Purchase and Sale Agreement dated as of January 16, 2018, by and among Wagon Wheel ArklaTex, LLC, Green Wheel, LLC and Empire Petroleum Corporation

Except to the extent as may be limited by the Leases, all of Seller's rights, privileges, benefits and powers conferred upon Seller, as the holder of any Lease, with respect to the use and occupation of the surface of, as well as the subsurface depths under, the lands covered by such Lease that may be necessary or useful to the possession and enjoyment of such Lease; except to the extent as may be limited by the Leases, all of Seller's rights in any pools or units which include all or any part of any Lease or any Well (the "Units"), including Seller's right, title and interest in production from any Unit, regardless of whether such Unit production is derived from wells located on or off a Lease and Seller's right, title and interest in any wells within any such Unit;

To the extent assignable, all of Seller's right, title and interest in and to surface or subsurface use agreements, authorizations, permits and similar rights and interests listed on Exhibit "A-3";

To the extent assignable, all of Seller's right, title and interest in and to the permits, seismic permits, licenses, servitudes, easements, rights-of-way, orders, lease agreements, royalty agreements, assignments, gas purchase and sale contracts, oil purchase and sale agreements, farmin and farmout agreements, transportation and marketing agreements, operating agreements, unit agreements, processing agreements, options, facilities or equipment leases and other contracts, agreements and rights described in Exhibit "A-4", but excluding any such contracts, agreements and rights where transfer of same is prohibited by third party agreement or operation of law (collectively, the "Contracts");

All real, personal, and mixed, movable and immovable property, fixtures, and facilities, including, without limitation, all: fee interests in minerals, surface interests and timber, oil wells, gas wells, saltwater disposal wells, water injection wells, and water source wells (whether producing, plugged and abandoned, temporarily plugged, held for future utility, shut-in, injection, disposal, or fresh water supply); gas gathering systems and lines, treating systems, processing systems, amine units, flow lines, injection lines, other pipelines, buildings, tanks, boilers, compressors and all other fixtures and improvements attached and appurtenant, described in Exhibit "A-5" and those used in connection with the Assets described on Exhibits A-1, A-2, A-3 and A-4 (collectively, the "Real Estate and Improvements").

All of Seller's right, title and interest in and to all equipment, including, without limitation, all: machinery, equipment (surface and downhole), tubing rods, engines, pumping units, inventory, utility lines, power lines, telephone lines, roads and other appurtenances, including all used or acquired for use with the Assets described in Exhibits, A-1, A-2, A-3, A-4, and A-5, and that equipment listed specifically on Exhibit "A-6", (collectively, the "Equipment");

All of Seller's right, title and interest in effect and of record as of the Effective Date in and to the Hydrocarbons produced from the Assets after the Effective Date, including "line fill" and inventory below the pipeline connection in tanks, attributable to the Wells, the Leases and Units; and

Copies of, all of the files, records, information and data relating directly to the Assets in Seller's possession, including title records, title opinions, title certificates, production records, severance tax records, and all other information relating directly to the ownership or operation of the Assets, but exclusive of (i) any such records, data or information where transfer of same is prohibited by third party agreements or applicable law, as to which Seller is unable to secure a waiver, (ii) accounting and tax records related to the Assets, (iii) internal reserve reports and estimates and (iv) the work product of Seller's legal counsel, excluding title opinions (collectively, the "Records").  Seller will be entitled to retain a copy of the Records.

All trade credits and all accounts, instruments and general intangibles attributable to the Assets with respect to any period of time prior to the Effective Date;

All claims and causes of action of Seller (i) arising from acts, omissions or events related to, or damage to or destruction of, the Assets, occurring prior to the Effective Date, (ii) arising under or with respect to any of the Contracts that are attributable to periods of time prior to the Effective Date (including claims for adjustments or refunds), or (iii) with respect to any of the Excluded Assets;

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

All Hydrocarbon production from or attributable to the Assets with respect to all periods prior to the Effective Date, together with all proceeds from or of such Hydrocarbons, and all Hydrocarbons that, as of the Effective Date, are owned by Seller and in storage or otherwise held in inventory and all proceeds attributable thereto;

All amounts resulting from any hedging transactions and any gains or losses attributable to any hedging activities entered into prior to the Effective Date by Seller with respect to the Assets;

All proceeds, income, revenues or other benefits (including any benefit attributable to any future laws or regulations in respect of "royalty relief" or other similar measures) not otherwise enumerated above, as well as any security or other deposits made, attributable to (i) the Assets for any period prior to the Effective Date, or (ii) any Excluded Assets;

Any of Seller's corporate, limited liability company, partnership, financial and tax records;

Any of Seller's proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property;

All documents and instruments of Seller relating to the Assets that may be protected by an attorney-client privilege;

Data in respect of the Assets that cannot be disclosed or assigned to Buyer without breaching confidentiality arrangements under agreements with persons unaffiliated with Seller;

All audit rights arising under any of the Contracts or otherwise with respect to any period prior to the Effective Date or to any of the Excluded Assets; and

All items listed in Exhibit "D".

At the Closing, Buyer shall pay to Seller cash equal to the Adjusted Purchase Price.

All cash payments by Buyer to Seller pursuant to this Article II shall be made in immediately available funds by confirmed wire transfer to a bank account designated by Seller to Buyer as provided in Section 2.04(d).

The Purchase Price shall be adjusted upward by the following (determined without duplication and on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and on a sales, not entitlements, method of accounting):

the value (i) of all oil in storage above the pipeline connection as of the Effective Date and not previously sold by Seller that is attributable to the Assets (such value to be based upon the price for similar production most recently paid prior to the Effective Date less applicable production taxes, royalties and other burdens on such production), such oil to be measured as of the Effective Date based on gauge reports to the extent available or, if not, on alternative methods to be agreed upon by the parties, and (ii) the net market value of Seller's inventory of gas plant products not previously sold by Seller that is attributable to the Assets.

the amount of all expenditures, net to Seller's interest, (including all capital expenditures, lease operating expenses, royalties, rentals and other charges, ad valorem, property, production, excise, severance and similar taxes, but not including income taxes, federal or state) based upon, or measured by, the ownership of the Assets or the production of Hydrocarbons or the receipt of proceeds therefrom, paid by, or on behalf of, Seller in connection with the operation of the Assets, in accordance with generally accepted accounting principles and attributable to the period on and after the Effective Date (the "Adjustment Period");

an amount equal to all prepaid expenses attributable to the Assets that have been paid by, or on behalf of, Seller that are, in accordance with generally accepted accounting principles, attributable to the Adjustment Period, including prepaid insurance premiums, prepaid utility charges and prepaid ad valorem, property, production, severance and similar taxes based upon, or measured by, the ownership of the Assets or the production of Hydrocarbons or the receipt of proceeds therefrom, and all other prepaid expenses;

by the value of each one-percent (or fraction thereof) of increase in NRI above the NRI set forth in Exhibit "A-2", with respect to any Well, such value to be calculated by dividing the applicable Allocated Value of a Well by the NRI set forth in said Exhibit "A-2" for such Well and multiplying the result thereof by the increase in NRI, but only to the extent necessary to offset any adjustments to the Purchase Price for Title Defects and Environmental Defects pursuant to Section 2.04(b)(3) in connection with Section 6.03; and

an amount equal to the sum of any upward adjustments provided elsewhere herein or as agreed to in writing by Buyer and Seller.

The Purchase Price shall be adjusted downward by the following (determined without duplication and on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and on a sales, not entitlements, method of accounting):

the aggregate amount of proceeds received, or to be received, by Seller from the sale of Hydrocarbons produced from the Leases, Units and Wells or otherwise in any way attributable to the Assets during the Adjustment Period (net of any production royalties, transportation costs and of any production, severance or sales taxes paid, or to be paid, by Seller, using actual sales, not Seller's entitlement, where such sales are greater than or less than Seller's entitlement);

all amounts otherwise received, or to be received by, Seller and attributable to the ownership of the Assets during the Adjustment Period; and

an amount equal to the sum of any downward adjustments provided elsewhere in this Agreement (including Sections 6.03 and 7.05) or any other adjustments agreed to in writing by Buyer and Seller (without any additional adjustment to extent offset against the adjustment to otherwise to be made pursuant to Section 2.04(a)(4)).

The adjustment described in Sections 2.04(a)(2) and (3) shall serve to satisfy, up to the amount of the adjustment, Buyer's obligation to pay operating expenses of the Assets for the period between the Effective Date and Closing, and Buyer shall not be separately obligated to pay the various payees for such expenses. Similarly, the adjustments described in Section 2.04(b)(1) shall serve to provide Buyer, up to the amount of the adjustment, with the value of the Hydrocarbons and the proceeds and products from the Assets to which Buyer is entitled between the Effective Date and Closing, and Buyer shall not have any separate rights to receive the production, proceeds and products affected.

Seller shall prepare, in accordance with this Agreement and generally accepted accounting principles, and deliver to Buyer a settlement statement (the "Preliminary Settlement Statement") not less than five (5) days prior to Closing for Buyer's review.  The Preliminary Settlement

From the date of this Agreement until 5 p.m. (local time in Jenks, Oklahoma) on January 29, 2018 (the "Examination Period"), Seller shall afford to Buyer and its authorized representatives reasonable access during normal business hours to the office, personnel and books and records of Seller in order for Buyer to conduct a title examination as it may in its sole discretion choose to conduct with respect to the Assets in order to determine whether Title Defects (as below defined) exist ("Buyer's Title Review"); provided, however, that such investigation shall be upon reasonable notice and shall not unreasonably disrupt the personnel and operations of Seller or impede the efforts of Seller to comply with its other obligations under this Agreement.  Such books and records shall include all abstracts of title, title opinions, title files, lease files, assignments, division orders, operating records and agreements, and financial and accounting records, in each case insofar as same may now be in existence and in the possession of Seller, excluding, however, any

 

 

If Buyer discovers any Title Defect affecting any of the Assets, Buyer shall notify Seller prior to the expiration of the Examination Period of such alleged Title Defect.  To be effective, such notice ("Title Defect Notice") must (i) be in writing, (ii) be received by Seller prior to the expiration of the Examination Period, (iii) describe the Title Defect in reasonable detail (including any alleged variance in the Net Revenue Interest), (iv) identify the specific Asset affected by such Title Defect, (v) include the value of such Title Defect as determined by Buyer in good faith and (vi) set forth the action that Buyer reasonably believes needs to be taken in order to cure the Title Defect.  Any matters that may otherwise constitute Title Defects, but of which Seller has not been specifically notified by Buyer in accordance with the foregoing, shall be deemed to have been waived by Buyer for all purposes.  Upon the receipt of such effective Title Defect Notice from Buyer, Seller shall have the option, in addition to the remedies set forth in Section 6.01(c) (the "Remedies for Title Defects"), but not the obligation, to attempt to cure such Title Defect at any time prior to the Closing.  The Asset affected by such uncured Title Defect shall be a "Title Defect Property".

With respect to each Title Defect that is not cured or waived on or before the Closing, the Purchase Price shall be reduced by the Title Defect Amount with respect to such Title Defect Property.  The "Title Defect Amount" shall mean, with respect to a Title Defect Property, the amount by which such Title Defect Property is impaired as a result of the existence of one or more Title Defects, which amount shall be determined as follows:

The Title Defect Amount with respect to a Title Defect Property shall be determined by taking into consideration the "Allocated Value" (as set forth in Exhibit "B") of the Asset subject to such Title Defect, the portion of the Asset subject to such Title Defect, and the legal effect of such Title Defect on the Asset affected thereby;

If the Title Defect results from any matter not described in Section 6.01(c)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Title Defect Property affected by such Title Defect with such Title Defect and the value of such Title Defect Property without such Title Defect (taking into account the portion of the Allocated Value of the Title Defect Property).

As used in this Section 6.01:

"Marketable Title" means, as of the Closing Date, with respect to the Assets, such record title and ownership by Seller that:

entitles Seller to receive and retain, without reduction, suspension or termination, not less than the percentage set forth in Exhibit "B" as Seller's "Net Revenue Interest" of all Hydrocarbons produced, saved and marketed from each well or unit comprising such Asset as set forth in Exhibit "B," through plugging, abandonment and salvage of all wells comprising or included in such Asset, and except for changes or adjustments that result from the establishment of units, changes in existing units (or the participating areas therein), or the entry into of pooling or unitization agreements after the date hereof unless made in breach of the provisions of Section 7.01;

obligates Seller to bear not greater than the percentage set forth in Exhibit "B" as Seller's "Working Interest" of the costs and expenses relating to the maintenance, development and operation of each lease, well or unit comprising such Asset, through plugging, abandonment and salvage of all wells comprising or included in such Asset, and except for changes or adjustments that result from the establishment of units, changes in existing units (or the participating areas therein), or the entry into of pooling or unitization agreements after the date hereof unless made in breach of the provisions of Section 7.01; and

is free and clear of all Liens, except Permitted Encumbrances.

"Permitted Encumbrances" shall mean (A) Liens for taxes which are not yet delinquent or which are being contested in good faith and for which Seller shall be responsible after the Closing; (B) normal and customary liens of co-owners under operating agreements, unitization agreements, and pooling orders relating to the Assets, which obligations are not yet due and pursuant to which Seller is not in default; (C) mechanic's and materialman's Liens relating to the Assets, which obligations are not yet due and for which Seller shall be responsible after the Closing; (D) Liens in the ordinary course of business consisting of minor defects and irregularities in title or other restrictions (whether created by or arising out of joint operating agreements, farm-out agreements, leases and assignments, contracts for purchases of Hydrocarbons or similar agreements, or otherwise in the ordinary course of business) that are of the nature customarily accepted by prudent purchasers of oil and gas properties and do not materially affect the value of any property encumbered thereby or materially impair the ability of the obligor to use any such property in its operations; (E) all approvals or rights to consent by, required notices to, filing with or other actions by Governmental Entities, including the Louisiana State Mineral and Energy Board acting on behalf of the State of Louisiana, in connection with the sale or conveyance of oil and gas leases or interests therein if they are customarily obtained subsequent to the sale or conveyance; (F) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of operations, pipelines, or facilities or the like to the extent the same do not unreasonably interfere with the operation and ownership of the Assets; (G) easements, rights-of-way, servitudes, permits and other rights, on, over or in respect of any of the Leases to the extent the same do not unreasonably interfere with the operation and ownership of the Assets; (H) other Liens, contracts, agreements, instruments, obligations, defects and irregularities affecting the Wells which individually or in the aggregate do not reduce the interest of Seller with respect to Hydrocarbons produced from (or, where subject to a unit or pooling agreement, allocated to) any Wells below the "Net Revenue Interest" or "NRI" set forth at Exhibit "B" for the Wells, increase the interest of Seller with respect to Hydrocarbons produced from (or, where subject to a unit or pooling agreement, allocated to) any Wells above "Working Interest" set forth at Exhibit "B" for the Wells or unreasonably

"Title Defect" shall mean any particular defect in or failure of Seller's ownership of any Asset: (A) that causes Seller to not have Marketable Title to such Asset, (B) regarding which a Title Defect Notice has been timely and otherwise validly delivered, and (C) that has attributable thereto a Title Defect Value in excess of $10,000.00.  Notwithstanding any other provision in this Agreement to the contrary, the following matters shall not constitute, and shall not be asserted as, a Title Defect:  (1) defects or irregularities arising out of lack of corporate authorization or a variation in corporate name, unless Buyer provides affirmative evidence that such corporate action was not authorized and results in another person's superior claim of title to the relevant Asset; (2) defects or irregularities that have been cured or remedied by the passage of time, including applicable statutes of limitation or statutes for prescription; (3) defects or irregularities in the chain of title consisting of the failure to recite marital status in documents or omissions of heirship proceedings; (4) defects or irregularities in title that have not delayed or prevented Seller (or Seller's predecessor, if owned by Seller less than three years) from receiving its Net Revenue Interest share of the proceeds of production and have not caused Seller to bear a share of expenses and costs greater than its Working Interest share from any lease, unit or well for a period of (10) years or more; (5) defects or irregularities resulting from or related to probate proceedings or the lack thereof which defects or irregularities have been outstanding for three years or more; and (6) conventional rights of reassignment normally actuated by an intent to abandon or release a lease and requiring notice to the holders of such rights and any defect or irregularity as would normally be waived by persons engaged in the oil and gas business when purchasing producing properties.

Buyer shall have the right, or the right to cause an environmental consultant reasonably acceptable to Seller ("Buyer's Environmental Consultant") to conduct an environmental review of the Assets prior to the expiration of the Examination Period ("Buyer's Environmental Review").  The cost and expense of Buyer's Environmental Review, if any, shall be borne solely by Buyer.  With respect to any samples taken in connection with Buyer's Environmental Review, Buyer shall take split samples, providing one of each such sample, properly labeled and identified, to Seller.

Unless otherwise required by Applicable Law, Buyer shall (and shall cause Buyer's Environmental Consultant, if applicable, to) treat confidentially any matters revealed by Buyer's Environmental Review and any reports or data generated from such review (the "Environmental Information"), and Buyer shall not (and shall cause Buyer's Environmental Consultant, if applicable, to not) disclose any Environmental Information to any Governmental Entity or other third party without the prior written consent of Seller.  Unless otherwise required by Applicable Law, Buyer may use the Environmental Information only in connection with the transactions contemplated by this Agreement.  If Buyer, Buyer's Environmental Consultant, if applicable, or any third party to whom Buyer has provided any Environmental Information become legally compelled to disclose any of the Environmental Information, Buyer shall provide Seller with prompt notice sufficiently prior to any such disclosure so as to allow Seller, at Seller's expense, to file any protective order, or seek any other remedy, as it deems appropriate under the circumstances.  If this Agreement is terminated prior to the Closing, Buyer shall deliver the Environmental Information to Seller, which Environmental Information shall become the sole property of Seller.  Buyer shall provide copies of the Environmental Information to Seller without charge.

If Buyer and/or Buyer's Environmental Consultant, if applicable, discovers any On-site Environmental Defect (as herein defined) affecting the Assets or any Off-site Environmental Defect (as herein defined) prior to the expiration of the Examination Period, Buyer shall notify Seller prior to the expiration of the Examination Period of such alleged Environmental Defect.  To be effective, such notice (an "Environmental Defect Notice") must (i) be in writing, (ii) be received by Seller prior to the expiration of the Examination Period, (iii) describe the Environmental Defect in reasonable detail, (iv) identify the specific Asset affected by such Environmental Defect, (v) include the value of such Environmental Defect as determined by Buyer in good faith and (vi) set forth the action that Buyer reasonably believes needs to be taken in order to cure the Environmental Defect. Any matters that may otherwise constitute Environmental Defects, but of which Seller has not been specifically notified by Buyer in accordance with the foregoing, together with any environmental matter that does not constitute an Environmental Defect, shall be deemed to have been waived by Buyer for purposes of this Section 6.02.  Upon the receipt of such effective notice from Buyer, Seller shall have the option, in addition to the remedy set forth in Section 6.02(d), but not the obligation, to attempt to cure such Environmental Defect at any time prior to the Closing.

If any Environmental Defect described in a notice delivered in accordance with Section 6.02 is not cured on or before the Closing, then the Purchase Price shall be reduced, subject to this Section 6.02 and the rights of Seller under Section 6.05, by the Environmental Defect Value of such Environmental Defect.

As used in this Section 6.02:

"Environmental Defect" shall mean (i) with respect to any given Asset, a violation of Applicable Environmental Laws in effect as of the date hereof in the jurisdiction in which such Asset is located (an "On-site Environmental Defect") that requires an immediate remediation, or (ii) any liability under any Applicable Environmental Law with respect to offsite disposal of hazardous materials or substances or waste materials (an "Off-site Environmental Defect"), in either case regarding which an Environmental Defect Notice has been timely and otherwise validly delivered and that has attributable thereto an Environmental Defect Value in excess of $50,000.00.  It is specifically acknowledged and agreed that the presence in any wellbore, equipment, pipeline, flowline or vessel on or related to the Assets of naturally occurring radioactive material or asbestos shall not be deemed to constitute an Environmental Defect for purposes of this Agreement.

"Environmental Defect Value" shall mean, (i) with respect to any On-site Environmental Defect, the reasonably estimated costs and expenses to correct such Environmental Defect in the most cost effective manner reasonably available, consistent with Applicable Environmental Laws, taking into account that non-permanent remedies (such as mechanisms to contain or stabilize hazardous materials, including monitoring site conditions, natural attenuation, risk-based corrective action, institutional controls or other appropriate restrictions on the use of property, caps, dikes, encapsulation, leachate collection systems, etc.) may be the most cost effective manner reasonably available or (ii) with respect to any Off-site Environmental Defect, the amount that will be required to be paid by Seller to a third party in respect of a claim by such third party.

Following execution of this Agreement by the parties, Seller shall send to each third party holding a preferential right to purchase or acquire any Asset or any interest therein as a result of or in connection with the transactions contemplated by this Agreement (a "Preference Right"), a notice offering to sell to such holders, in accordance with the provisions of the agreement applicable to such Preference Right, the Asset covered by such Preference Right on substantially the same terms hereof and for the value allocated by Buyer to such an Asset on Exhibit "B".  If a third party who has been offered an interest in an Asset pursuant to a Preference Right makes a timely election prior to Closing to purchase all or part of such Asset pursuant to the aforesaid offer and Seller receives written notice of such election at least two (2) days prior to the Closing Date, the Asset or part thereof so affected will be eliminated from the Assets and (i) if all of such Asset is affected by the Preference Right, then the Purchase Price shall be reduced by the value of such Asset set forth on Exhibit "B", or (ii) if only an interest in such Asset is affected by the Preference Right, then the Purchase Price shall be reduced by the value of such interest determined in accordance with the method set forth in Section 6.01 as if such interest failed on account of a Title Defect.  If such third party has not made its election prior to Closing and the time to make such election has not yet expired, the Asset or interest therein affected shall be retained by Seller and the Purchase Price shall be reduced by (i) the value of such asset set forth on Exhibit "B" if all of such Asset is affected by such Preferential Right or, (ii) if only an interest in the Asset is so affected, by the value of such interest determined in accordance with the method set forth in Section 6.01.  If the third party elects to purchase such Asset or interest therein in accordance with its Preference Right following Closing, Seller shall convey such Asset or interest therein to such third party and shall retain the proceeds from such sale and thereafter such Asset shall be deemed to be an Excluded Asset for purposes of this Agreement; if the third party elects to waive its right to purchase or the time to make such election expires, Seller shall convey such Asset or portion thereof to Buyer and Buyer shall pay Seller the amount of the reduction in the Purchase Price with respect thereto.

Seller will notify third parties that have rights to require a consent to the transfer of an Asset (a "Transfer Requirement") in order to comply with or attempt to obtain waivers of such Transfer Requirements, except with respect to any Transfer Requirements deemed a Permitted Encumbrance in clause (E) of the definition thereof (6.01(d)(ii)).  If any Transfer Requirement is not obtained, complied with or otherwise satisfied prior to the Closing Date, any Asset or interest therein affected by such Transfer Requirement shall, at the option of Buyer, be retained by Seller and the Purchase Price shall be reduced by (i) the value of the Asset set forth on Exhibit B if all of such Asset is affected by such Transfer Requirement, or

Buyer shall have performed and complied, in all material respects, with all terms of this Agreement required to be performed by, or complied with, by Buyer prior to Closing.

Each of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects as of the date made and (having been deemed to have been made again on and as of the Closing Date in the same language) shall be true and correct in all material respects on and as of the Closing Date, except as affected by transactions permitted by this Agreement and except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct in all material respects as of such specified date.

No Proceeding shall, on the Closing Date, be pending before any Governmental Entity in which it is sought by a person or entity other than the parties hereto or any of their respective affiliates to restrain, prohibit or invalidate any of the transactions contemplated by this Agreement or to obtain damages in connection with the transactions contemplated herein.

Seller shall have performed and complied, in all material respects, with all terms of this Agreement required to be performed by, or complied with, by Seller prior to Closing.

Each of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date made and (having been deemed to have been made again on and as of the Closing Date in the same language) shall be true and correct in all material respects on and as of the Closing Date, except as affected by transactions permitted by this Agreement and except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct in all material respects as of such specified date.

No Proceeding shall, on the Closing Date, be pending before any Governmental Entity in which it is sought by a person or entity other than the parties hereto or any of their respective affiliates to restrain, prohibit or invalidate any of the transactions contemplated by this Agreement or to obtain damages in connection with the transactions contemplated herein.

Seller shall execute, acknowledge and deliver to Buyer the instruments of Assignment, Bill of Sale and Conveyance in substantially the forms of Exhibit "C" (the "Conveyances").

Buyer shall pay to Seller the Adjusted Purchase Price by wire transfer of immediately available federal funds as provided in the Preliminary Settlement Statement.

Seller and Buyer shall execute, acknowledge and deliver transfer orders or letters-in-lieu thereof in a form reasonably acceptable to both parties, along with written notification of changes of operator as required.

Seller shall execute and deliver to Buyer a non-foreign affidavit in the form attached hereto as Schedule "9.02(e)".

Buyer shall (i) furnish to Seller such evidence (including evidence of satisfaction of all applicable bonding requirements) as Seller may reasonably require that Buyer is qualified with applicable Governmental Entities to succeed Seller as the owner and, where applicable, the operator of the Assets, (ii) with respect to Assets operated by Seller where Buyer is to succeed Seller as operator, execute and deliver to Seller appropriate evidence reflecting change of operator as required by applicable Governmental Entities and (iii) execute and deliver to Seller such forms as Seller may reasonably request for filing with applicable Governmental Entities to reflect Buyer's assumption of plugging and abandonment liabilities and platform abandonment and removal liabilities with respect to the Assets, Wells or Units, including the forms required by Governmental Entities to transfer liability under any State of Louisiana or Bureau of Land Management leases and/or operating agreements.

Seller shall deliver to Buyer all monies held in suspense by Seller for the account of third parties in respect of the Assets.

by mutual written consent of Seller and Buyer; or

by either Seller or Buyer, if:

the Closing shall not have occurred on or before Closing Date, unless such failure to close shall be due to a breach of this Agreement by the party seeking to terminate this Agreement pursuant to this clause (i); or

there shall be any statute, rule, or regulation that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or a Governmental Entity shall have issued an order, decree, or ruling or taken any other action permanently restraining, enjoining, or otherwise prohibiting the consummation of the transactions contemplated hereby, and such order, decree, ruling, or other action shall have become final and non-appealable; or

by Seller, if (i) Buyer shall have failed to fulfill in any material respect any of its obligations under this Agreement;  (ii) any of the representations and warranties of Buyer contained in this Agreement shall not be true and correct in any respect which is material to Buyer or the ability of Buyer to consummate the transactions contemplated hereby, and, in the case of each of clauses (i) and (ii), such failure, misrepresentation, or breach of warranty (provided it can be cured) has not been cured within ten days after written notice thereof from Seller to Buyer; or (iii) if the aggregate amount of the Title Defects and Environmental Defects exceeds five percent (5%) of the Purchase Price; or

by Buyer, if (i) Seller shall have failed to fulfill in any material respect any of its obligations under this Agreement, (ii) any of the representations and warranties of Seller contained in this Agreement shall not be true and correct in any respect which is material to Seller or the ability of Seller to consummate the transactions contemplated hereby, and, in the case of each of clauses (i) and (ii), such failure, misrepresentation, or breach of warranty (provided it can be cured) has not been cured within ten days after written notice thereof from Buyer to Seller; or (iii) if the aggregate amount of the Title Defects and Environmental Defects exceeds five percent (5%) of the Purchase Price.

Each representation, warranty and covenant of the parties hereto contained in this Agreement shall survive the Closing and shall remain in effect thereafter for the period that an indemnified party is entitled to indemnification based on a breach of such representation, warranty or covenant in accordance with this Article XI.

No party hereto shall have any indemnification obligation pursuant to this Article XI or otherwise in respect of any representation, warranty or covenant unless it shall have received from the party seeking indemnification written notice of the existence of the claim for or in respect of which indemnification is being sought.  Such notice shall set forth with reasonable specificity (i) the basis under this Agreement, and the facts that otherwise form the basis of such claim, (ii) the estimate of the amount of such claim (which estimate shall not be conclusive of the final amount of such claim) and an explanation of the calculation of such estimate, including a statement of any significant assumptions employed therein, and (iii) the date on and manner in which the party delivering such notice became aware of the existence of such claim.

Subject to the terms and conditions of this Article XI, Seller shall indemnify, defend and hold harmless Buyer from and against any and all claims, actions, causes of action, demands assessments, losses,

Notwithstanding Section 11.02(a) or anything else herein to the contrary, the indemnification obligations of Seller hereunder shall be subject to the following limitations.  Seller has no obligation to indemnify Buyer hereunder for a breach of any representation and warranty contained in Article III ("Seller's Article III Representation") unless, (i) on or before the six-month anniversary of the Closing Date, Seller shall have received from Buyer written notice of a claim in respect of such Seller's Article III Representation in accordance with Section 11.01(b) and the amount of the Damages attributable to such claim equals or exceeds $50,000 to Seller's proportionate interest in the asset subject to the particular claim (an "Eligible Claim"); and (ii) the aggregate amount of Damages incurred by Buyer attributable to Eligible Claims equals $150,000, and then only to the extent of the Damages attributable to Eligible Claims in excess of $150,000.