneous with the Closing, Seller and Buyer shall jointly prepare an accounting statement (the “Initial Post-Closing
Statement”) for the gross revenue, if any, received by Seller for hydrocarbons and liquid hydrocarbon inventory produced from the Assets from and after the Effective Time less reasonable and documented expenses incurred by the Seller
for the period of time from and after the Effective Time and attributable to the operation of the Assets or sale of such hydrocarbons and liquid hydrocarbon inventory following the Effective Time up to a date that is as close to the Closing Date as
is reasonably practicable (the last day of such period being known as the “Initial Post-Closing Date”). The Parties shall have thirty (30) days following completion of the Initial Post-Closing Statement to agree as to its
accuracy. Following such agreement, Seller or Buyer, as the case may be, shall promptly pay to the other such sum as may be found due by wire transfer of immediately available funds to an account specified by the agreed recipient of such sum. In the
event the Parties are unable to so agree, the Parties shall attempt to resolve any disagreement prior to the Final Post-Closing Date described in Section 6.7(b). In the event the Parties are unable to agree by the Final Post-Closing Date,
they will follow the dispute resolution procedures described in Section 6.7(b). 

  

	 	(b)	Final Adjustment. Within ninety (90) days after the Closing Date, Seller and Buyer shall jointly prepare a final accounting statement (the “Final Post Closing
Statement”) for the gross revenue, if any, received by Seller for hydrocarbons and liquid hydrocarbon inventory produced from the Assets from and after the Initial Post-Closing Date less reasonable and documented expenses incurred by
the Seller for the period of time from and after the Initial Post-Closing Date and attributable to the operation of the Assets or sale of such hydrocarbons and liquid hydrocarbon inventory following the Initial Post-Closing Date. The Parties shall
have thirty (30) days following completion of the Final Post-Closing Statement to agree as to its accuracy (the last day of such period covered by such statement being known as the “Final Post-Closing Date”). In the event the
Parties are unable to so agree, the Parties shall submit to binding arbitration to 

  

 21 

 determine any such amount pursuant to Section 9.16. Following such agreement or binding
arbitration decision, as the case may be, Seller or Buyer, as the case may be, shall promptly pay to the other such sum as may be found due by wire transfer of immediately available funds to an account specified by the agreed or otherwise determined
recipient of such sum. 
  
 Section 6.8 Liquidated Damages.
BUYER AND SELLER AGREE THAT IT IS DIFFICULT TO DETERMINE, WITH ANY DEGREE OF CERTAINTY, THE LOSS SELLER OR BUYER WILL INCUR IF CLOSING DOES NOT OCCUR BY REASON OF SELLER’S OR BUYER’S FAILURE TO FULFILL, AS THE CASE MAY BE, ANY OF ITS
OBLIGATIONS UNDER THIS AGREEMENT. ACCORDINGLY, BUYER AND SELLER AGREE THAT THE FOLLOWING REPRESENTS A REASONABLE ESTIMATE OF SUCH LOSS AND IS INTENDED AS A LIQUIDATED DAMAGES PROVISION: 
  

	 	(a)	if the conditions precedent set forth in Section 6.3 are met or, as applicable, waived, and Buyer fails to fulfill any of its obligations under this Agreement (other than any
obligation that is not fulfilled as a result of Seller’s or Parent’s failure to perform in any material respect its obligations under this Agreement) necessary for the Closing to occur on or before the last date permitted to be the Closing
Date pursuant to Section 6.1, then Seller may terminate this Agreement and Buyer shall pay to Seller within five (5) Business Days of such termination liquidated damages in the amount of Two Million and No/100 Dollars ($2,000,000.00); and

  

	 	(b)	if (i) the conditions precedent set forth in Section 6.3 are met or, as applicable, waived, and Seller or Parent fails to fulfill any of its obligations under this Agreement
(other than any obligation that is not fulfilled as a result of Buyer’s or Edge’s failure to perform in any material respect its obligations under this Agreement) necessary for the Closing to occur on or before the last date
permitted to be the Closing Date pursuant to Section 6.1, or (ii) if Seller fails to obtain the consent and approval of its stockholders as required in Section 6.3(b) or if the Board of Directors of Parent withdraws or amends the
recommendation described in Section 4.3(b), or if Parent or Seller enters into an agreement contemplated by the first sentence of Section 4.3(b), then, in the case of (i), Buyer may terminate this Agreement and in the case of (ii)
Buyer or Seller may terminate this Agreement and in any such event, Seller shall pay to Buyer within five (5) Business Days of such termination liquidated damages in the amount of Two Million and No/100 Dollars ($2,000,000.00); provided,
however, that, notwithstanding the foregoing, in the case of failure to obtain the consent and approval of Parent’s stockholders, as required in Section 6.3(b), the amount shall instead be One Million and No/100 Dollars
($1,000,000.00). 

  

 22 

 Section 6.9 Failure to Close. If the Closing does not occur on or before the last date permitted
to be the Closing Date pursuant to Section 6.1, for any reason other than those identified in Section 6.8, any Party may terminate this Agreement by giving written notice to the other Parties. Thereafter, no Party shall have any
further obligations to any other Party hereunder, other than any obligations and liabilities arising prior to such termination and those obligations that by their terms survive the termination of this Agreement.  
  
 ARTICLE VII 
  
 TITLE MATTERS 
  
 Section 7.1 Title Information. Seller shall make all information in
Seller’s possession regarding title to the Assets available to Buyer in Seller’s offices at reasonable times during Seller’s normal business hours. Seller makes no representations and warranties, express or implied, as to the accuracy
or completeness of any information furnished to Buyer, all as more particularly provided in Section 9.18. 
  
 Section 7.2 Defensible Title. “Defensible Title” means the title of Seller in and to each Lease and Well that, subject to
and except for the Permitted Encumbrances (as defined in Section 7.6): 
  

	 	(a)	Entitles Seller to receive not less than the net revenue interest (“NRI”) for the hydrocarbons and proceeds thereof produced from each Well set forth in Exhibit
B, 

  

	 	(b)	Obligates Seller to bear costs and expenses relating to the maintenance, development, operation and production of hydrocarbons from each Well, in an amount not greater than the
working interest (“WI”) for Well set forth in Exhibit B, and 

  

	 	(c)	Is free and clear of encumbrances, liens and defects that materially impair the use and enjoyment of or that constitute a loss of interest in the Well and the Lease.

  
 Section 7.3 Defensible Title: Development
Acreage. Seller’s title to any non-producing acreage (“Development Acreage”) included in the Assets and listed as a Well shall be presumed to be Defensible Title unless Buyer can show through actual evidence
submitted with a Title Defect Notice (as defined in Section 7.9) that Seller’s title to such Development Acreage has failed or that the Development Acreage is subject to a Title Defect, lien or encumbrance (except for Permitted
Encumbrances) that would constitute a material loss of interest in such Development Acreage. Unless otherwise shown as a Well, non-producing intervals within producing units shall not be considered Development Acreage. 
  
 Section 7.4 Title to Non-Well Assets. Exhibit B does not
provide the NRI and WI for any non-producing interval or formation that is not specifically identified in Exhibit B or for any leasehold interest or acreage. Buyer waives the right to assert Title Defects as to Seller’s interest, if any,
in any Asset or portion thereof not listed as a Well. 
  

 23 

 Section 7.5 Allocated Value. If an Allocated Value has not been given for an Asset or if the
Allocated Value for any Well is zero, Seller shall be conclusively presumed to have Defensible Title to such Asset or Well. 
  
 Section 7.6 Permitted Encumbrances. “Permitted Encumbrances” shall include the following (but only to the extent they exist
of record and constitute a burden on the Assets as of the Effective Time): 
  

	 	(a)	any royalties, overriding royalties, net profits interests, production payments, reversionary interests and similar burdens if the net cumulative effect of such burdens does not
reduce the NRI for a Well; 

  

	 	(b)	third-party consents to assign and preferential rights to purchase, as covered exclusively by Section 7.17; 

  

	 	(c)	liens for taxes or assessments not yet delinquent, or, if delinquent, being contested in good faith; 

  

	 	(d)	rights to consent by, notices to, filings with or actions by federal, state, local or tribal authorities in connection with the conveyance of the Assets if customarily obtained
after a conveyance is made; 

  

	 	(e)	obligations to reassign upon the surrender or expiration of any Lease; 

  

	 	(f)	easements, rights of way, servitudes, permits, surface leases and other rights with respect to the surface or any restrictions on access to the surface or subsurface that do not
materially interfere with the operation of the Asset; 

  

	 	(g)	Title Defects waived by Buyer; 

  

	 	(h)	division orders, transfer orders, letters in lieu of transfer orders and pooling or unitization orders, declarations or agreements; 

  

	 	(i)	materialmen’s, mechanics’, repairmen’s, contractors’, or other similar liens or charges (1) if the amount owed is not yet due and payable, (2) if such lien or
charge has not been filed pursuant to law and the time for filing has expired, (3) if filed, such lien or charge has not yet become due and payable or payment is being withheld as provided by law, or (4) if the validity of such lien or charge is
being contested in good faith; 

  

	 	(j)	rights reserved to or vested in any governmental authority to control or regulate any of the Assets in any manner and all applicable laws, rules, regulations and orders of general
applicability in the area; 

  

 24 

	 	(k)	liens arising under operating agreements, unitization and pooling agreements and production sales contracts securing amounts not yet due and payable or, if due, being contested in
good faith; and 

  

	 	(l)	calls on or preferential rights to purchase production held by third parties to purchase production for a price at or above market price. 

  
 Section 7.7 Title Defect. “Title Defect” means
any material encumbrance, defect in or objection to real property title, excluding Permitted Encumbrances, that renders Seller’s title less than Defensible Title. Notwithstanding the foregoing, the following shall not constitute Title Defects:

  

	 	(a)	defects based on lack of information in Seller’s files; 

  

	 	(b)	defects based on title irregularities or defects found in the Assets that are typically accepted as a normal business risk in the area of the applicable Asset and have not had and
are reasonably expected not to have, an adverse effect on the right to receive revenue from production from the applicable Asset; 

  

	 	(c)	defects in the chain of title consisting of the failure to recite marital status or omissions of successors or heirship proceedings, unless Buyer provides affirmative evidence that
such failure or omission has resulted in a third party’s actual and superior claim of title to the Asset, which claim, if asserted, is likely to prevail; 

  

	 	(d)	defects arising out of the lack of a survey; 

  

	 	(e)	defects based on the failure to record leases issued by the United States or any state, local or tribal authority or any assignments of record title or operating rights in the real
property or other county records; 

  

	 	(f)	defects asserting a change in NRI or WI based on (1) a change in drilling and spacing units or tract allocation or changes in participating areas, or (2) an after-payout decrease in
NRI or increase in WI pursuant to a farm-in, farm-out or other Contract, if the effect of such change is reflected in the NRI and WI set forth in Exhibit B; 

  

	 	(g)	defects related to suspension of revenues due and owing to Seller, if such suspension is not supported by facts and circumstances that would otherwise be a Title Defect; and

  

	 	(h)	defects that have been cured or that are not material in light of the entire chain of title or subsequent agreements. 

  

 25 

 Section 7.8 Title Defect Value. “Title Defect Value” means the value of
the Title Defect as determined by Buyer in good faith, taking into account all relevant factors, including but not limited to the following: 
  

	 	(a)	the Allocated Value of the Well; 

  

	 	(b)	the reduction in the NRI of the Well, or the increase in the WI of the Well to the extent such increase is not accompanied by a corresponding increase in the NRI;

  

	 	(c)	if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; 

  

	 	(d)	the legal and practical effect of the Title Defect; and 

  

	 	(e)	if the Title Defect is a lien or encumbrance other than a Permitted Encumbrance, the cost of removing the lien or encumbrance. 

  
 Only that portion of the Well or the Lease that is materially and adversely
affected by a Title Defect shall be considered for purposes of determining the Title Defect Value. 
  
 Section 7.9 Title Defect Notice. Buyer shall give Seller notice (“Title Defect Notice”) as soon as possible but no later
than ten (10) Business Days prior to the Closing Date (such date being referred to herein as the “Objection Date”). The Title Defect Notice must include all of the following: 
  

	 	(a)	a description of the Title Defect; 

  

	 	(b)	a description of the reasonable basis for the Title Defect; 

  

	 	(c)	Reasonable Documentation supporting the basis for the Title Defect; 

  

	 	(d)	evidence supporting Buyer’s belief that the Title Defect has not been released or cured and is still enforceable; 

  

	 	(e)	the identity and the Allocated Value of the Well; and 

  

	 	(f)	the Title Defect Value and the computations upon which Buyer’s belief is based. 

  
 Section 7.10 Assumed Title Liabilities. Any notice that is not timely and properly given or that does not satisfy all
of the foregoing shall not be a valid Title Defect Notice, and any Title Defects not included in a valid Title Defect Notice shall be deemed to be “Assumed Title Liabilities” and to have been waived or assumed by Buyer.
Except as to any Title Defects subject to Section 7.12(b) or Section 7.15(b) or consents to assign subject to Section 7.17(b), after Closing, Seller’s only warranty of title to the Assets shall be that special warranty
provided in Section 2 of that Assignment and Bill of Sale in the form set forth in Exhibit D. 
  

 26 

 Section 7.11 Reasonable Documentation. “Reasonable Documentation” means a
copy of any available title opinion describing the Title Defect and 
  

	 	(a)	a copy of the relevant document, if the basis is a document; 

  

	 	(b)	the deed preceding and following a gap in the chain of title or a title opinion describing the gap in reasonable detail, if the basis is a gap in Seller’s chain of title;

  

	 	(c)	a copy of the document creating the lien or encumbrance, if the basis is a lien or encumbrance, together with evidence supporting Buyer’s determination that the lien or
encumbrance has not been released and is still enforceable; or 

  

	 	(d)	any other reasonable documentation or explanation supporting the Title Defect. 

  

Section 7.12 Seller’s Options. Seller shall have the right to cure any Title Defect but shall have no obligation to do so. If Buyer gives a
Title Defect Notice, Seller shall have the option of: 
  

	 	(a)	curing the Title Defect before Closing, and, if such Title Defect is not cured before Closing, Seller shall further elect (b), (c), (d) or (e); 

  

	 	(b)	indemnifying Buyer for all liabilities and obligations associated with the Title Defect, which indemnity shall terminate if Seller later cures the Title Defect;

  

	 	(c)	contesting the existence of a Title Defect or the Title Defect Value, as set forth in Section 7.13; 

  

	 	(d)	reducing the Purchase Price by the Title Defect Value, subject to the Title Defect Threshold and Title Defect Deductible described in Section 7.14, in which event Seller
shall be released from and of all further liability or obligation to Buyer with respect to the Title Defect, and the Title Defect shall be a Permitted Encumbrance; or 

  

	 	(e)	if the Title Defect Value exceeds ten percent (10%) of the Allocated Value of the Well, excluding the Well from the Assets conveyed to Buyer at the Closing, subject to Section
7.15, in which event the Purchase Price shall be reduced by the Allocated Value of the Well. 

  
 Section 7.13 Contested Title Defects. If Seller contests the existence of a Title Defect or the Title Defect Value pursuant to Section
7.12(c), Seller shall notify Buyer within three (3) Business Days after Seller’s receipt of the Title Defect Notice. The notice shall state the basis for Seller’s contest of the Title Defect or the Title Defect Value. Within two (2)
Business Days 
  

 27 

 after Buyer’s receipt of the notice, representatives of Seller and Buyer, knowledgeable in title matters, shall meet
and either (a) agree to reject the Title Defect, in which case Buyer shall waive the Title Defect, or (b) agree on the validity of the Title Defect and the Title Defect Value, in which case Seller shall have the options provided in Section
7.12 (except for the right to contest under Section 7.12(c)). If Seller and Buyer cannot agree on either option (a) or (b) in the preceding sentence, the dispute concerning the Title Defect or the Title Defect Value subject to the notice
shall be resolved in accordance with Section 9.16. 
  
 Section 7.14 Adjustment to Purchase Price; Title Defect Threshold and Deductible. At Closing, the Purchase Price shall be adjusted for the Title Defect Values as provided in Section 7.12(d); provided, however,
notwithstanding anything to the contrary herein, there shall be no cure, remedy, deletion or adjustment to the Purchase Price whatsoever in respect of any Title Defects unless the aggregate value of all Title Defects equals or exceeds One Million
and No/100 Dollars ($1,000,000.00) (the “Title Defect Threshold Amount”). Once the Title Defect Threshold has been reached, the amount of reduction in Purchase Price for Title Defects shall be the sum of Title Defect Values
in excess of Five Hundred Thousand and No/100 ($500,000.00) (the “Title Defect Deductible Amount”). 
  
 Section 7.15 Exclusions of Wells. Pursuant to Section 7.12(e), if the Title Defect Value exceeds ten percent (10%) of the Allocated Value of
the Well, Seller shall have the option to exclude the Well from the Assets conveyed to Buyer at the Closing by notifying Buyer on or before the Closing, in which event the Purchase Price shall be reduced by the Allocated Value of the Well. If the
Title Defect Value exceeds ten percent (10%) of the Allocated Value of the Well and the Well is excluded from the Assets conveyed to Buyer at the Closing, Seller may elect either of the following: 
  

	 	(a)	if Seller cures the Title Defect to Buyer’s reasonable satisfaction before the Final Post-Closing Date, Seller may convey the Well affected by the Title Defect to Buyer on the
Final Post-Closing Date, subject to all of the terms and conditions of this Agreement, and Buyer shall pay to Seller the amount by which the Purchase Price was reduced with respect to the Well; or 

  

	 	(b)	if Seller does not cure the Title Defect to Buyer’s reasonable satisfaction before the Final Post-Closing Date and agrees to indemnify Buyer from all liabilities and
obligations arising out of the Title Defect, Seller may convey the Well affected by the Title Defect to Buyer on the Final Post-Closing Date, subject to all of the terms and conditions of this Agreement, in which event Buyer shall pay to Seller the
amount by which the Purchase Price was reduced with respect to the Well, and Seller shall be released from all further liability or obligation to Buyer with respect to the Title Defect, and, subject to the indemnity provided above in this paragraph,
the Title Defect shall be a Permitted Encumbrance. 

  
 Section 7.16 Additional Interests. As soon as possible and no later than on or before five (5) Business Days before Closing, Buyer shall in good faith notify Seller of any interest that 
  

 28 

 would be an Asset but that is not specifically listed, including but not limited to additional Wells, or any increase in
any NRI or decrease in any WI for a Well. The value of the additional interest shall be determined by the Parties in good faith, taking into account all relevant factors (and determining, wherever appropriate, a value that is based on the Allocated
Value for the Well and in proportion to the increase in the NRI of the Well), and the Purchase Price shall be increased by such amount. 
  
 Section 7.17 Preferential Rights to Purchase and Consents to Assign. 
  

	 	(a)	Seller shall use reasonable efforts to obtain consents to assign that Seller identifies before the Closing as contractually required to be obtained before the Closing and to give
notices required in connection with those preferential rights to purchase that Seller identifies before the Closing and that are identified in Schedule 2.4. If Buyer discovers additional such consents to assign or preferential rights to
purchase before the Closing, Buyer shall immediately notify Seller, and Seller shall use reasonable efforts to obtain the required consent to assign or to give notice required in connection with the preferential right to purchase before the Closing.
Before and after the Closing, Buyer shall cooperate with Seller in connection with any required consent to assign and preferential right to purchase, including providing assurances of financial condition, but neither Seller nor Buyer shall be
required to expend funds or make any other type of financial commitment in connection with such consent to assign or preferential right to purchase. 

  

	 	(b)	If a necessary consent to assign that is contractually required to be obtained before the Closing is identified before the Closing and has not been obtained by the Closing, at
Seller’s election, either (i) the entire Asset, including but not limited to that portion of the Asset affected by the consent to assign, shall be assigned to Buyer at the Closing, and Seller shall defend and indemnify Buyer against any loss
arising out of the failure to obtain the consent to assign, or (ii) that portion of the Asset affected by the consent to assign shall be excluded from the Assets conveyed to Buyer at the Closing, and the Purchase Price shall be reduced by the
Allocated Value of the Well corresponding to that portion of the Assets. 

  

	 	(c)	If Seller is able to obtain the consent to assign referred to in Section 7.17(b)(ii) by the Final Post-Closing Date, Seller shall on the Final Post-Closing Date convey to
Buyer that portion of the Asset affected by the consent to assign, subject to all of the terms of this Agreement, and Buyer shall pay to Seller the amount by which the Purchase Price was previously reduced with respect to that portion of the Asset.

  

	 	(d)	If a preferential right to purchase an Asset (i) is exercised before the Closing, or (ii) provides for a period of time to exercise the preferential 

  

 29 

 right that has not expired by the Closing and the third party has not waived and is not deemed to have
waived the preferential right, that portion of the Asset affected by the preferential right shall be excluded from the Assets conveyed to Buyer at the Closing, and the Purchase Price shall be reduced by the Allocated Value of the Well corresponding
to that portion of the Asset. 
  

	 	(e)	If (i) the holder of any preferential right to purchase exercises such preferential right to purchase described in Section 7.17(d) before or after the Closing but fails to
consummate the transaction before the Final Post-Closing Date, (ii) the period of time to exercise a preferential right expires after the Closing but before the Final Post-Closing Date, or (iii) the holder of a preferential right has waived or is
deemed to have waived the preferential right after the Closing but before the Final Post-Closing Date, Seller shall convey that portion of the Asset affected by the preferential right to Buyer, subject to all of the terms of this Agreement, and
Buyer shall on the Final Post-Closing Date pay to Seller the amount by which the Purchase Price previously was reduced with respect to that portion of the Asset. 

  

	 	(f)	If any other preferential right to purchase identified after the Closing is subsequently exercised, Buyer shall convey the affected Asset to the holder of the preferential right to
purchase and shall receive all amounts paid by the holder of the preferential right to purchase. 

  

	 	(g)	The remedies provided in this Section 7.17 are the exclusive remedies with respect to consents to assign and preferential rights to purchase that affect the Assets.

  
 ARTICLE VIII 
  
 ENVIRONMENTAL MATTERS 
  
 Section 8.1 Inspection of the Assets. From the Execution Date until
the Objection Date, Seller and Parent shall (and shall use reasonable efforts to cause Operator to) provide Buyer access to the Lease premises, at reasonable times during normal business hours with reasonable notice, so that Buyer, at its sole cost
and expense, may conduct a Phase I environmental assessment, excluding any sampling or testing, and, together with Buyer’s agents and contractors, may conduct the Independent Phase I Environmental Review (as defined in Section 8.2).
Buyer and Edge shall defend and indemnify Seller and Parent against all claims, demands, liabilities, judgments, penalties, causes of action, losses, damages, costs and expenses (including attorneys; fees, expert fees and court costs) of every kind
or character arising out of the conduct of such assessment or the entry upon the Assets, EVEN THOUGH CAUSED BY, ARISING OUT OF OR ATTRIBUTABLE TO, IN WHOLE OR IN PART, THE SOLE OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF SELLER. If there
is a conflict between the foregoing sentence and any other provision of this Agreement, the foregoing sentence shall control. Buyer shall give Seller adequate prior notice of all inspections, and Seller shall have the right to participate in all
inspections. 
  

 30 

 Section 8.2 Definitions. The following terms shall have the following meanings: 
  
 “Assumed Environmental Liabilities” means all
liabilities and obligations for environmental matters related to the Assets, whether located on the Assets or offsite, before and after the Effective Time, except for the Retained Remediation Obligations. 
  
 “Environmental Defect Notice” means a notice of an
Environmental Defect with respect to a Well that is given by Buyer to Seller in accordance with the provisions of Section 8.5. An Environmental Defect Notice must be based on the condition of the Well as confirmed by the Independent
Environmental Review or a notice of violation of an Environmental Law received from a governmental authority. 
  
 “Environmental Defect” means a condition on the Assets that exists before the Effective Time and that causes a Well or the lands
covered by the Leases or upon which the Well or Wells are situated to be in violation of an Environmental Law. 
  
 “Environmental Defect Value” means Buyer’s good-faith estimate of the costs and expenses associated with the remediation of
an Environmental Defect with respect to an individual Well, less Site Costs. 
  
 “Environmental Law” means any statute, rule, regulation, code or order of any federal, state or local governmental authority relating to pollution or protection of the environment, to the
extent in effect and consistently enforced before the Effective Time, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9601-9657, as amended by the
Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. § 6951, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq., the Clean Air Act, 42
U.S.C. § 741, et seq., the Clean Water Act, 33 U.S.C. § 7401, the Toxic Substances Control Act, 15 U.S.C. § 2601-2629, the Safe Drinking Water Act, 42 U.S.C. §§ 300F-300J, and all similar federal, state and local
environmental statutes, ordinances and the rules, regulations, orders and decrees now or hereafter promulgated thereunder. 
  
 “Incident” means a spill, release, discharge or emission of a substance that occurred or reoccurred in the same area on account of
a single cause or course of conduct. 
  
 “Independent
Phase I Environmental Review” means the Phase I environmental assessment, excluding any sampling or testing, performed by a qualified independent third party environmental consultant on behalf of Buyer. 
  
 “Retained Remediation Obligations” means only the
obligation to remediate certain Environmental Defects identified in an Environmental Defect Notice, except for Site Costs, which obligation to remediate is retained by Seller pursuant to Section 8.6(a). 
  

 31 

 “Site Costs” shall mean all costs of plugging and abandoning the Wells, disposing
of equipment in connection with the Wells and restoring the surface land in connection with the Wells (with the exception of any Retained Remediation Obligations) in compliance with any and all applicable laws, statutes, ordinances, rules,
regulations, orders or determinations of any governmental authority and in compliance with all applicable leases and all other applicable agreements. 
  
 Section 8.3 Acknowledgments by Buyer: Representation and Warranty by Seller. Buyer acknowledges and agrees that Seller does not operate any of the
Assets and, as non-operator, has no knowledge or only limited knowledge of the environmental condition of the Assets. Buyer acknowledges and agrees that Seller has made no effort to investigate, does not have the right without obtaining applicable
consents to investigate and does not have the right without obtaining applicable consents to permit Buyer to investigate the environmental condition of or on the Assets, and, except as expressly provided in the following paragraph, makes no
representations or warranties as to the condition of the Assets. Seller represents and warrants to Buyer that, to Seller’s Knowledge, Seller has not received any written or verbal notice, from any federal, state or local governmental authority
that (a) the Assets do not have a permit required under Environmental Law, (b) Seller is in violation or potential violation of an Environmental Law, or (c) Seller is liable or potentially liable for response costs or other remedial costs under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601, et seq. with respect to the Assets. 
  
 Section 8.4 Apportionment of Environmental Liabilities and Obligations. 
  

	 	(a)	Buyer’s and Edge’s Assumed Environmental Liabilities. Upon Closing, and except for Retained Remediation Obligations, Buyer and Edge shall assume and pay, perform,
fulfill and discharge, and release Seller and Parent from and defend and indemnify Seller against, any and all claims, costs, expenses, liabilities and obligations relating to (a) the Assumed Environmental Liabilities, including but not limited to
those arising out of events occurring after the Effective Time that are within the control of Buyer or that are attributable to the acts of Buyer or its contractors or subcontractors, and (b) the Site Costs. 

  

	 	(b)	Seller’s and Parent’s Retained Remediation Obligations. Upon Closing, Seller and Parent agree to retain and pay, perform, fulfill and discharge, and indemnify Buyer
and Edge against all claims relating to the Retained Remediation Obligations, except for those claims relating to the Retained Remediation Obligations arising out of events occurring after the Effective Time that are within the control of Buyer or
that are attributable to the acts of Buyer or its contractors or subcontractors. 

  

	 	(c)	ALL OF THE INDEMNITIES UNDER THIS SECTION 8.4 SHALL APPLY REGARDLESS OF WHETHER CAUSED BY, ARISING OUT OF OR ATTRIBUTABLE TO, IN WHOLE OR IN PART, THE SOLE OR CONCURRENT
NEGLIGENCE, FAULT OR STRICT LIABILITY OF THE INDEMNIFIED PERSON OR PERSONS. 

  

 32 

 Section 8.5 Environmental Defect Notice. An Environmental Defect Notice must be given to Seller no
later than the Objection Date and must include all of the following: 
  

	 	(a)	the name of the affected Well; 

  

	 	(b)	a detailed description of the condition on the Well that causes the Well to be in violation of an Environmental Law; 

  

	 	(c)	a copy of the Independent Environmental Review which addresses the violation of an Environmental Law or a copy of the notice of violation of an Environmental Law received from a
governmental authority; and 

  

	 	(d)	the Environmental Defect Value associated with each Well. 

  
 Any notice that is not timely and properly given or that does not satisfy all of the foregoing shall not be a valid Environmental Defect Notice. If Seller
does not receive an Environmental Defect Notice as to any Well, Buyer shall be deemed to have accepted the Well “as is, where is,” with all faults and waived Buyer’s rights to assert an Environmental Defect with respect to that Well.
No Environmental Defect Notice may be given by Buyer on any Well that is being operated or that has been operated by Buyer, and Buyer shall accept all such Wells “as is, where is,” with all faults and shall be deemed to have waived
Buyer’s rights to assert an Environmental Defect with respect to such Wells. 
  
 Section 8.6 Seller’s Options. If Buyer gives a valid Environmental Defect Notice, Seller shall have the option of 
  

	 	(a)	remediating the Environmental Defect, as set forth in Section 8.7; if not remediated before Closing, such Environmental Defect shall become, after Closing, a Retained
Remediation Obligation but, if remediated within ninety (90) days after Closing in accordance with Section 8.7, shall cease to be a Retained Remediation Obligation; 

  

	 	(b)	contesting the existence of an Environmental Defect or the Environmental Defect Value, as set forth in Section 8.8; 

  

	 	(c)	reducing the Purchase Price by the Environmental Defect Value, subject to the Environmental Defect Threshold and Environmental Defect Deductible described in Section 8.9, in
which event Seller shall be released from and of all further liability or obligation to Buyer with respect to the Environmental Defect and the Environmental Defect shall be an Assumed Environmental Liability; or 

  

	 	(d)	if the Environmental Defect Value exceeds ten percent (10%) of the Allocated Value of the Well, excluding the Well from the Assets conveyed to Buyer at the Closing, in which event
the Purchase Price shall be reduced by the Allocated Value of the Well. 

  

 33 

 Section 8.7 Implementing Remediation. If Seller elects to remediate an Environmental Defect
pursuant to Section 8.6(a), Seller shall select the means and methods of effecting the remediation in accordance with applicable Environmental Law and any applicable agreement, but Seller shall not be required to perform any activities if the
cost thereof would be Site Costs, including without limitation plugging and abandoning any wells. Seller’s responsibilities for remediation under this Section 8.7 shall be limited to a standard appropriate for the use of an asset for oil
and gas activities and shall be subject to Buyer’s reasonable approval and satisfaction. 
  
 Section 8.8 Contested Environmental Defects. If Seller contests the existence of an Environmental Defect or the Environmental Defect Value pursuant to Section 8.6(b), Seller shall notify Buyer within
three (3) Business Days after Seller’s receipt of the Environmental Defect Notice. The notice shall state the basis for Seller’s contest of the Environmental Defect or the Environmental Defect Value. Within two (2) Business Days after
Buyer’s receipt of the notice, representatives of Seller and Buyer, knowledgeable in environmental matters, shall meet and either (a) agree to reject the Environmental Defect, in which case Buyer shall waive the Environmental Defect, or (b)
agree on the validity of the Environmental Defect and the Environmental Defect Value, in which case Seller shall have the options provided in Section 8.6 (except for the right to contest under Section 8.6(b)). If Seller and Buyer
cannot agree on either option (a) or (b) in the preceding sentence, the dispute concerning the Environmental Defect or the Environmental Defect Value subject to the notice shall be resolved in accordance with Section 9.16. 
  
 Section 8.9 Adjustment to Purchase Price; Environmental Defect Threshold
and Deductible. At Closing, the Purchase Price shall be adjusted for the Environmental Defect Values as provided in Section 8.6(c); provided, however, notwithstanding anything to the contrary herein, there shall be no cure,
remedy, deletion or adjustment to the Purchase Price whatsoever in respect of any Environmental Defects unless the aggregate value of all Environmental Defects equals or exceeds One Million and No/100 Dollars ($1,000,000.00) (the
“Environmental Defect Threshold Amount”). Once the Environmental Defect Threshold has been reached, the amount of reduction in Purchase Price for Environmental Defects shall be the sum of Environmental Defect Values in excess
of Five Hundred Thousand and No/100 ($500,000.00) (the “Environmental Defect Deductible Amount”). 
  
 Section 8.10 Exclusive Remedies. The rights and remedies granted to Buyer and Edge in this Article VIII are the exclusive rights and
remedies relating to any environmental condition on the Assets, and Seller and Parent shall have no other liability or obligations with respect to environmental conditions on the Assets. 
  

 34 

 ARTICLE IX 
  
 MISCELLANEOUS 
  
 Section 9.1 Notices. All notices, reports, records or other communications that are required or permitted to be given to the Parties under this
Agreement shall be sufficient in all respects if given in writing and delivered in person, by fax, by overnight courier or by registered or certified mail, postage prepaid, return receipt requested, to the receiving Party at the following address:

  

			
	If to Seller or Parent:	 	Contango Oil & Gas Company
	 	 	3700 Buffalo Speedway, Suite 960
	 	 	Houston, TX 77098
	 	 	Attention: Kenneth R. Peak
	 	 	Fax:     (713) 960-1065
	 	 	Phone: (713) 960-1901
		
	If to Buyer or Edge:	 	Edge Petroleum Corporation
	 	 	1301 Travis, Suite 2000
	 	 	Houston, TX 77002
	 	 	Attention: C.W. MacLeod
	 	 	Sr. Vice President Business Development & Planning
	 	 	Fax:     (713) 654-8910
	 	 	Phone: (713) 654-8960
		
	With a copy to:	 	Edge Petroleum Exploration Company
	 	 	1301 Travis, Suite 2000
	 	 	Houston, TX 77002
	 	 	Attention: Mark J. Gabrisch, Vice President – Land
	 	 	Fax:     (713) 654-7722
	 	 	Phone: (713) 654-8960

  
 or such other address as such Party
may have given to the other Parties by notice pursuant to this Section 9.1. Notice shall be deemed given on (i) the date such notice is personally delivered by hand (costs prepaid), (ii) three (3) days after the mailing if sent by certified
mail, return receipt requested, (iii) one (1) day after the date of delivery to a nationally recognized overnight courier service (costs prepaid), or (iv) the next succeeding day after transmission by facsimile with retained confirmation of
transmission by the transmitting equipment. 
  
 Section 9.2
General Definitions. For the purposes of this Agreement, the following terms have the meaning set forth below: 
  
 “Affiliate” means, with respect to any Party, any Person directly or indirectly controlling, controlled by, or under common
control with such Party, and any officer, director or executive employee of such Party and includes any past or present Affiliate of any such Person. 
  

 35 

 “Business Days” means any day other than a Saturday, Sunday, or any day on which
banks in Texas are permitted or required to be closed. 
  
 “GAAP” means generally accepted accounting principles for financial reporting in the United States, consistently applied. 
  
 “Governmental Authority” means the United States of America, any state, commonwealth, territory or possession thereof and any
political subdivision of any of the foregoing, including but not limited to courts, departments, commissions, boards, bureaus, agencies or other instrumentalities. 
  
 “Knowledge” means that an individual will be deemed to have Knowledge of a particular fact or other
matter and a Person other than an individual will be deemed to have Knowledge of a particular fact or other matter if any individual serving as an officer, director or employee of such Person or its General Partner, Parent or any of its wholly owned
subsidiaries is actually aware of that fact or matter. 
  
 “Material Adverse Effect” means a material adverse effect on the value, use, operation or ownership of the Assets, taken as a whole. Where initial capital letters are not used, the words “material adverse
effect” have the ordinary meaning applicable to them in the context in which they are used. 
  
 “Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated
association, corporation, other entity or any Governmental Authority. 
  
 “SEC” means the Securities and Exchange Commission. 
  
 Section 9.3 Entire Agreement. The Schedules and Exhibits attached to this Agreement are hereby incorporated into this Agreement and are an integral part of this Agreement. This Agreement, including the
Schedules and Exhibits, sets forth the complete and exclusive understanding of the Parties with respect to the subject matter hereof and may be modified only by a written instrument signed by all of the Parties hereto. 
  
 Section 9.4 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute
effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties transmitted by facsimile shall be deemed to be their original signatures for all
purposes. 
  
 Section 9.5 Third Parties. Nothing in this
Agreement, express or implied, is intended to confer any right or remedy under or by reason of this Agreement on any Person other than the Parties and their respective heirs, representatives, successors and assigns, nor is anything set forth herein
intended to affect or discharge the obligation or liability of any third Persons to any Party, nor shall any provision give any third Person any right of subrogation or action over against any Party. 
  

 36 

 Section 9.6 Expenses. Each of the Parties shall pay all costs and expenses incurred or to be
incurred by it in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by hereunder, including, without limitation, legal and accounting fees and expenses. 
  
 Section 9.7 Waiver. No failure of any Party to exercise any right or
remedy given such Party under this Agreement or otherwise available to such Party or to insist upon strict compliance by any other Party with its obligations hereunder, and no custom or practice of the Parties in variance with the terms hereof,
shall constitute a waiver of any Party’s right to demand exact compliance with the terms hereof, unless such waiver is set forth in writing and executed by such Party. 
  
 Section 9.8 Governing Law; Jurisdiction. This Agreement shall be construed and governed in accordance with the laws
of the State of Texas without regard to conflicts-of-laws principles that would require the application of any other law. Any action to enforce, or which arises out of or relates in any way to, any of the provisions of this Agreement shall be
brought and prosecuted solely in the Texas state courts or the Federal district courts located in Harris County, Texas. 
  
 Section 9.9 Assignment. No Party may assign its rights or delegate its obligations hereunder without the consent of the other Parties. Subject to
the foregoing, this Agreement shall inure to the benefit of and be binding upon the Parties and their respective heirs, successors and assigns. 
  
 Section 9.10 Confidentiality. Buyer and Seller acknowledge that all information furnished or disclosed pursuant hereto is subject to the
Confidentiality Agreement by and between Parent and Buyer, dated as of September 8, 2004 (the “Confidentiality Agreement”) and such information must remain confidential. Buyer and Seller shall consult with each other prior to releasing any
press releases. The Confidentiality Agreement is hereby incorporated in this Agreement and is an integral part of this Agreement, and shall survive any termination hereof or shall terminate at Closing. 
  
 Section 9.11 Severability. If any term or other provision of this
Agreement is held invalid, illegal or incapable of being enforced by any court of competent jurisdiction, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. Upon any binding determination that any term or other provision is invalid, illegal or incapable of being enforced
by a court of competent jurisdiction, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible and in an acceptable manner, to the end that the transaction hereby
may be contemplated to the extent possible. 
  

 37 

 Section 9.12 DTPA. Each Party hereby certifies to the other that it is not a “Consumer”
within the meaning of the Texas Deceptive Trade Practices – Consumer Protection Act, Subchapter E of Chapter 17, Section 17.41, et. Seq. of the Texas Business and Commerce Code, as amended (the “DTPA”). The Parties
covenant, for themselves and for an on behalf of any successors and assigns, that if the DTPA is applicable, (a) the Parties are “business consumers” thereunder and (b) each Party hereby waives and releases all of its rights and remedies
thereunder (other than Section 17.555, Texas Business and Commercial Code) as applicable to the other Party and its successors and (c) each Party shall defend and indemnify the other Party from and against any and all claims, demands or causes of
action of or by that Party or any successor or any of its Affiliates based in whole or in part on the DTPA, arising out of or in connection with the transaction set forth in this Agreement. 
  
 Section 9.13 Seller’s Election to Effect IRC Section 1031
Exchange. In the event Seller so elects, Buyer agrees to accommodate Seller in effecting a tax-deferred exchange under Internal Revenue Code Section 1031, as amended. Seller shall have the right to elect this tax-deferred exchange at any
time prior to the Closing Date. If Seller elects to effect a tax-deferred exchange, Buyer agrees to execute additional documents, agreements, escrow instructions or other instruments as may be reasonably necessary to effect the exchange, provided
that Buyer shall incur no additional costs, expenses, fees or liabilities as a result of or connected with the exchange. 
  
 Section 9.14 Headings. The subject headings of paragraphs and subparagraphs of this Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of its provisions. 
  
 Section 9.15 Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the
construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any
Party. 
  
 Section 9.16 Binding Arbitration. 
  

	 	(a)	Disputes. Except as expressly otherwise provided in this Agreement, this Section 9.16 shall apply to any dispute arising under or related to this Agreement (whether
arising in contract, tort or otherwise, and whether arising at law or in equity), including 

  

	 	(1)	any dispute regarding the construction, interpretation, performance, validity or enforceability of any provision of this Agreement or whether any Party is in compliance with, or
breach of, any provisions of this Agreement; and 

  

	 	(2)	the applicability of this Section 9.16 to a particular dispute (a “Dispute”). The provisions of this Section 9.16 shall be the exclusive method
of resolving Disputes. 

  

 38 

	 	(b)	Negotiation to Resolve Disputes. If a Dispute arises, the Parties shall attempt to resolve such Dispute through the following procedure: 

  

	 	(1)	appropriate representatives of each Party shall promptly meet (whether by phone or in person) in a good-faith attempt to resolve the Dispute; and 

  

	 	(2)	if the Dispute is unresolved after ten (10) days following the commencement of the negotiations described in clause (1) above, then either Party may submit such Dispute to binding
arbitration under this Section 9.16 by notifying the other Party (an “Arbitration Notice”). 

  

	 	(c)	Selection of Arbitrators. Any arbitration conducted under this Article shall be heard by a panel (the “Arbitral Panel”) of three arbitrators
(each an “Arbitrator”) selected in accordance with the following provisions. 

  

	 	(1)	The Party that submits a Dispute to arbitration shall designate an Arbitrator in its Arbitration Notice. The other Party, by notice to the first Party, shall designate an Arbitrator
on or before the twentieth (20th) day following receipt of the Arbitration Notice. 

  

	 	(2)	The two Arbitrators so designated shall promptly meet and attempt to agree upon a third Arbitrator (the “Neutral Arbitrator”). If they are unable to do so
within twenty (20) days following their first attempt to do so, the two Arbitrators shall request the American Arbitration Association (or, if such Association has ceased to exist, the principal successor thereto) (the “AAA”)
to designate the Neutral Arbitrator. 

  

	 	(3)	If any Arbitrator designated by a Party shall die, resign or otherwise fail or becomes unable to serve as Arbitrator, such Party shall promptly designate a replacement Arbitrator.
If the Neutral Arbitrator shall die, resign or otherwise fail or becomes unable to serve as the Neutral Arbitrator, the two Arbitrators designated by the Parties shall promptly meet and attempt to agree upon a replacement Neutral Arbitrator. If they
are unable to do so within ten (10) days following their first attempt to do so, the two Arbitrators shall request the AAA to designate the replacement Neutral Arbitrator. 

  

	 	(d)	Conduct of Arbitration. The Arbitral Panel shall expeditiously (and, if reasonably possible, within ninety (90) days after the Neutral Arbitrator’s

  

 39 

 selection) hear and decide all matters concerning the Dispute. Any arbitration hearing shall be held in
Houston, Texas. The arbitration shall be conducted in accordance with the then-current Commercial Arbitration Rules of the AAA (excluding rules governing the payment of arbitration, administrative or other fees or expenses to the Arbitrator or the
AAA) (the “Rules”), to the extent that such Rules do not conflict with the terms of this Agreement. Except as expressly provided to the contrary in this Agreement, the Arbitral Panel shall have the power 
  

	 	(1)	to establish rules and procedures for the discovery and production of such materials, information, testimony and evidence as it deems relevant to the Dispute before it (and each
Party will provide the materials, information, testimony and evidence requested in accordance with such rules and procedures and relevant to such Dispute, except that neither Party shall be required to provide any information so requested that is

  

	 	(i)	proprietary, unless the Arbitral Panel enters a protective order that limits the use of such information to the arbitral proceedings; 

  

	 	(ii)	subject to a third party confidentiality restriction; or 

  

	 	(iii)	subject to an attorney-client or other privilege); 

  

	 	(2)	to grant injunctive relief, specific performance or any other remedy that would otherwise be available at law or in equity. 

  
 Any dispute as to the relevancy of any requested information shall be
determined by the Arbitral Panel. If it deems necessary, the Arbitral Panel may propose to the Parties that one or more other experts be retained to assist it in resolving the Dispute. The retention of such other experts shall require the consent of
both Parties, which shall not be unreasonably withheld. 
  

	 	(e)	Decision. All decisions of the Arbitral Panel shall be made by a majority vote of the Arbitrators. The Arbitral Panel’s decision (which shall be rendered in writing)
shall be final, non-appealable and binding upon the Parties and may be enforced in any court of competent jurisdiction; provided that the Parties agree that the Arbitral Panel and any court enforcing the award of the Arbitral Panel shall not have
the right or authority to award to any Party exemplary, punitive, consequential, 

  

 40 

 special, incidental, indirect or other similar damages, including lost profits, business interruption or
loss of opportunity, whether such damages are claimed under breach of contract, breach of warranty, tort of or any other theory or cause action at law or in equity, except to the extent that another Party is required to pay any such damages to a
third party in connection with a claim for which such other Party is indemnified hereunder. No Party may challenge the decision of the Arbitral Panel on the basis of any “evident partiality” on the part of the two Arbitrators appointed by
the Parties. The responsibility for paying the costs and expenses of the arbitration, including compensation to the Arbitral Panel and any experts retained by the Arbitral Panel, shall be allocated to one Party or both Parties in a manner determined
by the Arbitral Panel to be fair and reasonable under the circumstances. Each Party shall be responsible for the fees and expenses of its respective counsel, consultants and witnesses, unless the Arbitral Panel determines that compelling reasons
exist for allocating all or a portion of such costs and expenses to one or more other Parties. 
  
 Section 9.17 Time of Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. 
  
 Section 9.18 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER AND PARENT MAKE NO WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, WITH REGARD TO THE ASSETS. BUYER AND EDGE ACKNOWLEDGE AND AGREE, AS OF THE CLOSING, THAT BUYER HAS INSPECTED THE ASSETS AND IS FAMILIAR WITH THE NATURE AND CONDITION THEREOF AND ACCEPTS SAME “AS IS.”
BUYER’S AGREEMENT TO ACCEPT THE ASSETS “AS IS” CONSTITUTES A MATERIAL INDUCEMENT TO SELLER’S AGREEMENT TO SELL THE ASSETS TO BUYER FOR THE PURCHASE PRICE. BUYER AND EDGE ACKNOWLEDGE THAT THE PURCHASE PRICE IS PREDICATED UPON
BUYER’S AGREEMENT TO ACCEPT THE ASSETS “AS IS,” AND THAT SELLER, IN DETERMINING TO PROCEED WITH ENTERING INTO THIS AGREEMENT, HAS EXPRESSLY RELIED UPON BUYER’S AGREEMENT TO ACCEPT THE ASSETS “AS IS.” 
  
 SELLER AND PARENT MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE
ACCURACY OR COMPLETENESS OF ANY DATA, INFORMATION OR MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER, INCLUDING WITHOUT LIMITATION ANY MAPS, INTERPRETATIONS OF DATA, ECONOMIC PROJECTIONS OR RESERVE FORECASTS PREPARED BY SELLER OR SELLER’S
CONTRACTORS OR AGENTS. ANY SUCH DATA, INFORMATION OR MATERIALS FURNISHED OR MADE AVAILABLE BY SELLER ARE PROVIDED TO BUYER AS A CONVENIENCE ONLY AND BUYER SHALL RELY THEREUPON AT BUYER’S SOLE RISK. 
  

 41 

 Section 9.19 Limitation on Liability. No Party shall ever be liable to another Party for special,
consequential, exemplary or punitive damages, lost profits, lost opportunity or business interruption damages, whether such damages are claimed under breach of contract, breach of warranty, tort or any other theory or cause of action at law or in
equity, anything to the contrary herein notwithstanding, except to the extent that another Party is required to pay any such damages to a third party in connection with a claim for which such other Party is indemnified hereunder.  

 
 [THE NEXT PAGE IS THE SIGNATURE PAGE] 
  

 42 

 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

  

			
	 SELLER:

	
	 CONTANGO STEP, L.P., a Texas limited
 partnership

		
	 By:
	 	 CONTANGO STEP I, INC., a Delaware

	 corporation, its sole general partner

		
	 By:
	 	 /s/ KENNETH R. PEAK

	 	 	 Kenneth R. Peak,

	 	 	 Chairman and Chief Executive Officer

	
	 PARENT:

	
	 CONTANGO OIL & GAS COMPANY,

	 a Delaware corporation

		
	 By:
	 	 /s/ KENNETH R. PEAK

	 	 	 Kenneth R. Peak

	 	 	 Chairman and Chief Executive Officer

	
	 BUYER:

	
	 EDGE PETROLEUM EXPLORATION
 COMPANY

	 a Delaware corporation

		
	 By:
	 	 /s/ C.W.. MACLEOD

	 	 	 C.W. MacLeod

	 	 	 Sr. Vice President

	 	 	 Business Development & Planning

	
	 EDGE:

	
	 EDGE PETROLEUM CORPORATION

	 a Delaware corporation

		
	 By:
	 	 /s/ C.W. MACLEOD

	 	 	 C.W. MacLeod

	 	 	 Sr. Vice President

	 	 	 Business Development & Planning

  

 43 

 Schedule 2.4 
  
 Consents, Approvals, and Preferential Rights to Purchase 
  
 All Leases listed in Exhibit A in which any of the following entities is a
lessor: 
  
 Mesteña Proven, Ltd. 
 Mesteña Oil and Gas Company 
 Eshleman
Ranches, et al. 
  

 44 

 Schedule 2.12 
  
 Gas Balancing; Forward Sales; Calls on Production 
  
 None. 
  

 45 

 Schedule 2.13 
  
 Payout Balances 
  
 Pursuant to that certain Letter Agreement dated October 6, 2004 by and between Contango Oil & Gas Company and Juneau Exploration, LLC: 
  
 (a) the remaining payout balance to reach an after-payout status on the four
Wells in the Borregos Lease – Charco Nuevo #1, Horse Trap #1, Huisache #1, Palomas Ranch #1 – (the “Borregos Wells”) as of July 31, 2004 is $3,527,000; and 
  
 (b) the change in interest before and after payout in the Borregos Wells is
set forth in Exhibit B. 
  

 46 

 Schedule 2.14 
  
 Transactions with Related Parties 
  
 None. 
  

 47 

 Exhibit A 
  
 Leases 
  
 Cepres: 
  
 Oil and Gas Lease dated July 28, 2000, between Mesteña Proven, Ltd. et al, as Lessor, and Mesteña, Inc., as Lessee, a Memorandum of which
was recorded in Vol. 24, Pg. 211 of the Official Records of Jim Hogg Co., TX, as amended and recorded in Vol. 26, Pg. 195 of the Official Records of Jim Hogg Co., TX, covering 160 ac., m/l, in the Fowler & Rankin Subdvn. of the “Las
Vivoritas” Francisco Montalvo Grant, A-226 and the Fowler & Rankin Subdvn. of the “El Sordo” Luis Vela Grant, A-326, Jim Hogg Co., TX 
  
 Guilita: 
  
 Oil and Gas Lease dated May 5, 2000, between Mesteña Proven, Ltd. et al, as Lessor, and Mesteña, Inc., as Lessee, a Memorandum of which was in Vol. 21, Pg. 466 of the Official Records of Jim Hogg Co.,
TX, covering 1593.08 ac., m/l, in the Jno. Dewees Sy. No. 392, A-96, the Jno. Dewees Sy. No. 388, A-95, the Jno. Dewees Sy. No. 390, A-93, and the C&MRR Sy. No. 389, A-79, in Jim Hogg Co., TX, SAVE & EXCEPT depths below
11,000 feet subsurface. 
  
 INSOFAR & ONLY INSOFAR AS the
following leases cover the SW/4 Section 391, “Palitos Blancos” Grant, Rafael Garza Sais Sy., A-274, Jim Hogg Co.,TX, and ONLY AS TO the interval between the surface and 11,000 feet subsurface: 
  
 Oil, Gas and Mineral Lease dated March 14, 1998, between Margaret Mings Bunnell, as Lessor,
and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 662 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 16, 1998, between Stanley G. Marshall, Jr. et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 120 ac., m/l, recorded
in Vol. 6, Pg.700 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and
Mineral Lease dated March 23, 1998, between Nancy Bunnell Bentley, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 710 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 26, 1998, between David C. Blankenship et al, as
Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 713 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 27, 1998, between Bess Hal Yakey Murphree, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol.
6, Pg. 716 of the Official Records of Jim Hogg Co., TX. 
  

 A-1 

 Oil, Gas and Mineral Lease dated April 15, 1998, between May Eskridge Kearny, as Lessor, and Jerry L. Keehan, Inc., as
Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 745 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated May 19, 1998, between Julia M. Wyatt, Individually and as Independent. Executrix of the Est. of Julia G. Groce, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l,
recorded in Vol. 7, Pg. 19, as amended on April 4, 2001, recorded in Vol. 25, Pg. 221, Official Records, Jim Hogg Co., TX. 
  
 Oil and Gas Lease dated May 20, 1998, between B. Naylor Morton, Trustee et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, a Memorandum of
which dated July 2, 1998 was recorded in Vol. 7, Pg. 48, as amended July 17, 1998, recorded in Vol. 7, Pg. 455, Official Records, Jim Hogg Co., TX. 
  
 Oil and Gas Lease dated May 20, 1998, between NationsBank, N.A., Trustee et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, a Memorandum of
which dated July 2, 1998 was recorded in Vol. 7, Pg. 46, as amended July 17, 1998, recorded in Vol. 7, Pg. 455, Official Records, Jim Hogg Co., TX. 
  
 Oil and Gas Lease dated July 2, 1998, between Stanley N. Morton, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, a Memorandum of which dated July
2, 1998 was recorded in Vol. 7, Pg. 44, as amended on May 17, 2001, recorded in Vol. 25, Pg. 721, Official Records, Jim Hogg Co., TX. 
  
 Memorandum of Oil and Gas Lease dated August 14, 1998, between Jamie Michaela Salinas et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 975 ac., m/l,
recorded in Vol. 7, Pg. 60 of the Official Records of Jim Hogg Co., TX. 
  
 Memorandum of Oil and Gas Lease dated August 14, 1998, between San Marcos Ranch Ltd., as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 975 ac., m/l, recorded in Vol. 7, Pg. 65 of the Official Records of Jim Hogg Co., TX.

  
 Oil, Gas and Mineral Lease dated October 15, 1998, between Margaret D. Spencer
Trust, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 7, Pg. 69 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated November 3, 1998, between Houston C. Munson, Jr. et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded
in Vol. 7, Pg. 457 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and
Mineral Lease dated March 29, 2000, between Jane Thompson Slocomb Sec. 5 TR et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 19, Pg. 636 of the Official Records of Jim Hogg Co., TX. 
  

 A-2 

 Oil, Gas and Mineral Lease dated April 8, 1998, between Glenda Stowers et al, as Lessor, and Jerry L. Keehan, Inc., as
Lessee, covering 40 ac., m/l, recorded in Vol. 6, Pg. 736 of the Official Records of Jim Hogg Co., TX. 
  
 INSOFAR & ONLY INSOFAR AS the following leases cover the N/2 Sec. 388, all Sec. 389, W/2 Sec. 390 and S/2 Sec. 392 of the “Palitos Blancos” Grant Rafael Garza Sais Sy., A-274, Jim
Hogg Co., TX ONLY AS TO the interval between the surface and 11,000 feet: 
  
 Oil, Gas and Mineral Lease dated March 14, 1998, between Margaret Mings Bunnell, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 662 of the Official Records of Jim Hogg
Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 16, 1998, between Stanley G.
Marshall, Jr. et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 6, Pg. 690 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 16, 1998, between Stanley G. Marshall, Jr. et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee,
covering 10 ac., m/l, recorded in Vol. 6, Pg. 695 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 23, 1998, between Nancy Bunnell Bentley, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 710 of the Official Records of Jim Hogg
Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 26, 1998, between David C.
Blankenship et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 713 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 27, 1998, between Bess Hal Yakey Murphree, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering
360 ac., m/l, recorded in Vol. 6, Pg. 716 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated March 31, 1998, between Reginald Newton Harbison et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 430 ac., m/l, recorded in Vol. 6, Pg. 719 of the Official Records of Jim Hogg Co., TX.

  
 Oil, Gas and Mineral Lease dated April 15, 1998, between May Eskridge Kearny,
as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 745 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated April 15, 1998, between Paul Anthony Schumman et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in
Vol. 6, Pg. 742, and amended on March 27, 2001, recorded in Vol. 25, Pg. 126, Official Records of Jim Hogg Co., TX. 
  

 A-3 

 Oil, Gas and Mineral Lease dated April 23, 1998, between Billie Jo McCutcheon et vir, as Lessor, and Jerry L. Keehan,
Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 6, Pg. 757 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated April 24, 1998, between Geraldine D. McGehee, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 80 ac., m/l, recorded in Vol. 6,
Pg. 760 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral
Lease dated April 24, 1998, between Ronnie J. Dannelley, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 80 ac., m/l, recorded in Vol. 6, Pg. 763 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated April 27, 1998, between R. K. Wilson, III, as Lessor, and
Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 6, Pg. 766, and amended on April 20, 2001, recorded in Vol. 25, Pg. 589, Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated April 27, 1998, between Mary Eleanor Wilson Small, as Lessor, and Jerry L. Keehan, Inc., as Lessee,
covering 360 ac., m/l, recorded in Vol. 6, Pg. 771, and amended on April 20, 2001, recorded in Vol. 25, Pg. 651, Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated May 6, 1998, between Randolph B. Lee et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 60 ac., m/l, recorded in Vol. 6,
Pg. 779, and amended on April 29, 2001, recorded in Vol. 25, Pg. 653, Official Records of Jim Hogg County, TX. 
  
 Oil, Gas and Mineral Lease dated May 8, 1998, between Robert L. McFarlin, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 7, Pg. 1 of the Official Records of Jim Hogg Co., TX.

  
 Oil, Gas and Mineral Lease dated May 9, 1998, between Jack Holt et ux, as
Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 7, Pg. 7 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated May 9, 1998, between Lucian L. Morrison, Jr., as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 7,
Pg. 4 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease
dated May 19, 1998, between Julia M. Wyatt, Individually and as Independent Executrix of the Est. of Julia G. Groce, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 7, Pg. 19, as amended on April 4, 2001,
recorded in Volume 25, Page 221, Official Records of Jim Hogg Co., TX. 
  
 Oil and
Gas Lease dated May 20, 1998, between B. Naylor Morton, Trustee et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, a Memorandum of which dated July 2, 1998 was recorded in Vol. 7, Pg. 48, as amended on July 17, 1998,
recorded in Vol. 7, Pg. 455, Official Records of Jim Hogg Co., TX. 
  

 A-4 

 Oil and Gas Lease dated May 20, 1998, between NationsBank, N.A., Trustee et al, as Lessor, and Jerry L. Keehan, Inc., as
Lessee, covering 360 ac., m/l, a Memorandum of which dated July 2, 1998 was recorded in Vol. 7, Pg. 46, as amended on July 17, 1998, recorded in Vol. 7, Pg. 455, Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated June 3, 1998, between Lorine Toepperwein Uedker et al, as
Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 7, Pg. 29 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated June 3, 1998, between Wayne Udo Toepperwein et al., as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l,
recorded in Vol. 7, Pg. 32 of the Official Records of Jim Hogg Co., TX. 
  
 Oil
and Gas Lease dated July 2, 1998, between Stanley N. Morton, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, a Memorandum of which dated July 2, 1998 was recorded in Vol. 7, Pg. 44, as amended on May 17, 2001, recorded in
Vol. 25, Pg. 721, Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral
Lease dated July 14, 1998, between Ella Mae Caldwell Mueller, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 7, Pg. 51 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated July 24, 1998, between James Ector Gammage, Jr., as Lessor,
and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 7, Pg. 57 of the Official Records of Jim Hogg Co., TX. 
  
 Memorandum of Oil and Gas Lease dated August 14, 1998, between Jamie Michaela Salinas et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 975 ac., m/l,
recorded in Vol. 7, Pg. 60 of the Official Records of Jim Hogg Co., TX. 
  
 Memorandum of Oil and Gas Lease dated August 14, 1998, between San Marcos Ranch Ltd., as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 975 ac., m/l, recorded in Vol. 7, Pg. 65 of the Official Records of Jim Hogg Co., TX.

  
 Oil, Gas and Mineral Lease dated October 15, 1998, between Margaret D. Spencer
Trust, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 7, Pg. 69 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated November 3, 1998, between Houston C. Munson, Jr. et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded
in Vol. 7, Pg. 457 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and
Mineral Lease dated March 29, 2000, between Jane Thompson Slocomb Sec. 5 TR et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 360 ac., m/l, recorded in Vol. 19, Pg. 636 of the Official Records of Jim Hogg Co., TX. 
  

 A-5 

 Oil, Gas and Mineral Lease dated July 11, 2000, between John Charles Garoni, as Lessor, and Jerry L. Keehan, Inc., as
Lessee, covering 10 ac., m/l, recorded in Vol. 21, Pg. 109 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated July 22, 2000, between Emily Johnson Cale, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 20, Pg. 632 of the Official Records of Jim Hogg Co.,
TX. 
  
 Oil, Gas and Mineral Lease dated July 22, 2000, between Patrick M.
Johnson, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 21, Pg. 142 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated July 22, 2000, between George Weatherston, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 21,
Pg. 145 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral
Lease dated August 12, 2000, between Walter F. Johnston, Jr., as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in Vol. 21, Pg. 112 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated August 21, 2000, between Wells Fargo Bank, Trustee et al, as
Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 21, Pg. 682 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated August 24, 2000, between Fred W. Shield and Company, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 20 ac., m/l, recorded in
Vol. 21, Pg. 678 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and
Mineral Lease dated October 9, 2000, between Jerrell W. Lambert, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering 10 ac., m/l, recorded in Vol. 22, Pg. 477 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated December 11, 1997, between Mary A. Markwalter, as Lessor,
and Jerry L. Keehan, Inc., as Lessee, covering W/2 E/2 SE/4 Sec. 392, Fowler & Rankin’s Subdvn. of Palitos Blancos Grant, recorded in Vol. 6, Pg. 647 of the Official Records of Jim Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated January 20, 1998, between Burton Seely Morwood, as Lessor,
and Jerry L. Keehan, Inc., as Lessee, covering W/2 E/2 SE/4 Sec. 392, Fowler & Rankin’s Subdvn. of Palitos Blancos Grant, recorded in Vol. 6, Pg. 653, as amended on January 12, 2001, recorded in Vol. 23, Pg. 675, Official Records of Jim
Hogg Co., TX. 
  
 Oil, Gas and Mineral Lease dated January 29, 1998, between The
Reynolds Trust et al, as Lessor, and Jerry L. Keehan, Inc., as Lessee, covering W/2 E/2 SE/4 Sec. 392, Fowler & Rankin’s Subdvn., Palitos Blancos Grant, recorded in Vol. 6, Pg. 656, as amended on December 21, 2000, recorded in Vol. 23, Pg.
398, Official Records of Jim Hogg Co., TX. 
  

 A-6 

 Oil, Gas and Mineral Lease dated December 29, 1997, between Lucy Schneeberg McBride, as Lessor, and Jerry L. Keehan,
Inc., as Lessee, covering W/2 W/2 SE/4 Sec. 392, Fowler & Rankin’s Subdvn., Palitos Blancos Grant, recorded in Vol. 6, Pg. 650, as amended on December 18, 2000, recorded in Vol. 23, Pg. 396, Official Records of Jim Hogg Co., TX. 

 
 Oil, Gas and Mineral Lease dated February 4, 1998, between Mildred Schneeberg et al, as
Lessor, and Jerry L. Keehan, Inc., as Lessee, covering W/2 W/2 SE/4 Sec. 392, Fowler & Rankin’s Subdvn., Palitos Blancos Grant, recorded in Vol. 6, Pg. 659, as amended on December 11, 2000, recorded in Vol. 23, Pg. 329, Official Records of
Jim Hogg Co., TX. 
  
 Portero: 
  
 Oil and Gas Lease dated January 10, 2001, between Mesteña Proven, Ltd. et al, as
Lessor, and Mesteña, Inc., as Lessee, a Memorandum of which was recorded in Vol. 24, Pg. 280 of the Official Records of Jim Hogg Co., TX, covering 320 ac., m/l, “San Antonio Baluarte” Jose Luis Salinas Grant, A-276, Jim Hogg Co.,
TX. 
  
 South Coyote: 
  
 Oil and Gas Lease dated September 26, 2000, by and between Mesteña Proven, Ltd. et
al, as Lessor, and Mesteña, Inc., as Lessee, a Memorandum of which was recorded in Vol. 21, Pg. 470 of the Official Records of Jim Hogg Co., TX, covering 1280.00 ac., m/l, being 1020.93 ac. out of the “San Antonio De Baluarte” Jose
Luis Salinas Sy., A-276 and 259.07 acres out of the Jno. Dewees Sy. No. 394, A-97 in Jim Hogg Co., TX. 
  
 Hermanas: 
  
 Oil and Gas Lease
dated January 12, 2001, between the State of TX, acting through its agent, Est. of W. W. Jones II, as Lessor, and Mesteña, Inc., as Lessee, recorded in Vol. 23, Pg. 459 & rerecorded in Vol. 24, Pg. 615, Official Records of Jim Hogg Co.,
TX, covering 172.87 ac., m/l, being all of the Ismael Guerra Sy. 910, A-144, Jim Hogg Co., TX. 
  
 Hot Wells (C&P Acquisition): 
  
 Oil and Gas Lease dated June 11, 1984, between Mesteña Oil & Gas Company, as Lessor, and CPC Exploration, Inc., as Lessee, as recorded in Vol. 104, Pg. 82 and amended & recorded in Vol. 118, Pg. 369 and Vol. 118, Pg. 385, Oil
and Gas Lease Records of Jim Hogg Co., TX, INSOFAR & ONLY INSOFAR AS said lease covers 640 ac., m/l, being the 320-ac. Cox & Perkins Hot Wells No. 1 Gas Unit and the 320-ac. Cox & Perkins Hot Wells No. 2 Gas Unit as
further described in Exhibits “B” & “C,” respectively, to Partial Release of Oil and Gas Lease and Designation of Units recorded in Vol. 124, Pg. 129, Oil and Gas Lease Records of Jim Hogg Co., TX. 
  
 Pump Jack (C&P Acquisition): 
  
 Oil and Gas Lease dated June 11, 1984, between Mesteña Oil & Gas Company, as
Lessor, and CPC Exploration, Inc., as Lessee, as recorded in Vol. 104, Pg. 89 and amended & recorded in 
  

 A-7 

 Vol. 115, Pg. 76 and Vol. 115, Pg. 63, Oil and Gas Lease Records of Jim Hogg Co., TX, INSOFAR & ONLY INSOFAR
AS said lease covers 319.96 ac., m/l, being the Cox & Perkins Pump Jack No. 1 Gas Unit, described in Exhibit “B” to Partial Release of Oil and Gas Lease and Designation of Unit recorded in Vol. 124, Pg. 152, Oil and Gas
Lease Records of Jim Hogg Co., TX. 
  
 Llano (C&P Acquisition):

  
 Oil and Gas Lease dated September 9, 1985, between Mesteña Oil &
Gas Company, as Lessor, and Alta Vista Exploration, Inc., as Lessee, as recorded in Vol. 111, Pg. 40, Oil and Gas Lease Records of Jim Hogg Co., TX, covering 318.79 ac., m/l, out of the “Palo Blanco” Grant, Antonio Pena Sy., A-246, Jim
Hogg Co., TX. 
  
 Jaboncillo: 
  
 Oil and Gas Lease dated December 29, 1976, between Mesteña Oil & Gas Company, as
Lessor, to C&K Petroleum, Inc., as Lessee, recorded in Vol. 73, Pg. 45, Oil and Gas Lease Records of Jim Hogg Co., TX, INSOFAR & ONLY INSOFAR AS said lease covers lands and depths earned with the Mesteña
Operating—Jaboncillo No. 1 Well drilled under that certain Farmout Agreement dated November 30, 2001, by and between Cody Texas, L.P., as Farmor, and Mesteña Operating, Ltd., as Farmee. 
  
 Leoncito: 
  
 Oil and Gas Lease dated August 3, 1989, by & between Mesteña Oil & Gas Company, as Lessor, and The California Company, as
Lessee, a Memorandum of which was recorded in Vol. 130, Pg. 193 of the Oil and Gas Lease Records of Brooks Co., TX, as amended by Agreement to Amend Land Description of Oil and Gas Lease dated September 11, 1990 and recorded in Vol. 133, Pg. 39 of
the Oil and Gas Lease Records of Brooks Co., TX, and as amended by Partial Release of Oil and Gas Lease dated March 5, 1992 and recorded in Vol. 135, Pg. 723 of the Oil and Gas Lease Records of Brooks Co., TX, and as amended by Agreement to Amend
Land Description of Oil and Gas Lease dated March 7, 1994 and recorded in Vol. 141, Pg. 571 of the Oil and Gas Lease Records of Brooks Co., TX, INSOFAR & ONLY INSOFAR AS said Lease covers the 160-ac. tract around the
Leoncito No. 19 Gas Unit in the “Las Mestenas Y Gonzalena” Rafael Garcia Salinas Sy., A-480, Brooks Co., TX. 
  
 Libre: 
  
 Oil and Gas Lease dated December 7, 2000, between Eshleman Ranches et al, as Lessor, and Mesteña, Inc., as Lessee, a Memorandum of which was recorded in Volume 23, Page 213, of the Official Records of Jim Hogg
County, Texas, as amended and recorded in Volume 25, Page 100 and Volume 26, Page 259 of the Official Records of Jim Hogg County, Texas, covering 1920 acres out of the 8,711.35-acre “Morgan Tract” in the Palo Blanco Grant originally
granted to Francisco Pena, A-247 and Antonio Pena, A-246, INSOFAR AND ONLY INSOFAR as the lease covers the following: 
  
 320-acre Mesteña-Libre No. 1 Gas Unit, recorded in Volume 34, Page 164 of the Official Records of Jim Hogg County, Texas, limited to the interval from the surface
down to 10,538 feet. 
  

 A-8 

 320-acre Mesteña-Libre No. 2 Gas Unit, recorded in Volume 34, Page 170 of the Official Records of Jim Hogg County,
Texas, limited to the interval from the surface down to 10,552 feet. 
  
 320-acre
Mesteña-Libre No. 3 Gas Unit, recorded in Volume 34, Page 176 of the Official Records of Jim Hogg County, Texas, limited to the interval from the surface down to 10,648 feet. 
  
 320-acre Mesteña-Libre No. 4 Gas Unit, recorded in Volume 34, Page 181 of the Official Records of Jim Hogg County, Texas, limited to
the interval from the surface down to 10,524 feet. 
  
 320-acre
Mesteña-Libre No. 6 Gas Unit, recorded in Volume 34, Page 186 of the Official Records of Jim Hogg County, Texas, limited to the interval from the surface down to 10,560 feet. 
  
 320-acre Mesteña-Libre No. 11 Gas Unit, recorded in Volume 34, Page 191 of the Official Records of Jim Hogg County, Texas, limited to
the interval from the surface down to 10,546 feet. 
  
 Llano:

  
 Oil and Gas Lease dated May 3, 2001, by and between Mesteña Proven,
Ltd. et al, as Lessor, and Mesteña, Inc., as Lessee, a Memorandum of which was recorded in Volume 25, Page 591 of the Official Records of Jim Hogg Co., TX, as amended by that certain Partial Release of Oil and Gas Lease dated February 18,
2002 and recorded in Volume 32, Page 518 of the Official Records of Jim Hogg Co., TX, covering 320 acres, m/l, out of the Palo Blanco Antonio Pena Survey, A-246 in Jim Hogg Co., TX. 
  
 Mesquite Creek: 
  
 Oil and Gas Lease dated January 18, 2002, by and between Mesteña Proven, Ltd. et al, as Lessor, and Mesteña Operating, Ltd., as Lessee, a Memorandum of
which was recorded in Volume 31, Page 5 of the Official Records of Jim Hogg Co., TX, covering 160 acres, m/l, out of the Palo Blanco Grant, Francisco Pena Survey, A-247 in Jim Hogg Co., TX. 
  
 Palitos Blancos: 
  
 Oil and Gas Lease dated July 3, 2002, between Mesteña Proven, Ltd., as Lessor and Mesteña Operating, Ltd., as Lessee, a
Memorandum of which was recorded in Volume 33, Page 741 of the Official Records of Jim Hogg Co., TX, covering 320 acres out of Block 10 of the Fowler and Rankin Subdivision as shown on a Map recorded in Volume 26, Page 350 of the Deed Records of Jim
Hogg Co., TX, and situated in the “Palitos Blancos” Rafael G. Sais Survey, A-274, Jim Hogg Co., TX. 
  

 A-9 

 Borregos: 
  
 Pursuant to Section 6.3(i), Buyer will provide Seller with a description of the Borregos Lease no later than five (5) days prior to the Objection Date. 

 

 A-10 

 Exhibit B 
  
 Wells 
  

								
	 CEPRES LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 CEPRES #2
	  	0.666668	  	0.500001	  	$	1,300,000
				
	 GUILITA LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 GUILITA # 1
	  	0.666668	  	0.500001	  	$	275,000
	 GUILITA # 2
	  	0.666668	  	0.500001	  	$	1,900,000
	 GUILITA # 3
	  	0.666668	  	0.500001	  	$	875,000
	 GUILITA # 4
	  	0.666668	  	0.500001	  	$	4,450,000
	 GUILITA # 5
	  	0.666668	  	0.500001	  	$	1,600,000
	 GUILITA # 6
	  	0.666668	  	0.500001	  	$	700,000
	 GUILITA # 7
	  	0.666668	  	0.500001	  	$	115,000
	 GUILITA # 9
	  	0.666667	  	0.500000	  	$	50,000
				
	 PORTERO LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 PORTERO #1
	  	0.666666	  	0.500001	  	$	2,350,000
				
	 SOUTH COYOTE LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 SOUTH COYOTE #1
	  	0.666668	  	0.500001	  	$	900,000
	 SOUTH COYOTE #2
	  	0.666668	  	0.500001	  	$	1,000,000
	 SOUTH COYOTE #3
	  	0.666668	  	0.500001	  	$	1,325,000
	 SOUTH COYOTE #4
	  	0.666668	  	0.500001	  	$	700,000
	 SOUTH COYOTE #6
	  	0.666667	  	0.500000	  	$	1,450,000
	 SOUTH COYOTE #7
	  	0.666667	  	0.500000	  	$	1,250,000
				
	 HERMANAS LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 HERMANAS - STATE #1
	  	0.750000	  	0.562500	  	$	1,350,000
				
	 HOT WELLS LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 HOT WELLS #1
	  	0.525000	  	0.367501	  	$	140,000
	 HOT WELLS #2
	  	0.525000	  	0.367501	  	$	50,000
				
	 PUMP JACK LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 PUMP JACK #1
	  	0.525000	  	0.367501	  	$	50,000
				
	 LLANO (C&P) LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 LLANO #1
	  	0.410417	  	0.287292	  	$	75,000

  

 B-1 

								
				
	 LLANO LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 LLANO #1
	  	0.750000	  	0.562500	  	$	125,000
				
	 JABONCILLO LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 JABONCILLO #1
	  	0.525528	  	0.394146	  	$	1,300,000
				
	 LEONCITO LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 LEONCITO #19
	  	0.666667	  	0.500000	  	$	0
				
	 LIBRE LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 LIBRE # 1
	  	0.750000	  	0.562500	  	$	2,900,000
	 LIBRE # 2
	  	0.750000	  	0.562500	  	$	3,300,000
	 LIBRE # 4
	  	0.750000	  	0.562500	  	$	3,600,000
	 LIBRE # 6
	  	0.750000	  	0.562500	  	$	2,450,000
	 LIBRE # 8
	  	0.750000	  	0.562500	  	$	1,500,000
	 LIBRE # 9
	  	0.750000	  	0.526500	  	$	4,450,000
	 LIBRE # 10
	  	0.750000	  	0.562500	  	$	2,700,000
	 LIBRE # 11
	  	0.750000	  	0.562500	  	$	1,900,000
	 LIBRE # 12
	  	0.750000	  	0.562500	  	$	2,700,000
				
	 MESQUITE CREEK LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 MESQUITE CREEK #1
	  	0.750000	  	0.562500	  	$	80,000
				
	 PALITOS BLANCOS LEASE

	  	WI

	  	NRI

	  	Allocated Value

	 PALITOS BLANCOS #1
	  	0.475000	  	0.340417	  	$	50,000

  

 B-2 

												
	 BORREGOS LEASE

	  	 	 	WI

	  	NRI #1

	  	NRI #21

	  	Allocated Value

	 CHARCO NUEVO #1
	  	BPO	 	0.475000	  	0.340417	  	0.328542	  	$	450,000
	 	  	APO2	 	0.356250	  	0.255313	  	0.246406	  	 	 
	 HORSE TRAP #1
	  	BPO	 	0.475000	  	0.340417	  	0.328542	  	$	250,000
	 	  	APO2	 	0.356250	  	0.255313	  	0.246406	  	 	 
	 HUISACHE #1
	  	BPO	 	0.475000	  	0.340417	  	0.328542	  	$	200,000
	 	  	APO2	 	0.356250	  	0.255313	  	0.246406	  	 	 
	 PALOMAS RANCH #1
	  	BPO	 	0.475000	  	0.364167	  	 	  	$	140,000
	 	  	APO2	 	0.356250	  	0.273125	  	 	  	 	 
						
	 TOTAL
	  	 	 	 	  	 	  	 	  	$	50,000,000

	1	NRI #2 reflects the automatic increase in royalty reserved under the Jones Est. lease (from twenty-five percent (25%) to twenty-seven-and-a-half percent (27.5%) upon
expiration of twelve (12) months after its production from depths above eight thousand (8,000) feet and twenty-four (24) months from first production from a well producing solely from depths below eight thousand (8,000) feet.

	2	Payout occurs the first day of the month following the date on which Buyer recovers one hundred percent (100%) of its Borregos Lease costs (3D, leases, wells, etc.),
less and except any dry holes and/or uneconomic wells and all ancillary or related costs associated therewith (e.g., land, lease and all other costs allocable to such Wells). Other than the payout referenced above, which is further described in
Schedule 2.13, there are no other back-in interests associated with this Lease, as referenced in that certain Letter Agreement dated October 6, 2004 by and between Contango Oil & Gas Company and Juneau Exploration, LLC.

  

 B-3 

 Exhibit C 
  
 Wire Transfer Instructions 
  
 Guaranty Bank, FSB 
 ABA No. 314-970-664

 For Credit to: Contango STEP, LP 
 Account No. 4990004345

  

 C-1 

 Exhibit D 
  
 Form of Assignment and Bill of Sale 
  
 ASSIGNMENT AND BILL OF SALE 
  

			
	 STATE OF TEXAS
	  	§
	 	  	§
	 COUNTY OF             
	  	§

  
 This Assignment and
Bill of Sale (the “Assignment”), effective as of 7:00 a.m. Central Time on July 1, 2004, the (the “Effective Time”), is made by CONTANGO STEP, L.P., a Texas limited Partnership (the
“Assignor”), whose address is 7600 West Tidwell, Suite 103, Houston, Texas 77040, to EDGE PETROLEUM EXPLORATION COMPANY, a Delaware corporation (the “Assignee”), whose address is 1301 Travis Street,
Suite 2000, Houston, TX 77002. 
  
 NOW, THEREFORE, for good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby acknowledged by Assignor, Assignor has granted, sold, bargained, transferred, conveyed, set over and assigned, and by these presents does hereby grant, bargain, sell,
transfer, convey, set over, assign, and deliver unto Assignee, its successors and assigns, the following properties, assets, rights, and obligations: 
  
 (a) All of Assignor’s right, title and interest in the oil and gas leases described in Exhibit A (each a “Lease” and
sometimes, collectively, the “Leases”); 
  
 (b) All of Assignor’s right, title and interest in all oil and/or gas wells, whether producing, operating, shut-in or temporarily abandoned, located on the lands covered by the Leases or pooled therewith, including, without limitation,
those described in Exhibit B (each a “Well” and sometimes, collectively, the “Wells”); 
  
 (c) All of Assignor’s right, title and interest in all equipment, fixtures, machinery, tanks, pipelines, gathering lines, flow lines, saltwater and
other disposal wells, and other appurtenances and all other personal property located on the lands covered by the Leases or pooled therewith and used in connection with the ownership or operation thereof and the production of oil and/or gas
therefrom (collectively, the “Equipment”); 
  
 (d) All of Assignor’s right, title and interest in all contracts, agreements, leases and title instruments attributable to and affecting, only to the extent attributable to and affecting, the Leases, Wells and Equipment, including all
hydrocarbon sales, purchase, gathering, transportation, treating, storage, compression, marketing, exchange, processing and fractionating contracts, and joint operating agreements (each a “Contract” and, collectively, the
“Contracts”); and 
  
 (e) To the extent
assignable without payment of fees or charges, any seismic data (and proceeds from the sale thereof), together with any related data, studies, compilations, reserve reports, engineering data or other information, covering the Leases or surrounding
lands, other 
  

 D-1 

 than the Excluded Seismic Rights (as defined in Section 1.2 of that certain Asset Purchase Agreement by and among
Assignor, Assignor’s Parent Contango Oil & Gas Company, Assignee and Assignee’s Parent Edge Petroleum Corporation, dated as of October 7, 2004 (the “Agreement”)). 
  
 (all of which is herein called the “Interests”). 
  
 TO HAVE AND TO HOLD the Interests unto Assignee, its successors and assigns,
forever. 
  
 This Assignment is made and accepted subject to the
following: 
  
 1. THIS ASSIGNMENT OF THE INTERESTS IS MADE AND
ACCEPTED SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS AND ENCUMBRANCES AFFECTING THE INTERESTS. 
  
 2. ASSIGNOR HEREBY BINDS ITSELF AND ITS SUCCESSORS AND ASSIGNS TO WARRANT AND FOREVER DEFEND ALL AND SINGULAR THE INTERESTS UNTO ASSIGNEE, ITS SUCCESSORS
AND ASSIGNS, AGAINST EVERY PERSON WHOMSOEVER, LAWFULLY CLAIMING OR TO CLAIM THE SAME, OR ANY PART THEREOF, BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE. 
  
 3. TO THE EXTENT REQUIRED TO BE OPERATIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS ASSIGNMENT ARE “CONSPICUOUS” DISCLAIMERS FOR
THE PURPOSE OF ANY APPLICABLE LAW, RULE OR ORDER. ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES AS TO PERSONAL PROPERTY AND FIXTURES (A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. ASSIGNEE EXPRESSLY AGREES THAT SUCH PERSONAL PROPERTY WILL BE ACCEPTED “AS IS, WHERE IS, AND WITH ALL FAULTS,” AND IN ITS PRESENT CONDITION
AND STATE OF REPAIR, ASSIGNOR DISCLAIMS AND MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE INTERESTS, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUALIFY, QUANTITY OR
VOLUME OF THE RESERVES, IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE LEASES, OR THE ENVIRONMENTAL CONDITION OF THE INTERESTS. ASSIGNEE HAS INSPECTED THE INTERESTS FOR ALL PURPOSES AND HAS SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE. 
  
 4.
Assignor hereby gives and grants to Assignee, its successors and assigns, to the extent so transferable, full power and right of substitution and subrogation in and to all covenants and warranties by others heretofore given or made in respect to the
Interests or any part thereof. 
  

 D-2 

 5. This Assignment is made subject to the terms and provisions of the Agreement. Terms used herein and in
Exhibit A and Exhibit B shall have the same definitions as in said Agreement. In the event of a conflict between the terms and conditions of the Agreement and this Assignment, the Agreement shall govern and control. 
  
 6. The Interests herein assigned are subject to all the terms and provisions
of the Leases, to their proportionate share of all overriding royalty interests, lessor’s royalties, net profits interests, carried interests, reversionary interests and other interests, encumbrances, and burdens on the production therefrom to
the extent they are in existence and burden the Interests as of the Effective Time; to all covenants, conditions, obligations, and conditions in instruments and assignments in the chain of title to the Leases; and to all other encumbrances affecting
the Interests in existence on the Effective Time. Assignee hereby assumes and agrees to pay, perform and discharge its proportionate share of all obligations under the Leases and the agreements relating to the Leases herein assigned. The references
herein to obligations and encumbrances shall not be deemed to ratify or create any rights in third parties. 
  
 7. Reference is here made to the land descriptions contained in the documents of title recorded as described in Exhibit A. To the extent that any
land descriptions in Exhibit A are incorrect or not legally sufficient, the land descriptions contained in the documents so recorded are incorporated by this reference. 
  
 8. ASSIGNEE SHALL ASSUME ALL OF ASSIGNOR’S PLUGGING, REPLUGGING, ABANDONMENT, REMOVAL, DISPOSAL AND RESTORATION
OBLIGATIONS ASSOCIATED WITH THE INTERESTS, INCLUDING, BUT NOT LIMITED TO, (I) ALL NECESSARY AND PROPER PLUGGING, REPLUGGING, ABANDONMENT, REMOVAL AND DISPOSAL OF THE WELLS, STRUCTURES, AND EQUIPMENT LOCATED ON OR COMPRISING A PART OF THE INTERESTS,
(II) THE NECESSARY AND PROPER CAPPING AND BURYING ALL ASSOCIATED FLOW LINES, (III) THE PROPER ABANDONMENT AND RESTORATION OF ALL OIL AND GAS LEASEHOLD, FEE, AND OTHER PROPERTY COMPRISING A PART OF THE INTERESTS, BOTH SURFACE AND SUBSURFACE, AS MAY
BE REQUIRED BY APPLICABLE LAWS, REGULATIONS, OR CONTRACT, AND (IV) ANY NECESSARY DISPOSAL OF NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM). ASSIGNEE SHALL BE RESPONSIBLE FOR THE PLUGGING AND ABANDONMENT OF ANY WELLS DRILLED AND THE REMOVAL OF ANY
STRUCTURES PLACED ON THE INTERESTS BEFORE OR AFTER THE EFFECTIVE TIME. ALL PLUGGING, REPLUGGING, ABANDONMENT, REMOVAL, DISPOSAL, AND RESTORATION OPERATIONS SHALL BE IN COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS AND BE PERFORMED IN A GOOD AND
WORKMANLIKE MANNER. ASSIGNEE SHALL INDEMNIFY AND HOLD ASSIGNOR HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITY, DEMANDS, AND CAUSES OF ACTION NOW OR HEREAFTER EXISTING FOR THE PLUGGING, REPLUGGING, ABANDONMENT, REMOVAL, DISPOSAL AND
RESTORATION OF THE INTERESTS HEREIN ASSIGNED. ALL ASSUMPTIONS OF LIABILITY BY ASSIGNEE AND INDEMNIFICATIONS PROVIDED FOR IN THIS AGREEMENT SHALL APPLY AND BE BINDING UPON ASSIGNEE (WITH THE EXCEPTION OF ANY RETAINED REMEDIATION 
  

 D-3 

 OBLIGATIONS, AS DEFINED IN THE AGREEMENT). NOTWITHSTANDING THAT THE APPLICABLE LIABILITY OR OBLIGATION ARISES OUT OF THE
SOLE OR CONCURRENT LIABILITY OF ASSIGNOR, THE STRICT LIABILITY OF ASSIGNOR OR THE CONDITION OF THE PREMISES OF THE INTERESTS. 
  
 9. Assignee shall comply with all current and subsequently amended laws, ordinances, rules, and regulations applicable to the Interests and shall promptly
obtain and maintain all permits and bonds required by governmental authorities in connection with the Interests and Assignee’s ownership and operation thereof. 
  
 10. This Assignment and all of the terms, provisions, covenants, indemnities, obligations, and conditions herein contained
shall be binding upon and inure to the benefit of and be enforceable by the Assignor, Assignee and their respective successors, legal representatives, and assigns. 
  
 EXECUTED on this              day of
             200    , but effective for all purposes as of the Effective Time. 
  

			
	 ASSIGNOR:

	
	 CONTANGO STEP, L.P., a Texas limited
 partnership

		
	 By:
	 	 CONTANGO STEP I, INC., a Delaware

	 corporation, its sole general partner

		
	 By:
	 	  

	 	 	 Kenneth R. Peak,

	 	 	 Chairman and Chief Executive Officer

	
	 ASSIGNEE:

	
	 EDGE PETROLEUM EXPLORATION
 COMPANY

	 a Delaware corporation

		
	 By:
	 	  

	 	 	 C.W. MacLeod

	 	 	 Sr. Vice President

	 	 	 Business Development & Planning

  

 D-4 

 ACKNOWLEDGMENT 
  

			
	 STATE OF TEXAS
	  	§
	 	  	§
	 COUNTY OF HARRIS
	  	§

  
 This instrument was
acknowledged before me on the              day of              200    , by Kenneth R.
Peak, Chairman and Chief Executive Officer of Contango STEP I, Inc., a Delaware corporation and general partner of Contango STEP, L.P., a Texas limited partnership, on behalf of said limited partnership. 
  

			
	 My Commission Expires:
	 	 
		
	  

	 	  

	 	 	    Notary Public, State of Texas

  

 D-5 

 ACKNOWLEDGMENT 
  

			
	 STATE OF TEXAS
	  	§
	 	  	§
	 COUNTY OF HARRIS
	  	§

  
 This instrument was
acknowledged before me on the              day of              200    , by C.W. MacLeod,
Sr. Vice President Business Development & Planning, of Edge Petroleum Exploration Company, a Delaware corporation, on behalf of said corporation. 
  

			
	 My Commission Expires:
	 	 
		
	  

	 	  

	 	 	    Notary Public, State of Texas

  

 D-6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}]]